draghi delivers the ecb's latest rate decision. looking for clues about how he might unwind stimulus. the honeymoon with china is over. high-level talks break up. and john cryan on how the bank is preparing for brexit. time highs. at all good morning. i'm jonathan ferro with david westin and alix steel. futures are positive. the s&p 500 begins another day in 2017 for the 27th time at a record high. the euro falls further back from 1.1505.h at alix: in the currency market, the u.k., butn that isn't helping sterling. it is all about brexit. john cryan warning about a heart brexit.

-- about a hard brexit. the boj has to push back its inflation target one more year. selling on the margin when it comes to the german 10 yield bund. morning,ming up this 7:45, the important ecb rate decision followed by mario draghi's news conference 45 minutes after that. initial jobless claims and the fed survey. at 10 a.m. we will get the indicators. after the bell we will have fourth-quarter results from microsoft. now, let's get an update on headlines outside the business world. emma: a startling admission from the president about jeff sessions. the president tells the new york times he would not have appointed sessions if he knew that he would recuse himself

from the russia investigation. he called sessions' decision unfair to the president. the president may take another shot at getting a health care bill passed after the present parish republicans to stay in washington until they repeal obamacare. republican senators met with the president. mitch mcconnell still was to hold a vote on a repeal bill next week. senator john mccain has been diagnosed with brain cancer. his office says he and his family are reviewing treatment options. the arizona republican is 80. presidential andidate and spent 5 years as prisoner for after his airplane was shot down. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. a main event for global markets. mario draghi's tone will be

closely watched. he will attempt to balance optimism over a desire to move as slowly as possible when removing stimulus. ecb has forecasted to keep rates unchanged amidst an improving backdrop. the bank has been examining options around asset urges says. joining us is the central bank team leader who runs our coverage in brussels. layout the changes we could see in today's statement and in the news conference as well. probably the biggest focus will be if the ecb drops the easing bias on qe. it is a tricky one. at the moment they by 60 billion euros of debt through the end of the year. they said in the past they would go a long rate if needed. it sounds ready to increase the the or duration of

purchases, monthly purchases, if the outlook deteriorates. they reserve the right to go from 60 billion to 80 billion if it wants to. if the ecb were to drop that and purchases,ide to its that would be taken as another step to the path on normalization. everyone waits until september, but ahead of september we had a speech from of central bank president portugal. does he have to clarify the message in that speech after some people apparently thought the market this touched it? -- misjudged it. nervousme are more about market reactions after what they saw in centra/ . mario draghi intended to send a balance message as the economy grows at financial conditions loosen. you could pull back some

stimulus in line and remain at the same level of accommodation, but you have to do that actually . he may send that same message today. jonathan: we did reporting that we understand they are preparing a plan to announce may be in september on what unwinding qe would look like. we have any idea of the plans they are looking at currently? paul: we know they are comprehensive. they include a straightforward tapering plan down to zero, or ad hoc announcements, or combinations of those and other methods. there are different things to look at. the experts within the ecb, that is not necessarily the ones at national central banks, are analyzing their options. at some point that needs to be formulated into a proposal made by the executive board. that hasn't happened yet. that is something to look out for in september. jonathan: thank you for joining us. joining us from london on the

ecb is michael sneed -- michael andrew wilson. always good to catch up with you . i wonder how you add goldman are thinking about the situation. : the balancing act the ecb is trying to do is to give some clarity that they will gradually ease policy without toting financial conditions tighten so much. it was a surprise to them when mario draghi announced this last month. the euro is up one point five percent and financial conditions are tightening. what we are looking for is to try to balance that to give some sense they are going to proceed with the taper. september will likely be more detailed. he will try to walk a fine line. he doesn't want to see the euro at 1.16, hee are

doesn't want to see it in a stronger. alix: the trifecta between inflation, deflation, and reflation. mario draghi phil have to drive scenario,lationary not inflation. how do you think he will do that? we think he will be looking at a holding situation. the ecb has time on their side in the fact that they have the meeting in september and the deadline for giving an extension of the qe program not until october. draghi to rush for set up the market too soon. david: you said they have to be concerned about the euro, where it is. will mario draghi admit that, at least in the q&a? will that in itself have an effect on the euro? andrew: he will reference the

broad tightening taking place. they don't like to comment on exchange rates specifically, so i think it will be an oblique reference to the tightening, but he will be careful not to give a sound out that the euro is too strong or two-week. i think it will be there that the tightening that has happened impacts theal and inflation forecast. the last inflation forecast come the eurocentric was 1.09. it has put downward pressure. we won't see that and sale september, but they are conscious that a stronger euro puts downward for -- downward inflation. when this is the conversation we're having about the ecb -- used a central banks thing heavily involved in the markets. we are at a tipping point. we are at a tipping point that when the fed, the ecb, will be

moving back. how does that impact yields? german yields have doubled. still, the market volatility makes our life more interesting and gives us opportunity. jonathan: what are the opportunities? andrew: in those relative moves. the divergence in central banks. ecb will be doing quantitative easing or reducing next year, they will be doing it gradually. we are optimistic the fed will be raising interest rates. the ecb will not be raising interest rates next year. that craze opportunities on a relative value basis. alix: what about periphery old that? -- peripheral debt? long as the ecb is doing this gradually, they will say inflation is low and they

are gradually easing, so i think al debt looks ok. yields went lower. could we see something similar happening in europe if the ecb moves too quickly? andrew: i think it is unlikely. behind the taper tantrum and the rally and bond yields was the sense that inflation was never coming back. i think in europe inflation stays low. it might be up a little because go lower, but i think inflation stays relatively low. you are both going to be staying with us. 7:45 used in time, the ecb policy decision followed by mario draghi's news conference 45-minutes after that

