it's a bright beautiful day in davos. stephanie: we are going to be speaking to some of the most extraordinary people here. and thebett is with us morgan stanley chief james gorman. martin gilbert will be here and we will have full coverage of the ecb decision in revived minutes. at 8:30 a.m. eastern, mario draghi's news conference. david: let's go to matt miller in new york on the markets. it's nasty and i want to start off by showing you what we went through yesterday. it was fairly insane. the dow dropped at one loss of five through 65 points. -- 555 points. it was a 500 point swing in the

doubt we were still able to climb up to gains. i talked to traders after the day ended and they were concerned that we cannot swing back up. we keep trying and failing in their concert we will in lower lows every day. the drastic drop kicked up around the world, the chinese markets were down and they are again today. it was down 38 yesterday. -- it was down 3.8 yesterday you . but notains in europe germanic. -- dramatic. taking a look at futures in the in futurese losses

with the s&p many contracts down 10 points on the dow jones many contracts down 90 which is not as bad as we saw yesterday. still sets up for losses in the cash trade when we open. one of the other catalysts besides asia yesterday was oil. brent crude and west texas intermediate fell sharply. today we see green arrows. has a green arrow but the contract -- it is spinning back -- it is swinging back down. there will be added volatility to an already incredibly volatile market in oil today. you can go on your to animal at btv95 and you in g#

can see this chart which is the short. it gets big. this is one of the reasons that oil has had a tough time. everybody seems to be betting against it. let's take it back to equities. you see the shanghai composite is down 44%. the stoxx 600 and europe is down 22%. -- in europe is down 22%. let's check in on first word news. a british judge is pointing the finger at vladimir putin and a murder of a former russian spy. the judge ruled that he was murdered by government agents a decade ago. he said the agents are working on orders that probably were approved by vladimir putin.

poisoned. -- he was poisoned. military exercises are taking place off of taiwan. christine lagarde is the nominations from across europe for a second term as head of the international monetary fund. u.k.ny, france, and the have come out for her. global news, 24 hours a day, powered by 2400 journalists in 150 locations around the world. investors are worried about slowing the growth and china and the free falling oil prices. let's see with the ceo of one of america's largest banks has on his mind. it is mike corbett from citigroup.

welcome. we all know that everything you have been doing for the past three years and what regulators are doing is to make a bank like to prepare it for balance sheets stress and market volatility. we've got both, how is it going? >> if you look at how we came out of 2015, it was not the easiest of years. we came out with record earnings since 2006 and put targets out three years ago and hit those targets. we managed the institution pretty well in a challenging environment and how it got to show that the work we've done in terms of radical transformation into a bank and not an insurance company. it's a different company when the markets get volatile, we manage the place right. when emerging markets get hit and they have been hit hard now, citigroup gets hit harder than the rest of the

street. we continue to look at citigroup as a proxy to the emerging markets. is that a true story? >> i think people look at citigroup the wrong way but that's true. people do view us as a proxy. we are global and are the world's global bank so we have exposures in those places. we've got to break that cycle and show people that whether it's china or oil that we have exposures but they are completely in line with we are and what we do. stephanie: so you are not vulnerable? if china takes another leg down, you will be ok? >> yes, we will be ok. we talked about the earnings call. about 1% of our assets are in china. 3% of our total loan exposure is in energy. that exposure to our clients are largely investment grade multinational oil companies.

the markets have tried to punish us for that in we have to put them wrong. five weeks ago, janet yellen and her colleagues at the fed felt on the basis of strength in the labor market and perhaps expect haitians of infant inflation, raising inflation rates was the right thing to do. will we look at that decision is a was a mistake? >> i think it was necessary for the fed to do. their credibility was on the line of the dead not do it, when would they? the was in the room and had same information, i would have made the same decision. at that time, downdraft in terms of oil and growing fears of a slowing china, those things are exacerbating. we do not see this is a big fundamental shift in terms of the markets. there is absolutely a repricing. stephanie: should she raise it again?

>> i think they should wait and watch and see. if you look at when they raise rates, we thought we would see 4 rate hikes this year and that has moved back to three. some people are talking 2. we have to have a wait and see attitude. erik: it sounds a crazy question but do you think there is a possibility next year we will be talking about or seeing qe4? >> we don't see that today. there is talk of fears of recession but we don't see that right now in the u.s.. we've got a healthy recovering consumer. at what happens and the purest from of oil prices. the average american family, those numbers flow through and that allows $100 billion of spending per year. that is in europe to and in your wallets of our population. we've got to make sure they have the confidence to put that to work.

we've got to get more of it. stephanie: china, ubs and credit suisse are going big in china and you've only got 1% exposure. how do you see things different than they do? >> we operate in china like many other places. anyot an institutional bank consumer bank and service high credit high quality customers and are there with the multinationals doing business. the world as they expand. we run a consumer bank where we are offering credit card products to what we see as creditworthy customers. stephanie: you are ranked number five in your investment bank. you've got some wood to chop. is a business depending on the deals, you are up and so weo we punch from 3-5 think we have a good backlog and m&a will stay active in will be in short -- an important role as

growth stays tough if you look at the markets, maybe valuations got better. the europeans are leading into china and out of fixed income. credit suisse, ups, deutsche bank -- morgan stanley and goldman sachs, will that make fixed income a more profitable business? >> if you look at what's going on in europe, those institutions and that being constrained by leveraged ratios. is a constraint or a pathway to scale. you have seen people pulling back and focused on those things. we think that creates an opportunity for us. andave an upscale presence it's not a binding constraint so we take share in those markets. that those same firms are prioritizing equities as they retreat from fixed equity, doesn't make it more

sensible to your eggs in the fixed income basket and maybe not compete in an equities business? >> we already have our eggs in the fixed income basket. we punch below error weight. erik: >> what do you do? we have invested in people and technology and research and we have to raise our standards. shooting to displace someone at number one but we can move up. it's probably worth in the hundreds of billions of dollars of revenue. stephanie: why does it make sense to invest in research? provide greatn't value and customers don't prefer it. >> customers dupe before it. -- customers do pay for it. why wouldn't a

research analyst work on the buy side where he can get paid for it? >> when you look at our platform, we will give that analyst access to investors that they will probably not get access to another places. you are not just going to ask us investors in the europe but in asia and europe and latin america. to a research analyst being butgnized not just locally globally, that's something we can offer. the dominant feature of the banking landscape has been regulation for the past eight years. re you getting ready for basel iv? no, in many ways, we have moved basel. stressrgely based on tests. it's the scenarios would provide ourselves and the scenarios the fed creates. when we run our institution, we run it to dip metrics -- two different metrics. u.s., stress testing has

taken the place of basel iv. erik: regulation is largely done? >> the creation of new regulation is largely done. the implementation is still ongoing but we believe you have seen the bulk of what's coming in terms of new regulation. stephanie: we're hoping that. thank you so much for joining us. he is the ceo of citigroup and we will take a quick break from davos. we will have the aberdeen ceo martin gilbert with us next. ♪

matt: welcome back. take a look at the markets. we are seeing losses in futures across the board but not as bad as yesterday. the dow jones many contracts are down more than 100 points. is a function we look at the last fed meeting. in the last few weeks, we have seen a more than 50% chance the fed will raise rates in march. 20%we see chances of only and chances of a cut according to futures in the january meeting up to 8%. check it out on your bloomberg terminal. earnings are out from verizon and that company beat with $.89 and we were looking for any eight cents and travelers eat as

90 cents two dollars per share we were looking for $2.66. let's look at your first word news. vonnie: cheaper fuel helped southwest airlines beat estimates. it flew more passengers longer distances. it has 10 new domestic and international routes. general motors is becoming a big player in the booking business. offeringrting maven rental of electric cars. it will start in ann arbor, michigan and will expand to new york and chicago. taken half billion dollar share in lyft. the $2.3 trillion route in emerging markets is causing stocks to deepen worldwide.

at least 26 emerging and frontier markets are officially in their territory. better to join us in aberdeen asset management, martin gilbert. firm's assetsis are invested in emerging assets. your cio said the stock drop as a buying opportunity. if you look at the market in the last 1.5 days, it felt like a selling opportunity. >> it looks like a bigger buying opportunity. stephanie: what you do with your money today? >> you have to hold. the key is not to. panic. markets tend to be right and they are signaling a slowdown in the global economy. what is coming down and what signals are indicating. said it's if your cio a buying opportunity and you say it's a hold, what do you mean? >> it's a great buying

opportunity if you are brave. the key is not to panic and sell. that is the worst thing to do. when you put your finger on the mystery, everyone says the economy seems pretty solid. yet the markets are sending a different message. markets are great forward indicators. they are saying we will see a slowdown in emerging markets and developed markets. to a certain extent, it is priced in. at the company level, you are quite right, we are seeing profits going up in 2016 compared to last year. at the company level, it's still ok. stephanie: in september, you look at asia as a buying opportunity.

