Moments about why they might be. Restarting qe and continuing it until necessary. Now for thetiers pointsand further basis into negative territory in terms of the key interest rate. In the United States, we are up three points for the s p 500. N activist story is doing well value act getting in on carport stocks, up about 8 now. The 10 year yield at 1. 70 . Crude is lower. We will be examining why later on. Just want to point to a strengthening china renminbi as well. There are marginal headlines on china. China is trying to tier talks and negotiations into two tracks. Google is up 0. 75 . We have a settlement in europe, 500 million on the part of google. We will talk about what that means for the company. Right now, investors rewarding the company. Coming up, Marathon Asset Management chair and ceo Bruce Richards will join me. An exclusive conversation coming up in one hour. The European Central bank cutting Interest Rates tend more basis points below zero to 50 now, announcing plans to start openended bond purchases. Ecb president mario draghi spoke about the risks growth. Mr. Draghi the risks surrounding the euro area Growth Outlook remain to the downside. These risks mainly pertain to the prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets. Vonnie we are joined now from frankfurt by bloombergs matt miller. Some announcements today, not just a policy decision in three parts, but also Forward Guidance from mario draghi. What were your Key Takeaways . Matt an explicit request to government to step in with more fiscal accommodation. I thought it was interesting when we first got the headlines because a survey of economists had set out the expectation for 30 billion euros worth of assets per said his of asset purchases for one year starting in october. Draghi came out with only 20 billion euros not starting until november 1, but that could go on theoretically forever. It is openended initially, there was a little bit of disappointment, and then i t somof the market started reading that as more dovish maybe than they had initially expected. Then cameas up, and down. German yields were up, and then came down. In terms of the key interest rate, it was widely expected he would lower that 10 basis points to 50. This is somethingthis is somethe been really concerned about for a long time. Markets dont believe that the tiering set out in todays press conference is really going to do a lot to help banks. If you look at the euro stoxx banks index, it is down substantially, and almost every bank in it is a loser today. The market is concerned that negative rates are going to have a negative effect, or continue to have a negative effect on banks, even with tiering in this third rate of tltros. Vonnie it was interesting because, obviously, it was his last press conference, but he was very muted when it came to responding to the president s tweet. But when it came to the banks, he said youve got bigger problems than just negative Interest Rates. Matt right. This is his second to last press conference. He has one more. His response to President Trump, hes had this response always it comes to trumpstweets, since tweets about draghi are always about the possibility of moving the currency. Draghi has a standard answer that he doesnt target the currency. Hes only concerned with his one mandate, which is price stability. I think his response to banks was really interesting, and youre right. He took a swipe at the banks ratio, that it is too high, and they need to get it under control. I dont think markets would disagree. Deutsche bank, the markets have always had an expectation for more cost cuts, and it looks like they are delivering on that now. But the question is, how much damage can these negative rates do . Draghi said he thinks negative rates have been very positive in terms of spurring growth and boosting inflation. The problem is when you look at growth and inflation, they are both too low, certainly lower than the ecb target. Vonnie matt miller, think you for that. We will be back with you in frankfurt in just a little bit. For more on the ecb rate decision, we are joined from San Francisco by axel merk, Merk Investments president and cio. The euro is trading stronger right now, but there was a period of weakness with a definite whipsaw to the market action. Why is that . Axel the market shall be excused for being a little confused. It is considered very dovish that qe restarted and is openended, but finally, central banking is no longer data dependent, so the guard gets a chance to define how it so lagarde gets a chance to define how it evolves. I dont of the risks, think Monetary Policy helps. Surveys asking whether any of this action would help inflation or growth, and both said they wont. Trump should be excused for thinking this may be targeting the currency. Im not suggesting that is the intent of the ecb, but it is hard to see how this will really help. Clearly, draghi himself says he has thrown in the kitchen sink. He didnt use those words, but he said he got everything at it, so what is next . We should focus on what lagarde can and will do down the road, but these are fiscal issues we are facing in europe and the world, actually. Vonnie and mario draghi definitely making that point during the News Conference as well, but theres only so much he can say about fiscal policy or so much he can urge fiscal policy makers. Do you believe that Christine Lagarde will somehow change or tilt policy . Axel we will have to see. One of the things she has said in her confirmation hearings is that agility is going to be her theme. She defined that as all the she defined that as all the extreme reactions. One thing the extraordinary actions. One thing i would like to point out, she was nominated july 3. Ever since, spreads have come down quite radically. We are seeing good policies in greece and italynd todays action, but i would not underestimate the impact that lagarde