all possibility of helicopter money, sending the end to its biggest gain in a month. cruz.s his speech was not received kindly. ♪ city, i haveork jonathan ferro alongside david westin and alix steel. with the fx market very much in focus. ecbd: we will hear from the and announcing his latest monetary policy decision for the first time since the uk's vote to leave the eu. we will take you live to frankfurt for president mario draghi's news conference at 8:30

a.m. eastern time. alix: after that, we have some heavy hitters lined up for you. we have heralded him -- harold ham joining us. we will get his take on the booz cruz. we will find out what nelson -- the story of the day seems to be the fx market. jonathan: absolutely. i think that is where we have to begin. the question is on sustainability with we are discussing the bank of japan with the ecb. this is what it means for the fx market. it dipped below 106. ay comes back, but we stsya stronger on the yen. helicopter money was off the table, not of negotiations at this point. japanese yen in the equity market starts a little lower,

down about 4/10 of a percent. if you look into the doubt, a night -- dow, a nine-day winning streak. ahead of these monetary policy conversations, two-year burdens, two-year yields a little higher. -61 basis points on a front-end on the german two-year. alix: thanks so much. let's go around the world to check in with our bloomberg team of our in-depth coverage for top stories. governor kuroda saying no need for the helicopter money. caroline hyde in frankfurt counts as down to the ecb rate decision, and make a murphy is very tired in cleveland wrapping update three of the gop convention. we want to start you off with a coronda.news out of mr. this was released today, not

recorded today. but what does this mean taking helicopter money off of the table? >> good morning, alix. it is a statement from governor kuroda. he is selling is the helicopters will stay i on the launchpad for now. helicopter launch a without changing the rules, but at the same time, it does not take pressure off so when the number unto meetings they spread it, even if they are not going to do helicopter money, there is an expectation they have to take steps to mitigate falling exports, the weak economy. governor kuroda, back to generate, he ruled out negative rates only to surprise us later. say that the boj will not press further into unconventional territory as the months go by?

the feeling that everything is still on the table. alix: to your point, we saw an immediate yen strengthening, but we had nowhere near recapped the losses we saw earlier in the week so the market could still expect that stimulus. >> you are right. there is pressure on the boj. they could buy more bonds. let's not forget that prime minister abbé is coming around the corner with a bazooka as well. maybe another big push by the government, so we are heading for a very interesting tfew weeks o. alix: thank you so much. front and center of policy. jonathan: and communication as well because it is coming down from the "wall street journal" that this interview was

conducted in the middle of june. initially dropping off and coming back as well so a real communication issue there at the bank of japan. some communication in the fx market now warranted because reply to understand whether the commas are dated and what it things have changed in the last three weeks. let's get to caroline hyde over in frankfurt for today's ecb decision or not decision. walk us through it. 45 minutes time, i there inwill be frankfurt because no policy change expected by any of the ists we spoke to. what about september? what about a press conference in an hour and a half? will he send off brexit?

saying us we can bring a more stimulus, war bond buying buying -- more bond overall. we did see a cut in the deposit rate as well, but another key question is how are you buying worth?lio 80 billion euros so many bonds are eligible to be bought now. it is so hard to find the 80 billion euros when you have 60% in german debt trading below -.4%. jonathan: the ecb makes the rules. are they just going to change the rules? i think that is what many economists and researchers are expecting. they can tinker with how the qualitative easing is done. they can buy longer maturities,

longer than the 31. they can buy more individual bonds. they can hold more than a third they have limited themselves to. they can even say we can buy had yields below the deposit rate. that is perhaps a step too far, but we will be gauging signs from mario draghi as to what he do about the buying of bonds. we will be hearing what he is going to do, what he thinks about the crisis unraveling in his own country. jonathan: fantastic work. much more from her throughout the day in favor. -- in frankfurt. we will break the decision in 38 minute times and the 45 minutes after that comes the news conference with mario draghi. david: thanks very much. we are going to jump to cleveland. republicans held the third night of the convention, and the news was not what they were expecting.

stage, andz took the then, he refused to endorse a candidate. it was not well-received. ted cruz: stand and speak and vote your conscious, vote for candidates up and down the ticket who you trust to defend our freedom and to be faithful to the constitution. david: those were boos you are hearing. megan murphy has been reporting all week from cleveland. normally, the tv people go out looking for some drama. this is pretty extraordinary. what was it like out there? megan: oh my. from a plagiarism scandal with the first lady to the booz we heard, the one thing you hear from people is they have been around politics a long time. they have never seen this seems we saw last night. ted cruz boo'd off the stage. his wife had to actually be

ushered out of the arena. this is a moment unlike any other we have seen, and we have seen a lot so far in this convention, so that is saying something. interns to tonight. donald trump will give his speech. whether or not he can project any sense of unity, can he save this convention is the question everyone is asking. david: the reporting is that he knew in advance that ted cruz would take the stage and not endorse him, and he decided to let him go anyway. is that a mistake or him trying to bring the parties were him? egan: up until the very end, they did not know exactly what he was going to do, where he was going to go. in the arena last night, he was building up to the moment. he was leading the crowd down the path of endorsement. it was smart of the donald trump cap to let him do what he was going to do.

they do if they did not, they would prolong this fight. the day, all we are talking about in this convention is not the message, is not what they want to get across about making america great again. we are talking about scandals from plagiarism to ted cruz. they had been abl able to solidify a single message of how we want to receive our economy and the social doctrine we have seen. whether he will do that in a single speech, it is going to be very difficult. the hurdle is very difficult for him. david: thanks very much to megan murphy in cleveland. now we go to alix for a look at the stocks on the move. alix: it will be a fun night tonight. biogen news breaking in just the last few minutes. ceo resigning, and the company upgrading is forecast. watch that stop as we head into the open. qualcomm for the

sale of two chips. slower growth in the chip division is worrisome because pc sales are not so great either. qualcomm, it is a different story, getting a lot of customers over in china. that is helping boost that well.ker as you have to look at joy global being bought out. it is the world's secon second-biggest mining construction. $2.9 billion, and a huge bet on a rebound in commodity prices. wrapping it up with the european airline travel. easyjet and lufthansa, very bad days for these guys. easyjet in particular being hurt by terrorism fears restricting travel. but also raise it. they are worried they may not be able to travel as freely around

europe as they used to. lufthansa lowering its full-year forecast. watching this group as well. busy day. jonathan: coming up, mario draghi and the ecb less than 35 minutes away. we get a decision on monetary policy. that is all of five minutes later with a news conference. we will take that news conference right here on bloomberg. this is bloomberg. ♪

♪ jonathan: this is bloomberg from new york city for our viewers worldwide. to the fx market we go where there is a stronger japanese yen. this after an interview broadcast today with governor kuroda of the bank of japan with bbc's radio on helicopter money.

apparently ruling out helicopter money. reports suggest that interview was conducted in the middle of june. that is why you see that retracement on the chart. i want to bring in someone i know very well in london. i want to start with central bank communication. if you see that headline and you are operating in this fx market and then you find out a central or an outlet sat on the news for a month,m how difficult is it to understand central-bank policy with the mitigation like this is so muddled? >> central-bank mitigation is difficult, especially nowadays that monetary policies are much operating at the limit. one thing i would point out is that we really did not have a lot of noise coming from th as s helicopter money is concerned so

my impression the past two to three weeks is that the markets actually interpreted this potentially upcoming fiscal stimulus is being financed by helicopter money, but i cannot recall an instance in which kuroda alluded to that possibility, giving it a realistic possibility. jonathan: the bank of japan by buyingprohibited from bonds directly from the finance ministry anyway, so we do they cannot do it by law, but the very suggestion they are going to do something is driven by the fact they have reached the limitations of the current program. a lot of people say nothing counts less than a buyout there. how is this buyout? how is monetary policy shape up in the coming months? now isos: i think right a very close call as to whether these guys are going to do anything or they are going to announce a third round. i think helicopter money is

almost a near zero probability event, and it is a big difference because in the helicopter money as i understand it, you are increasing the monetary base. the way i see things going forward is that in all likelihood, we will get a fiscal stimulus from the government. there is a 50-50 chance this will become committed by a third round. in terms of currency implications, i still am quite bearish on dollar yen. we may see short-term spikes, but it goes lower from here. david: i wonder what we know about possible coordination between abbe on the one hand and kuroda on the other. one is the likelihood of a joint announcement, fiscal combined with qe or whatever they do at

the central bank? vasileios: it does not have to be as long as we don't go down the road of helicopter money. obviously, if they go down the road of fiscal expansion and at the same time or at a very similar time, they announce a third round, it does not have to be an explicit a announcement about ordination because this is pretty much the boj buying assets in the secondary market. respect, i don't think we will get a joint announcement. jonathan: one thing you pointed out over the last couple weeks an, you said quite clearly you don't think that should mean a weaker japanese yen. why is the market interpreting it the other way? vasileios: i think there has been a growing speculation by given a veryat high debt to gdp ratio that the

market thought when the fiscal, goespense down the route of fiscal byansion, it does that issuing do debt and having the bank of japan buy the new debt. the problem i have with all that is it is not a very natural connection. one of it does not follow from the other. happen. there to be a clinician, but it does not necessarily mean that if we go down the road of fiscal expansion that the boj well. jonathan: dollar yen retracing some of the losses at the moment. alix: before the boj, we have the ecb. coming up, we are headed to the ecb big decision. will it be déjà vu, high expectations, and little delivery? we will have an exclusive interview with nelson peltz.