were you early to the trade or wrong? think we were early rather than wrong. i still think asia and emerging markets of the place to be medium and long-term. even more short-term now because we are seeing quite distressed prices. and is partly gearing unwinding and people are selling who have to. these companies are still doing pretty well. stephanie: do you are investors agree with you? teen, weabout 2003rd have seen -- 2013, we have seen big outflows for emerging markets. the other thing we did not foresee is the collapse in the oil price has caused a lot of the sovereign wealth funds to take money out of the funds. they set them up for a rainy day

and for them, this is a rainy day. a day like you had yesterday in the markets with so much down, what you hear your investors? -- what do you hear from your investors? getting as not be many calls as the private banks. there are institutions that want reassurance and here that we are not seeing anything that has changed. the markets are telling us that things have changed. that is the quandary that everyone here has. stephanie: you are publicly traded so your larger shareholders like lloyd's and mitsubishi, what are they doing? >> they are very long-term. they say do what you can do and i think that is the key. got to manage the parts of the business we can manage

and not worry about markets. obviously you worry but try to do what you can do and manage what you can manage. david: what about structural changes? looking atlways acquisitions. deals liketribution the lloyd's scottish widows and those are the sort of deals we really like. we value our independence and it's a great advantage being independent. we can deal with everyone. we can manage money for everyone. stephanie: you said you're not up for sale. has the downturn change that in any way? >> not at all, quite the reverse. it makes us more keen to remain independent. it's a great advantage being an independent stephanie: make us money today. in this market, what do you want to buy? >> i still like india. the sleeping giant that

continues to grow nicely. the companies are well-managed. we are invested in a few businesses there so i like india. it's great to have you with us and we will have more on the markets and from davos i had them sir richard branson will be with us as well. ♪

matt: welcome back. a quick look at the markets after the markets after this things beside inequities yesterday. futures are down and steadily falling this morning. the dow jones is off about 102 points. s&p futures are down almost 11 point. the nasdaq futures are down and it was down big yesterday and then came back for a moment before closing in the red. home.n get this screen at

this shows a global selloff in stocks and we are now down 19% per record high on the msci world index of just shy of a pair index for global stocks. china is a big for that and another big part has been oil. the contracts have switched over to you will see volatility in the trade. oil is down again and this is the march contract, t 809. 2809. it failed to match what we saw in oil and we will keep on the markets and we will be back in two minutes with more from davos. ♪

david: welcome back to "bloomberg ." we will be talking to sir richard branson in a few minutes. it is an extraordinary time to

be in dumbo's. stephanie: it is extraordinary because of the disconnect. we talked tole here say they are changing their long-term views. they still like china. but if you turn your attention to new york and look at the markets, it is hard to pay her the tube. the only people really smiling our bankers. david: it seems like markets are trying to tell us something. stephanie: the markets aren't listening. david: let's start with the first word news. vonnie: today, the obama administration may announce new travelers.for the rules are designed to make it harder for europeans who are

associated with the islamic state to enter the united states. meanwhile, a plan is gaining the nationaltop gas leak. the proposal takes aim at methane leaks from wells in federal and -- federal land. and a blizzard tomorrow is expected to dump up to two feet of snow in washington. the heavy snow and wind could create life-threatening conditioners. smaller amounts will fall along the east coast. global news, 24 hours a day. i am vonnie quinn. back to matt miller. check out the markets. futures had been falling steadily and we are seeing a bit of a turnaround. still a drop of the 93 points on the dow jones. 10 points. are down yesterday, this kicks off after

asian markets gapped more than 3%. overnight we saw the shanghai, drop again. it is not nearly as bad as yesterday's loss of a double. indeed, europe is skating today. held draghi will be speaking. ftseee the dax up and the as well. bear markets are in a market, they are already solved the down more than 20% from their highs. take a look at u.s. majors here to date. the dow and the nasdaq, this is just in 2016. we are down 10% already this year. david, this is the worst year we have seen for u.s. equities since february, 2009.

david: extraordinary. with sir richard branson. the founder of virgin atlantic, version mobile and many more companies. good to have you here. let's start where matt left off. you are involved with businesses that trigger the market. what messages are you getting right now? not too worried about what message i get from the markets. expect businesses to do greater still. collapse, not because of a global recession but because it exceeds demand and you have now got iran coming on putting half a million barrels a day on and that it will go up to 3 million barrels a day. low fuel looking at

prices for many years to come. stephanie: how much of a positive impact will it have on you? richard: it will have a positive impact on not just airline owners, but on the consumers, and people who stephanie: are buying things. i'm not seeing that anywhere. it will come through quickly. that is why it is so baffling at these markets are behaving in this way. europe and america are not that dependent on china. am completely baffled by the fact that they are cutting all the shares down by down 30%. will be a lot of winning companies in this and there will be some losing companies but more companies will be winners in losers. stephanie: you are expanding to

china which makes it sound like you have a holy scroll there. sounds like you are bullish there. richard: i think it is still a great economy. and yes. i'm not too worried about the long-term. even if china is major, it won't have that big of an effect on the united states or europe. the end result will be lower commodity prices so i wouldn't want to own a commodity company. you have a major strategic alliance with delta. how has that changed your business? richard: virgin atlantic has benefited enormously. delta airlines are the most

profitable in the world. and we have ared very good partner. they are delightful people to work with which is also a pleasure. partnershipthat affect your decision about international expansion? i doubt we would be flying to detroit if they weren't our partners in america. so there is no question that it affects our decision-making. stephanie: let's talk about the years to come. comingyou see changes given the pressures of the global economy. you have got no worries here? withrd: we were doing fine fuel prices at $149. so the prices will come down and more people will buy and we will make our profit. stephanie: equity prices are getting slashed, why are people going to go on vacation?

right now, it doesn't feel that way. one of the reasons that bernie sanders and donald trump are doing so well is because the people are sad and depressed. america only has 5% unemployment and a has been reduced from 16% since the recession. america is growing at 3% a year. themselves contort to talk people into a depression. but it is not such a bad country. david: let's talk about what could be a cloud on the horizon -- grexit. what is your view? it is likely to happen this year and i think it would be a great mistake if any country who is part of the european union was to leave it. britain is part of

the european common market but it has managed to exclude itself from the things it didn't like. itself completely would be a mistake. david: you believe the referendum will keep them in the common market? richard: yes. i would say that it is much more that britainot will stay in the common market. they are sensible people and they aren't going to shoot themselves in the foot. the pound is being affected and if we were to pull out of the common market, the pound would drop. stephanie: sir richard thank you for joining us. you are watching us live from the world economic here in the ..fice -- in davos

♪

welcome back. we are on the markets ahead of a decision by the ecb in a few minutes. jonathan golub joints they now. brendan greeley is going to join us as well. is walking out here on set. let's take a look at the futures. we see drops here across the board but a slight recovery. the s&p futures are now down about one third of 1%.

and the nasdaq as well. jonathan, let me turn to you and ask. the wildou think about ride that we had yesterday? beseems to be kickoff -- kicked off by the massive drop in asian stock. i woke up this morning and checked the asian markets and i wonder, is it possible for u.s. equity markets to recover while they remain in freefall? jonathan: i am looking at the fact that there is green and europe. and what is happening in china is a disconnect from the global economy, it is more about the chinese stock market. is it possible for u.s. markets to rally if they continue to fall further? for the: is it possible u.s. market to rally his oil keeps falling by one dollar a day? absolutely no. we need oil to stop leading in

order for the market to get its legs under it. but itl go back to $45 needs to stop falling. matt: let me ask about the european numbers that we are seeing now. are they waiting for mario draghi to bring a bazooka with him? brendan: what we are focusing on is the tone. expect the economists that he will change it. but in the fall, you and i sat here and we listened to his changed tone. he was thinking about all aspects. and then they extended it to march of 2017. what we are looking for now is a press conference where he will talk about inflation. do they expect they will reach the 1% target? markets don't think so, it is the ecb going to change its

mind? next year they are seeing 1.6% inflation. that isn't anywhere in the world. so we are looking at what kind of changes they will make in the next meeting and are they beginning to get realistic? matt: what do you think? jonathan: i'm looking at profit growth in here of. pm eyes in europe are strong. year, the dollar put downward pressure on emerging markets. that effectively reallocated to japan and europe where we have greater economic strength. so we have to separate the health of the economy, which is on the mend, as opposed to the stock market. brendan: i don't think this is an exchange rate move. one of the things we're looking aspect right now. so to what you are saying, i think the ecb is not focused on trade that on inflation.

