Snapping a sevenmonth losing streak. Deal maker, russia selling an 11 billion stake in its Largest Oil Producer to glencore and the Sovereign Wealth Fund. The russian president went on national tv to tout the deal as one of the largest acquisitions in the oil and gas sector in the world and in the world in 2016. Thats what you need to know at this hour. Lets turn back to our main story, the upcoming ecb decision. We turn to our Bloomberg Team in europe, with our colleague, matt miller. Looking rather cold over there. And paul gorton, who leads the coverage overall of the western European Central banks, in a somewhat warmer situation. Matt, lets go to you. What do we need year from the ecb and mario draghi today . Matt what we want to hear, david by the way, its great to hear your voice is that there will be an extension of the Quantitative Easing Program. The consensus is six months past the march deadline and about 80 billion euros a month, a continuation essentially of the program as it is now. What investors are concerned about, and correct me if im wrong, paul, is that he willed failed to deliver he will fail to deliver the consensus, tapering the end of qe, which is why we see a takeup a bit of italian yields. David what about that, paul . We get nervous when there is consensus because there is disappointment possible. Paul right, theres a possibility, nonnegligible, i would say. Withake him up come out something that is neither this or that. Tapering is somewhat unlikely, although you cant rule it out. The extension of six months, 80 billion euros a month, is largely what is expected. What if he comes out at nine months, 60 million, or some other contribution. Published only one week ago, the interview was one week before that, saying that there were different, nations. We could do different sizes, so you got to rule that into the equation. Matt, take us inside the politics. We know they have their own internal politics here. Mario draghi has to be somewhat concerned that he doesnt go too hard, right . Matt they do. And draghi, of course, is very supportive of the program. He wants this program to be successful. But maybe he doesnt want to end it so quickly. I think some of the Economic Data that weve gotten as far as expectations has been positive and that might lead you to believe that its time to wind this to an end. Im not sure if he wants to do that, but others on the governing council want to. Is that right, paul . Theres a very good chance that the ecb will say, when it unveils the 2019 forecast today, that inflation in the year will be in the region of 1. 8 . Just under the goal of 2 . The key thing is that it has to be sustainable. Its no good falling back again from 1. 8. Thats probably where he lies. He wants to go as far as possible to make sure that that is fully entrenched. The risk now is that that will not be fully entrenched without good structural reform to the economies of europe. Given the access we have had in bigger economies like germany and france, those reports are probably not in the cards. It really raises the logistical question of how they do buy more bonds. Matt, take us through the three kinds of scenarios that we might hear mario draghi layout at the press conference. Well, its a very good. Oint, alex alix they only buy bonds that have durations between two years in 30 years. Theres a scarcity, since they purchase a many. If we get to the next nine months, say, or a year, they could be other threshold for bonds. They could have artie bought 33 of all the new issues and because of their own rules, they have to stop there. The question is will they change the rules . Allowing themselves to buy more or a different duration that would change the ratio . Paul, give us a sense of how much mario draghi and the ecb need to react to what happening on this side with the election of donald trump. Its a different world that they are looking at from a month ago. Paul ironically it has helped a bond yields,sing reasoning more bonds falling into the eligibility pool for qe. But thats the chief concern, you are right, what happens of this comes off the rails . We have had trump, brexit, the italian referendum, german, french, netherlands, all coming up. Establishment coming into Power Holding a referendum on the euro. Out. S pointed that it hasnt manifested itself that strongly yet, but it could in thats a good reason to keep some powder in the keg. Alix the other question, the elephant in the room the stronge ask you, dollar, because of the trump policies, is that affecting Mario Draghis decisionmaking at all . Of course, a stronger dollar helps the euro in terms of its exports. ,he euro pound, rather strong ever since brexit. Therefore, that can weigh on trade, but i think the bigger issue in the euro area economy is what happens to yields. Its ok they rise a bit, but its not ok is the rise a lot or spreads blowout. Thanks to paul gordon and matt miller. We will be coming back to you, matt, so get some place warm for that. Alix . To a global getting fixed income strategist joining us from london. Can see, its the overnight anxiety in the euro. Volatility over the last two days. You can see the big spike that we have seen. What are traitors most anxious about. Kit at the moment i think they are anxious in a bunch of ways. My sense is that the vast majority of people in the market expect extension and the ecb Bond Buying Program, 80 billion euros per month for some time. The anxiety is what if he doesnt quite deliver that . A lot of people were caught up by the speed of it in the italian bond market this week. For a while. Rexit trump, pretty quickly. The italian referendum in a couple of hours. People are being caught out quite regularly. Sure, but now we hear that the bank might go to ecb executives for the potential of recapitalization. How is mario draghi going to address this and the potential volatility . Kit this is his task today. His problem is the economic environment not getting worse, core inflation picking up, there is pressure to start