has. I think we will move more to the next phase in the euro zone when the debt will be more socialized, meaning or the germans will be more liable for italian debt. Canourse, how much she influence on that, that will be the path she is on. That has several implications. It is good for the spreads, but not necessarily good for the euro versus the dollar and other currencies. I do think we are entering a new era for the euro with lagarde coming in. Vonnie i want to ask you your forecast for the euro. Perhaps you give us that first . Axel i can give you a forecast, but i would not be surprised if the euro were to weaken over overme play bogus time, simply because lagarde has a very activist approach. Running forlied president , she gave quite a socialist agenda of wealth readers to be should. Minister, she has policies that will all lead me to believe she will be in the dovish camp and be very creative. When she uses words like agility and embraces these policies at the ecb in the past, i think it is an open ended policy shes going to have, and we are only starting to see the creativity at the ecb to coerce things moving forward. In that context, the euro will hold together, but the euro may well be weaker. Vonnie lets talk about the program. We have an extra 10 basis points into negative territory for the main interest rate. We have qe basically at infinity. We have tiering for the banks. Do you believe any of these will make a marginal difference that will boost inflation . Axel my twitter survey says no. Do you believeclearly, the lowet have a little bit of an impact. The challenge is that every day, under the yield curve and Interest Rates. To give you my outlook, we already saw yesterday President Trump tweeting that some tariffs be postponed for two weeks. We have a window between october and december where we can ease tensions on the trade front. That would be very good for european exports, notably german exports. Clearly there are other headwinds, but turkey, brexit, those sort of things, all these we have the glass halfempty right now. I think the glass will be halffull on some of those. We have a u. S. President who wants to get reelected. In order for that to happen, he needs to resolve some of the issues he can control. Back to the Interest Rates, they might have a marginal impact, but remember, the transmission channel is not broken. That is what people were concerned about. Were announced, we shod question how much demand there will be. Theres plenty of credit available. None of these are really the issue. It would be very helpful for central bank to just admit that, that there is only so much they can do. Draghis playbook has been he will do whatever it takes, he will cut rates. I think he has a very liberal interpretation of what the mandate is. We will have to see what lagarde is going to do, but it appears we will get more of the same. Vonnie axel, i want to break some news right here. Trump advisors are apparently considering an interim china deal to delay tariffs. Discussions are preliminary, and the president has yet to sign off, according to people speaking with bloomberg. Once again, advisors are considering an interim china deal to delay tariffs. They have discussed limited trade agreements, and even to roll back tariffs the first time in exchange for chinese commitments on intellectual property and agricultural purposes, according to people familiar with the matter. We did see strengthening for the yuan earlier, and that continues 7. 0777. Onger now at how would this change the state of play for u. S. Markets, not just currency markets, but more broadly . Bond markets and the outlook for the Global Economy . Axel just keep in mind, President Trump, like any president , would like to get reelected. Also, President Trump can control the agenda on trade. He wants trade to be in the news. I theory has been that starting in october, he will ease tensions where they matter and maybe ramp them up where they dont matter. Maybe he will impose tariffs on french wine. Difference wont like it, but it wont affect global gdp. It is in trumps interest to ease tensions so that Business Investments resume and things get more normal on that front. We have very low unemployment. We had easing trade tensions. We have Interest Rates being cut. All of that sets us up for potentially a hot economy heading into the election. A few days ago, i was the only one saying that is a risk, and it is still more of an outlier scenario, but it is certainly a feasible scenario. In the meantime, we have Central Banks trying to solve problems they cant solve. When the fed says they monitor political developments, the fed says they are tweet dependent. That makes no sense at all. They should look at the data, and yes, they will be late, but you cannot be early when it comes to trumps tweets. Vonnie we are not seeing a huge amount of reaction in u. S. Markets. 0. 3 , the nasdaq up 0. 7 . The dollar is actually weaker. Still at a strong level, but weaker by 0. 25 . We already knew that there was a twoweek delay to certain tariffs. China then did come and say, henley talk about the national say, can we talk about the National Security being completely separate from trade . Is there a separate route for this . Will trump go for that . Axel trump wants to be in the headlines an appeal to his base. Even if he says it, he might switch his mind on this again. The important thing is we will make some progress, but us we make progress, we will see some headlines going one way or the other. It is a process. We are not going to have a trade deal before the election because it needs to continue to be in the news come up so we will have in the news, so we will have an easing of trade tensions. But this is a process where we have to listen to the tweets, where we have to go stepbystep. Obviously, Business Needs to adjust as part of that world. In the goal has to be coming months to make sure