that is what they are looking at. good jonathan makes a point. with oil continuing to slip, it makes it difficult to operate. decision inthe ecb about 10 seconds. for the decision, it will roll across the terminal at any moment, we will look at a rate right now of 0.5%. brendan points out that nobody expects that to change. and is the benchmark rate indeed, we got the decision out that rates are unchanged. in johnson is standing by london. we didn't expect the rate to change but are we going to get any kind of smaller decisions about the benchmark rate? guy: no, i don't think you will get anything. it has been six weeks since the

measures were announced by mario draghi so it is unlikely that you will see anything. the press conference is all going to be about the tone. how dovish will he be? that is the real question the market is asking. the ecb has a single mandate and that is inflation. it needs to get inflation up and it has been too low for too long. you also have the deflationary andlse coming out of china, the ecb will do something in 2016 and it may be in march when we get the next projections out from the ecb and we seek further provisions or it could be later in the year. it will not be now, it is too soon. but listen to the tone. what will mario draghi say? oil,an: to his point about i am wondering whether he is looking at core and whether he is threatening core inflation.

they have a problem with topline inflation. it is very hard to get that up when you see the drop in oil, but when you do, that is something they don't talk about. of this,ghi is guilty janet yellen is guilty of this. when you strip out oil, you still have a problem with inflation. there's no way to hold the price changes that the drastic drop in oil has created. it has to bleed into other things. jonathan: they also look at inflation differently. as a propertynt for what our housing costs is and therefore we have a much higher inflation number, not because we have more inflation but because rentals in new york and cleveland are up. when you measure them that way, we all have a much weaker inflation rate.

brendan: however you measure it, they are nowhere near their target. matt: exactly. its benchmarkft rate unchanged. it has left the main refinancing rate unchanged. 0.3%. we don't seem to have a reaction, the market is well set up for this. we see the euro-dollar trading at 1.0907. if you hear anything more dovish in the press, you could see the becausel further obviously the fed is headed, for now, in the other direction. look at u.s. futures and see where those moves are. we are down across the board. we aren't seeing the kind of drops we saw earlier. by 3.5ures are down points.

we were a look at a drop of 100 and european markets, we work up across the board and we are still looking at gains, euro 1% -- a0 at a gain of gain of .6%. guy johnson, brendan greeley and jonathan golub -- thank you so much. we will continue to give you coverage. stick with us on "bloomberg ." when we come back, we go back to davos. ♪

stephanie: you are watching "bloomberg ." and we are in davos

talking markets. are there still deals to be done? here,e stephen pagliuca he is the director of one of the equity markets. every dayt be trading but valuations are going down. does that mean you are looking at buying opportunities? could it be m&a? loveen: that is why we private equity. you are allowed to invest in year times.r 5, 10 yes, valuations go down. erik: the cheaper you buy, the better your return. are you buying now? stephen: we are fortunate. we proceeded with caution because all you nations were high. because valuations were high.

and now the s&p is at the 50 percentile. that means more deals for avid equity. every equitymuch deal requires leverage. stephen: we haven't had that problem. you recently talked to richard branson. we just merged -- we just announced a deal to start virgin cruise lines. we haven't had an issue with that. there is more equity in the deals but the financing has been fine. stephanie: how about yahoo!? stephen: we can't talk about what we are specifically looking at. i think you know we coverage media heavily but yahoo! is looking at strategic alternatives. erik: given what is happening

with markets right now, what is the process? you still have something. what is the process of taking a company private? stephen: we do things we believe in. over an amount of time. when it is appropriate. i guess you could say, have been lucky. i think the prospects are very good. we are already seeing greater deals right now. we have talked to many ceos here banks are lending. the banks are in better shape than i have ever seen them be. so i'm hoping this is just a market correction with the market recognizing that the world has slower growth. it is being pulled down by china and oil but oil is positive. when you talk about $70 less per barrel, it is a massive dividend

to the u.s. and other economies. at allie: when you look the sectors that you follow that you invest in, without naming names, is there a specific sector you think is most attractive? stephen: financial services has been hit hard and we have done some interesting deals in the payment space. it has been a big success for us. so i think the payment space is interesting. space ishe technology interesting, valuations have come down a bit. and the u.s. has created an ecosystem -- there is so much going on that will revolutionize value shock. another question about the oil shock. from oil funds has to be difficult right now. stephen: again, we haven't had

that experience. if you step back, the sovereign wealth funds are diversified. i have large portfolios and real estate and equities. so i have heard some rumors that they are selling but i don't think that's true. i think they are in the normal pattern. have are countries that interest income and dividends income as high as they are oil income because they have been investing in avid equity for 20 years. stephanie: janet yellen, issued going to continue to raise rates? general, it is going to be proceeding with caution. stephanie: proceed with caution. we will be back. ♪

david: welcome back. stephanie: it is a beautiful day here in switzerland.

in a few moments, we will be sitting down with james gorman plus an exclusive interview with marc benioff. and later, we have muhtar kent. we also will be carrying mario draghi's news conference live in 30 minutes. we have to take a moment and think about the disconnect. so many positive ceos have long-term views. haven't found one yet who says the economy is in trouble and yet the markets are screaming at us. you back: let's take to new york where matt miller is giving us a snapshot of the market. matt: we saw a recovery in futures after the ecb decision. although the ecb left its benchmark financing rate unchanged. here is the s&p futures, now

down only two points. take a look at oil. our eschewed viewers will notice that oil is down 1% and yet, it is trading at $28.08. the reason is, we have switched contracts. the march contract is down from where it traded at yesterday. currencies, the ruble got our attention yesterday when it fell to a low. ruble has fallen to an all-time low and if you take a , you will terminal see that hedge funds are short. net short against the ruble and they will remain that way. that will be a problem for this currency, especially adding to the fact that oil continues to fall.

this.y, take a look at anything mario draghi says could change your euro. when i am watching the euro during a conference like this, i keep my screen like this. this gives you a live trade of the euro. interesting stuff. for more perspective on the global economy, we welcome james gorman. with us in switzerland. stephanie: exactly one year ago, he was sitting with us as mario draghi spoke. he got everyone comfortable and said it was time to ease. >> that is the question. that depends on whether you think this is a temporary correction or something more systemic.

james: the violence would suggest that it is not temporary but on the other hand, the absence of the fundamentals to support it shows it might be. what we're seeing here is a solid reaction against global economic growth. this is not a bullish outlook. but we do have solid growth. erik: how do you explain this? james: the markets are not rational. the animal spirits do rain. companies that were worth 40% -- the thinghs ago that is different is oil. stephanie: did they deserve to be worth 40% more six months ago? there were many companies who wrote the momentum wave. we didn't see a lot of fundamental analysis done. even the there's eventually capitulated and they got killed

for it. james: the banking stocks were trading at 1.2 value, historically, you sold them and now they are trading at .8. what happened? what has fundamentally changed in the banking system? the markdownjust will continue for five months. stephanie: banks exposure to emerging markets -- there has been a global markdown. james: that is our job as bankers and they will take marks and hits over time but not at this pace. the fundamentals don't support this violence. due forsaying we were some form of connection but not this. stephanie: the financial crisis happened just six years ago at people don't have full confidence back in the market. so as much as you can say banks are this or that, they are also long and bloated.

maybe people are being defensive? james: the facts don't support it. today, the banks don't support it. erik: most of the people here in davos don't have anything -- don't know what is going on is it a market. but morgan stanley does. do you see your company taking risks? james: no. i don't have access to that kind aggregate, no. i think stephanie's point is right. there is a lot of scar tissue from the financial crisis. throw in the noise about china trading, whichs nobody anticipated, and it would take a brave person to step in at this point. but if brave people step in now, they will see it as a buying opportunity. erik: so before we bought them in this correction, people have to look at this as an opportunity. james: it might be too soon.

we have just seen the china numbers. 6.9%, is it really 6.9%? we are now hearing talk about oil going for long $20 a barrel. erik: do you think oil will go below $20? james: i don't know. i didn't think it would go below $50 a barrel. stephanie: fantastic point. james: nobody was out there with this prediction. the facts don't support it. there is an extensive supply that is being pushed out of the system and to be pushed out, ucb ,ommodity cycle -- pushed out which you see in the commodity cycle. it happens again and again. stephanie: much of this has to do with dodd-frank. if they were not in place, would morgan stanley and banks like them because it in? james: i don't think so.