a very busy thursday morning underway. this is bloomberg. ♪

♪ jonathan: from new york city for our viewers worldwide, this is bloomberg. later today, the ecb rate decision comes out and about 23 minutes time. still with us from london, the head of global fx strategy. with the ecb, it is not often about the decision.it is about the conference that comes 45 minutes later . you can follow that right here on bloomberg tv of course. what are you looking for from that conference? vasileios: first of all as far as the hard facts are concerned, the ecb does not have any significant amount of information to assess any potential damage that has occurred on the back of the u.k. referendum result, so i think that mario draghi will highlight

the downside of risks and basically said a message saying things are there in case deteriorate. other than that, we don't expect any action. alix: what would that do to euro-dollar? what is the downside potential? vasileios: i don't think there potential.f downside from a technical perspective, the 110 has proven to be quite a strong support level. yesterday, we briefly fell below that, but then we came higher. i don't think the euro-dollar is going to be very exciting over the next two to three months or throughout the summer. i think we will be between 110 and 112. alix: come on. get as excited. the question would be what they are doing with their bond buying program, both corporate and sovereign. the you think it will affect the currency at all? vasileios: given the fact that

we will not have any announcement today, this is likely to have any impact on the exchange rate in the short-term. our view is that sometime between september and december as long as we do some filtering through of the u.k. referendum result, we are probably going to get an announcement of an extension of the program going into september 2017. i think anna martin, this will provide some headmans for the inds for the euro, but you have to put it in perspective. fair value of the euro is already trading quite undervalued. beid: the euro may not interesting, but the leverage trade with turkey is. tell us what is going on? . vasileios: right. you know he has some quite sizable moves. i am bearish on the lira.

i am sure nothing goes down or up in a straight line as we all know. we are going to see some choppy price action. potentially, we are going to see relief. i am bearish in the medium to long-term. we have an escalation of the political front, plenty of certainty, which implies a lot of hurdles. you have a consolidation of erdogan's our, which seems a likelihood of a significant compromise of the independence, . david: there were reports overnight of funds closed into turkish etf's. what do you make of that? vasileios: i am not entirely sure. i would be very cautious in interpreting that into a very

generalized environment. i think all the points of the bonds in high-yield turkey, but i would legally point out there are a number of emerging markets out there which offer if not as high but at least quite high yields that do not suffer from the same political risks and political dangers as turkey's. david: jonathan: thank you -- jonathan: thank you very much. the ecb's latest rate decision coming up in about 20 minutes time. 19 to be precise. 45 minutes later, we get a news conference with the man himself mario draghi. alix: results are moments away. we will bring them down. this is bloomberg. ♪ [hip hop beat]

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♪ from the bottom of the mat, ♪ ♪ to the couch where you at? ♪ ♪ show me the latest medal count♪ ♪xfinity's where it's at. ♪ welcome to it all. comcast nbcuniversal is proud to bring you coverage of the rio olympic games. hohes w'oiithongestc ?estc .thlais hotas hke hyson' at' ey llg ca hke cwistomin biness rn fid , p cth bou e.juais hotas hke hyson' at' ey ddstus azetomimeag y wiourofia'y llg ca hke heesev .or upde . 'itrestn i, w c u'e e dry.ynebuss. oding uc pwiwiro fi hthatpsroui ♪ jonathan: from new york city, this is bloomberg. in the fx market, wow. move.a red-hot it is the dollar yen down, then

back up. it had a 107 and oh, and now it in a bbc interview broadcasted today, we found out it was recorded in the middle of june. that is why you are seeing the retracement. dollar yen trading stronger at the back of that. some breaking news coming from gm. alix: gm is the highlight here. the company is boosting its full-year earnings review. you have a beat on the top and bottom line. $1.86 a share. revenue a staggering $42.4 billion. overall, it was record profit here in the u.s. you also had china sales higher. i should point out, this is europe's first profitable quarter since 2011 when it comes to the european division. these are blockbuster numbers. the stock really popping. david: pretty much across the board, everything you are looking at, the euro, u.s., china.

jonathan: you want them to be on estimates and raise it for the year. that is what they have done. raising guidance, too. david: we will talk with jeff green. he reports on automobiles. welcome to "bloomberg ." we have just gotten the numbers, as have you. give us your overall take. is there a problem? >> there is not a problem in the numbers. the question is whether investors will look at the numbers and see something they can act on. gm has been showing profit from many quarters in a row. this is their fourth or fifth time exceeding estimates but they are just moving the needle on the stock. david: it also goes to the strategy i just talked to jonathan about. they got down on unit sales in the united states because they don't want some of the fleet, the rental cars so much. sales are down, but profitability is up, so is it the strategy working? is their strategy to

have a profitable sales. they are saying we had the responsible thing and showing we can continue to be profitable even if the market were to dip. the investors have not been jumping on this. the stops should be moving based on their price-earnings ratio and every other factor, so i would be curious to see what the stock does. i should point out also that we are getting a little bit about look on some brexit. brexit could cost the company $400 million in the second half of the year, so starting to get some quantifiable earnings estimate revisions due to the benefit of which is interesting. david: we had chuck stevens -- we have chuck stevens on in about half an hour. we will ask him. what is going on in china phrygia? gm?china with

jeff: you cannot just go with volume. you have to have premium pricing. everything is pretty much positive across the board. it would be really interesting to see what the stock market does and how it looks a week from now. david: right now is looking pretty good. they are up 4% in the premarket. thanks for joining us from the joint. alix: now, we want to turn to airlines, in particular, southwest airlines. earnings missing on the top and bottom line. revenue down 5%. joining us now is gary kelly joining us now from dallas. thank you very much for joining us. we are going to get your numbers in just a moment, but yesterday was a really tough day for you guys. you have a huge amount of flights that were delayed or canceled, almost 700 flights were canceled. is the problem to the result -- today resolved? gary: good morning.

yesterday was a tough day, especially for our customers, and i very very sorry for those who ar were affected. about 12 hours after we discovered the technology outage, on the technology has been restored as of about 1:00 or 2:00 a.m. this morning. we are in the process of recovering our operations so that we can get our customers where they need to be today. the worst is behind us. we will have some bumps today. again, i am very sorry for all of our customers were affected yesterday. i employees of course were and have worked heroically to get the airline back on track here. i want to thank them for those efforts. alix: you also had an instance back in october as well. this time around, the outage affected multiple platforms of your technology. are these two instances related?

is there a root cause for that? gary: i think it is a little bit early to give you a totally accurate answer there also we will need to do some work, but they appear to be completely unrelated. equipment involved with supporting our network. our operations are very highly integrated. it fail. -- failed. there is a backup process that should be seamless. it failed. the efforts were confident because the backup effort was not working properly, so this is something that at least in my experience i don't ever seeing remember seeing before, but that is not what we expect of ourselves or what we want to deliver for our customers. alix: now turning to your earnings, they were down by 15%. overall, with the airline industry, is seems to be really hard to continue raising earnings, especially when you have fuel costs coming down, but

the juice from that dies down. all you need to do is raise spears in order to get the earnings of. yo-- up. what you do? what is that lever to pull to get your earnings higher? gary: levy just make sure that we are clear and i am understanding what you were saying. our earnings were up. earnings per share were up 15.5%, so it was a stellar quarter. we had revenue growth of 5%.on a unit basis , our revenues were also up. we are outperforming the industry in every way. our unit costs were down year-over-year. our fuel costs for god were down. we are paying less this year than we did a year ago, so we had a very strong quarter. in line with our expectations. for some reasons, some analysts were about our expectations, so

we did not beat our expectations, but we had a very strong quarter. most important become our return on invested capital for 12 months into june 30 was taxed 33 and a half percent. we had a very strong quarter. alix: it was my back of the envelope calculation. forgive me for that. they haven't industry seems to be under pressure because of so much competition. what do you do next to help boost your earnings and revenue going forward. .t is hard to get wages gary: yes. we are in a very strong earnings environment. a lot of as being supported of course by lower fuel prices, so the industry has not seen profits like this ever, so we are in a very strong environment , and the industry is growing faster than gdp, which is resulting in the pressure on

fares that you mentioned. despite the pressure on the fares, we are looking at a very strong operating margin in the third quarter . we are going to continue to work on the basics, serve our customers very very well, work on keeping our costs under control. there is no immediate crisis. we are looking at all record earnings, and we will have a very strong third-quarter. what we want to do is sustain that we cant a rate sustain very strong returns on capital, continue to reward our shoulder shareholders, continuee care of our employee. we are not talking about cutting our employees's wages. we are talking about getting raises. they are working very hard doing a great job by southwest airlines, and we need to keep our eye on the competition. with information we protect our low bristling in support

fares. the outlook is very strong, and ready to make sure we are growing at a rate that we can sustain these very stellar results. alix: thank you very much. earnings coming in $1.19 . thanks for joining us. it is respectfully ceo comes on after that type of a day -- tough of a day. some of the financials industry leaders,art for 13 executives jointly issued a set of guidelines for publicly traded companies. a quote from it. " our financial markets have become too obsessed with quarterly earnings. companies should not feel obligated to provide earnings that is should only do so if they believe providing such

guidance is beneficial to shareholders." it is about 80 principles they have in this document, and they are pretty unobjectionable. people onto do a good job. -- people should do a good job. i wonder who the audience is. who is going to read this and say i will change because of this? alix: what kind of company are they towards? david: they are saying the sec should require it. company laws should be changed. is a little unclear to me who they are trying to persuade of what. alix: with the companies make those changes themselves? david: i would be surprised how many of these companies would really have to change their actions based on these. alix: you made a really good point earlier when we were discussing this. when you have a dual share ownership, is a good thing because it get to the long-term with one shareholder and shorter term with the other. david: it can be a good thing.