. from new york and london, this is bloomberg. ♪

david: i'm david westin. donald trump is six months into of his presidency. here to give us a status report is our chief washington correspondent kevin cirilli. and the bloomberg international economics correspondent michael mckee. let's start with you. one thing the president wants to do is repeal and replace obamacare. still no big developments on health care. the cbo scored the latest repeal bill. they say 32 million americans

would lose coverage over the next decade. that it would lead to a billion dollar deficit reduction. it is unclear if the senate majority leader's position and assertion that he will bring this up for a floor vote, or try to next week, with pass. behind the scenes, lawmakers are looking to move on to tax reform. the house budget committee laying in a markup the reconciliation process and setting the stage for the roles that they will need to follow, not only for the budget, but to pass tax reform and repealing parts of dodd-frank. david: that is the pesky congress the president has to deal with. when it comes to trade he doesn't have to deal with congress so much. the u.s.-china negotiations, how did they work out? everything we know, they failed. nothing came out of yesterday's

meetings. it appears that may have taken a step backwards. the harsh rhetoric, the cancellation of the news conferences, the lack of statements, any specificity, suggest they did not make progress and actually have e have not lived in that direction. wey still have steel, but don't know where they go from here. toid: it is fair enough president trump that he hasn't done this job before. is there any indication that he and his team are getting the hang of things and learning how to pull the levers in washington? policy, iterms of spoke to several sources in the treasury department who says they are in daily negotiations and meetings with capitol hill to learn from the lessons from health care in regards to tax reform. they expect to release a plan by mid to late august. trying to get everyone on the

same page to avoid the differences on display with health care. that is a tall order for steve mnuchin. yesterday, a full display of divisions between republicans on the border adjustment tax with several different republicans taking different positions. david: thank you both, very much. alix: the clock is ticking when it comes to getting something done. mohamed el-erian writing that constitutes only foundation stones for the comprehensive policy effort needed to generate a high and sustainable rise and more inclusive economic growth. it names to be supplemented by further efforts to enhance needs to bet supplemented by further efforts to enhance productivity. to dealing with the expectation of something from d.c., what will be your base case?

you could argue that sentiment is still high and that is a positive. michael: the key thing we are looking at for the administration to be delivering over the next six months is the of changing tax reform. sophia there has been very little attention put to this. -- so far there has been very little attention put it this. if we look at the earnings expectations, a lot of that was over expectations we would see earnings pick up as tax reform takes place. that hasn't come through. so far, earnings are doing well helping to support the elevated evaluations in equity markets. if we don't get tax reform, there is scope for equities to unwind. alix: by how much? michael: we like to look at u.s. equities first. we think over the next six to 12 months we could see 15%

outperformance of european equities. alix: we were talking about central banks in the last segment. some officials baked some stimulus into their forecast. if they bake that out, what is it due to the june rate hike cycle? andrew: there is not a lot of optimism on getting health care reform. it looks like it is on the back burner. taxes, i don't think there's a ton of optimism. the 10 year bond yield, we went all the way to 260, now we are 2.25.to there is room for upside surprises. it will also come back to the fundamentals and looking at the labor market. you have to balance the optimism over the potential tax cuts. do not forget to keep an eye on the labor market. the unemployment rate is something the fed will be looking at closely.

we have easy financial conditions, it is bizarre that they have raised rates three times and financial conditions have gotten easier and they have a tight labor market. it is hard to discount how much tax will impact growth. they will be looking at the labor market saying we need to tighten things up. we think the fed is moving there much on a tightening path this year and next year. jonathan: breakevens have rolled over. we talked about opportunities in europe. talk about inflation in the united states and where the opportunities are. i think inflation will pick up. would we look around the rest of the world there is not much inflationary pressures. the u.k. excluded. elsewhere, japan with the boj pushing out there inflation. i think that inflation could surprise, that is something we subscribe to and gives a chance for inflation-linked bonds.

i think the market will be surprised about the amount of rate hikes that have to happen because of the inflationary pressures building. market weree persuaded nothing could be done on taxes it could affect equity valuations. how subtle is the market in interpreting things? we are seeing washington backing off the fundamental tax reform, something more modest, nonetheless tax cuts, 16% corporate rate, it might be 20%. with that form of lesser tax cut, will that be enough? i think atmichael: the moment the market isn't putting too much attention on detail. the market has seen the amounts of liquidity, what is happening with real rates, the message from yellen, and going into equities. i think around reforms, at the

has not putmarket much on 15% or 20%. it is more the headline message that comes out of the administration. at the moment there is not really a headline message for the markets to digest. alix: and the asset classes, what is the biggest miss price? treasury yields are too low. it should be close to 3%. i mentioned before we have been 60% a few months ago. if i said 3% then it wouldn't have been a surprise. early part of next year. i think the trend will be pretty clear. and andrewel sneyd wilson. both of your sticking with us. coming up, erik nielsen will be joining us right before the ecb press conference.

this is bloomberg. ♪

jonathan:

emma: the british government needs a few more weeks before deciding to let 20th century fox takeover sky according to the culture secretary. she may refer the deal for investigation of murdoch's media influence. the biggest maker of chips and mobile phones has a the klein and profits from revenue. qualcomm says sales in the licensing division has fallen. t-mobile has raised its forecast for adding wireless subscribers in the u.s. threempany expects to add .6 million customers in 2017. it raised its profit outlook suggesting t-mobile's promotion and giveaways are not hurting

the bottom line. here is how t-mobile stock is performing in premarket, up over 3%. the ceo says t-mobile has new m&a options and that profit will rise this year. good news for t-mobile. american express down by over 1% . it offers more rewards to retain rivals for the premium cards. to $1.3income is down billion. heating up. best of core, a utility based in and canada's hydro one making a bid for the company. that stock trading a little bit below that level. that brings the total u.s. energy buying to $14 billion. interestingindustry -- i find the utility industry

interesting. it has gotten hit. they're so much natural gas in the business it has been hurting pricing across the board. that industry seeing a lot of tieups. jonathan: thank you. will bring you the ecb policy decision followed by the president, mario draghi's news conference 45 minutes later. futures unchanged or become men in at all time highs at major benchmarks in the united states. 1.15.ro-dollar, sub you are watching bloomberg. ♪

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on the nasdaqgh as well. up about a half of 1%. -- that put the retail sales, but it is doing nothing for sterling. they should cross out the story. let's get you some headlines. sterling. here's emma chandra.

-- russian lawyer. wouldrity of americans pay higher gas taxes to fix crumbling roads and bridges. today, -- business executives offer their views. chama, -- emma chandra, this is bloomberg. spoke in a message saying the following.

we will try to minimize disruption, but inevitably, roles will need to be removed. we are down by about 2/10 of 1%. zurich to help break the story. we havethrough of what seen and did not know yesterday. >> it is a straightforward story. deutsche bank ceo was addressing employees. we are familiar with the content of that that the bank should get ready for brexit and the bank cannot wait until the final negotiation has been done with

regards to brexit. this is a deal we don't know. this is why we need to prepare for a hard brexit. this includes establishing new jobs and also moving from london which is a big entities for deutsche bank. >> a lot of people who watch the story would have sat there and -- ght this is a ceo walk me third about what the others are saying and perhaps why frankfurt has become an attractive destination post-brexit.