we are not sliding into recession. That is an extra parameter that was less of a concern a few months ago. That is the context we have to see it in. I dont think theres going to be a clearcut answer on how exactly it is going to play out. It is a process. The folks that will benefit from it is journalists because you guys can cover it. It. Ie vonnie thank you for joining. That is axel merk of Merk Investments, the president and cio, from San Francisco. I want to reiterate the headlines crossing the bloomberg, which are not having a huge rocket reaction, except perhaps the offshore brenneman be the offshore renminbi. Trump advisors are considering an interim trade deal with china that would involve commitments on intellectual property and purposes, according to people familiar with the matter. It would be a limited deal that would consist in a delay. Bloombergs shawn donnan is with us from washington. It doesnt strike me that any of this is very new. The u. S. Has trying to get china to commit on intellectual property for so long. Why would it commit now . Shawn i think whats new here is the packaging being discussed. In may, we were talking about they wondered 50 page, allencompassing agreement that fit everything talking about a 150 page, allencompassing agreement that fit everything. What we understand is under discussion in the white house is an interim deal to freeze the conflict, if you will, rather than resolve it. That interim deal would involve some chinese commitments on intellectual property, and we should point out that earlier this year, china did pass an intellectual property law, and has promised regularly that it would respect intellectual property of foreign investors. Theres a new ip court system there, so this would probably be more focused on something that to to. As already committed again, we saw the president tweet about that this morning, and that is something he is foredibly sensitive to Rural America overall. The idea here is to try and stop deescalation. To get back to a position where they can have longerterm negotiations, but the trade deal stops being this unnerving shadow over Global Financial markets and the Global Economy. Inside the white house, there is concern that if you escalate tariffs further, there would be more economic damage in the United States in particular, and i coming into an election year, that would be a bad thing. They want to turn things around their. They want to turn the direction around. Importantly, for the first time, we are hearing people inside the administration considering rolling back tariffs. That is very different from the escalation we have seen through the summer. The direction so far over the past year has been entirely in one direction, and that has been more tariffs, not less. While we are seeing a turn up in the broader indices, i want to point to things like the european car index, for example. The stoxx 600 autos up 1. 4 . Several commodities are also adding to gains, as well as the offshore renminbi. I want to bring in Michael Mckee , who joins me in new york. It doesnt seem like chinas overtures were met with a little bit of optimism on the part of President Trump and his advisors. Michael i think theres a couple of things you have to keep in mind. Our story says trump advisors are considering this. The president hasnt signed off. We have seen this tugofwar within the white house going on for two years now, where you have the china hawks and the more practical advisors to the president. At any one time, one is above the other. It looks like at this point, we are seeing the practical side come through. That may be because weve seen a in the pollsws recently for donald trump, in ts recently for donald trump, with six in 10 americans saying they expect a recession next year. Shawn did a great story going out to the manufacturing states that trump narrowly won in 2016, and he is losing favor there. It appears to be a pragmatic wing in the white house that has gone to the president and said, look, you are only hurting yourself here. If you can concoct some sort of interim deal to take the pressure off, youre going to be much better, and you can always come back to this later. I suspect that is kind of where we are. I sort of been waiting for this, and i imagine shawn has been as well, that the president could come up with something that doesnt need a whole lot in the shortterm but can be packaged as such. Vonnie i want to turn to my terminal. One day, you can see that all of the emergingmarket currencies, with the exception of the argentine peso, having its own problems, are higher. This is obviously on the ecb to theut also a reaction idea that we might be getting somewhere on trade. Next . T happens will the president keep this story out there for a while, or will he actually make some kind of positive statement . It does feel like it is being floated. The president has not fully decided. Is there a response from china necessary before the president says something . Shawn the first thing is we need to focus on what is actually happening inside the talks. We still have the chinese who will come here next week for working level talks ahead of higher level, ministerial talks in october. Those still have not been scheduled firmly, but there is expectation that it will happen after october 1, after the move that we saw on tariffs last ,ight from President Trump obviously between october 1 and october 15. There is tension inside the white house between the hawks and the pragmatists, if you will , and that is a tension that is here more broadly in washington. President trump is going to be watching carefully the reaction from capitol hill to news like this. There ares up increasingly worried about what is happening in hong kong and shenzhen, and they are not in the mood to give china very much. So donald trump has a tough political alley to navigate here, and that is what hes been doing all along.