i think that is overstating it. what dodd-frank did was to over capitalized the banking system. has that taken liquidity out of the market? has it contributed to volatility? i'm sure it has. visceral, animal reaction to whether the world will be a safe place from an economic perspective. stephanie: if more investors are scared, how could that affect your business? james: it remains a phenomenal business. our revenues and profits are up 12%.e present -- up by dailyction activity on a basis drops during times of stress but at the same time we are doing other things to grow the business with banks and lending processes. erik: all of the european banks

appear to be trying to do what morgan stanley is doing. toling back on fixed income various degrees, going big in equities and investment banking. what is got going to mean? in the business of setting prices in fixed income is going to be left with a smaller -- sure that itt as is as straightforward as that. talk aboutt to counterparties. but they are all reassessing their business models. there are very real capital changes to the industry. this industry was operating with returns of 25% precrisis. capitalroducing the new rings us returns to 10% or lower and then when you add in the relevance of. present -- relevance of dodd-frank, it gets

pushed further. -- people are asking questions about whether it returns above capital. and that is a restructuring that will be going on for several years. we were fortunate that we bought smith barney at the time that we did. stephanie: if energy hadn't gotten hit as hard as it did, would you be making such a pullback in fixed income? a lot of that had to do with that 30% of the markets are oil-based. do thisdn't seen oil would you be making a pullback? james: it has nothing to do with oil, to be honest. brisklyit business is a for -- and you put them together and ask what is the right route? we are good at securitized lending. we are good at businesses that

support our m&a franchise. the core for exchange businesses -- but there are the things we didn't need to be in. stephanie: isn't a way to cut high-cost headcount? those are traditionally things that get paid a whole lot money. i don't mind people making a lot of money. but what we worry about is the revenue to support it. we look at it from a business model perspective. optimally,rtably -- what kind of fixed income -- james: we laid out clear targets. we said the firm should be generating up to 11% in 2017 and our stock is trading, present in a number lower than that. we are confident in our ability to get there. stephanie: how do you make sense of where morgan stanley stock is

trading versus other banks? how do you make sense of that or turn it around? james: if you look at the largest six banks in the u.s., we are trading at number three or number four. in the last six months we have had a more difficult time that i have a time frame much longer than six month. the last three years we have been the number one performer. erik: speaking of a time frame longer than six months, you have decided to stay on as ceo at chairman longer. technically, the board makes that decision. i believe that having long-term succession planning matters. i gave the board an indication aat given my age, that five-year time felt very reasonable and they are

supportive of that. i wouldn't be near the retirement age at that point. so it gives the organization's ability to move forward. erik: might it be longer than five years? james: i don't want to predict that. stephanie: over five years, that is too much. someone who we look to for stability is janet yellen. she raised rates last year, but we are seeing a different picture now. as far asnge courses cutting rates? i would be stunned. stephanie: stunned. does she have to hold off? will be think she driven by the factors she has laid out clearly. unemployment. we may have a full handle on unemployment. it is extraordinary. it is not a zero interest rate economy anymore. james: but you have a frustrated america who are sad about jobs,

that is why you see donald trump and bernie sanders doing well. you are not going to try to get me on the political process. ready to you getting be used to the idea that donald trump is a leading candidate? james: that is a leading question. i think people get to observe candidates under question. this is what democracy is all make their mind up about what they want. stephanie: james gorman, chairman and ceo of morgan stanley. thank you so much for joining us. when we come back, my interview with marc benioff. ♪

matt: welcome back to "bloomberg ." let's take a look at the futures after the wells ride we saw in equities. $28.11, it ist down almost 1%. the contract has switched over and we are now trading for march rather than february. let's take a look at futures. we saw a slight recovery. we are headed up after the ecb decision. mario draghi is leaving the benchmark rate the same. the financing rate is at 0.3%. that pushes futures to a gain. we are seeing the s&p up four

points. the dow jones is up 12. just about 14 minutes until mario draghi begins his press conference. you will want to watch the euro trading if he becomes more dovish than he is. that will push it down against the dollar. finally, take a look at united airlines and southwest. we saw southwest beat earnings and united missed. the ceo has been on leave because of a heart transplant but he will take part in the conference call. let's go now to the first word news with vonnie quinn. vonnie: thank you. russia is reporting -- russia is rejecting a london report saying the vladimir putin approved assassination of a russian spy. agents were working on orders that may have been approved by putin.

radioactivened by -- germany's finance minister says that solving the refugee crisis will cost much more than expected. spends will need to billions of dollars to deal with the influx of refugees. trying to come up with the more than $3 billion to house refugees. global news, 24 hours a day. i am vonnie quinn. now back to davos. stephanie: i am here now with the ceo of salesforce.com, marc benioff. salesforce has had an extraordinary run but here at the economic forum there are talks of economic headwinds around the world. how do you face them? are fast know, we

growing. it has been an amazing year for salesforce since we last saw you a year ago in this beautiful community in davos. excited, i love coming here because it reminds for all ofpportunity these companies to do more. here with this incredibly -- this incredible message blows me away. stephanie: but if we are facing , will economic downturn we have conversations about collaborating at what we will do next? the more companies i talked to, it feels like survival mode. marc: i don't think you have a choice. the reality is, if you want to be a great company and leader, you want to add value to the world. we saw this incredible panel on europe. if you want to help things in

europe, it is businesses that are the platform for change. and these businesses that are here can make the world better place. it is the leaders who are here that can make the world better place and that is why i love coming here. son i get here i am motivated and inspired and it gets back to in 1972, the founder of the world economic forum came up with this simple idea to hold a stakeholder theory. businessess that can't just focus on shareholders. they also have to focus on stakeholders. stephanie: but you have to focus on shareholders. the last time we sat down we talked about yahoo! and marissa mayer's and how talented you believe she is at her company has taken a beating as has she. here. i don't see them

i would point that to shareholders. marc: if you want to build a great company to have to focus on your stakeholders and not your shareholders. that does include your shareholders but also your your employees, the environment we live in. there are many critical stakeholders and if you can bring it together -- salesforce is able to a stakeholder company. we are a company that manages and focuses at leeds and grows by thinking about the fact that we are in a new world. and in this new world, we all have to pull together in a smart make andake on these difficult challenges that are going on. that is the only way we will get through this. in our last conversation, you told me we were a customer business. what happens if your customers have to tighten their belts?

what will that do to your relationship with salesforce? things look bleak. look at where some of the stocks are trading? isn't an stock market indication of economic growth in the world. certainly you have challenges in the world. china and oil. when we met last year, it was a $2 trillion economy and it is not. neverso, the dollar has been stronger. so companies who are reporting the dollar are going to start looking weaker than they actually are. i know you haven't had a chance yet, because you are trapped up here but there are a lot of people who are optimistic about the economy. people don't realize the economy

goes through an extension. and downs, there is a season for everything. the reason we come here to davos is to work on that muscle of how to build stakeholder companies. stephanie: you have had an extraordinary run. we are looking at many companies that are struggling. do you think that will continue as we beef up the muscle. will you focus on acquisitions? marc: we focus on acquisitions all the time. but does this environment make it more attractive? know, when you are publiche will look at and private companies and say, are there other organizations who will come in? partsitions have not been

of the core strategy over the past few years. we did a major acquisition a few years ago and then we said, he will hold back but that doesn't mean we don't do smaller acquisitions. be aext ones will probably little cheaper because capital might be more restrained but our business operation doesn't get affected. 2001 ashrough this in the ceo of salesforce, i also went through this in 2008. focusedearned was keep on your vision. stay focused on your values and customers. this is what is important. connecting with your customers in new ways. understanding what the new challenges are. this is an opportunity for incredible growth in marker chair. stephanie: what is your message who lookies out there at this market and to say, i am

never going public. marc: i think the companies who do not go public will be in a very difficult position because capital may be more constrained for them with valuations that may not be as lofty. if we really move into more of a recessionary type environment on thoseal basis then startups are going to have to raise money. stephanie: things are as lofty in davos and they should be. we have true global leaders changing the world. but take us back to silicon valley where people have felt good about themselves as the innovators over the last few years. is that going to change? unicorns.about dead marc: i think we are going to have a lot of dead unicorns.

my message has been now, for who time, these companies are great companies need to get out of the public markets and they need to ride the same public market roller coaster as every other company. you peeled -- you build strength in your organization and become better leaders if you are able to operate in this environment. anyone can go through the good times. it is during the bad times we find out who the leaders are. stephanie: and who your friends are. marc benioff is live here in davos, no dead unicorns on this mountain. ♪

>> welcome back to "bloomberg ." we are waiting for mario draghi to begin speaking. you see him walking out there appeared essential bank left its key interest rate unchanged.

bank. european central here, you can see u.s. futures which have been in the red all right now.all they climbed higher and higher. european markets continue to rise. i'm watching the euro on my screen, little changed right now. that could change drastically if mario draghi begins his speech and during the q&a. function, gipt lets you see a live screen of the euro. let's listen to mario draghi. >> we will now report on the

outcome of today's meeting of the governing council which was attended by the commission vice president. regular economic analysis and the recalibration of our monetary policy measures last month. we decided to keep the key interest rates unchanged and we expect them to remain at present or lower levels for extended p eriod of time. regarding our monetary policy have as, we continue to favorable impact on the cost of credit for firms and houses. taking stock of the evidence available at the beginning of 2016, it is clear to monetary policy measures that we have adopted since 2014 are working.