>> i don't want to lobby for frankfurt, but you have seen a lot of non-european -- i guess it comes down to regulatory map. guess frankfurt is seen as a to oversee these big banks . the case is probably much more straightforward. headquartered and it is a german bank. a tragedy announcement has made this clear. reemphasize our german roots. making deutsche bank more german

again. >> i won't lobby for frankfurt either. >> and all metal -- lot better restaurants and hotels. still with us to discuss market , have you thought about what this means for the functioning of financial markets. maybe not in waves, but a continuous movement the upcoming gears. -- it just creates uncertainty.

think there will be some concern that you get more volatility than you otherwise would. they want to get as much clarity as they can. others will look at the contingency plan and say what functions exist. paris, ike dublin in think there will be people there as well. >> a lot of people are after the city of london. for many fuel, it is a political vendetta and the argument against trying to break up the city is on the consonant -- is that the kind of thing you pay much attention to? too far apartare

from that discussion. what is interesting is the amount around brexit. think prices30, we very little downside risk. seeing the start of the brexit negotiations is going at a very slow progress. the market is not holding the position and also when we look at the bank of england, we have seen rate hikes. it seems inflation is going to come down in all of the major economies in the next three to six months. >> inter vivos says negotiations are going at a slow pace.

when i took from that is we have a lot of work to do. whether theng back damage isn't already being done with regard to what the deal into being. to -- going to have to make decisions? >> i think there is a little bit of time. around to make decisions .ow the businesses look you probably do it trump months before that. think if you don't get any -- i think it is a six

to nine month time frame. >> the u.k. governor is considering a special visa so that foreigners continue working in the financial service industry. how they got the howrmation, but it shows difficult it has come to be. i want to raise with you. how much damage could be done here? >> the friction costs they are creating when it comes to financial markets. potentially, there could be a lot of damage. this comes at a time where the

real economy is being impacted by the damage we've seen so far. , what is going to be key i think is the timing in which companies will have to put together their contingency plans. we have seen that it takes time. compromise often doesn't come until there is pressure. >> stay with us. we are about five minutes away from the decision. simon, 70 up for the decision in about five minutes time. expected.y change aboutr they drop hints

being able to extend or deep in a needommodation shows to. up not too time come exciting. >> a couple of days ago, and closed market pushing towards 116. comingve they sent you and trademark like this? position, an extreme but also an extreme position and these are going in opposite so expect more fast money positioning.

longest position these investors held for the last eight years. positioning from fixed nice image.us on a these are positions built up course and it is huge. have been oneases

trillion euros. is sort of the trade we talked about earlier. the corporate credit trade. what is the trade there? assuming they will trend that general line. whether they have six sided about batch that balance sheet you were talking about is going .o be instrumental the backstop over the course of the last six years has been significant.

me about howk to tight it has been. >> if you look at investment, we are back to 2015 levels. we are continuing to push the envelope in terms of yields lower and spread tighter. >> for longtime, east to come on the program with me. what about buying question mark cautious.much more we are at the end of the cycle. has really driven some much title and slowly coming to an end. we think the credit cycle is very extended so taking a much more cost us approach. >> we should be coming in about 30 seconds time. unchanged. be

justdollar, the 2017 had short two days ago. 115.dollar now sub cable rate, 129. treasuries unchanged. you know how things are set up. 25 basis points in rates remain unchanged, 0%. rate left unchanged. negative -- -40 basis points. the guidance from the

ecb, here it is as follows. their method qe will can adjust in size if the outlook worsens. adjusted if the outlook worsens. toot of people were looking see that was removed. it stays. down by about a quarter of 1%. michael, let's turn to you quickly. did think they would

remove that line about the guidance of the qe program. is that significant? >> we were not expecting that line to be removed. really, i think the focus is comment be on draghi's and how much he refers and more thinks there is potential for inflation over the next coming months. if he starts of knowledge more that story, that could start more of an impact on the market. >> some areas were expecting the

language to the removed. >> is this a surprise? that link through is an important point. europeanagree that inflation has come down as a result of the stronger euro. the fact that it has linked to the inflation rate might make it more difficult. i think it is interesting -- -- thentinue to struggle ecb ahead of the inflation. turn to the story

over the next six months. play inhat divergence your mind? >> i think the strength of the labor market here in the u.s. still --ter, but it still a pretty high-level. admittedly, the unemployment rate at 4.3 you would have average higher earnings. the combination, we cannot afford to stay on hold. -- that kind of language was introduced from 60 doing euros. what they convinced the market of wasn't at the beginning of a journey towards zero. once we get to september, and they communicated the same thing? it is not a journey towards

zero. is that the direction of travel for the ecb? >> i think now the direction of travel is slightly different than it was previously in the reason for that is the situation in the eurozone. at the moment, growth is very strong to that means you will likely see a slight change of some -- tone from draghi when that time comes. >> it can the increased. put that statement together. are they compatible? and more importantly at the news conference he holds 40 minutes or so from now, when he is asked about this, will he back off what he said or double down? outlook remains positive and that is something to be focused on, but he will be aware inflation is going to come down. i think he is going to try to maintain that, however inflation remains subdued and therefore have to the cautious. that is going to put them in a bind unless they prepare the market for that.

, if ieral months ago asked what the path of least resistance was, it was easy for a lot of people. is that a little bit more balance now? >> i think so. ofis not just because draghi's speech, it is also very morewith yellen's much expected, last week. really come on direction has changed within the last month. us.reat to have you with to wrap things up, rate unchanged. points on the depot rate. another things that has remained unchanged is the language. it will run and they can adjusted in duration if things worsen.

a news conference comes in about 40 minutes time. from new york, you're watching bloomberg.

>> you're watching bloomberg tv. bankuropean central maintaining that commended to adjust the qe program should things worsen. euro-dollar down for a second straight session. the ecb.nged over at that news conference in full right here on bloomberg. you looks aket for

little something like this. we are down about a basis points. 53 basis points on a german tenure. all the the ecb. language, but it will be interesting to get to that news conference and see if the president wants to clarify that message. happyl gross is probably because he had a warning letter that central banks must use caution. it could tip the economy into a recession. he also goes on to say a flatter -- now, we have a

little bit of a warning. wehe says all the rules thought we knew may not apply anymore so it may be different. >> there's always a riskier. >> you never know. they will be joining us at 2:00 p.m.. again, bill gross sank central banks should be careful because a domestic and global economy are so over levered.