right now, you see mark zuckerberg of facebook. when you worry about short-term, one way to avoid that is the dual class of shares. alix: we will be speaking about his later on in the show. david: looking forward to that. alix: another quick check -- i have sarin. you are talking. -- i am sorry. you are talking. jonathan: let me break you up and get to the markets. down by 4/10 of 1% ahead of the city. story.lar yen story 45 orof the ecb decision, 50 minutes away from the news conference. we train at -61 basis points. coming up, it is decision time. will mario draghi make any changes to his asset purchase program? that news comes in about 45, 50

minutes time. the decision, that is next. this is bloomberg. ♪

♪ alix: this is "bloomberg ." i am here in the green room. coming up, continental resources ceo harold hamm will be joining us live from the rnc in cleveland. don't miss it. ♪ moments away from an ecb decision. this is bloomberg. let me get you up to speed. that decision comes in about 30 seconds or so. the main refinancing rate is currently a 0%. expected to stay there as is every single rate in

today's decision. the marginal lending facility, that is also expected to stay unchanged at 0.25%. there is an 80 billion euro every single month asset purchase program over the ecb.that is expected to remain unchanged as well. the decision comes through right now. rates remain unchanged. the main refinancing rate remains unchanged. the marginal lending facility the third rate,, stays at 0.25%. looking at the asset purchase program, 80 billion euros every single month. that remains 80 billion euros every single month. looking at the markets, relatively unchanged. 1 trade at euro-dollar at .1024. we stay at -60 basis points.

the ecb saying the asset purchase will run a until at least march. something that will be extended. you want to extend it beyond march 2017 at a time when you see deals already into the important basis territory, what do? alix: you have to change what you can actually buy. are you going to lower the varsity can buy more german debt at the end of the day? david: will they have enough to buy before march of 2017? jonathan: that is precisely the problem. remain therates to lower. the as a consensus in the market that the ecb will run qe3 march qe through march 17. i will bring in vince reinhardt.

he joins us now from busted. great to have you with us on the program. we understand the limitations. i wonder how the ecb are planning to get around this in the coming months if you do think they need to. vince: they need to. is european economy dealing with significant inflation below his goal. -- its goal. you're not going to get any help from fiscal policy makers, so the ecb will have to do more. at first, it will be tweaking the program, changing its rules. these are rules it imposed on itself with regard to what bonds it can buy and not buy. alix: here is the question, why? spreads are coming in. they are not widening out. the more your and suspending action, the more yields will come out anyway.

what is the point? vincent: a good point is, what do you buy if you get from buying or government debt, and particularly pushing german bonds yields lower and lower and lower? the first point is, sometimes they have to execute on what you promised to do. since they promised to do it, they have to play out the string. second point is they want to show a commitment to do whatever theakes because ultimately, euro area will be supported by a weaker euro. that is the dirty little secret mario draghi has. he wants to convey that he is willing to provide policy accommodation in hope of getting some lift to inflation, the economic activity. jonathan: you know the order of events. you get the decision from the ecb and a little bit more color in a news conference.

rates are to remain present or lower for an extended period. it is not the person we heard that, but it is the lower i am trying to understand. -40 basis points on the depot already. do you really see the ecb taking things lower from here? vincent: i think it is a legitimate debate on what kicked you get from negative deposit rate. europe is a bank centric system and a negative deposit rate is a tax on the banking system. why are you taxing a sector that is already capital impaired? president mario draghi does not have that many instruments of policy left, and you have to work on the margins you possibly can. a compounding problem is in japan. negative deposit rates do not sell very well with the public, but he has to push on the strings that he's got. david: i am curious about telstra.

we are about it went into it now. is actually giving incentives to base to give more loans. do we have any sense of whether that is working? vincent: i think that is exactly the right mechanism in a bank centric system to subsidize lending. they are giving money away to encourage banks to make more loans. that is where the ecb will get traction overtime. the pickup has been pretty good. more than just rolling over, maturing obligations. that is where the ecb will get traction over time. it is perfectly consistent with their rhetoric when they talk about trying to improve the monetary mechanism. bank centric system, the way to improve the monetary transmission system is to get the banks to lend more. alix: that is one area. theyrms of the that can buy, one is by going to buy

bank debt outright. debt based on how much sovereign is actually borrowed versus how much they contribute to euro area gdp. what is the most likely scenario for expanding the program? vincent: work backwards. we know they want to keep their purchase program in terms of scale and scope. how can they do that? where do they get the most mileage? they probably get the most mileage by changing the capital. don't think about what the initial contributions were. think about how much governments issue now, and when you think in those terms, they are basically rewarding governments that sally live debt, which may not actually be the best -- a lot of debt, which may not actually be the best incentive. but you do what you have to do. atathan: sticking with us 8:30 a.m. eastern.

will review the full ecb conference with president mario draghi. more from new york city. this is bloomberg. ♪

♪ alix: this is "bloomberg ." about what the ecb should do for the next policy move, and this chart encompasses why question is so hard to answer. this is the output gap in the euro area. it measures the capacity of the economy. many peg that at -2%, but recent research looks at it as -6% potentially, meaning you have to have so much more stimulus in order to raise that output gap. joining us now is vincent reinhart. when you look at the eurozone, how do you measure what that output gap is? vincent: inflation is below. upward lift to

it. in the united states, economists depreciated that productivity growth slowed down in 1973 in about 1980. it is very hard to understand what potential output is. it is a moving concept. depending on how you try to infer what it is, you're going to get different answers. that tells you how hard president draghi's job is. david: does and harder because he has so many countries? normay you go to a fiscal authority. there is not one. there is 27 now that you take out the u.k.. alix: another question you have -- vincent: another question you have to ask is what is the output capacity in each of the countries. researchers have historically been able to explain ecb behavior by looking at germany.

policy setting process is a little more brought now, but the gap does not mean countries,ing across and what it means for inflation pressures, and more importantly inflation expectations across the euro area considers considerably.fers jonathan: ahead on this program, we go to frankfurt for president mario draghi's news conference. plenty of questions in that news conference . the technicality of the asset purchase program will be questioned. stimulus on hold for now. ♪

expected, the ecb follows the bank of england's lead, keeping rates unchanged. we will hear more details on drug use press conference shortly. jonathan: the bbc confirms

statement against helicopter money was the last month. alyx: booze cruise, the texas senator refusing to endorse donald trump. ♪ david: welcome to the second hour of bloomberg go. the ecb did what was expected, it left rates unchanged, that is what everybody was predicting. jonathan: no surprise for reaction from the market. the ecb following the bank of england's lead to do nothing. we will bring you that conference in 29 minutes. alyx: we will headline to frankfurt in just under 30 minutes for the live news conference with mario draghi.

the big question is how will they expand their asset purchase program. ,onathan: equities in europe just a touch softer with ftse 100 down 1/10 of 1%. the dax is largely stable. dollar yen at one point early 106.34.- back up to out the broadcast interview took place last month, so an fx market trying to figure out those comments are dated. at of the ecb news conference later, in the bond market, the front end of the yield curve continues to sell off a little bit. points tells you everything you need to know about what the ecb is up against. buy it, so what do you do with it?

we will bring in caroline hyde with more on the ecb. john pointed this statement out, that rates to remain at present or lower levels for an extended time, that was an interesting time that interesting sentenced that sentence. caroline: everyone is wondering whether the quantitative easing past march 2017 and whether we will see the deposit rates cut anytime soon. at the moment, economists are all betting we will see qe extended come september. that weet factoring in could see a deposit rate cut in december. -- come december, we could see the deposit rate go even lower. that could actually help with the quantitative -- quantitive easing.

