Gold was making a bid for 1300. Now coming off that potential. Over,continues to roll separate from the macro events we are seeing there. It is down 0. 6 . David dan coats will testify before the Senate Committee on intelligence. At 10 30, we get weekly crude inventory numbers for the u. S. We expect supplies to fall. President trump continues his infrastructure week, traveling to cincinnati, to talk about investments in waterways. Jonathan we begin in spain co popular has been rescued by santander in a takeover. Seeing debt surging. Joining us to discuss more on the acquisition is Bloomberg Intelligence ajit. It will not make sense to people outside the markets. Market, this makes a lot of sense. Walk me through the junior debt and the senior debt. What has happened is overnight the ecb has market, ta lot of sense. Deemed popular is likely to fail. Debt,eans the tier one the tier to get have been two debt have been written down. Two has been converted into shares and transferred to santander. That was expected. Ofs was supposed to be loss when it was written up loss absorbing when it was written up. Jonathan is this a success for the regulators . Yes. In many ways this is what was supposed to happen. Events in italy have cost out the loss absorbing see process. Swiftness in terms of the event certainly gives confidence to this process Going Forward. Jonathan richard from black blackrockng joining me at the table. Great to be here. I think this is good news. This is another shortterm reason not to buy europe. Investors have been worried about the french elections, concerns about the Banking System, and this is another one of those risks and allows investors to focus on the increasingly positive fundamentals in europe, stronger growth and inflation taking hold. Jonathan some people would have been attracted to the juicy yields out there, 11 coupon over at santander. We definitely look at equity rather than credit in the market. We see more upside in equity today. That is because as growth comes through, what drives your return on the equity side is Earnings Growth in an environment where the yield curve is stable. Jonathan you mentioned the growth story. That is why santander wants the bank anyway. Take a look at what the ceo over at santander told Francine Lacqua about this acquisition earlier. This opportunity comes at a good time. Spain is doing well. Spain has been growing close to 3 for two years and will be growing close to 3 this year. This is the right time in the economic cycle. We are not in a rush to sell real estate. We aim to sell at least half in the next 18 months. Jonathan look at what santander has acquired, to businesses, one that is very solid. The other is a really bad lending business to property that has not gone well at all. How long do they have to do proper Due Diligence on that side of the bank . That is the key question. Popular has been trying to market itself to a number of bidders for weeks. It has only been weeks. Popular has almost 37 billion ,uros in nonperforming assets only seven of which are related to real estate. Somedoes provide confidence. Given it has only been a number of weeks, it is still a question. Turnedn many investors to meet without even prompting and say they are long europe. They want to buy europe. They can take positives out of this story this money. Those that are short can take another look and say there you go, there is a bank that needs to fail. There are a lot more of them, in italy, too. You go back six months or 12 months, europe is a deeply contrarian trade. Recognizing the trouble. I think this transaction is another reason to think about reentering the market and focusing on those longerterm fundamentals. When we look at the money coming into your, this is still very far from a trade. When we look at the growth prospects, it is still attractive. Jonathan lets talk about italy. That could be the next shoe to drop. Emboldenedgular feel , you are likely to fail. You need to be acquired. Do they do the same thing across the periphery and take confidence away from the way the debt market has performed on my screen this morning . Certainly this whole process has set a precedent, and investors will be questioning the regulators if they dont carry on doing this in other cases. It will put a spotlight on some of the less robust banks in southern europe, such as the italians that are in difficulty. It sets a precedent. Jonathan looking at the ibex this morning when the news broke, 14 on the ibex already. Do they have to be careful about what they are actually buying . If you buy the ibex, you are buying santander in a big way. Diversification, if youre buying to europe, make sure you are getting diversification. You also want to get exposure to areas that are growing rapidly. This applies to santander as well. They think the european stock market has been geared to the european economy. There is significant european exposure, but there is also significant global exposure. We are seeing Many Companies benefiting from the recovery in global activity relative to the euro. There is increasing demand for european debt. This is about the Global Growth story, and europe is advantageous going into that. Jonathan thank you very much. Coming up on the program, more on the european banks with Chris Wheeler at atlantic equities. He will weigh in on the action in spain. Coming up, friday we have press reaction to those u. K. Election results. From the city of london, i have got to say, a beautiful one. The cable rate goes nowhere. From london and new york, youre watching bloomberg tv. \ david this is bloomberg. We are here with alix steel and Jonathan Ferro. We are keeping a close eye on the big story of james comey testifying tomorrow morning on the hill. We have special coverage beginning at 9 30 a. M. Eastern time. Ber is cracking down on harassment in the workplace. After aed 20 employees companywide investigation into harassment claims. Three dozen other employees have been warned. The European Central bank is preparing to cut its inflation forecast according to officials familiar with the matter. They are concerned about weaker energy prices. Showsay ecb projections Consumer Prices rising at 1. 