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-- high-levelp trade talks breakup in the sea without a joint same it. of employs theeo bank is preparing for a hard brexit. -- this is bloomberg daybreak. futures are positive in the united states. the bid starts emerge in bond market. >> take a look at what is happening in germany in terms of the bond market. about onehave yields basis point higher. .ot totally dramatic

the pound and instant story as well. >> people went shopping for clothes apparently. >> coming up at a: 30, holding leaveews conference to rates unchanged. initialame time, weekly jobless claims and at 10:00, medium indicators. issue u.s. treasury will -- right now, it is time to get an update on what is making

headlines. president trump have some criticism of his attorney general. accusedresident also running anler of office that is filled with conflict of interest. president trump urge republicans to stay in washington until a repeal obamacare. mitch majority leader mcconnell still wants to hold a vote on the health care bill next week. senator john mccain has been diagnosed with brain cancer. mccain's office says he and his family are reviewing treatment options. than fivent more years in a prison camp after

being shot down during world war. is mammoth chandra, this bloomberg. >> it is a beautiful thing. >> anticipation builds. the statement reads that the ,utlook becomes less favorable the governing -- increase the program in terms of size and/or duration. and about 30 minutes, we will hear from the ecb president. joining us now is on bloomberg reporter. the questions we are expecting to hear shortly. said, so far we have

not seen anything to unexpected. the ecb decided to keep its language on the bond buying program. that was something they initially discussed and economists were split over whether they might decide to drop it had this meeting. it appears they haven't. the big question that still the draghi sees for the future. time.lly appreciate your more on the ecb news eric joins us now. great to have you on the program.

>> i think you're right about that. he laid up of the ducks and we think he is coming to announce a program starting early january 2018 so it's a matter of getting the language trade. >> park of the great interests of the press conference is mario they talk about tapering. will he be able to deny this time? >> they don't want to use the word. they started tapering a long time ago. we know the program is going to

roll off sometime in 2018 unless we get a massive shock. this is a program doing well. they're going to roll off. >> it is really going to be about duration. the longer they wait, the harder see it when they try make a shift? >> ultimately, there is no limit to what they can buy. obviously a problem for the bonds. right if theynd are going to buy a lot more stuff.

i think they good news is the program has worked and other things have helped so the european economy is doing quite well. is the bond market , why do youd really think it will be better to avoid an abrupt change. >> i share the concern you have. think he did not really say anything new, with the exception of ane a little bit more analytical backdrop. i think some did not fully understand the issue. he did seem to indicate a bit more patience when it comes to inflation.

panicked -- i think they know it to him to be honest. we are at a time when markets in thesually on volatile tables have some volatility. i would think they would take it easy on the language. had a really fragile is the girlfriend now in europe? --what their worrying about they might really stop the growth. i thought we were doing pretty well in europe? >> there should not be a worry.

the elements of a good recovery. it has been nice starting of the consumer the elements of a good recovery. growth and now we have investment growth so it is a nice robust growth. so i'm surembalance they are not particularly likeed, but they don't volatility and don't want the curve to go too fast. >> known to disagree that the -- pean economy is if you take him at his word on those four conditions, it is pretty difficult to say --

this is where there is some news into the analysis. hey are a little bit worried talks about the deepness of this. i think they are too worried about it, but it is very clear they have decided they can start to take away stimulus even seegh they cannot for sure inflation on the horizon. that is sort of the news. >> what are your thoughts now? we're heading for a

stronger we're heading for a stronger euro. place where the current account -- the only thing is speculative money, which is not that powerful. we see the dollar still high from here. >> you talk about a steeper yield curve. here's what bill gross said in his recent outlook. today's -- central bankers and investors

should view additional tightening short range with caution. do you agree with that, the letter ago we have a risk of recession? disappointed -- worried about disagreeing. i think what you're seeing now is central banks have been pushing the curve down dramatically. that has helped the real sector and we have seen a growth and recoveries. i think what you're seeing now is a willingness to steepen the curve a little bit and in the u.s. you have a little bit of the same story.

they played these two interest agree with this one. i think coming out of the recession, we can take a slightly higher interest rate than benefit from a slightly steeper curve. in about 20 minutes from now, mario draghi's news conference. live from new york, this is bloomberg.

>> president trump has reached

the milestone. six months into his presidency he thinks he has got more done than anyone before him. how is he doing? >> he's not doing very well according to polls. 36% is the lowest for president ever this far in his term. he came to washington to drain the swamp, but did not know where the alligators were. in hewas thought going would have more of a free hand. yesterday, we had u.s.-china negotiations. why did i not know better? >> it appears the president .verestimated his ability

once they got to talking about issues -- may 1 in china to gives a lot of areas the chinese were not willing to. that has been the case all the way through. immigrationut those orders. rushed through. he is finding it very difficult to get things done. >> it is easy to put a negative thing -- about markets not forces, this is about something else. feels like the administration wants to get the message and do more of a hard-line. >> all of these things take a

lot of negotiation. there have been talks going on for months. >> thanks so much for being with us. we want to go down to washington. >> we're here with senator rand paul. senator, the president saying he wants to move ahead on a repeal bill. when you stand on this? have been for repealing obamacare. been for a repeal and remain so. the problem is as we got into the survey, many republicans replacethey wanted to it with a form of obamacare with

a little bit less. i don't think the federal government should be giving money to insurance companies. uncertain which way we are going. the white house now talking about going back towards the senate leadership plan. >> right now as it stands, are -- are you yes on repeal? >> yes. insuranceke the bailout money and put it on another bill. . cannot give money they have doubled the profits under obamacare. oppression is are

you frustrated with leadership for how this has been negotiated? elections.nd one for now we had the chance to repeal it, they have gotten week in the knees. i'm also for creating an insurance allow. none of this was part of the repeal discussion we ran on. business health care -- >> one-way we are getting new tax reform.

>> i think will get something done by the end of the year. i'm confident that. >> have you had conversations with the treasury secretary? the last time it passed in the house, a hundred democrats in every republican voted for. the main lobby against it, fed. fedink it is unseemly the should be lobbying on legislation. transparency and i think it will be good for the country. going to fort knox anytime soon? >> i am. >> who are you going with? >> i think the governor, treasury secretary and senator mcconnell. >> a lot of talk about federal reserve.