80io draghi is trying to buy billion euros worth of bond terms and a lot of bonds are not eligible at the moment. debt trades with yields less. so many questions directed at mario draghi and half an hours time. alyx: what the beneficial aspects would be if you would lower that and would be able to debt.re german caroline: i really think for them, it is how will you ensure quantitive easing actually works and how will you ensure that you are able to buy up 80 billion euros of debt and how they will make more bonds were eligible and be able to long -- be able to buy longer dated debt.

will they perhaps be able to buy more of each individual bond issued? whatwant to understand point they see more stimulus and at the moment it is unsurprising there has been no policy change because tomorrow, we get some pmi data showing us how the eurozone is reacting to the uk's exit. will it show weakness? how will the ecb respond? we want to hear mario draghi's viewpoint. alyx: the statement might have been boring, but the next hour and a half is not going to be. anothere have to wait 25 minutes for that press conference but we do not have to wait for gm earnings. shares are up this morning after posting record second -- record-setting quarters. joining us is the gm chief financial officer.

this is kind of a good morning for you. you must enjoy this. take us through the top numbers. >> it is not only a good morning, it is great. we had outstanding results in the second quarter. driven by strong performance in north america, another record quarter for north america, $3.6 billion in profits. continued strength in china and continued strong net income margins. importantly, profitability in europe, the first we have had since the second quarter of 2011. tremendous work by the entire team. david: take us through those three geographic areas, starting with north america. it is taken -- it is been a strategy at gm to take some reductions at the door in order to get the profitability up. how is that strategy working out?

the overall results, revenue and profitability, demonstrate that our strategy is working as we focus more on profitable retail sales. that has long-term benefits as we look to sustain our margins in north america. it helps with brand building, residual values. we make sure we keep our capacity in line and fundamentally disciplined instead of spending. david: what was your north america profit margin? chuck: 12.1%, a record. david: how does that compare to your overall level? chuck: from a company perspective of the second made $3.9 billion, another all-time record for the company. north america is clearly a big driver of our overall success.

david: one of the things that has helped you in north america has been those midsized trucks. how are you doing in japan? chuck: we are building every midsized truck that we can. our pricing in the market is strong. we have grown our segment share -- share. we are very pleased with the results. david: you announced some new incentive plans for your truck business. does that indicate a certain softness in the market? chuck: absolutely not. what we did was execute a very if you look at, our track record over the past five years, we have been disciplined from a spending perspective and we will continue to be. this was nothing more than a model year sell down tactic. david: take us to china, very

important. in growth how are you doing on -- veryunit sales? important in growth. how are you doing on overall unit sales? we continue to see a lot of strong performance from buick and cadillac. you look were up significantly in the second quarter. suv sales were up in the double digits. shows in our strong equity income performance. clearly, china is a tougher dynamic that it has been in the past, but the team is executing very well and we would expect to see continued strong performance going forward. david: you mentioned a profitable quarter in europe. we have brexit now, this quarter is near -- is pre-brexit. what are you looking forward to

for the rest of the year? chuck: based on the first half results, we were profitable in europe, on path to break even. the referendum in the u.k. has certainly raised uncertainty around the economic environment. as we look at today's conditions, we could have up to a $400 million headwind in the second half of the year versus the first half. we have not given up. the team is focused and committed to continue to drive and improve performance. this is a speed bump we will have to work through depending on how it plays out. david: looking into the future, you have increased protections of what you might be doing for the rest of the year. lift.de some big bets on when will you see that show up in your financials? chuck: part of our strategy is to lead in the future of

personal ability. the strategic alliance with lyft expectations,ur whether it is working with them to deploy autonomous vehicles. cruise was the last piece we needed to put ourselves on a path to lead from a autonomous vehicle technology perspective. overtime, both of these investments are going to pay off when you think about the future of personal mobility. these are necessary investments so we can lead in the future of personal mobility and that is part of our strategy. david: thank you so much, chuck. let's get an update on what's making headlines outside the business world with taylor riggs. taylor: in cleveland, donald trump will accept the republican nomination for president. he will do so after his bitter rival ted cruz was booed off the stage at the convention. the texas senator ended his

stage without specifically endorsing donald trump. we will unite the party, we will unite the country by standing together for shared values, by standing for liberty. god bless each and everyone of you and god bless the united states of america. taylor: he is widely expected to run for president in 2020. is wonderingident why the u.k. is stalling on its exit from the european union. he called on the u.k. to start the process as soon as possible. he says a delay could create a damaging uncertainty. he meets later today with british from minister theresa may. in turkey, the president says there will be no backsliding from democracy even though he has imposed it re-month state of emergency. the move comes less than a week after an attempted to -- attempted coup.

they can issue decrees that would have to force a block. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. up, the ecb deciding to keep its stimulus program unchanged. we had to frankfurt in less than 20 minutes for mario draghi's news conference. with, exclusive interview nelson peltz. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg.

the ecb leaves all three main interest rates unchanged and the asset purchase program also unchanged. of the newsad conference in about 15 minutes with president mario draghi, joining us is the oppenheimer funds for polio manager. statement you get the 45 minutes late, but what is interesting is that put out a few rings with the statement in the headlines and that is rates to remain the same or lower. we have heard this before, several times, that i want to reemphasize because what i look at rates in the ecb and speak to guys like you, this is it, so why do they keep using this line? >> it as part of their forward guidance. -- it is part of their forward guidance. you need to continue emphasizing what the long-term plan is. we are getting too attached to the month-to-month outtakes,

when this is really a long game, this will work overtime. will not move higher, there will not be any tapering anytime soon. they will be even lower if rate conditions require so. they are trying to add some material for the september meeting, hinting that even though things are unchanged, the direction is still more easing, longer time. david: steady as she goes. do we have real evidence that it is working, that it is stimulating the underlying economy? keephan: if you have to saying rates will stay as they are or lower, you are saying it is not working at the moment. alesso: we talked about this in the past. is caps offn, debt

actual evidence. if we had not done all of this, we would be in a far worse situation and counterfactual evidence is not a weak argument because that is the way to look at it. is it working enough? no. the reality is we are in a certain environment we are experiencing in japan, and the u.s. and in the eurozone. when you have a debt overhang problem in the private sector, a balance sheet recession, and you have the banking system clock because of regulations, you need fiscal policy, other means to get the real economy going. alyx: the issue is how you measure the real economy. we talked about the output gap. i have a chart that looks at it. estimatesintelligence at 9% which is not bad -- not that far below current eu unemployment, but who is to say that is even accurate?

the traditional tools no longer matter. alessio: that is an important point. i love your chart on the outlook showing how estimates can lead to dramatically different conclusions. there is an additional problem in a globalized world with global supply chains. is it the right way to look at individual countries, or should we look at the global output gap. areou are here and you feeling the capacity is tight, locally, you have two choices. you either raise wages or you source or labor elsewhere. -- source your labor elsewhere. monetary policy looks of the outlook from a domestic standpoint, but that is the additional structural change that is taking place over many years. david: you see overcapacity throughout the economy and the

question is, what you do about it? the answer needs to be a demand solution. alessio: we will make a theribution from both, capacity statement is also a function of where the project -- projections are going. we will need to adjust, i agree. if demand comes back and we keep up on debt on how much demand is coming back, we will need to adjust supply. the two influence each other. you are staying with us and we have to talk about how you construct a port olio against this backdrop -- a portfolio against this backdrop. alyx: ecb deciding to leave rates unchanged. to assess the economic damage from the uk's brexit. we will take you live to frankfurt for mario draghi's press conference. ♪

jonathan: from new york city, this is bloomberg. the ecb news conference about eight minutes away. -- portfolio manager, i think it's worth going back to years, ,he summer, i was here discussing and ecb going into negative territory for the first time ever. points,are, -40 basis 80 million euros of qb. i will say what next? no one thought this would happen in two years, hardly anybody did. is there anybody left? the good news is the

european court has basically proven draghi right. statement, you can basically realize that a lot of the self-imposed rules by the ecb are just that, self-imposed. what that statement says is the ecb still has enormous legal room. in september, we will probably -- to thes to the t's capital keys. the market anticipates something like that, then they go to buy some sovereign debt and that drives yield down even lower. you also have to make money. how do you make money in the kind of environment? part of that objective is to force the portfolio rebalancing from the private

into riskierbonds assets, but if we keep talking about rates going lower, and there is no floor and 60 basis points negative yield is not even enough and 10 year yield could go who knows where, then really paradoxically not forcing the process of portfolio rebalancing. we do not buy bonds at these are, weand in the we have much more freedom and latitude. buyers have benchmarks, so the demand is still there. we tend to focus on yield elsewhere, always mindful of macroeconomic conditions. we like credit in the current environment and we are adding exposure to high yield emerging dollar debt. -- emerging-market debt. you need to be tactical, need to adjust. we do not feel that equities

provide that positive potential, major upgrade potential for profit growth. when we talk about portfolio rebalancing, we prefer to go into credit opportunities. david: what does that mean, high-yield? alessio: some sovereigns in the emerging markets face -- market space. david: which emerging-market currencies? alessio: not much in asia. the places are brazil, south africa, columbia. david: mexico? alessio: probably not really attractive from a yield perspective. jonathan: let's talk euro credit very briefly. do you want to buy some of that paper right now?

what are the market conditions like since the ecb has been buying so much? alessio: we have not said -- seen much trouble with liquidity's. you are sticking with us, a busy hour. alyx: mr. draghi taking center stage. we had to the ecb to hear the president give his remarks on the policy decision to leave those rates unchanged. ♪

jonathan: this is bloomberg. the attention of global financial markets firmly on frankfurt at the ecb headquarters where mario draghi

is about to commence a news conference following this month decision to keep all three interest rates unchanged and keep the asset purchase graham on hold -- at jet -- asset purchase program on hold. let's get you up to speed on the markets. equities in europe softened through much of the day. isking at futures, the ftse softer, down 4/10 of 1%. at a news conference, this is how the euro trades. 11019,ght now at unchanged on the session ahead of that yield in the u.s. yield on the u.s. 10 year is about 1.6%. ecb president mario draghi about to commence his news conference. >> to welcome you to our press conference. we will report on the outcome of

also's meeting which was attended by the vice president. based on regular economic analysis, we decided to keep the key ecb interest rates unchanged. we expect them to remain at present or lower levels for an extended period of time and well past the horizon of our asset purchases. regarding standard policy mentions -- measures, to confirm that the demand for asset purchases in euros are intended to run until the end of march and or beyond, if necessary in any uncertainty, sees unstained -- sustained adjustment with the path of inflation consistent with inflation aims. today, we focused developments since our last policy meeting in early june.