, developments in the real economy, credit provision and financing conditions have and have strengthened the euro area's global economicsi shocks. decision to extend our net asset purchases of 60 billion ofos to at least the end march 2017 and to reinvest the principal payments of mature is to securities for as long as necessary were fully appropriate. they will result in a significant addition of liquidity to the banks and will strengthen our forward guidance for key interest rates. , as we start the new year,

downside risks have increased again. amid heightened uncertainty about emerging-market economies 's growth prospects bu. volatility and geopolitical risks. in this environment, euro area inflation dynamics also continue to be weaker than expected. it will therefore be necessary to review and possibly reconsider our monetary policy standards. at our next meeting in early march. macroeconomic projections become available, which will also cover the year 2018.

, work will bee carried out to ensure that all the technical conditions are in place to make the full range of policy options available for implementation if needed. explain in greater detail, starting with the economic analysis. euro area real gdp growth was -- supported mainly by private consumption. the most recent survey indicators available up to december .2 ongoing real gdp point to ongoing real

gdp growth. we expect the recovery to proceed. dimension should be further supported by our monetary policy measures and their favorable effect on financial conditions. as well as by the early progress made in structural reforms. renewed fall in oil prices it should provide original -- additional support for household income. in addition, the fiscal stance in the euro area is becoming expansionary, reflecting in particular measures and supportive refugees -- and supportive refugees -- in support of refugees.

recovery continues to be dampened by subdued growth prospects in emerging markets, volatile financial markets, the necessary violence sheet adjustments -- balance sheet adjustments in the number of sectors and the sluggish pace of implementation of structural reforms. the risk to the euro area growth outlook remains on the downside. particular to the heightened uncertainties regarding developments in the global economy as well as to further geopolitical risks. these risks have the potential growth and global foreign demand for euro area exports and i'm confidence more widely. -- on confidence more widely.

inflation was 0.2% in december of 2015 compared with 0.1% in november. the december outcome was lower than expected. renewedeflecting the sharp decline in oil prices as well as lower food price and services price inflation. current oil of prices which are well below the ago,s observed a few weeks the expected path of annual inflation in 2016 is now significantly lower compared with the outlook in early december. currentlyrates are expected to remain at very low or negative levels in the coming

later and to pick up only in 2016. thereafter, supported by our monetary policy measures, weeks --k an economic recovery inflation rates should continue to recover. the risks of second-round effects should be monitored closely. a more comprehensive picture of the impact of oil prices and other external and domestic forors on the outlook inflation will become available 2016 ecbrch macroeconomic projections which will also cover 2018. turning to the monetary analysis, recent data confirms a -- the annual rate

of growth standing at 5.1% in 2015 after 5.3% in october. continues to be mainly supported by its mostly liquid programs. with a narrow monetary aggregate and one growing at an annual rate of 11.2% in november after 11.8% in october. long dynamics continued the path of gradual recovery observed since the beginning of 2014. in annual rate of change loans increased to 0.9% november 2015, up from 0.6% in october.

developments in loans to enterprises continued to reflect the relationship with the business side come a credit risk and the ongoing adjustment of financial and nonfinancial sector balance sheets. rate of loanswth to households increased to 1.4% in november compared with 1.2% in october. the bank lending survey for the fourth quarter of 2015 points to further improvements in demand for bank loans. supported by the low level of interest rates, financing needs for investment purposes and housing market prospects. -- increasingds positive pressures and retail

banking. easing oned to a net loans to households for house purchases. , the monetary policy measures in place have clearly improved borrowing conditions for both firms and houses. as well as credit flows across the euro area. , a crosscheck of the outcome of the economic analysis of the signals coming from the monetary analysis confirmed the effectiveness of the monetary policy measures in place. and the need to review and possibly reconsider our monetary policy stance at our next meeting in early march in order to secure a return of inflation s levels below but close to 2%. is aboutpolicy

maintaining price stability over the medium term. it's economic stance supports economic activity. in order to reap the full benefits from our monetary policy measures, other policy areas must contribute sizable he. structuralnued high unemployment, the ongoing cyclical recovery should be supported by effective structural policies. in particular, actions to improve the business environment, including the provision of an adequate public interest for structure -- infrastructure are vital to boost jobnvestment, creation and increase but activity. -- but activity. -- increase productivity.

it will not only lead to higher sustainable economic growth in the euro area, but also raise expectations of higher incomes and accelerates the beneficial effects of reforms thereby making the euro area more resilient to global shocks. fiscal policies should support economic recovery while remaining in compliance through the fiscal rules of the european union. full and consistent implementation is crucial to maintain confidence in the fiscal framework. come allme time countries should strive for a more growth friendly composition of fiscal policies. we are now at your disposal for questions.

>> you said in your opening statement that you could possibly reconsider the monetary policy stance as soon as march. what measures do you still have -- from a second question, would it be possible to clarify -- we heardsition the ecb was not involved in the decision. would you be involved in decisions taken by the bank of portugal in the future? mind, we are not the

resolution authority. that is an important point to keep in mind. as far as you are first question just recall, let me my speech in new york. during ouruoted discussion today. all, we have the power, the willingness and determination to act. to how faro limits we are willing to deploy resources within our mandate to achieve our objective for the rate of inflation belo. there should not be any doubt about that. we have plenty of instruments

come as you know. we did not want to discuss today the specifics of the instruments. but rather to determine and assess the stance that we may have to take in march. -- it will again therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early march when the new projections will become available. communicatedready no interference on the decisions what you asked about. from now on, also, there is a

single resolution authority in europe. abo will be applied by that resolution authority. if we are talking about smaller banks, by the national resolution authority -- it is not for the ecb to implement the rules. >> you commented at the meeting last month that the monetary stance is adequate. it now, sing you want to review it again. -- saying you want to review it again.

credibility that you want to act so swiftly? after these multiple stimulus programs, inflation is still near zero. is it a sense that central banks don't have as much control over inflation as that used to -- as they used to? >> first, let me say that our monetary policy measures that we have undertaken since mid-2014 have been quite effective. in december, are measures -- our

measures were effective. they were entirely appropriate based on the circumstances that were prevailing at the time. the circumstances were basically looking at several variables. rate in effect in terms, we looked at the price of oil, we look at the growth prospects of emerging market economies. these circumstances have changed. of oil has the price fallen by 40% since the cutoff date of the last projections. you can observe the situation of the markets, both financial and

monitor markets and the geopolitical developments since then. in december were , the decisionant st.reinvent amount, about two thirds of the original size of the program. these conditions have worsened. the credibility of the ecb would be harmed if we were not ready to review and possibly reconsider monetary policy stance when we will have full information. as i said before, the governing council that has the power, the willingness to act and the fact

that there are no limits to our actions within our mandate. let me add one other thing. relevantctually quite -- the governing council was unanimous in being committed to this line of communication. i think there was another question about the power of the central banks to control inflation. that is a very important question. that we are clear adopting our instruments to the changing conditions. the conditions change because some global factors are at play. doing whatever is

necessary to comply with our mandate. surrendering in front of these global factors, actions. so, we will confer our determination to continue to comply with our mandate. which is to reach a level of inflation that is below but close to percent -- close to 2%. even more so in face of adverse the elements. -- adverse developments. -- mr.mberg news president coming you have said that there are no limits to what you can do. what i would like to ask you, if you could clarify a bit how this

extends to potential scope of classes of assets completely out of your scope, such as equities or something else? doesn't mean you could lower rates -- does it mean you could lower rates on the main rate? is the refugee issue in europe -- are you concerned about the recoveryr the european from the border closures? thank you very much. there are no limits. you should see the reference to the technical work. in the meantime, work will be to make the full

range of policy options available for implementation if needed. we are toke sure if decide about the specific policy instrument, we will be absolutely confident that there are no technical limits to the size of its the planet. deployment. on the refugees, i have commented on this in the past. the refugees are an external redevelopment -- extraordinary development which will be changing the face of our society in europe. it is in our hands, the opportunity, capacity, ability, that might to transform this

development into an opportunity for future growth of europe. thank you. >> new york times. you referred to financial turmoil. the biggest bank in germany reported its biggest loss ever yesterday. you concerned about the banking system or financial stability in light of what is happening in the world? as far as our monetary policy is concerned, when these market developments in this heightened volatility in financial and commodity markets translates -- may wellist tightening ofr in

the financing conditions and therefore is one of the reasons we willi read before, review and possibly reconsider a monetary policy stance in march. , constantlyoring andtoring markets generally, the financial sector, seebanking sector trying to if the monetary policies could become a source of financial instability. , we have not seen signs of potential financial

we'veility of the like seen in the precrisis times. our mandate is a mandate to reach price stability. it is not a mandate to protect banks's profitability. aware ofare of this -- the consequences of this. we must ensure the overall economy returns to growth, sustainable growth with price stability. that is the best answer for the stability of the financial and banking sector as well.