-- i don't have a specific, but i think the president should appoint someone with his 2 -- consistent with his policies. -- interest rates going down is a thorough price signal the people in the marketplace. >> big meeting with the said next week. >> thank you for coming. back to you. >> janet yellen surprise they might not like what the fed is

doing. -- will get into that. we are about seven minutes away. rates unchanged. if you are in the news conference in the cattlemen's times, what would you want to ask president? whether he is him -- and thenng away relate that to over 2%. -- whate going to see are some of the language and keywords you want to me >> ining to question mark

you -- courage this is not the way to do it. hissure if you talk to piece writer, they are not sitting and counting words. we are past that time. journal sentiment -- less, but ivide -- k you are happy don't seeer, i still it.

worried.ot too have is a talk about the euro? >> i think is going to duckett completely. and then remind them they are -- king about the short end of the curve and the financials more generally. discussionlly the for sure at the governing

council. their sure if you were in to thiss the answer time around? >> that is -- so far, the governing council has never discussed policy or monetization. the real conversation has been postponed until september. >> the reporting you have been doing this week man working on a plan that they will envelop september. do we have to handle around whether this will be a tempering program down to zero or whether to 40-- we take it down

-- those are two of the options that we have heard. is the council -- you can do this and then decide. this is what may happen today september and in the council will decide. from thea long way council. i find it plausible that these you have never discussed the possibility of tapering.

of course they have. no one think thing you could -- there is a complete understanding of the options on profound and a very effects. this is completely clear. we are talking about the governor and council which it probably isn't because you have a lot of governors -- -- you think about president draghi. nervousness.t the

who is more nervous? the guys in the driving seat or on the other side? >> the investors for sure. people talk.r you say things. they hop up and down, but at the end of the day, remember they are about providing stimulus price for the economy. volatility is within reason and they wonder tremendously about. get thatle you talk to very well. >> is eric nelson going to london for building or she watching this?

>> i could do both. i have one of these wonderful devices and and i've had. we're going to let it go to stay with us because president draghi looks like he might be a little late. there's going to be several questions. is there anything else we need to be thinking about? this is where they could have been more open. i don't think there are bonding constraints. is the do what we think start of january. in that case, there will not be thy.h

i think they could be a little more open about putting more risk on the balance sheet. me is it seemss like the tapering and the law here has more to do with andomic -- economic growth weaker inflation. can you help me understand that? inflation don't think of it as much as inflation as you want to think about an indication that the output cap is closing in all the rest of the.

is indeed where they are now looking at it. insertion for some reason we don't fully understand couple but this is something academics are all over the world. objective,only one they have little bit harder task in communicating this and that is a shame. they should talk about it as if it's meant to be which is a fully functioning economy. >> he said the lack of inflation is not unique to euros. a fair amount of discussion would be about the lack of weight pressure despite lack of employment. what is the situation in the

eurozone unemployment? important, but because we don't have index was a target, i think draghi is little bit nervous, but of course it is because clearly you want -- we moved in on the phillips ifve and we don't quite know it is on that. distribution the and all this sort of stuff which applies to your. of a lack oft wages and a difficult one for them on the horizon.

>> thank you very much. marriage audrey you can see now arriving a couple minutes late. rates still unchanged. the people remains negative 40 basis points. keeping that pledge until the end of september. >> the vice president and i am very pleased to welcome you to our press conference. we will now report on the outcome of today's meeting which was also attended by the commission vice president. the -- regular economic analysis, we decided to keep the interest rates unchanged.

remain at their present levels for their -- regarding -- the current monthly pace of 60 billion euro are intended to run until the end of december 2017 or beyond the untilary and in any case the governing council sees a sustained adjustment in the path of inflation. madeet purchases are alongside investments of the principal payments from purchased.ecurities havenetary policy measures

continued to secure finance conditions necessary for continuous progress towards inflation rates to levels below 2% over the medium term. the income information confirms a continued strengthening of the economic expansion in the area which has been broadening across sectors and regions. the outlook is broadly balanced. while the ongoing economic expansion provides confidence --t inflation will gradually it has yet to translate into stronger inflation dynamics. dampenedinflation is

by the weakness in energy prices. moreover, measures of underlying inflation remain overall subdues levels. therefore, a very substantial agree of accommodation is still needed for gradually building up and support headline inflation development in the medium-term. if the outlook becomes less favorable or if financial conditions become inconsistent with further progress towards sustained adjustment, we stand ready to increase our purchase and or in terms of size duration. limit explain our assessment in greater detail starting with the

economic analysis. by 0.6%.increased -- incoming data continue to point to solid growth in the. -- in the the period ahead. the investment continues to benefit from very favorable improvements in corporate profitability. consumption is supported by implement gains which are also benefiting from labor market

reforms and increasing household wealth. moreover, the global recovery should increasingly lend support to trade and exports. however, economic growth prospects continue to be dampened by lopez of implementation of structural reforms in product markets and by remaining -- a number of sectors notwithstanding a number of improvements. on the one hand, the current chances increases the of economic upswing. on the other hand, outside risk primarily related to global factors continue to exist.

inflation was 1.3% in june, down 1.4% in may are mainly to lower inflation. looking ahead on the business of current futures prices for oil, headline inflation is likely to inain around current levels the coming months. at the same time, measures of underlying inflation remain low and have yet to show convincing .igns of a pickup inflation is expected to rise only gradually over the medium term, supported by monetary measures and

continued economic expansion and gradual resumption of economic slack. turning to the monetary analysis -- as in previous months, annual supported byinly is most liquid component with a narrow aggregate and expanding 9.3% in may rate of 2017. of recovery in the growth is private sector proceeding.

the inaugural parade of those households increased to 2.6 to 2.4 in april. -- loan growth continues to the supported by increased demand. monetary policy measures put in place to june 2014 continues to significantly support conditions for firms and households and credit flows across the area.