following the referendum on eu membership, our assessment is that europe financial markets have weathered the spike in uncertainty and volatility with resilience. -- our policy measures as well as a robust regulatory and supervisory framework have all helped to keep market stress contained. financing conditions remain highly supportive which contributes to a strengthening increasing -- strengthening in creation. they continue to support our baseline scenario and ongoing economic recovery and an increase in inflation rates. at the same time, given prevailing uncertainty, the council will continue to monitor

economic and financial market developments there a closely and to safeguard the pass through of monetary policy to the real economy. over the coming months, when we have more information, including new stock projections, we will be in a better position to reassess the underlying macroeconomic conditions, the most likely path to inflation and growth, and the distribution of risk around those paths. to achieve its objective, the council will act by using all the instruments available within its mandate. explain our assessment in greater detail. starting with the economic analysis. increased byl gdp

0.6% quarter on quarter, in the first quarter of 2016. 0.4% in the last quarter of 2015. growth continues to be supported by domestic demand, while exports growth has remained modest. incoming data points to ongoing growth in the second quarter of 2016, though at a lower rate than in the first quarter. looking ahead, we continue to expect the economic recovering -- recovery to proceed at a moderate pace. domestic demand remains supported by the pass-through of normal -- monetary policy measures to the real economy. favorable financing conditions and improvements in corporate profitability continue to promote the recovery in

investment. whichned employment gains are also benefiting from past structural reforms and still relatively low oil prices provide additional support for households and thus, for private consumption. in addition, the fiscal stance in the euro area is expected to be mildly expense year he in 2016 and -- at the same time, headwind to economic recovery in the euro area include the outcome of the u.k. referendum and other geopolitical uncertainties. subdued growth prospects in emerging markets, the necessary balance sheet adjustments in number sectors and a sluggish

pace of implementation of structural reforms. against this background, the growtho the euro area remained tilted to the downside. stats, euro euro ina annual h icp inflation from2016 was 0.1%, up highern may, reflecting energy and services price inflation. on current futures price forecasts. inflation rates are likely to remain very low in the next few months before starting to pick up later, in 2016. anlarge part, owing to

annual rate of change of energy prices. supported by our monetary policy measures and the expected economic recovery, inflation rates should increase further in 2017 and 2018. turning to the monetary analysis, growth money continue to increase at a robust pace with its annual rate of growth standing at 4.9% after 4.6% in april. as in previous months, and you will growth in three was mainly supported by the most liquid an expandingth annual rate of 1.1% in may, up to 9.7% in april. dynamics followed a gradual

recovery observed since the beginning of 2014. the annual rate of change of loans to loan financial inrations increased to 1.4% may, 2016, compared with 1.2% in april. developments in loans to enterprises continue to reflect the relationship with the business cycle, credit risk, and the ongoing adjustment of financial and nonfinancial sick -- sector balance sheets. the annual growth rate of loans to households remained broadly stable at 1.6% in may after 1.5% in april. bank -- indicates whether improvements in loan supply conditions or loans to enterprises and household, and a

continued increase in loan demand across all loan categories. that continue to report they targeted longest term refinancing operations had contributed to a more favorable terms and conditions on loans. the monetary policy measures in place since 2014 have significantly in -- proved -- improved borrowing conditions for firms and households as well as credit flows across the euro area. the comprehensive package of new punt -- monetary policy measures adopted in march of this year underpants -- supporting the recovery of the real economy. in light of the prevailing uncertainties, it is essential that the bank continues to

function well. up, a cross of the outcome of economic analysis with the signal scamming from the -- signal standing -- canning -- but close to 2% without undue delay. policy is focused on maintaining price stability over ae medium-term and it is stance that supports economic activity, as emphasized repeatedly by the council and as gains a strongly in both european and international policy discussions. in order to reap the full benefits from our monetary policy measures, other policy

areas must contribute much more decisively, both at the national and european level. the implementation of structural reforms needs to be substantially stepped up to reduce structural unemployment, and boost potential of growth in the euro area. structural reforms are necessary in all euro area countries, although specific reform needs differ across individual economies. they focus should be on actions to improve the business environment, including the provision of adequate public infrastructure, which is vital to increasing investment and boosting job creation. the enhancement of current investment initiatives, including the extension of the plan progress on the capital

markets union and reforms that would improve the resolution of nonperforming loans will also contribute positively to this objective. in an environment of economy -- of monetary policy, the swift implementation of structural reforms in line with the 2016 country specific recommendations, recently approved by the european council will not only lead to higher sustainable economic growth in the euro area, but will also make the area more resilient to global shocks. fiscal policies should also support the economic recovery while remaining in compliance with the fiscal rules of the european union. full and consistent implementation of the pact over time and across countries is crucial to maintain confidence in the fiscal framework. at the same time, all countries should strive for a more growth friendly composition of fiscal policy.

we are now at your disposal for questions. >> ted jones, financial john -- financial times. brexit has revived concerns that you will run out of quantities in program. to the governing council consider today whether to relax the rule, or was there any discussion of whether to relax the rules for government bond purchases, including potentially moving from the t room -- from the capital key room. thank you. mario: as i said before, we discussed the general economic conditions, we concluded that we did not have information to take

decisions, and we decided that over the coming months when we have more information, including projections, we would be in a better position to reassess the underlying macroeconomic conditions. no attention was given to discuss specific instruments at this point in time. >> the imf in its recent -- of the world economic outlook singled out italian and portuguese banks as one of the risks for the outlook. ,s that a view that you share one of the risks you are taking into account, and d are that some degree of public support for banks in the eurozone is

acceptable, or desirable? isio: monetary policy supportive of economic activity and focused on maintaining price stability. also, other policy measures are needed in order to reap the full benefits of our monetary policy and one of them is to address the nonperforming loans and nonperforming exposures in the euro area. that is a very important reform. i would not say we consider the risk, but italy has to be addressed. we may come back on it, later on.

we have not placed the rules. we have the the rd. these rolls contain all the flexibility to vote with exceptional circumstances. the power and responsibility in activating these rolls lies with the commission. -- these rules lies with the commission. have the survey of professional forecasters available and was wondering whether that was conducted after -- whatnd what those impact it had on the growth and inflation forecast.

you have said any more data and more time to assess the exact impact, but it seems to be generally, most is expected to be a question of when and how much you might act, so do you think that people who assume that are running ahead of it? bit?nning ahead a point, i the first cannot remember whether a survey was done before or after. what i know is on the inflation outlook, the brexit did not seem to have any measuring at this point in time. inflation speak about expectations, it is worth pointing out that we have a increasing diversions between the spf expectations and the

market-based expectations. the spf expectations remained year, 1.5 in this expectation is the in the medium long-term. pretty anchored. on the other hand, we have a market-based expectation, which in the days immediately after andit, fell significantly, one immediate explanation was there are technical factors that cause such a decline, namely that the impact on nominal bond yields was bigger than the impact on the lingers. hand, even with the

market sentiment recovered, we have not really witnessed an of ther similar recovery inflation of the market-based expectations. again, we cannot say much about this at this stage, we need a little more time to assess what is the state of the market base inflation expectations. i your second question, reiterate what i said before. over the coming months, when we have more information, including new staff projections, who would be in a better position to assess the underlying economic , but ifns, and so on warranted to achieve its objective, the governing council will act by using all

instruments available within its mandate. i would not -- i would stress resident -- readiness, willingness, ability to do so. >> so far, banks have suffered most from brexit, it seems. very important for the transmission of monetary policy, so do you see there is some need to act and my second question is moment, bond the purchases are linked to the capital, which you outlined to change to that in the nearby future.

mario: banks are important, especially important for the eurozone, which is basically bank based economy where the theit goes mostly through bank lending channel. bank equities in the aftermath of the brexit were especially hit. eurozone, and especially those banks with a high share of npl's. price -- bank equity price is of some significance whenolicymakers, because they drop the way they did, one would assume this is to stay,

cost of capital would increase and therefore, the net return on landing would decrease and would suggest on the banking side a more conservative behavior. that is why we do care about equity bank, equity prices for the transmission of monetary policy. in a littleer this more bright perspective but also medium-term perspective. on the solvency side, our banks are better if not much better than they were before. let me give you one number, the be 9%, but --o directly supervised by was 9% in 2012, and it is around 13% today.

from a solvency viewpoint, one would conclude that a series of actions that have been undertaken in the last three or four years, like a new regulation supervision as i said, a robust supervisor and rails redesign, also a new harmonized classification npl's and certainly, substantial provisioning against these npl's and other forms of part of the balance sheet and finally, the role that our monetary policy played in the spirit of time are the reasons why banks are better if not much better than they were in 2009. what is the problem?