>> one of the constraints on your purchase is of a political nature. that is the p. -- capital key. will that generate a political problem? my second question relates to banks again. it seemed turmoil in financial markets. have you spotted any sign or the potential for any stress when it investor'se confidence in the banking sector? thank you. reallyfirst question is -- we never addressed that. we designed our program according to certain parameters. so for come our program is

proceeding smoothly. if they were constraints of any kind, we would make sure we use the constraints to their full ability. best answer to these recent developments in financial theets is to make sure banking sector is resilient. confident that all the actions we now have taken both in europe as well as elsewhere in the world have actually produced a much stronger banking sector than it was before the crisis. but one should be very cautious too selft not being complementry.

the gyrations we are observing in financial and commodity times wouldther -- at that time. so far, we've seen actually that they stand pretty resilient. >> i have two questions referring to risks. first, china. of feasibility and how the chinese government will deal with the soft landing

-- that makes a lot of people nervous. i want to hear from you how this topic was discussed today. thatd in the minutes china's risks were more understated. perspective,an chancellor merkel has taken a big risk with her policy. that leads to a lot of criticism inside of her party. which could make the situation worse. some people guess that she could maybe leave. how do you assess whether this domestic policy in germany -- on the first question, first

of all, let me make clear that the reference to china in the accounts of our meetings last -- theght to be read accounts reflect the opinions of some participants in the discussion. coming to the substance of your question, there have been at least three main developments in recent weeks in china. the first was a pmi which was weaker than expected. the second was the overall situation in the forex markets. the third was the situation in the stock market. generated sizable capital outflows. we are carefully monitoring these developments. so far, all the economic

indicators show that there is a by and deceleration large in line with our expectations. the outlook for the euro area has been revised downward. the effect of these developments on the commodity market are quite visible, there has been renewed declines since mid-october. with oil prices and commodity new lowsving reached by the end of 2015. as far as oil prices are concerned, we have low supply and demand factors. what is happened in china is contributing to the demand slide

of this develop an. -- what has happened in china is contributing to the demand slide ide of this development. it was recalled that the chinese authorities have a reputation for acting responsibly. done in the last two weeks shows they are gaining control over their policymaking. refugees, the nature of your question is important. there's little i can do about how the refugee issue is being viewed in one specific country. i can only give a general impression of how we view the whole phenomena.

structural important , sociopolitical change. it could become an opportunity. that is not for me. thank you. >> i would like to pose a question on the oil price. wouldn't it be better to ignore the impact of the lower oil inflation? oil prices go up and down and then up again. waitot just be patient and for the oil price to rise and then get the higher inflation rate?

why is it so important to look at the oil price? to what we are looking at when we have these dramatic movements in oil prices and commodity prices. we look at three factors. the first is the persistence. of these changes. it is quite clear that if it were to be a short-term effect, as you seem to hint at, we would look through. that has not been our experience. of the last two years, at least. materiality,e namely the size. when you look at that, it seems projectionshe last

in december, oil prices fell by 14%. we look at second-round effects. namely, whether lower oil prices and low commodity prices do feed into other prices. generate exactly what we want to avoid. namely a spiraling downward phenomenon. so far, we don't have that. we have to be very vigilant about that. even when we look at the recent developments in the inflation core, we don't have many reasons to be optimistic about that.

when we look at the wage development, we don't have many reasons to be optimistic about that. we have to take seriously the fact that low oil prices, low commodity prices for a long period of time may have second-round effects that we definitely want to take action against. >> thank you. draghi, you mentioned the three major factors you take into account. namely the exchange rate development, the oil prices and the emerging markets slowdown. i was just wondering if you can

give us a sense of the combination of all three at the moment given the slowdown or deflating china effect on both financial market volatility and oil prices. thequestion relates to global selloff of equity markets that creates a lot of free liquidity. an option of a safe haven, the assets that are purchased by the european central bank might be the target for free money. thist you worried that development, should continue, would jeopardize the targets of the ecb? >> thank you. factors.t many other

by the way, let me state once again the exchange rate is not a policy target. it is pretty clear that our actions have an effect on the exchange rate. i'm referringates to is not effective exchange rate. effective exchange rate. it takes into account the actions of a variety of other countries. price and the growth prospect in emerging the outlookmies -- for inflation. at,'s what we are looking what we are monitoring. that's why i said we will review and possibly reconsider our monetary policy stance. your second question is very difficult answer.

we see major movements in the marketplace. what could be the sources of this movement? it is difficult to assess. whether there will be transient, short-term movements or persistent -- whether the markets will adjust to a different level or not, these are all questions that market analysts are better positioned to answer. >> i would like to go back to the question of financial stability. s andelling in stock market bankshares -- especially italian

rank shares. .- bankshares you are the supervisor of these entities and you have conducted a copperheads of assessment last year. you've given a clean bill of health to the banks. the markets seem to be disagreeing completely with your assessment. they keep selling. i wonder what your assessment is of that. abouther question is npl's. an acute problem. you requested information about npl's from a dozen banks. purpose ofplain the this exercise and why these banks are singled out for further action on top of the

companies of assessment -- comprehensive assessment? >> that is a good question because it allows me to clarify what is a significantly confused perception. there are very good reasons for returning to normality. were of all, the npl's fully identified and assessed by the comprehensive assessment. this is nothing new here. againstthe provisioning these npl's was determined by the comprehensive assessment. newh means that no unexpected provisioning nor new unexpected requests for more

capital will be made by the supervisor. specifically on italy, the overall reading is that italian banks have on average a level of provisions similar to what is prevailing in the euro area. also a fairly high level of guarantees and collateral. the fifth point, the european supervisor -- i'm commenting on this. we are in a separation principle. before preparing this answer, i likely consulted with the chairman of the ssf.

supervisor is fully aware that to deal effectively with the npl's, it takes years. it is not something that can be urged and result in a very short period of time. a good example is what is happening in ireland. which is one of the most successful countries as far as recovery is concerned. and regaining market access. they're dealing with the npl s gradually. we come to the questionnaire sent by the ssf. banks innt to several the euro area, not only the italian banks. what is this questionnaire? it is an inquiry on how the

banks are doing, are managing their nps. in other words, an inquiry on the governance of the process management. what is the purpose of this questionnaire? .his inquiry to look at different national to get one best practice. nothing more. it is not an initiative that would push the banks to deal with the npl's urgently. we know very well that it takes a long time. i think i've answered all your questions. there is no discrepancy. i'm sorry.

there is no discrepancy. it depends on the confusion that account ofted by the what this questionnaire was. all the questions about the bank and different valuations -- you heard about that as well, of course. come a singlenps number does not mean anything. each of them might have a number -- there are practices differing from bank to bank. valuation of an -- what central bank is managing this?

the process of valuation has to be a granular process. on the other hand, if one has in wholesale disposal of nps , one will come out with a number come a different number. that is the difference between a wholesale valuation and a granular valuation. the markets are disagreeing with the assessment made by the ssm. there has been a significant amount of confusion. i hope this exchange will help. thank you. >> if inflation is becoming a

long-term problem while the ecb is far from achieving its mandate, what is your message for countries like spain? whose internal evaluation is less effective. you said in december that we have to rethink the physical -- fiscal terms of the euro area. the european commission is sending us another message. you are marked on the necessity of infrastructure investment. we need a change in the fiscal policy in the euro sum. -- eurozone. point, i think spain is one of the countries that has a really -- has really achieved most significant reform and its

structural reforms especially. the figures that spain has enjoyed in terms of outputs, recovering growth and by and large all sectors are simply remarkable. on its country is now way to continue its structural reforms. , with very lowar inflation rates for long periods of time, the internal revaluations become much more difficult. why's one of the reasons come in a monetary union like ours, to objective of the rate of inflation close or below 2% makes a lot of sense. makes even more sense in a monetary union like ours.

the second point come i don't think there's any disagreement --ween the views of the ecb but the ecb has insisted in its own confidence because we are not the guardian of the fiscal ,olicy in the monetary union what we all be said is that should besolidation growth friendly. currentased on government expenditure control and possibly public investment with a high return. accompanied by the structural reforms which will make potential output growth.