-- to secure a sustained inflation rate towards the levels close to 2%. in order to reap the benefits from our policy measures, other -- reduce vulnerabilities. inflation is to be substantially stepped up and reduce structural unemployment in produce --

a full transparent and consistent limitation over time and across countries remains essential to bolster the resilience of the economy. we are now your disposable -- disposal for questions. flavor, you give us a mainly heavy held any formal after december this year and my second question .s more on the follow-up we have seen euros strengthen to in 2014.st level

from that standpoint, are you concerned the gains and currency are already excessive? thank you. >> let me respond to your first question. we reviewed the economic wherepments in the area we took stock of the continued improvements and -- there is not any convincing signs of pickup for inflation -- e noting

-- remains conditional upon the very substantial monetary accommodation that is known place. summarize to try to around the concepts we have thatded on like confidence is basically generated by the growth momentum, but also the fact we need to be persistent and patient because we are not there yet. way, we are unanimous in

communicating no change to the we were and also unanimous in setting no precise dates for when to discuss changes in the future. saidher words, we discussions should take place in the fall or the autumn. malcolm turning your second true there have pondmovements in pond -- -- bond price. financeovement in conditions remain broadly supported to secure rates

towards inflation. long-term yields have reason, but still are lobar historical standards. some issues have seen falling rates. the corporate bond spreads have continued to decline incidents close to his level at the beginning of the year. and the bank service suggests banks expect to further over the credit standards in the third quarter. the repricing of the exchange attentioneceived some

, but as i said has received some. as my call it mentioned, there was a sharp reaction. is there any concern that -- thank you.

one comment on market reactions, let me give you the bottom line of our changes is that basically inflation is not where we wanted to be and what it should be. are confident it will gradually get there, but it is not very it. -- the very substantial recognition is necessary. let me read the statement. -- and support headline inflation developments in the medium-term.

let me just make clear one thing. time, we are finally experiencing a robust recovery. the last thing a governing is on --ay want tightening of financial conditions. that is why we retained the second bias of reaction. favorablemes less with further -- further progress

thetand ready to increase program in terms of size and duration and i think the council has given enough evidence that when flexibility is needed to objectives, has been very able to find all that was needed. thank you. -- emarks on inflation confident that inflation was starting to reemerge. today, you are seeing no sign of a pickup. you explain how we get to point

then fordo see -- and my second question, it seems the is having some impact on your thinking and what you'll do with 2018, but we have that it can be very difficult to control the markets. would you consider doing something similar to the bank of japan when there is no attempt to manage the yield curve directly? thank you. the financial markets a moment ago.

i think i put them in the proper context but nothing like this was discussed. assessment of what i said -- statements are not very different. and all occasions, will be needed was basically take stock of the improvements in the growth outlook of the area and then we ask ourselves why is it this showing up into a higher inflation rate and underlined inflation? went through a series of reasons that has to do with the negotiations which productivityo with

and the analysis was quite broad , quite detailed. factorssaid all these going to be permanent or temporary? probably be are not permanent because as economic recovery improves and the growth outlook improves, all these reasons will lose some of their effect. biggeror market might be , but as the economic situation improves, so will the labor market can this will be absorbed . nobody can be one is a percent sure, we think it is going to take time, but in the end --

-- then we said, are we there? yet.e answer was not -- persistence in keeping the current stimulus in place. december was in which the path of inflation is conditional. sense that our -- tary policy will says basically trust the strength and power of its

monetary package in all its elements. second, ready to use the and third, iteded says it will stay in the market for a long time. in conclusion, i'm not sure i see a big difference. much was made of the word reflation. havetion means you reflation when the price level thers and has fallen below trade line and recovers so recovers from the trendline. speech, reflation has , so no bigflation

difference. >> a general question of how confident are you that it is possible -- without creating volatility at all? that a smoothent transition is possible. -- to go back to the market i should say. they alsoent are you be buying government bonds going forward? >> thank you. we are confident that this process can be brought forward

see smooth way so we don't the program proceeding in a smooth fashion. on your second point, we have gone through this several times. first of all, the review must be completed. to caps on market and decide about this. the sound implementation of the are essential for soaring market confidence and we have to note the national central bank has expressed concerned about that, although

there has been serious the way we see this is activity should be part of an overall strategy when you have the completion of the program and also the return to the market. there should be a lasting way. premature to talk about other things and what you suggested and other problems. thank you. >> mr. president, let me touch on your centrist speech and the expectations you have given today. would you say there has been part of the economic world a misinterpretation of what you

have said? secondly, in the wake of this speech and before in some parts of the markets there have been forwardthat ecb for put a roadmap, a kind of timetable concerning tampering and concerning changes in general monetary policy. would you say something like this would be hurtful? thank you. >> thank you. on the first question, i never comment on market developments. on the second question, this is thetly what is going to be substance of our discussion in the fall. the answer is yes, the ecb considers the useful, important, essential. that is the sort of discussions we will have in the fall. thank you.

>> my first question is about heavy at ecb staff to start looking into the technical options for qe beyond december? the second question is slightly different. for appointments inside ecb an old and up -- annulled in the last year. what do you intend to do improve? >> the first answer is no. it has not been discussed. they have not been tasked. , really, innswer is a sense we are thankful to the staff committee when they address mistakes we like everybody else make.

sometimes their concerns are right and sometimes they are not. proceed in this way. sincerely we wish to work -- not only i, but the board management. the problem is it is difficult to have -- traffic is a two way route where it is difficult to trust someone who discussed things in the press and so on each and every time. frankly, also for the staff, which is a staff of a world-class quality, to be seen in the press as being sort of continuously discussed is a little sad. i think we should be improved perhaps on both sides is the way to work together. not necessarily a hiring practice. when any correction, we correct

them without hesitation. thank you. >> thank you. you,resident, can i ask you also said in the speech that as the economy continues to recover a constant policy stance will become more accommodated. it looks like the economy will continue to recover even more. you also said the governing council will likely discuss changes in the auto. -- in autumn. is it likely there is a change in the monetary stance in autumn will be necessary? >> that is exactly why we have

-- why we're having this discussion in autumn and why we did not want to set the precise date because we have to have all the available information at that point in time, which we will have by then. it will be a discussion which is made up of different parts. we don't look only at the growth recovery in assessing whether monetary policy stance is appropriate or not. we have to look at the, first and foremost, at the path of inflation. where it converges in a sustainable and self-sustaining manner to our objective. if wes why i said before, are going to experience in the presence of this recovery, if we experience and unwanted , and then we will

have to act and use the inflation bias and other measures as well. that is why this discussion we is having in the fall multifaceted. thank you. >> thank you. president, would it be possible the ecb, for example, takes a general decision on the reduction of the bond purchases , for quitehen maybe early, and decides on the

modalities of the purchases later? would that be an option maybe? my second question, you have said there is no convincing sign of a pickup inflation yet. for example, a rate growth has not been picked up yet. have maybe the fundamentals also changed about the financial crisis, the relations between growth and wages and inflation? or is the convincing sign only if the rates really pick up? the answer to the first question is we have not discussed that. reallyond question is something that changed all over the financial crisis. the response of wages to an

improvement in labor market is different from what it was in the past before the crisis. the answer is yes, certainly. it has changed and there are a variety of factors why this is changing. i went through explicitly during my speech. these are profound changes. is are issues for us they going to be permanent or structural or in the end we will go back to a sort of relation between the labor market, unemployment, wage growth likely used to have in the past? the conclusion we draw is with great caution because it is not something where one can be 100% sure. the conclusion we drew is that

in the end, yes, we will go back to a relationship like we had before the crisis. i focused on the labor market, but there are other reasons why this response may be delayed. for example the leveraging process is another reason why this is lower than you would have in normal times. in general after a protracted financial crisis and a long recession like we had, you would backwardenomena like looking wage negotiations,-deleveraging. it's a variety of phenomena. some have to do with the labor markets and others don't. all throughout we are confident when we are through. it is a combination of confidence and prudence and patience. thank you.