the problem that we will have to ,ddress is weak profitability not a problem of solvency. on julynow, next week, 29, the eba will publish the outcome of the most recent stress test for 51 banks in the european union, including 37 significant institutions directly supervised by the ssm. the ssm has conducted the same stress test for an additional 57 banks under direct supervision. these stress tests will be one input to determine the capital demands by the end of this year. then, what about the npf? we said it is certainly a significant problem for the

future profitability, and for the capacity, the ability of the banks have. it is a problem that needs to be addressed because it is an obstacle to the transmission of monetary policy. one would say that the solution of the program -- of the problem is based on three pillars. a consistent supervisory of aach, the development full functioning npl market, and inrd, government action passing the legislation that would force the development of an pf market -- npl market. this involves a sort of revision legislation,anker

but also other actions and also having a public backstop when at times of exceptional market isces, the npl not well functioning, and we want to avoid fire sales. the answerquestion, is no, we had no discussion about that. i want to be very precise, what was the question? >> go back to the effects of brexit on the eurozone. i understand the ecb expects to hit growth of about half a percent over three years.

would that be sufficient to bond purchases beyond march which is coming up fairly soon? the second question is on the qe program. howming you did face -- difficult do you think it would be to change the parameters? do you see any legal challenges? mario: on your first question, the fear that circulated that the figure that circulated was of 0.2 percent or 0.5% over three years. the commission came out with a similar figure of 0.5%.

i think we should take these estimates with a grain of caution. uncertaintyfore, prevails because first of all, these figures well in the end, depend on how long it is going fore a stretch of time these negotiations to be completed and to give a certain outlook, which we do not have with us, today. second, these figures will also depend on what kind of outcome is going to come out. i think they have to be taken with a certain grain of caution. what is clear is that financial markets and also the banking sector, in spite of the larger changes in the stock prices have

reacted in a fairly resilient fashion to the event. observed any disruption, neither in a financial market sector, nor in the banking sector, and this is still caused by the large liquidity being abundant, also by the preparation that all central banks have undertaken before, ensuring their liquidity lines will be available. certainly by the economy monetary policies undertaken by all central but also because of what i was kind ofefore, the more robust regulatory system all over the world. that insured resilience by markets and banks.

i think it is too early to say what is going to be the final impact. say isy thing we can that it is a risk that has materialized and it is a downside risk. as far as your other question is concerned about the possible execution difficulties that the , werogram may have to face view all her monetary policy measures as having been quite successful. they are underpinning the economic recovery. they are underpinning the return of inflation to our objective. second, as i have the opportunity to say before, we

did not give attention today on the discussion -- to the discussion of specific instruments. but in the past, we have given enough evidence, not only of our readiness to act and their willingness to act, but also to being able to adapt our programs ofas to reach the objective a purchase of 80 billion euros per month until march 2017 and beyond, if needed. think, and worrying about the coming months, whether we will be able to fulfill this objective or not, i think proper attention should begin been to the evidence we have given in the past few months in our ability to exploit the flexibility that the design of our program gives us.

mr. president, the ecb has recently published an article that illustrates its various ways of estimating the output gap, which is quite an elusive number, with the measure that was considered more robust. is what is the measure you consider most convincing of the output gap and what conclusions do you draw from that study? my second question is if you have already started considering ofering or other ways closing the asset purchase, especially given the widespread expectation that the asset

purchases will be extended past march 17. thank you very much. pres. draghi: thank you. i'm aware of that paper, of course. it is an estimate of the output gap. as you yourself said, it is an elusive concept. theo take into account various definitions of output gap when we design monetary policy, including the one you mentioned. that is the answer to your question. thank you. that i had quoted the work of our expert last year in my speech at jackson hole. the other internal estimates of theretput gap means that

is a whole range of internal calculations with different models that go from -2 to -6. we cannot really make a choice in a very concrete way in saying this is better than the other one. reaching that conclusion based on the assumption that the variables in the model could explain exactly what happened to inflation and to achieve that reverse engineer, it concludes that the output gap should have been -6 in order to explain the inflation that actually happened, but that is totally model-dependent. everything has to be analyzed with all of the uncertainties behind such a concept. pres. draghi: your other question was about tapering.

no, we have not discussed that. you said that countries that -- when you spain a country like spain, ,hich has reduced its deficit deserves a sanction that can be counterproductive in economic and political terms? do you think the sanction could be a risk for the eurozone if we have problems in the financial system or a change in the fiscal stance of the eurozone as a whole? pres. draghi: thank you. the decision about sanctioning spain or other countries for

this matter is entirely in the , whichf the commission has the responsibility, the power, and the knowledge to take a decision. , whatthe g-20 meeting kind of message do you want to send to your colleagues at this upcoming meeting? do you see another downside risk outside of europe? thank you. the message that -- well,ably come out

the message that will come out with a message that i can foresee or expect to come out will be a message of stability. the message that will come out specifically from the eurozone will be a message of a recovery that continues, though at a , in the midst of great uncertainties. uncertainties that are not especially coming from the eurozone. but they come from various parts of the world. in this climate of general , mostly geopolitical uncertainty, it is very important that a message of stability comes out of the g-20.

everywhere. very accommodative. the financial system and the banking system are stronger than they were before. it is very important that a message like that comes out. >> mr. draghi, earlier this week, the bundesbank made a inposal about strengthening the case of crisis countries. the proposal to rethink what is called the troika. i was wondering what you think about this position, if there

was a discussion about this in the council, what you think about this. how worried are you about turkey? how can these developments generally have an impact on the recovery and the situation in the eurozone? thank you. pres. draghi: thank you. on the first question, we are part of the troika because of passed.ion that was at the time, there was good inson for involving the ecb the programs. the eurozone did not have any experience with how to manage these situations. it made sense to have all the other players in the imf, the commission, and the ecb.

there is also a good case for the ecb to be part of this, so that the ecb could have information about the solvency and about the financial were --y of what they where the counterparties would reside. through the years, actors have required experience and ecb, especially in the last two a role whichrved is more minor and more specific to its capacities, to its skills , namely the financial and the banking sector in these countries. now, to change the troika, we need to change legislation. that is not our task, that is

the european parliament, the legislators, that is the euro group, and so on. so, we are ready to give our contribution to that extent. turkey,second question, it is very difficult to understand how these very big geopolitical uncertainties what effect the recovery because the channels are not obvious. even in the case of brexit, there is an obvious channel, the trade channel, but is it the most relevant channel to express the impact of such an event on the eurozone? one would rather think about the confidence channel or the financial service channels. in the case of turkey, it is very likely that all of these events might affect the confidence.

it is very difficult to foresee significant impact on the eurozone recovery, at least in the immediate future. >> thank you. the corporate bond buying purchases have started fairly recently, but i'm wondering if you can give us an assessment of whether it has met your expectations so far in bringing you closer to your mandate. this may be an obvious question, but i wonder if you can explain the transmission mechanism for that part of the asset purchase program, as you see it. i have seen some reports questioning how that is actually going to bring you closer to your mandate. thank you. pres. draghi: thank you.

, we, in terms of results see inflation moving forward according to our baseline scenario. , there was a better than expected development in recent times, when headline 0.1% toon moved from - 0.1% and that is essentially due to changes in the price of energy. even when we exclude food and energy, we saw a positive development in services inflation. set atflation has been uptick as been shown for several months. we are moving forward at the pace which was expected according to our baseline. by the year-end, there are

certain basic facts concerning the oil prices, which will make inflation go up and stay for the at 1.2%, if i'm not mistaken. we will see these effects by year-end. ask aboutalso monetary policies which have been undertaken at the time when we had many other contrary factors or headwinds going against -- what we should ask ourselves, what would have happened in absence of these monetary policy measures? consequencesat the , the impact that are monetary policy measures had on financial

markets, i think there is no doubt that they have been highly effective. in the give you an idea last few days, our measure of lending rates is a composite average of bank lending rates and it is now at a historical minimum. we never saw lower rates. the bank lending service shows that now credit conditions and credit volumes are improving and have been constantly improving for several months. even more importantly, when we , the bank lending survey was taken before and after the brexit. banks had been given the opportunity to tell us is what happened changing your views? none of them seemed to have

given an answer to that. perhaps, it is just too early. we did not have any feedback from brexit into their answers. but, basically, when we are asking, why is credit going up? what is motivating your lending decisions? they answer, competition. competition between banks. when two or three years ago credit flows were still, credit growth was still negative, the main answer about the main motivation behind your lending decision, the main answer was risk. that is the important thing. being given this answer about competition being the main driver for several months. basicallyr this to be a product of our monetary policy measures.

all of this is being passed through to the real economy. we are seeing this through the gradual economic recovery, which is moving forward at a steady and moderate pace. not to mention, of course, all the other figures that i did not mention in the past, namely stock prices, namely spreads between the fragmentation in the overone being by and large -- spreads between core countries and periphery. bank lending. spreads between corporates and sme's have narrowed down a lot. excuse me.

