On the u. S. 10 year. The euro firmer against the dollar. Alix take a look at commodities. Oil below the 100 day moving average. That is significant. I wanted to point out it is not just oil that is weaker. It is the entire commodity complex. Iron ore, copper also down. Gold a little softer as well. It is important. Not just about oil or the oversupply, but weakness permeating. Jonathan lets get over to pray for now. President mario draghi predicted to leave Interest Rates unchanged through the end of 2017. Joining us for more ahead of the decision is jamie murray and matt miller. I wanted to start with a simple one. What are we expecting today . We are not expecting change in Monetary Policy for the ecb today, but we are expecting a change in the ecb inflation forecast. 1. 3 ank currently sees inflation for 2017. Running much hotter than that. It is at 2 . We expect the ecb to nudge that up this year. Comes off in 2018 and back in 2019. The question is, when is mario draghi beginning to taper off the stimulus . He will lower his bond buying from 80 billion euros a month to 60 billion euros a month next month, but that was planned in september. Jonathan how does the ecb and president draghi say yes, we can be optimistic about the economy, but we cannot get ahead of ourselves . Think one of the things is to not get too carried away about economic strength either, and the reason inflation is going up is a slightly higher price of oil, which will squeeze income. This is a bad source of inflation for the economy. Jonathan as you look at the , that hasg program been dropping. The conversation in the minutes was a temporary deviation away from the capital. Will we have another today . Ation about that perhaps the italians buying more italian debt in the spanish buying more spanish debt . Matt also buying at the front end of the curve. Over the past few months, if you look at where they are buying, it has gone from durations of 12 years to 16 years to nine years and now lower closer to 3. 5. They are buying closer to the front end of the curve and higher german debt. Also higher peripheral debt in italy and france and spain as well. That is evidently the conversation we will have with mario draghi in the press conference here. Asks, i wille raise my hand and ask. Jonathan we expect you to. Jay demerit sticking with us jamie murray sticking with us. Alex, i want to begin with you. There are people that believe the ecb may have to raise Interest Rates at some point, and i think the argument goes as follows. If you drop the purchase rate from 80 billion to 60 billion because the deflation fear no longer there, maybe you should raise the deposit rate from 40 to 30 for the same reason. Do you buy that argument . It is early in the game to be talking about Interest Rate hikes from the ecb. One of the reasons being although the deflation theory is behind us, inflation in europe is looking quite subdued. I know it has rebounded strongly, but if you strip out the impact of energy and look at , it is still well away from that 2 target. I think we are still well off an an interestrate hike. We continue purchasing assets at this 80 to 60 Going Forward. Alix i understand argument quite well, but if you look at the supplies, you take a look at financial conditions when it comes to the eurozone, they are still negative, but we have had a huge runup of almost 100 in the past few months. If that is the case for the fahrenheit, why not a case for a taper conversation . The ecb finds itself in a similar place where the fed has found its the last few years itself the last few years. The fed overstatements welcome with qe and waited too long to move off of zero. Looks like the same case with the ecb over the next few years. Alix what does mario draghi do with that . The one thing people are talking about is changing the balance of risk description in the ecb statement. At the moment, they say Interest Rates may be all lower at the present rate. To me, that is a valid thing to say. They have had persistent underlying forecast. I think the risk is still skewed to underlying inflation lower so that wording should be kept. That is one thing he could change if he wanted to appease the folks in germany. David putting it simply, when do they run out of bonds to buy giving some of the issuance restrictions . How soon is that deadline coming up . It is difficult to measure, but we still have some way to go before we get that deadline and what we believe will happen once the political crowd began to clear and people focus on the fundamental improvement that has a happening in the eurozone. Dr. Draw play will say we draghi may even take it one step further and provide guidance how to taper it down to. Zero. To it will not put the t under much distress. David i understand the issue is right now is about 15 billion total. Even at 40 billion, you are still soaking more out of the market than putting it. Will kind of pressure does that put on the market . It does put pressure on the market. Yields are inventively distorted in europe, but it is also the compositional issue. Germany runs a balanced budget. They are not issuing a lot of debt. I am sure the ecb might like to be buying core debt, but they end up having to skew away from the p and to the country cap ital key. It introduces a lot of political questions for the ecb that does not have an analog here. Jonathan to this point, how does the ecb avoid a major bond can from as they tantrum as they tried to exit the program . At the moment when you have yields 50 basis point in the french curve and almost 100 in germany, that can be a vicious turnaround in yields. Yes, particularly for peripheral bonds bearing in mind that the ecb owns about 12 to 60 of peripheral debt depending on what country you are looking at. Stepping out of the market and limiting asset purchases will see limits. It is an exercise in communication from the ecb and dr. Mario draghi in particular, highlighting the fact that if they believe they need to, they asset purchases again Going Forward if they believe financial conditions