5 each year between now and 2019. That is your Bloomberg Business flash. Alix the reaction in the market is stark. The euro dropping like a stone, now down 0. 6 . Joining us is richard from blackrock. Changed that, taken hawkishness off the table . We always thought this was going to be a dovish meeting. We have seen growth improving. Inflation expectations have been anchored at low levels, not just below the forecast, but well below the ecb target. That is a good reason for them to be cautious and move away and the move away from accommodating Monetary Policy is still a way off. Alix this yellow line is where we were in the beginning of the year. The green light is where we are now. I want to show how much the markets have rerated for higher rates quickly. The first hike expected in about a year. Is the market still too hawkish . I think in the shortterm, the market is too hawkish. I think it needs to adjust. The ecb will be very cautious about tightening too early. Out to 2018 further and beyond, we see the ecb normalizing to a more appropriate level of policy for the broader economy as that sustained expansion takes hold. David we have a piece on the bloomberg today warning that although you are probably right, you can have too much of a good thing. Inflation is the only indicator that suggests they should continue monetary easing. Ecbthere risks in the remaining as dovish as this . That missingare the signs that the economy is overheating. E those signs today. Pressures and other parts of the economy, and we dont see that today. We dont see evidence of Financial Stress building up. What we see is an equity market which is rallying, strong flows into credit markets, spreads coming in driven by the ecb action, and we are worried about keeping this level of accommodation for two long, but we dont see evidence that now is the time to tighten policy. Jonathan we could argue that it is also all because of the credit markets. How much is the ecb bailed out by their own forecast tomorrow . On, isnt it . S whatart thinking about they are going to do with Monetary Policy. We get the countercyclical move. We have seen the ecb play an Important Role in compressing credit spreads. What you have seen is fundamental investors coming in and buying other areas of the market, which are reflective of the improving Economic Outlook globally. Wary to unwind that position. It was not long ago we were worried about deflation in europe. Now we think we see signs of a self sustained recovery. The risk of remaining cautious is far less than the risk of tightening too early and ruining what is an early but sustainable recovery. Jonathan talking to the guys upstairs, they feel that comes in around 5 billion euros worth. This is said to be 22 billion. This is 30 year that in europe where the yield is 3 , 3. 5 . Do you want to assume that kind of risk in a place like italy . As you look forward as an investor, it is important to take a longterm deal and by assets view and buy that provide longterm worth. When we look at the equity markets, receive valuations much more attractive and fundamentals improving and flows coming back into europe. We think those are the areas to focus on. Goldilocks, is that fundamentals ok, ecb going nowhere fast. David isnt there a drinking game involving goldilocks . Jonathan alix steel would be so drunk. Angry drunk. You dont want to see angry drunk steel. David President Trump is going to ohio today. Ohio senator rob you dont wants us today to talk about infrastructure and trade. This is bloomberg. Alix this is bloomberg daybreak. With davidteel weston in new york. Election fatigue is coming on. Jonathan and a big way. This time last year we had the brexit decision. I dont think anyone expected election anytime soon with the exception of theresa may. The countdown until the election continues. Many are wondering what the boat is about. An issue we addressed earlier, the u. K. Election about nothing. A textbook example of the limits of elections when choices are clear and articulated by strong leaders. They can move politics four. When choices are clear and parties dont know where they stand, both resolve nothing. Turnill,e is Richard Black rock. This is a vote that resolves nothing . Participants were thinking majority, more certainty, leverage for the prime. What to expect now . The Learned Behavior over the last year has been to we had brexit, u. S. Election, french elections, italian reform vote. The Market Reaction is whatever the outcome to look through that. That is the same likely reaction we will get this time. Whatever the outcome, what investors are going to do is focus on the fundamentals, what are the fundamentals telling us . They will be focused on any sign that this election result has any implications for the brexit vote Going Forward. The one asset potentially moving is the pound. Jonathan let me put forward an outcome for you. Tell me whether this matters. Hung parliament. There is some argument that that leads to some decline in sterling, increased uncertainty, and another election, talking about election fatigue. I think investors will look late look beyond the result itself. I think they will largely be unaffected by a hung parliament. Jonathan what is clear from everyone is that shortterm is about sentiment, and anyone with a time horizon longer than five minutes it is about brexit. I wonder how long it takes to look at the labour party wi n. Bigger deficit spending, less accommodating