>> you mentioned earlier that there is a need for a public bus stop to prevent a possible fire sale of npl's. you expand on that? what form could it take? in second question on npl's italy, which happens to be our country, how urgent is the need for capital and how big? mentionede steps you earlier are fairly gradual and take time, but sometimes, the feels like the problem is urgent and cannot wait. thank you. pres. draghi: on the first is aion, public backstop measure that would be very useful. we agreed with the commission.

it is important and it is more important given the existing rules. what shape should it take? all of this should be agreed with the commission. the second point about the npl's in italy, it is a big problem, it is going to take time. it has taken time everywhere, by the way. 's when theyhe npl reach this size. that has taken time. that the be aware longer we have this in place, the less functioning will be the banks with high npl's, so the

less capable will be these banks to transmit our monetary policy impulses to the real economy. npl -- high-level love 's makes thenpl banks will rebel to the markets -- vulnerable to the markets. hit,equity stocks were especially with those with high levels of npl's. future profitability comes into western. lots of s stock. -- lots of capital is stuck. they are interested in trying to resolve this serious problem as fast as one can. on the other hand, one is bound by its nature. it is a problem that is slow to

be resolved. the question is what can be done to accelerate the resolution of this problem? one of the measures is to have a well functioning market for npl's. what is needed for such a market to develop? several things. one is dominant. to create a legislative npl'swork where thee b can be traded and sold easily. some steps have been taken in italy. there are steps in the right direction recently. more should be done and it should be done especially to address the legacy npl's, the past stock of npl's. the legislative changes should be such that the legacy npl's

could be quickly addressed. thank you. i would like to follow up on what my colleague just sat on this proposal on the situation of reform. not enough appetite in the countries to go ahead with further integration of fiscal policies, so we need a market-based solution that includes restructuring and credit participation and so on. i was wondering whether you think this goes in the right direction or h and better not be undertaken? largef has signaled out financial institutions is one of the main risks for global financial stability. -- imf has singled out large a large bank in frankfurt as a main risk for global financial stability. i was wondering whether you

share these concerns. pres. draghi: the second question is easy to answer. i won't comment on specific banking institutions. , it isfirst question -- the changes that are being suggested may be , butnal in their own sake it is very important that they take place in the proper framework. another words, can i have that restructuring in absence of a or a somewhat more advanced idea of a common fiscal policy. sure that we have examined all the implications and morecial markets generally for stability a large of big changes in the treatment

of sovereign debt? i think these questions or these proposals, which have their own rationality taken by themselves ought to be reframed in a more complete framework than the one we have today. >> thank you. mr. president, members of the european parliament have called fromhe eb8 to be moved frankfurt to london. do you support these calls to make your work easier? pres. draghi: i did not know that. [laughter] pres. draghi: sorry. i have no specific view on that.

>> the commitment of the ecb to bank notes and coins -- why to you bury the 500 euro note? pres. draghi: i'm sorry. what is the question? is the ecb what? >> is there a clear commitment to banknotesstem notes and coins as sole legal tender. >> of course, there is. >> what is it? pres. draghi: no, we did not bury the 500 euro note. we decided that the 500 euro a good instrument in hands that are not exactly proper hands. wantmeone said, we don't to draw comfort to criminals.

so, we decided to stop production in 2018. beginning of 2018. we will stop production of the 500 euro note. it will stay in circulation and it can be converted at any time in the future. so, it will have legal tender. , it is trueestion that your son is a bond dealer in london, wouldn't it be a conflict of interest? pres. draghi: this very simple question was asked five years ago when i started this job. he is a traitor in london -- is not a london and it conflict of interest. and the european parliament did not believe so. >> i just wanted to pick up on

your point about the solvency of the banks and the approve men's -- improvements we are seeing since the financial crisis. when we look around europe and we see some of the largest and most strategically important banks trading at or around record lows, that suggests something bigger than profitability concerns and even solvency concerns in some cases. do you think there is still a structural lack of confidence in the european banking sector and do you think investors are perhaps overemphasizing the risks? , we have question is seen a significant recovery in equity markets in particular since the brexit vote, but the data suggests that international investors are heading to the door. , inink when they look particular across the water,

they see a fractured european union, they see low growth, high inflation, terrorism, geopolitical risks fueling , and politicians that are, in many cases, failing respond.on -- i was wondering how you would respond as a european and as the head of the central bank of the eurozone. pres. draghi: thank you. let me respond to the second question first. response lies in achieving our mandate in achieving our objective. in ensuring lies price stability. it amounts to growth and job

creation. our response lies in making sure the labor markets continue to improve. that is our domain. this is our job. we consider this to be a very important contribution for also addressing the other side of our continent that creates so much worry in the rest of the world eyes.- world's that is what we do. that is what we are accountable for. that is what we believe we will succeed. , i don'tirst question want to underplay the situation. to say it is not the solvency problem and it is a future profitability problem does not mean that one underplays the problem.

figure-wise, we see that from a solvency viewpoint, or banks are better off than years ago. certainly, they do have profitability issues, especially the banks with the higher share of npl's. some of it has to do with the weaker performance of the past few years. i'm pretty confident that a strong supervision and the robust regulation and the better communication by the supervisory authorities and all of this will certainly improve the situation and the perception in the rest of the world's eyes. >> thank you very much. we will see some of you at the g-20. thank you. goodbye. jon: that wraps up the ecb news

conference in frankfurt. let's map up -- wrap up the market reaction. theeuro on a round-trip to dollar. saw the spike up in the euro and then you saw it rollover. euro-dollar settles at around the 1.10 model -- level. switch over the model and i will show you the bond yields. the 10-year up to positive territory. yields up on the periphery, as well. alesio.to bring back in it was a greenspan-esque performance by mario draghi. within it, there were some material headlines on italian banks.

specifically, on equities and on npl's. there was a strong message on the banks for the european commission. on manyrepeating occasions the importance of not breaking up the transmission mechanisms in the banking sector. the public backstop would be very useful, he said. hasaid the bank directive room for flexibility and he basically said that flexibility has to be used. it seems to me there is a strong case for italy to be helped in this case. retail depositors, corporate bank bonds. the issue of these npl's back to the 2000 a crisis, this is really just a political problem at this point. it is between renzi and merkel. they both have elections and they both have to sell it to the electorate.

to play the better hand because he has more risks with the constitutional referendum. he has said he will resign if the referendum is lost. his image, between now and then, will be particularly liked to success in dealing with the italian banks. jon: it has been fantastic to have you with us. thank you for giving us your time. david: first of all, we have some breaking news. the attorney general is going to announce something that has been reported before, that they are going to sue against the merger .f cigna anthem the arbitrators have been telling us this. now, we want to turn to a very important development in corporate governance. 13 executives, including warren buffett and jamie dimon, have signed a letter publicly urging traded companies to use a set of common sense principles for good

corporate governance. to the tr e turn iant fund manager. >> good morning, david. call me nelson. these desk onlled through these principles and they are common sense, as they say they are and they are about the role of the board and shareholders and management. specifically asset managers. tell us your relationship to these principles. are you supporting them? did you sign -- did they ask you to support and sign it? .elson: we are highly engaged we think these principles, as i said, our music to our ears. i'm thrilled to see them in print, finally. we act as long-term shareowners. we want to management and boards

to act the same way, like 100% of their net worth is tied up in the business. these principles are saying exactly that. that there isct emphasis on the executive section on the board, which is so important. we do speak regularly to jeffrey think,-- immelt, larry and jamie dimon. we don't see this as a bible, we see this as a primer. it is almost all-encompassing for boards and how they should conduct themselves going forward. we are just thrilled to have it finally in print, finally put out there. it is a great product and it is excellent and it will help move our economy forward. david: nelson, as you say, and throughout the principles, there is an emphasis on the long-term

rather than the short-term investment. you are a very successful businessman and investor and you identify with fairly successful activist investing. a lot of people associate activist with the short-term, that that is part of what has driven short-term thinking apart to get value in the short-term term. is that unfair? nelson: that is why i started off by saying we are a highly engaged share owner. we don't view ourselves as activists. -- we thinkctivists certain activists are short-term, certain are long-term. we create real value, that creates a longer period of time. we understand time frames. we know things don't happen over the weekend if you are trying to redirect a company.