>> thank you. my first question, in october last year, he said the governing council would extend monetary policy stance of the next meeting -- at the next meeting. the statement today is slightly different. it will be necessary to review and possibly reconsider the stanford is there any difference between these two sentences when it comes to substance and commitment? the second question is on inflation expectations. are you worried about the recent drop in inflation expectations, for example, the five-year --pared to the oil crisis

the correlation has decreased or disappeared. thank you. all, we've used a variety of inflation measures.n they have declined. more worryingly, their coalition -- correlation has increased. therefore, their correlation with oil prices also increased. second-round effects are especially important. the governing council has the power, the willingness and determination to act.

there are no limits to how far we are willing to deploy our instruments within our mandate to achieve this objective. this is after the press conference. >> which is your assessment of the results in the recent ?panish parliament --ld they have an effect >> i'm sorry, but i will have to abstain from making political comments. it is not in our mandate. >> before the december 3

meetings with the markets got ahead of themselves based on is that a risk or a concern now? what caution would you offer so people don't get overheated? >> that is a good question. they are all good questions. we are -- you probably noticed i abstain from making comments about markets, blaming markets. communication -- why is that so echo communication is a two-way affair. it is hard to put the blame of some disappointment on one side only.

that is what i want to say. , the governing council is open to use all necessary instruments to cope with the situation which is materially different from what it was in december. making very bold claims that the ecb is ready to act in its next march meeting. the last meeting has shown that the governing council seems to and pulled down by its more conservative members.

how confident are you that you can pull together a majority to further easing measures? i have a second question about the target, the ecb 2% target. ecbchief economist of the that theing today in theshould be achieved longer run and not in the medium run. 'scause it harms the ecb ability to reach the target. but do you think of this proposition? >> let me disagree with your reading of the minutes. they do not show such divisions as you've hinted.

let me restate that this line of communication today was unanimous. finally, to your more specific question, how you put together a majority for making monetary policy decisions -- that's what we've done over the last four years on and on. one should not have any doubt that the governing council has the power and willingness and determination and also the cohesion necessary to take the actions that are needed. thesecond point about objective of inflation. at a timerkable that when you have people suggesting that we should revise the inflation objective to something lower than 2% -- you have other people saying we should strive

to have an inflation rate above 2%. the camps are divided. the professor confirmed the validity of the objective of an inflation rate close to 2%. as the governing council definition of price stability. he also confirmed the validity hicp inflation as its objective. in which this objective will be reached is the argument of his hi interview. the view of the governing -- wel is that we issued should absolutely reject any

that we may do less than what is necessary to of the the objective inflation rate below for close to the inflation rate close to 2% without undue delay or it -- u ndue delay. in other words, the government counsel is affirmed in reaching the objective without undue delay. instrumentsoy the necessary to achieve this objective without hesitation. it is an objective in the medium substantial, there is a substantial agreement on this point. on the other hand, we have to understand each other, what medium-term is, what it is, so the status of the governing

council and the ecb is the following -- there are global developments. very recently, they are adverse objective.ing this is this a good reason to give up? no. it is not a good reason to give up. how do you give up? either accepting a lower objective, which we do not do, r that it will be reached in a very large number of years. we do not do that, either. we do not give up. >> on that note, we close the press conference for today. thank you very much. matt: welcome back to "bloomberg ." i am matt miller. our guy johnson is standing by in london with market reaction to i guess what could be considered a more dovish tone. guy? guy: i think it was.

the critical thing was that we saw what happened in december. the market was disappointed by what we got from the ecb, draghi making it very clear to the meetingthat it is now a in which we may expect some sort of a policy change. have a listen. in this environment, inflation dynamics also continue to be weaker than expected. it will therefore be necessary to review and possibly reconsider our monetary policy r next meeting in early march. clearly was not position for the accurate we have seen the euro have its biggest move down against the dollar in over two months. we have seen stocks rallying as well. that is something we have an watching very, very carefully.

it is the inflation expectation, matt, that is really the critical thing here, and that is what the market is paying attention to. he is talking about inflation being lower for longer. u.s. stocks just opening as well, the draghi effect writ large throughout all of them, and we see a bid coming through into bonds as well. a move in the german 10-year will be a bigger move. signals that he is willing to do more. matt: all right, guy, thank you in london. i want to talk about u.s. market because mario draghi's unchanged 7.45 lead to a turnaround in futures.

throughout his press conference, the gains -- we gave up some of the gains, and now we are looking at pretty much unchanged markets here. 1861, gaining just to point spirit i want to point out that aboutdo not fall today, .8% on the s&p 500, it will no longer be the worst start ever to a year for the s&p. 2008 will then take that title back because 13 trading days into 2008, we were down almost 10%. now we are down 9% year to date, so we could lose that title that .e probably did not want i want to bring in brendan greeley to talk more about the b decision,n -- ec mario draghi his press conference. we were chatting during the conference about the yield a change on the two-year, the five-year bund. brendan: the real mover in the

the five-year. they are not living together because only five-year, there is a shift tremendous off a cliff, 17% drop. matt: neil piling and to the five-year. brendan: that is saying that expectations have changed for inflation and economic growth. this is something that investors knew before. this is something mario draghi was confirming. expectations have been anchored a little lower, and we are really taking it seriously. i have to say looking at that, i think in the language of the presser, mario draghi is the least-subtle central bank or that we have. he would almost lean forward and wink to make sure people got it. we have no limits and no technical limits on what we can do. we are going to review and possibly reconsider. i have a three count on that. he would answer question and say, "i am going to review," "i

would possibly reconsider." matt: i would put the count closer to 10. , a me bring in david's ar chief market strategist. what do you take from the market reaction because we had clearly a rally on more dovish sentiment out of the ecb, but that has subsided here in the u.s. david: good morning, matt, brandon. -- brendan. initially, everyone got excited, but we lost a little bit in terms of the power of mario's worse. he is a new guy after this december meeting where he really i think tortured the market and did lead them astray, so the words used to be a lot more powerful than they are now, and i think we kind of see that a little bit in the reaction where we had a big pop up in the stocks as well

as the u.s., and we saw a big drop in the euro. talking, you know what, i'm not sure if i can trust this guy 100%. matt: is that because, david, some have accused him or the ecb at large of a little bit of a bait and switch for the last meeting. david: one of the last question, which he refused to answer, which he said was a great question, and then he started how dog, which was -- you manage excitations into this new meeting? road,t everyone down the doing everything in your power, the tools are very strong, and we have everything to go, and the bazooka is loaded, but the last time we all followed him with a bazooka, he sort of brought out a pellet gun, and that was pretty unfortunate for a lot of people who listened to many folks in the ecb, so again, i think there is a bit of a gun shy attitude in the market. you are talking about a market that is also trading with a pretty disconnected sort of risk asset do at the moment after the

worst start, as you pointed out, the worst start ever. i actually think these words are coming from a pre-december mario draghi would've had a much larger impact. things: there are other that he offered cured i heard him say twice, again, making sure we got the hint, that the governing council was unanimous on this strategy, that they are foreshadowing for march. does that make any difference for you, that the germans are on board? david: i think it does. but these things can change, right? it seems like there was a power loss last time, and you never know whether that is going to stick or not. sayot the authority to that. that is great, but getting the authority to say something versus getting the authority to act are two different things, and that will keep the market skittish. he was as dovish as he could be. he only talked about the new york speech, sort of a move away from what happened at the conference, talking about the power to lead, how it works, and

what they could do, and really trying to pick up the pieces from the press conference. he rarely referenced the press conference. he did everything he could in his power to try to redeem what one would have to call in retro a mistake in december, especially given what has happened since. i think he did a good job. but the problem is -- he is not as stressful as he used to be. matt: people, investors who took the hint last time, they ruled the day. will they -- they rue the day. will they take the hint this time if they lost last time? you so much. thank brendan greeley, also appreciate it. erik schatzker will join us from davos with david westin. erik: thank you very much, matt. we have diamond. -- we have bob diamond.

good afternoon. yourave done so much in career, being the ceo of barclays, the seven africa, people forget once what time you were one heck of a trader. with the trader's mindset, did you see this coming? bob: the fundamental underpinnings, china needed to slow down. leading into the slowdown, 40% was coming from investment spending. think about that. the peak and japan was 30% before the bubble. today in america in the u.s., it is 15%, so china had to have a slowdown. i think the commodity complex was going to be impacted by that, but the speed of these moves certainly surprised me and quite a few people. david: we have known that china's growth would be slowing down for a long time. bob: and we knew the fed was going to raise rates for a long time. david: exactly. why didn't the markets price this and to begin with? that is the

question people are asking today feared this estimate is far, what is underpinning this? what am i missing? the other thing that is certainly not cause that has impacted the speed and the depth has been less liquidity in the financial markets, and certainly post a lot of the regulatory changes, just and become a vocal seppe,basel three -- giu 3, it isule, basel less committed to market than it had been. erik: let's pretend that the volcker rule did not exist. with the bob diamond of barclays be in a market like this, making market for clients? in sevenre now countries. we have acquired eight banks. seven closed in africa.