tighten. The ecb withdrawing Monetary Policy should be visible of strength, not weakness. It is a sign the european economy is Getting Better and does not need the emergency medicine to be has been providing. Alix what is your top trade in europe right now . Alex we particularly like eurozone equities. The aspect of this economic divergence has been taking place between the u. S. And the rest of the world. That gap will begin to close later this year, particularly once the political clouds clear. You can see european equities begin to move higher as investors jump back in again. Alix bullish on equities for europe. Good stuff. Great to see you. Coming up, draghis next move. We will break the latest ecb decision and bring you live coverage of Mario DraghisNews Conference at 8 30 a. M. Francine lacqua with a sitdown with jamie dimon, the ceo of jp morgan. You definitely do not want to miss that. This is bloomberg. This is bloomberg daybreak. Tears says it will pursue Strategic Options would kenmore and diehard brands. To actively managed his portfolio. The loss was more than expected. Another step to a 30 billion l. Vestment program for shel billion. , about 7. 3 the buyer, a unit of canadian natural resources. Shell stocks soared last year. 8 30 eastern time, the u. S. Government comes out with initial jobless claims, the last big number before tomorrows february report. They probably added 200,000 jobs last month. That is your Bloomberg Business flash. This is bloomberg. David thank you so much. Tomorrow is u. S. Jobs day. That seems to be the only thing standing between the markets and a family hike. Still with us is alex and stephen. He was one of only two primary economists last week who saw this march increase coming, and i was before we heard from the fed. Congratulations, you were right. Basicallyanet yellen said we will raise unless there is a disaster. What would be a disaster . Stephen i think you would have to have a flat jobs number. David zero growth . Stephen yes, something along those lines. We saw this happened last year. The fed with setting us up for a move in june and the many jobs report came out in early june and was low and they held off. The environment is different today. The economy has made a lot more progress. Inflation is that much higher than it was a year ago or roughly a year ago. Everything toes you the labor market is really solid right now. I am with the consensus. I expect the 200 number. I think we get a rebound in wages. Every one of those parameters would be arguing in favor of a grea rate hike. David where are you, alex . Alex somewhere around similar numbers. Several hundred thousand would be enough to knock the fed off of a march rate hike, but it would have to be a bad number coupled with a bad wage growth number as well. After all that we have had over the past couple of weeks from been officials. Jonathan the labor market has been solid for a while, but what are we doing posting 300,000 still . Almost every month stephen the job Growth Numbers continue to be very strong. Over 200 is probably something that cannot be sustained over the longterm, buffer right now, buffer right now, it was a little get a short time of accelerated job growth. Using the Participation Rate can begin to improve and maybe conversation shift to a little more slack in this labor market and the new realized . Alex that is one of the things a bit elusive when it comes to wage growth. There is some room to run still within the labor market in order to get that tightness coming through and feeding into the weight Growth Numbers. There is clearly some room to run. We cannot keep printing these incredible payroll numbers for ever and ever. There will be a point when we start bumping up against the limits. That is when the fed will need to be taking some sort of adjustment. I dont think it will be hit this year. We can see that at the end of 2018 an into 2019 before we encounter the problem. David it is clear whenever we hit it is a lot later than what a lot of expertly telling us a year ago. They thought would be coming down at this point. Is this good for the dawn Trump Administration . In that thereews is potential for growth . Alex it is a difficult one to manage. The is a lot of people have dropped below the surface from the labor market that have become disenfranchised and just stopped looking. Warming up in the u. S. Economy and Global Economy has seen people starting to come back to work. That would suggest that is a few more people dusting off their tvs and looking for jobs again. They are the ones that will be starting to come up in the numbers. It suggests the Trump Administration is right and highlighting areas where the labor market can move. David do you have to get increase workforce get growth . Maybe there is more workforce out there . Stephen perhaps. That can only take you so far. Eventually, we will start to run into a spot where it is hard to find workers. In lot of firms are already complaining we are there. A year ago, the tightness in labor market seemed to be in pockets, specific javascript is and whatnot, a and now it seems to be generalized. Specific job areas and whatnot, and now it seems to be generalized. We will continue to see job growth after we have reached that elusive full employment mark, but i think wages will continue to gradually creep higher and the labor market will keep jonathan if you look at it become you think it is boring. Bonds is significant. Nine days of declines. 256 on the u. S. 10 year. What is that screaming to you, currently . Alex i am surprised the 10 year ed higher. Eep what is happening is quite a lot of money on the sidelines that needs to get to work, and they are looking at the u. S. 10 year. 6, and they are saying i will have some of that. That is why we have seen them being stuck relatively range bound this year, especially after the big move we saw after the trump rally. That can continue as more and more institutional cash gets to work and put a bit of a lid on how far the u. S. 10 year can rise. Jonathan very quickly, at what point does it by into the risk rally . Alex it is a difficult one to say. For us, we are still well a point where the rate hiking cycle starts to hurt. Until thet be twoyear reaching a 4 yield. That is when you start seeing negative correlations between equities and fixed income markets. Right now, we are sitting close to 1. 