slowing down the pace of bond buying and start tapering bond purchases. Get annot be able to agreement just to carry on with this 80 billion euros per month rate. But he really is going to be trying to be as noncommittal as possible, give himself as much flexibility as possible, because he doesnt want an adverse bond Market Reaction to something the ecb is doing while he has so many other things to worry about. Take us to the geopolitical risk issues. Seems like mario draghi has to take this into account, that to the spreads and peripherals if a signal that they will start backing off . I would be concerned that the narrowing we would see over the cap the last two or three days could be reversed quite quickly with peripheral spreads moving and potentially reacting negatively to that, despite it being a good thing in the long run. Remember, we have crowded european investors out of european bond markets. By creating a shortage of managers,onds to bond weakening the currency and driving the spread for the best part of two years. ,f we start to go the other way it could have a significant impact. Just remember the taper tantrum when the fed even mentioned the mere idea of tapering bond purchases back in 2013. You know, navigating this in terms of what it means for peripheral spreads and what it means for the currencies requires, you know, tight rope walking, if you like, from the ecb. That theyother prong have to address, take a look at the repo fund rate in germany. The down move here indicating a stretch on the market, it the end of november you saw that moving lower. The idea being that they use bonds as collateral, the ecb buys them all and theres nothing left to lend. How does the ecb address that . Its another of these indications where they can start to lend them out themselves and help with liquidity in the system, but it is an indication of the difficulty you have when you own more and more of the market. Going by 80 billion per month extending beyond march, they are already going to have to increase the share of each of the bond issues they buy. Buying maybe lower yields than they had before. Various amount a of tinkering around. If nothing else you get the sense that we are scraping the bottom of the barrel with what we can do in terms of qe in europe. Time, the original rationale for doing it, the exceptional circumstances in the economy dont really add up to some of the members and the council. This policy is coming to an end and the unintended consequences of it are becoming clear, but they dont want to end it quite yet because it is too much else going on. Will beit juckes staying with us and we are waiting for the key policy decision coming out today, followed by Mario Draghi PazNews Conference at 8 30 a. M. Eastern. Alix right, so we are looking at that really big deal. Glencore and cutter by at a 98 stake. Hitting a record alltime high over in moscow, this deal prevents them from doing a massive Share Buyback that was putting a lot of pressure on rosneft. It is their second largest deal by 2 . In london, bank of america put the annual market on rocketing from marketing from the deal at 80 billion. Next fivever the years is going to see 400 Million Barrels. A few for them. Really makes them even a bigger in oil trading as profitability continues to come lower. The other start of part of the story is the banking and the financing. , they arefinancing putting up 320 million in cash. Thatest comes from banks, stuff up by 1 . The interesting part, and beetle be talking about this later in the show, does that violate the spirit of the western sanctions against russia . David its a really big, really important question. Coming up, more with kit juckes. The yuan has fallen more than 10 against the dollar. Chinese exports are up for the first time in seven months. Is donald trump right about china being a currency manipulator . Thats next. This is bloomberg. Alix this is bloomberg daybreak, im alix steel. The other big story this morning was the increase in chinese of 1 . , but by 1 10 you can see the increase there on the white line. Why . Take a look at the purple line. That is dollar u. N. , dollar exportelping the scenario. The question is, does that continue . Do we have a lower yuan and do exports continue to advance . Is that fuel donald trump us concern that china is a currency manipulator, david . David thanks so much. To talk aboutckes that very question. We had these numbers coming out overnight from china. Numbers,e i get these its an entirely different result if im asking about dollars versus yuan. How much of it israel Economic Activity and how much of it is just currency . There has been a pickup in Economic Activity just globally inside the second half of this year, but in china as well. A year ago we were all worried about continued economic slowdown in china, but those fears have somewhat eased. There is a real story here that does help them. That is much more of a story the currency becoming a big boost exports at this time. That good news for the yuan, which is come under a lot of pressure in the last year. Kit it is still likely to come under pressure. The other data that you saw yesterday was another big fall in the Chinese Foreign exchange reserves. If they are manipulating the currency, they are intervening to stop it falling as fast as we the Financial Markets would make it fall. They still have significant capital outflows at this point in time coming out of the country they would like to weaken the currency and i think with the chinese authorities are trying to do is manage a steady pace of depreciation to get the dollar yuan rate from a little bit under seven at the moment to yearsing like 7. 