mr. draghi, you said you had not asked the committee get to prepare options for an exit. what are the chances at the next policy meeting you have concrete that youn the table could make a decision on? or are you only tasking the committees to prepare the option after your initial discussions on a possible exit in the autumn ? and you have highlighted the governing council's flexibility. what the you think are the chance at this point you would the rules of the qe program to ensure they are sufficient? thank you very much. >> thank you. the answer to your second question is we have not discussed that. to the first as well.

we have not discussed what we are going to do in view of september, are even less so what we will do after september. was a unanimous conclusion. don't set dates. we need to think. we need to have lots of information that we don't have today. there is a lot of uncertainty around. the governing council did not want to be forced to make decisions and absence of full information. >> good afternoon. first, on the inflation picture at the moment.

secondly, with regards to capital keys and the fact that for the third month in a row germany has falling below that on purchases, price and availability of credit on the made ite side possibly more attractive for the program as it has been discussed or considered? >> i'm sorry. can you repeat those questions? >> inflation picture. is it time to look at the inflation target? has that been discussed? we thank you eat pumping up this is -- we have had qe pumping up the system. is it where you would like it to be? is that because the target is wrong or because it will take a lot longer to get there? secondly on the capital keys and the german element to this, with

the council look at more corporate debts and purchases as price and availability of credit make it more attractive? >> ok. the answer to the second question is we have not discussed that. that.e not discussed we gave you enough evidence that was the case. when the governing council needed flexibility to carry through its monetary policy, it was successful in finding it. we do notst point, actually discuss this, not this time, but on other occasions we are briefly touched upon it. the issue is -- the answer is first, the reasons that led the

central banks in the world to adopt a 2% objective all around 2000'scept in the early are still valid. for the ecbally, they are still valid. true are voluntary policy -- monetary policy managers have been in place for a long time, but they have produced. they produce very significant effects. --can say today we created we created in the last six years 6 million jobs. much more than anytime before the crisis in the same amount of time. all the economic sentiment indicators, the survey indicators are either at all-time high or close to that.

have beenes unquestionably successful on the real side of the economy. ofis the response in terms inflation we are still waiting for an monitoring. the answer to that is we have got to be patient rather than changing objectives. also if you can ask yourself how credible is anybody really, an individual or institution that when it does not attain the objective and changes it in makes it attainable. the whole reason it could be so ifhe other way around, we had inflation at 4% and what to bring it down and decide 4% is the new objective.

it is not very credible. finally, to discuss changing objectives at this point in time for the destabilizing expectations. highly destabilizing. >> what kind of information you need to see between now and the fall to convince ecb something needed to be adjusted? would need to see an upward revision in inflation? or would it be sufficient if growth continued the way it is expected to do? i second question is does september 7 count as the fall? thanks. >> the second question is?

well, if the governing council decided to define autumn as september 7, it is probably when we will this side. he will be deliberately kept open. your other question, what other information? it is not that we are looking for a specific data point it triggers one behavior or another. in september we will be having the microeconomic projections. there is more information we can look at between now and then. basically the sense of the governing council that there will be more confidence in making a decision with more information than we have today. mr. draghi, you said in the

opening statement the recovery has been broadening across sectors and regions. it's obvious there is some trouble spots, some areas that have high unemployment or credit is difficult to find. how much does that play into thinking? how broad does the recovery have to be before you will feel confident about perhaps removing some of the accommodation? a related question, how confident are you that some areas that have been benefiting from the accommodation can't stand other own once conditions go back to normal? thank you. >> thank you. your question reminds all of us that what we say about growth momentum and strong recovery is an average. in fact, there are spots which

have not seen such great recovery. they in a sense don't appear only give this average aggregate description. that is something that should always be kept in mind when we say we created jobs and delivered markets improving, no question that is true in the aggregate but it doesn't deny the presence of areas where slack remains significant and unemployment and new time employment remains significant. having said that we should remember our mandate is not a growth nor employment. it is price stability. that is where our monetary and what weared for have to look at in terms of

deciding whether we are actually moving successfully. that is my answer. i'm sorry, your second question was? you are worried some areas have been determined -- benefited from accommodation might prove unable to stand on their own when the accommodation is not in the same place. -- we have toond take this an account in our minds, but the remedy is one of price stability. att is what we have to look it we have to aim our policy action to that objective. >> thank you very much. that wraps up a news

conference for mario draghi and the european central bank. market reaction fairly intriguing. mario a very dovish draghi on all accounts. the qb program can be increased in size and duration. then came the news conference and the words from draghi could be seen as hawkish. he said very substantial degrees of accommodation is needed. this is what the road did. did.uro if you find a confusing, get to the bond market and i will show you with the german 10-year was up to. down and then up and then down again. an isolation going up the market reaction. they struggle trying to figure out what happened. if you watched the news conference in isolation, just

what is going on? joining us from london, the chief multi-asset strategist over there. joining us on the telephone is international fx strategist, also joining us from london. jordan, try to make sense was happening in the fx market. a case yes, it is just of delivering upon expectations or not to explain the market price action. reading thedesk words from draghi's mouth. they are word for word from the press conference. the june statement he gave. he did not change anything. going into this meeting today i was asked to questions. -- two questions. tapper ini announce some form?