15 keyget is 10 to countries could we see this as an opportunity to invest that these levels. we think this is a positive time to invest your it obviously, there is less competition to acquire thanks. i start lower, the currencies are better, so i do think you will see investors -- acquire banks. prices are lower, the currencies are better, so i do think you will see investors. david: the capital market has gone into big hedge funds to have $1 trillion or more of assets. a lot of automatic trading throughout algorithms. the structure changed to make it more volatile. bob: yeah. look at how many banks have exited the commodities market. jpmorgan, morgan stanley, getting out of speculating and commodities. now we have a lot of volatility in commodities. -- now we havee more volatility, and we are surprised by this?

erik: what is the future of fixed income? what is the future of the clients? bob: that is a great question. one of the things we're focused on it atlas merchant capital, and this is very self-serving, but one of the impacts of the very strict leverage rules, the ring fencing of capital means that the big fixed income business of investment-grade debt, government bonds, corporate bonds, rico, simple derivatives, those flow monsters cannot fit into much higher capital letters. so we have seen a lot of layoffs, but we are seeing the broker-dealer business start to grow in a more entrepreneurial way. it standalone business had best quarter last quarter because we are seeing more opportunities for standalone businesses like this. we are looking at other opportunities to get into the broker-dealer era of broadly speaking fixed income.

david: bob diamond, founder of atlas capital. thank you. ♪

david: welcome back to "bloomberg ."

kent,g us now is muhtar chairman and ceo of coca-cola. he runs the world's biggest beverage maker. welcome to "bloomberg ." it is good to be here. david: how does it affect your business? muhtar: there is a notion that everything is really, really bad, and it is not. first, yes, there are a lot of puts and takes, there is a lot of red, green, and amber on the map, but there are a lot of opportunities in the world. a lot of people are still coming to the middle class -- in africa, and asia, in many parts of the world -- in the middle east. unemployment, high youth unemployment. we have got to do something about that, more than we are doing. but at the same time, commodities are very benign if you look at it from a perspective of a consumer goods

company and how does impacting the consumer in terms of creating more mobility, lower gasoline prices. all of that. there are some puts and takes. yeah, we'retime, much more targeted with our investments, but we are continuing to invest into the downturn. stephanie: when are we going to see those consumers start to spend? when oil prices started to go down, people said well, those consumers, lower gas prices, they will be at the mall, the movies -- they have not shown up. when we look at sales across the board, the consumers are not spending. what prices oil need to get out before we see the shift? muhtar: mobility in the united states is up compared to 12 months ago, compared to eight months ago. more people are driving, more people are stopping at retail outlets and buy goods at small, retail outlets, gas stations and convenience stores, in the united states. stephanie: and what coca-cola product are they buying? muhtar: they are biting all

coca-cola products. still beverages, dairy products, juices, coca-cola, coca-cola life, diet coca-cola, fanta, sprite. one-product, a one-brand business for 100 years. we are now in our 129th year, and we now have 550 brands with 3500 products, so consumer wants more choice, and we're giving them more choice. stephanie: what percentage of those 500 brands is soda? muhtar: we do not breakout numbers for specific countries, but around 65%, 75% sparkling. the key about our business is the way we look at our business and the way you think about our business across the board, sparkling beverages in the next 10 years are going to grow, our sparkling brands, and still brands are going to grow. the groceries maybe a little

different, but at the end of the day, we are the largest sparkling beverage company in the world, and we are the largest still beverage company in the world. you look out, and emerging markets, which markets do you anticipate will grow the most? africa is still growing at about 5.5%, still generating a middle-class every year. improvement in governance and african nations, producing accidentally better results in terms of gdp growth rates. we are seeing that. in latin america, it is a mixed bag. what used to be great markets like brazil have slowed down, and what used to be really scary markets like argentina, there is a better hope going into the future in the next three years in argentina, so, again, think about the world as very volatile.

commodities are volatile, currency is volatile, growth rates are volatile, so there has to be much more precision in the our plans,ade execute our plants, and we have to be very flexible. david: i believe i thought you were moving a long-term investment in argentina. as that in part because they have improvement in governance with macri's coming in? muhtar: partly. we will still invest, but nothing like that. stephanie: you are the biggest beverage in a still and a sparkling, no matter what. i think it is like the united states some of the cleanest of the dirty shirt. what happens if your whole sector ends up in a decline? muhtar: the sector will not end up in decline because it is one of the most dynamic consumer products products in the world. it is the fastest-growing consumer-products business. in the next decade, there will be $300 billion and criminally spent by consumers in this sector.

spent byentally consumers in this sector. there are 2.1 billion households in the world. household consumes 25th beverages, all kinds of beverages, hot, cold, sparkling, still. of those 26, less than two are ours. david: but they are consuming different kinds of beverages. you have a very large battleship that you have to move from full calorie to low-calorie. muhtar: of the 3000 beverage products, 1000 of them are low-calorie or no calorie, so we have moved. the last 20 years, increased 20 times in products for us. we had 150 products, now we have 3000 plus products. 350 willxt 10 years, be a small number.

that is the way it is moving. stephanie: both of those products, traditionally you have been more in an acquisition mode rather than develop. it seems like the market is taking a downturn. do you see 2016 of the year of acquisition for you? michael: i would not call -- muhtar: i would not call 2016 a year of acquisition. make some acquisitions, however, of the 3500 products, 20x increase over 20 years, 85% of them have been completely our brands that we have developed from scratch. stephanie: and if you took is inside of all of those homes you are talking about, all of those families consuming beverages, please help us understand what the u.s. economy looks like from your perspective because here in davo there is a very bigs disconnect between what we see when we look at the equity markets and what we see when we look at the huge popularity

candidates like donald trump and bernie sanders have gotten. help us understand -- what does america think? what we see as a consumer-products business is has notancial contagion passed over the wall to the consumer fiercely in any way or form. that had not happened. can it happen? anything can happen. i cannot protect what will happen, but i can tell you across the world, there is a lot in the financial markets. at the same time, there is some benefit that companies are reaping because of the lower commodities. countries that do not produce oil are actually doing better now because of the much lower price in oil . whole fiscal picture and the budget in those countries are going to look much better in 2016 for the full year when you actually compare it to 2015, so, yes, there are puts and takes. can you benefit, can you target

your investments, execute really , actually, it is not as bad as what the general picture would lead you to believe. david: i want to talk about why specific you are in davos. you had it up and initiative before the world economic forum, employment skills and human capital. tell us what that is. muhtar: there are 2 million people unemployed in the world. that number is going up, unfortunately. it is not going down. so the net increase in technology jobs is not making up for the loss in white-collar jobs, which is going to in the on the recented human capital report of the world economic forum, one million more jobs net will be shed a year going forward, and i think that number is conservative. years ago, as head of the international business council on that the world economic forum, i convened a group of city mayors, because i thought going subnational he would be a lot better.

city mayors are a lot like ceo's. they do a lot more than talk. we brought together ceo's and ngo's, ilo's, universities, too, practical of solutions to use on of limits physically and woman unemployment. stephanie: we will ask you to create jobs, muhtar. muhtar kent, double colas ceo and -- coca-cola's ceo and chairman here and what a dapper guy. that will do it for us on "bloomberg ." we will be back live at davos with black rock ceo larry fink.

betty: it is 10:00 a.m. in new york and 11:00 p.m. in hong kong. welcome to bloomberg markets. ♪

betty: from bloomberg world headquarters in new york, i'm betty liu. we are 30 minutes into the trading session right now and we are lower but we have been fluctuating in the first half hour. the s&p indexes trying to rebound from its lowest close in 21 months. european stocks are rallying after mario draghi says the ucb -- so the ecb may reconsider its monetary stance and could add more stimulus in march. we will hear from our discussion with christine lagarde. we will be talking with ukraine president petro poroshenko who met with vice president joe biden. we will be talking with the bank of america chairman and ceo ryan moynahan days after the