3 in a time. So, a slow pace at the same time they are controlling this capital outflow of reserve reduction. You took is exactly to the currency manipulation question that is on our minds right now. Yesterday we sat down with tom barrett, a very close confident confidante of donald trump, and this is what he had to say about declaring china a currency manipulator. A currencya is manipulator . Whats the final at that is. That is if the chinese are using u. S. Bonds or securities, they can avenue and flow the value of their own currency and also evan and flow the value of our currency. So, on the one hand where we have trade regulations, which by the way are thousands of thousands of pages, and mostly unenforceable. I think there have been two of the enforcement acts in the last 10 years. David take us into the currency manipulation question. Does it make sense for the new president to call china a currency manipulator . They will come, back and say if we let it flow free, will you be happy . We all know that it will get weaker and that wont make anything better. I dont think it serves a useful purpose except in so far as perhaps mr. Trump will want to send out a message to them to say look, we are not happy with the fact that the currency is weaker. Particularly we are not happy with the size of our bilateral trade deficit with you. We would like to send the message that an ever stronger dollar to something that we are not going to tolerate. That message, i think, makes some sense. David all right, kit, think you some much for joining us today. Thats kit juckes, of societe generale. Alix a stunning reversal of fortune from glencore. What is behind the deal . Next. This is bloomberg. David this is bloomberg. Im david westin. We thought it was all about opec. Turns out Vladimir Putin had his own ideas when it comes to what to do with the major deal to sell a large chunk of rosneft to glencore and the cutter investment authority. That gives us our morning mustread. He proudly claimed on television that this is one of the largest acquisitions of the oil and gas sector in the world in 2016. The head of rosneft gave mr. Putin all the credit, saying the deal became possible only nks to your personable personal contribution. To make sense of this, we are joined by ken hoffman and our government editor for russia, tony. Tony, start with the russian angle. How important is this to him that he is back in the business now . Tony it is very much an indication for putin and for russia, because it very much demonstrates that it makes a mockery of the International Sanctions that the European Union has imposed for the last two years on russia. Rosneft, a sanctioned entity, has managed to do this deal with it isre and, by the way, their biggest deal with an arab nation. Putin has managed to make everybody look rather foolish if they try to isolate russia economically. They are very pleased. David briefly, how much of it is the money . Hes got problems with his budget, but how much of it is them back in business, these sanctions are not going to hobble me. Its a twofold tony as you say, its a twofold message. Internationally it is putin flying a flag as the moment that trump comes in, but hes here and you have to deal with him on his terms. Alix my question has to do with glencore. They have a huge position in oil, but the profitability is not so great. Why would they want to take such a big stake in a less profitable business . Ken for them this is a home run. The rest of it is all going to be nonrecourse financing. Meaning that if they go down, they dont care, its all the banks problem. They have struck a master course deal on their end. Does this signal a shift . Ken i think that like a great trader, they took advantage of it. They will take any trade like this any day of the week. Going gold, going platinum, this is a great deal for them. Great point. How do they insulate themselves from that . Technically they dont actually own that much of it. Is interesting. They havent really put out their own press release, it will be interesting to see the details of this. David going back to moscow for the president has announced a deal, but that glencore is saying is not finalized yet. They are in the final stages according to them, but all the music from russia is that this is a deal whose teas have been crossed and eyes dotted. They think the deal is there on the table and there will be nothing to stop it happening. From the Russian Point of view, i think, its very important to demonstrate that they have this international reach. David thank you so much to ken hoffman on the phone. And tony helfman, our Moscow Bureau chief. No, hes our government editor in russia. We will get this straight sooner or later. But one thing i will get straight, the chairman of bloomberg lp, peter brower, is a senior in dependent nonexecutive director at glencore. Lifting volume 10 for them when it comes to oil from the current level. These are huge numbers. David might expand my they were so willing to go along with that opec deal. Alix good call. I like it. Coming up, a special envoy on the Glencore Rosneft deal. Alix this is bloomberg daybreak, im alix steel. Trade. Where we s p futures riding slightly higher. The dax, over 11,000. The dollar, trading heavy into the meeting. The euro, if you look at the boards, you can see it moving at a three week high. 107 is how we trade into the meeting. Yields climbing higher across the board. The italian yield, up six basis points. David . David heres what you need to know at this hour. Draghis decision. The European CentralBank Releases its Decision Just minutes from now. Everyone is counting on an extension of the Quantitative Easing Program as the italian lender reportedly told the ecb that they needed more time to recapitalize. We will bring you that decision live, followed by the news onference at 8 30 a. M. China, lift. Imports surging on Strong Demand for raw materials. Exports snapping a sevenmonth long losing streak. Vladimir putin, dealmaker, selling a huge stake in its tosian oil maker, rosneft, glencore. It was touted as one of the largest acquisitions in the oil and gas sector in the world in 2016. That is what you need to know in this hour. Alix this was the biggest deal after the western sanctions were imposed on russia. With us now is the u. S. Department of state bureau of Energy Resources spe