another thing that this touches on, but probably does not touch on enough is the strategy of a company. i think the board needs to be iny engaged very early on the development and the approval of a strategy for a company. they touch on this in the principles, but i don't think quite enough. i think it is terrific that they have done this. i think all activists are not demonstrative -- homogenous. if you lump is in there, we are going to tell you that they are not homogenous and we are long-term in our thinking, long-term in our investments. we are longer than most of the mutual funds and they will readily admit it. our average length of stay in a company, once we get on the board, is about five years. to would be hard-pressed

find mutual funds in stocks for five years area david: i don't want to lump you anywhere you don't want to be lumped. there was an activists in and it brought up -- brought in marissa mayer. haveapproach would you taken to that situation that could have led to a better result? nelson: first of all, we would not invest in yahoo! we don't claim to know the tech space. we invest in areas where we are very comfortable, consumer products, consumer brands, retail, restaurants, industrials. financials without balance sheet, that is what we invest in. we don't know enough about the tech space to understand what is

coming around the bend. i can't give you any advice or opinion on yahoo! david: let's talk about one specific thing in the principles . that is the voting shares. the two classes and a disapproval of having more than one class of voting shares. when you go back to long-term-ism versus short-term viewpoints, there have been in the in american corporation history were two classes of shares has promoted long-term. even now, when you look at mark isn'tberg and facebook, that one way in corporate governance that you can ensure that management has an ability to put in a long-term strategy and make it effective? nelson: you know, i want to tell you that there are probably instances where two classes of stock makes sense. where a family wants to maintain control. you will not find is making

investment in those companies. ofneed a democratization shareholders. i'm on the board of a company that has two classes of stock, but i'm there in a personal capacity, not through trian. iran a company in the 1980's, i built a company with peter may that had two classes of stock that we ultimately did away with. david: let's talk about someplace where you have invested and that is general electric. jeff immlet did sign this letter. you made a $2.5 billion investment. in your view in the transformation they are trying to bring about? nelson: i think they are right where they should be. they set targets for themselves, they made a decision that was , to get out for ge , finally.dit business

it was a brilliant decision, it was a brave decision. it was really well planned. when you take ge credit away from the were asked -- the rest of the business, the son finally shines -- sun finally shines on assets, probably the best collection in the business. those assets, along with a commitment to reduce overhead, not going into new verticals, i think ge is phenomenal, it has been great for us, it has been great for all investors who came in at that time. the stock is well above $30 now. we think it is a great long-term investment from here. david: finally, there is something going on in cleveland this week you might have heard about. nelson: i think i read something about it. [laughter] david: it was not that long ago that you were a major supporter of president george w. bush.

are you supporting or intend to support donald trump, the republican candidate this year? nelson: look, i'm here to talk about our investments, i'm here to talk about the principles that the committee put forth, which i applaud, but my politics are very personal and i don't want to air them. david: and i respect that. let me ask you a more general question, as we look forward to a presidential election, what does the country, what does business need in leadership in this country in order for them to succeed and for us to have growth again? nelson: this country needs to one of the fundamentals that the united states is built on and that is capitalism. the further we get away from capitalism, the further we get away from a growing middle class , a growing middle class in this country that are comprised of

small businessmen, that don't have to go through massive regulations in order to start up and run a business, the better off we will be because that is where the employment grows in small to medium-sized businesses. it is not the big companies. the big companies are always figuring out a way had to do something more effectively, more efficiently, and reducing labor. that is their job. i'm applauding that. it is the small business guy, he is the guy who hires people. it is the plumbing supply house and the painting contract or her and we need more -- contractor and we need more of those in this country and we keep putting regulations on them that makes it so difficult for them to start and grow their business. we also need to bring back the trillions of dollars overseas and bring them back in some economic way.

maximum,, a 10% tax the highest i can envision. bring that money back, have it invested here. that money is never coming back. as a result, we keep robbing ourselves of what a great asset that are right there for us for the taking. people just on understand that. you invest a dollar overseas and if you make a lousy return, you get 5%, you get $1.50. you bring that dollar back here and you pay a 30% tax, to get that dollar and $.50, you have to get a 50% return. 50% returns are hard to come by. that money is not coming back unless the government does something to motivated to come back. deregulating some of these businesses, letting the small business guy grow and exist,

that is a recipe for success in this country. that is getting us back to the roots of why we moved here from europe. david: nelson, thank you so much for joining us. trians nelson peltz, fund management ceo and founding partner. alix: republican vice presidential nominee mike pence introduced himself to voters last night in cleveland hoping to unify the party behind the ticket. he was upstaged by trump's biggest gop rival, who showed unity may not be so easy, ted cruz. senator cruz: stand, speak, vote your conscience, vote for candidates up and down the ticket who you trust to defend our freedoms and be faithful to the constitution. [booing] alix: it sounded like cheers, but they were boos. ,oining us from cleveland

harold, a sincere pleasure to see you. thatdo you think it means you have basically the republican party costs -- party's number two choice for the presidency did not endorse donald trump? harold: he came close, but he did not come over the line and that is too bad. at this point, and of people are at the convention. unfortunately, he got some boos and things like that. anyway, a lot of people don't like to lose and can't get over it. unfortunately, i think that is , unitye and, hopefully will follow. it certainly will. there have just been a couple and ites with mr. cruz

is too bad. alix: you advised mitt romney, but you have a much closer relationship for donald trump. do you feel like it was a mistake to let ted cruz speak? harold: well, donald trump is a great leader. if anybody can unify the party, it is him. he knows the job ahead of him. he realizes what he has to do. certainly, he will do that. you will hear that today, you will hear that tonight. i'm looking forward to hearing his talk and just how that will happen. he can get the job done. alix: you have known donald trump for a few years now and you are a relatively early supporter. have business leaders expressed worries about trump.

you are the quintessential businessman, you do the due diligence on any kind of deal, and trump is the ultimate deal for the u.s. talk about your process of due diligence you did for donald trump. harold: well, we need somebody to look out for the best interest of america. certainly, he will do that. a lot of people have not seen the side that i've seen. the fact that donald is such a good listener. business people listen and learn. that is all we do. certainly, he is one of the best at that. he has demonstrated that so many .imes to me i'm involved with the trump leadership council. he has demonstrated that he knows so much about all of the

sectors across the entire economy. he has demonstrated also that he will listen and learn everything that he needs to know to go forward. alix: part of that has been listening to you. he calls you "the king of energy." there are reports that you could be considered to become the next energy secretary of the united states. would you take it? harold: nothing has been talked about in that whole area at all. certainly, i would be honored if that was offered, but i've not given any thought to that at all at this point. alix: if you were asked to become the energy secretary, what would be the number one thing you would do on like day one? harold: certainly, there is a the entirell across spectrum of energy.

mr. trump has talked about all of the above and there is a lot of different aspects of energy, from nuclear to gas to coal. solar.ernatives, wind, thaty, is a broad spectrum has to be considered. number one, we have had a tsu nami of regulations. that is the predominant theme of everybody's concern, whether it is manufacturing or whatever it might be. they hinder businesses. they make it completely different. i was listening to the speaker, the first beaker -- speaker here this morning, he talked about

the fact that you could not go into business -- i talked about that last night. i was 20 years old being able to go into business and create the american dream. it would be very difficult to do that today. we need to make it easier for entry. all of the regulations out there trashed,e thrown out, that are not worthy of keeping. alix: herald, the first thing you would do is throw out regulations. the thing i'm trying to understand is that i know you've attacked the obama administration as being very anti-oil, that their oppressive regulations as you see them, but during his tenure, the u.s. has secured u.s. energy independence, we did lift of the export ban, your production went from 50,000 barrels per day to over 200,000 barrels per day. your revenue quintupled. what specifically has hurt your

ability to do business over the last eight years? harold: well, first of all, all of that has been done despite this administration, despite this president. inset out to basically do us . i mentioned last night, in their very own terms, they said they wanted to crucify oil and gas producers. that came out of his administration. you can't hardly get any more direct than that. certainly, this is already been done in spite of him. up.as not let they just continued to get worse. it all came from one thing, it

put this administration back on its heels, when they found out the potential that we have today and you talk about energy being first, we are first in production, both oil and gas. we turned it around, but it has been in this administration. if we do get hillary clinton and we see a continuation of more energy regulation, what kind of regulation could then add to costs for continental in 2019? what are you doing today to protect yourself against that? harold: all of it adds to cost. all of these regulations that they come up with really have no bearing, no benefit at all. it all adds to cost. economic or less less able to compete in the world. we are competing on a global stage now.

you mentioned lifting the ban on exports. that was a no-brainer decision. moving refined products, but we could not export crude oil. yes, we got that passed, but it was in a bill that he could not turn down. that was the only way we got it passed. alix: before we wrap this up, i have to turn to the oil price, trading at $45. do you see a scenario where we help -- have another selloff this year or is 2016 different? harold: absolutely, it is different. chasetinental, we don't price spikes. i don't see that happening. , wefundamentals of supply

have a demand of 1.3 million new barrels this year. that is strong. we had 1.6 million barrels last year. fundamentals are very close together. lending, supply, increasing demand leads to balancing of the market. aftere seen that happen this second quarter of 2016. periody, going into a where we will not quite reach, fromuite have enough production. we will be pulling out of inventory for the balance of the year. that means higher prices and that is what we predicted for the end of the year. alix: you were looking at $60, $65, maybe $70. thank you for joining us. harold hamm, continental

resources ceo. jon: a fantastic set of interviews with harold hamm. just to wrap up some of the market moves, 25 minutes into the open, the dow coming off a nine-day winning streak. the dow opened a little bit lower. down 0.1%. in europe, we are down about 0.3%. switch of the board very quickly. here is the post ecb mario draghi situation. dollar-yen, what a ride. the euro is pushing higher. we will be on the markets through the day. thank you very much. this is bloomberg. ♪

>> from new york, i'm vonnie quinn. >> mrs. bloomberg markets on bloomberg television.

-- this is bloomberg markets on bloomberg television. >> we are going to take you from detroit to cleveland and cover stories out of frankfurt and paris. economic data breaking in the u.s. so let's get right to julie hyman. julie: existing home sales is what we are talking about the month of june coming in higher than estimated in annual pace of 5.5 7 million homes being sold. the between existing home sales -- aew home sales existing 1.1% increase here again to 5.5 7 million that is the highest level in nine years for home sales. sign for positive residential real estate. closings of 1.1%. sales of 1.9% before