3 on the usgs. We are still well off the point where equity markets are stabilized from an Interest Rate cycle. Jonathan great to have you with us. Stephen is sticking with us. Coming up on this program, Francine Lacqua will be sitting down with jamie dimon. Do not miss this conversation. 7 45 eastern time. From new york city counting you down to the market open about two hours and 10 minutes away. Futures a little bit softer. 25 on the dow. You are watching bloomberg. Moving 10. 5 over the last two days. U. S. Production is moving higher. U. S. Stock piles moving higher. Joining us now from london is stewart. Is this capitulation . No. I dont think we are there yet. We have built up a massive net long position, and it will stay that way over several weeks. What we are seeing at the market , i they are anticipating a massive plan in prices. It is more that they are taking bets off the table and not exciting a rally. I think this is a repositioning in the futures market. Alix but it does beg the question, when we want up seeing it when we start seeing stocks higher than future prices . This is the wti contract and the brent contract from december 2017 to december 2018. You get a nice read where the market is expecting oil to go. The blue line is zero. When it moves lower, you are entering an oversupply market. The wti just went negative again. What is it going to take for us . O see that opec is not a local enough about extending the agreement. They will need to come in the next few weeks and start stating their intentions about what they intend to do about that. We have some problems in libya. There is some uncertainties there about how much supply we will be able to get out of the country given what is effectively a civil war going on. They are clashing against each other. At the same time, we have dissonance rebound in u. S. Shares happening faster than anyone anticipated. All of those are combining to make people a lot more nervous about the outlook. Are we expecting a big rally back up . Alix even harold coming out and saying take it slow. Thank you so much. Stephen stanley is with us. If we get continued softness in crude, especially wti under 50, what is that due to Inflation Expectations . Stephen oil has been plus or minus two dollars to 50 for months now. I remember when it was moving 5 , 6 , 7 a day. Lled into aten lu sense of a stable market so a move seems a lot bigger than it really is. Oil has been a little bit out of phase. The cpi numbers and other Inflation Numbers are adjusted and it is a wellestablished pattern for oil prices. This year, it has been a little different. On theincreases seasonally adjusted basis in the winter when you usually see declines. It feels like now in the spring when oil prices are usually maybe we dont get that. Alix the idea is it will not be the same headline contributor. Stephen no doubt. We have seen a big adjustment in yearoveryear numbers for headline inflation, and i think we are getting close to the end of that. Maybe february or possibly march is the end of that runup. We should plateau a little bit Going Forward. Alix great to get your perspective. Thank you for joining us. It is going to be fascinating for me to watch. I am in oil nerd. Jonathan you are referred to as a nearby other people. We can talk about that in the commercial break. We break down the ecbs latest decision at 7 45 a. M. Eastern and bring coverage of Mario Draghis conference at 8 30. An important conversation with jamie dimon after that. You are watching bloomberg. Jonathan from new york city, i am jonathan ferro. The you up to speed on the markets quickly as we count down to the ecb decision. Futures a little softer on the dow after a threeday losing streak after both major four down by 1 10 of a percent two hours away from the open. The fx market like this with a firmer euro up by 2 10 of 1 against the dollar. The treasury market is worse for a ninth straight day. Yields climb higher a little bit. The yield on the u. S. 10 year this morning is 2. 57. Thats the story. Lets get you to news elsewhere. Emma in the u. S. , republicans are one step closer to getting rid of former president obamas Affordable Care act. Committee approved a measure that would remove the tax penalty for people who do not buy insurance. It would replace incomebased subsidies. Groups have come out against it. Scotland may hold a second referendum on whether to stay part of the u. K. Late next year, says thereo one who must first be very about the exit from the European Union. Scotland voted to stay in the eu. Asependence is inevitable the u. K. Softens the brexit stance. Trial today. Nt on he has denied any wrongdoing. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Jonathan thank you very much. Bigbond market gets a shakeout supercharged by the adp report. We have had a nineday losing streak for treasury. Yields climbing up to 2. 57 on a u. S. 10 year. What does this mean for the u. S. Dollar . You assume yields go higher and the dollar goes with it . That is the base case right now. Yields keep going higher and the dollar rides up the back of it and gets stronger. Do you buy that argument . It is a pretty good argument and you have to have a pretty good story to go the other way. At this point, i would say the bigger sensitivity is in emerging market because that is what investors have been buying the first two months of the year. They think the euro weakness, yen weakness, g5 weakness will be there, but that will not be the bigger story. Jonathan you see that happening . We grow tothink once 55 on the 10 year, we are in territories where markets did not expect to be in. It is breaking to the highest levels since late last year. The message to the market that he positions they have be