bank of england. How long does it take to get there . We have a whole series of elections where we can look at what is the impact of those elections on the macroeconomy, on investors, and the result in most cases was fairly limited. If we look at the data, the published data and sentiment data coming out of consumers and corporate, as we have seen labor olls narrow,nd the p no evidence so far of that impacting investor behavior or animal spirits in the you k economy. U owth of a long way from recession. You would have to see a very different path for a labor victory to materially change that. Jonathan lets stick to sterling denominated assets. Is the ftse still case of i will tell you where the sterling is and you will tell me where the ftse is . The ftse is very high. 80 of earnings, from overseas. If the pound balls, that is a good indicator. The key determinant will be the success of the u. K. And the Global Economy, not the move of the pound. That is a positive environment. Short run, strike that have an impact. Longerterm fundamentals are sound. Jonathan we had a massive conversation about buying your. Europed. Intothe u. K. Story bleed the by europe story . They are both ultimately global stories. They are about improvement in Global Growth and sentiment coming back to encourage investors to come back to the u. K. We see Continental Europe better positioned and more attractively priced. We are not seeing any evidence that concerns around brexit and the upcoming election are having any he really impact in terms of impact in terms of Investor Sentiment coming back into europe. Jonathan final question for you, i am putting you on the spot. I know youre not exclusively an fx guy. Which side of the trade do you want to be on . This is a oneweek call. Trying to call currencies over one week is not the right thing for most investors to try to do even if you know the outcome of the election. Of the lastessons years this is challenging. Togerterm, there is reason believe sterling will remain weak. Vonnie there is someone coming up the believes brexit is a headwind. Youre watching bloomberg. Afternoon forod london and a good morning for new york. Im so confused with the time difference. Im jonathan with alix steel and david westin. Lets look to the Market Action. Flat. S are dead we go nowhere on the dow and s p 500. What is remarkable about the session as we head into tomorrow with three key decisions on the calendar tomorrow. , it is remarkably muted. The pound going nowhere. Sterling does nothing. The euro is a bit softer on the session after the inflation forecast from the ecb may, in softer. Treasuries go nowhere to some extent. 215 2. 15 on the u. S. 10 year yield. Intel ron, an attack on the parliament there has ended. Security forces killed four. Unmen there were two attacks, one on the parliament. At least those go people were killed and more than 30 wounded. A suicide bomber set off a suicide bomb at the shrine of ayatollah khomeini. Fbi director james comey will stop short of saying President Trump try to obstruct justice in the Senate Investigation into russian meddling in the investigation according to someone close to call me. He will testify in front of the Senate Intelligence committee tomorrow. We will have special coverage of that on Bloomberg Television and radio again in 9 30. President trump outlines his vision for american infrastructure. The plan calls for 200 billion in federal spending over the next 10 years. Critics say much more direct federal money is needed to repair roads, bridges and other assets. We will bring you live coverage of President Trumps remarks later today. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. 27 hundred journalists and analysts in more than 120 countries. David with all the talk about russia and james comey and attorney general sessions. We are wondering what came of tax reform. Tom barrett is one of President Trumps staunchest supporters. He remains bullish on the agenda overall. Hanging fruit for everyone. I am the most can encouraged i amusable tax reform as for everybody because everybody will win. Health care is much more complicated. Im optimistic about the workable tax bill. It wont be as bad as the naysayers think, mnuchin and together with the budgetary confinement and a congress will have to get there, this congress has got to do something. I think on a business sense, boldness. Hope, when you look at transparency, why stock market doing what it is doing . Ands driven by five stocks all we have to do is invest at google, amazon, whoever. That is the market cap of the world. ,ransparency and optimism capital at a time when the rest of the world is in sovereign wealth centralbank warfare. The Central Banks have now become the governors to shore. Du jour 10 years ago, nobody cared who the central banker was in these countries. It was a boring job. Now it dictates the pace. We are almost in the 10th year. Everybody wants to fix Interest Rates. All of you in the audience and Interest Ratesas started to trip from 5 to 4 , everyone saying i would lock it and go fixed. If you would have done in the 15 years the last 15 years, you would have been wrong. Everything is getting cheaper, in five years we will have driverless cars. The effect on the world is going to train change tremendously. Yet you have amazon who has put Shopping Centers out of business. You have netflix, which was a , blockbusterpan video which was worth 5 billion and netflix were severe worth zero and blockbuster is bank. Obbed bankrupt who can figure out where the world is going . Is the best bogner world for preservation of capital everywhere. Place in thet world for preservation of capital everywhere. What he what the president is doing is driving Global Growth in a meaningful way. I think that is the rhetoric. He has the best team in the world. Kel