emphasis he put on financial conditions kind of gave investors agreement to say ok, if we do have that moment where it happens, the ecb will react and not set course. i have looked at the massive payments. you had a big increase in the current account banks and levels. also, consistent -- there is a six-figure. if i'm in europe i just read a very accommodative monetary policy remains intact. that will be fun civil and reactive to any unnecessary conditions. you can watch the financial questions index, but if they get worse they will perhaps slow down on the paper whether tightening a policy. worries didnvestor not come to the floor. jonathan: the structural story

of europe. are we going to trade on that all over again. it was all about the inflows going to europe. you really stimulated the bid for the euro away from the story. : jordan this is a multiyear trend in the euro. it's about when you get in and out. the current account story makes it very hard for the europe to have a lower hit. -- euro to have a lower hit. alix: my big question was what are we going to see in the next eight to 12 weeks. w of clarity to talk about something to tapering. he said economic assessment, but what really are the data points? >> i think you made very clear he did not want to be boxed in

in terms of specific indicators or in terms of timing for making a decision. elementit important will be for us happening on the other side of the atlantic. what is the fed going to do, partly because of the impact on the euro and on financing conditions for generally. there will be a couple more days on inflation. i don't think anyone is expecting any dramatic change. the more time passes and they see very subdued underlying inflation, the stronger the case for being patient and not tweaking. lastly i think it's important to acknowledge even though mario draghi is stressing anonymity by the framing of the decisions, we know there are very different viewpoints on the governing council. if you have more time, that

allows you time to build consensus. alix: focusing on inflows and surplus, what did you make about what happened over in the bund market? >> i would not try to read too much in the instant reaction of the bond market or the fx market. clearly one of the key objectives of mario draghi going into this press conference must have been not to try to move markets too much, and the clarifications issued by the debate. there was still uncertainty if ory are meant to be dividovish hawkish. ,ou said reaction in the market i would wait a couple of days to read anything more significant into it. david: coming back on the fx issue susan equate --

specifically, he said something about tapering. they would discuss it in the autumn, and then very coy about tumn is. au are we going to see tapering announced in the fall? jordan: i think so. they announced a taper from september onwards. we are pushing one of the more aggressive views. we think they wind down the qe program down to zero by the beginning of the second half of next year. a six-month timeframe. the market is probably over nine months. you do have jackson hole in august where he can signal his or weion for ecb policy, do find out ourselves getting to september and he puts his hat

forward for action in december. jonathan: that is an aggressive you. is that what you think they will do. they have announced that in the fall and they communicate to the market this is a taper. this is the beginning of a journey down to zero. say taper they say recalibrate. the european area is very positive right now in growth momentum and slight measures in the labor market are falling away. inflationary pressures are to come, but you have to remember the second side. tech limits. it is based on many different assumptions, when you start to run out of european paper to buy from the beginning of the end of the year until the second half of next year when the ecb throws off the constraints of the unprogrammed. anything else is to listen constraints rather and they have already done that several times

in many forms. it's a technical taper rather than just the economic story alone. you know which one i'm going to ask. i understand the autumnal equinox comes on september 22. the next ecb meeting is september 7. jordan: i describe these things, yes. jonathan: make sure that is in a note. thank you very much. alongside us is isabella from blackrock. just a few minutes away from the opening bell. 2:00 today, at an all-time high in the u.s. market. we can give you the premarket movers they give you the futures first. up about nine points on the dow, s&p, acord of the

record on the nasdaq as well. /10th oflar of -- up 4 1%. brent crude starting to make a move to the upside. a story crossed our desks about 20 seconds in. >> new record highs on all the indices. this is 28 days for the s&p we have seen record highs as we close at these levels. the nasdaq the big winner. on the upside you have brent crossing over $50. you have the dollar also a little weaker on the day. all that boosting equity indices. a few names to pay attention to.

sears up 19%. it is adding kenmore appliances amazon. they are going to listen to alexa voice command. vista up by 18%. you got a takeover bid by hydro one in canada. $3.4 billion. that would combine an unregulated facility with a canadian company and bring total m&a up to $14 billion this year. t-mobile of a 3%. john legere has an aggressive forecasts. trying to add 3 million to 3.6 million this year. the mobile carriers are continuing their price for, but i feel confident their profits will rise this year. talk to me about earnings. look where they are surprised. the top panel is average sales

so far for earnings. the bottom is average earnings percentagewise. the orange is all securities. the light is financials. the blue is tech. i wanted to highlight the tech. it was about financials and and we saw a big move in terms of sales. up by almost 2%. technology coming in at about 1%. different divergence when it comes for earnings. tech having a beat. banks at 6%. the earnings season? main's. will sentiment be held up by the results we are getting? for netflix the answer seems to be yes. jonathan: a move to the upside by 1/10 of 1% on the s&p 500. we close here for potentially 28 times a record high in the united states. , still within paul

us from london. the amount of records. the s&p 500 down. is irrelevant are not? >> significant is a strong trend in the market. we heard at the beginning of the year -- that was a big red flag for the market. a few stocks were driving the market higher. rent has -- brent has been strong throughout the rally. it corrected a little bit in the market kept going higher. people think this is a sign of promise to come. the overriding trend is the market is innocent until proven guilty. we are not seeing major divergences in any of the key indicators. jonathan: you see the same strength? >> absolutely. but we just heard from the ecb is a confirmation we are in this

first lower for longer environment. maybe we are beginning to see the design at the end of the -- the light at the end of the tunnel in the hope that inflation will return at some point, but interest rates will remain low and that's affordable equities, particularly in europe. alix: in the middle of earnings season we talk about the sentiment living up. you have to find undervalued stocks and stocks and will have growth. if you look at energy, i feel that does not really fit the bill. they have gotten pummeled so far. that is a value play. >> energy stocks hitting a 52-week high. as the energy sector is declining, 40% of stocks in this sector in the new 52-week low.

in the last couple of weeks it was down to about 20%. when you start to see that narrowing of the decline, is a positive divergence. turning season has been abysmal. alix: do you have a constructive you on oil? is this going to be a short-term relative value plan? >> long-term there is a lot of overcapacity in the sector. revisions was at levels we saw in the bust two years ago. that shows things are getting a little out of hand to the downside. when you look at prior quarters were analysts are cutting estimates going and earnings season for the energy sector, it's a gain of about 3% during earnings season. eight out of 10 times. two times was just as much or worse. in the short-term you can take a tactical play for the energy sector and focus on these companies that are the most washed out.

on the technical perspective, a lot of these stocks and especially services groups up and breaking the downtrend. david: to continue the legal analogy, is the probable cause for arrest in valuations? alix: you lost me on that one. >> i'm not sure i like the metaphor, but there has to be a correction sometime soon and it has gone on for too long, we are strongly in disagreement with that view. we have looked at data going back all the way to 1872. these phases of global facility have a lot of persistence historically. the fact they are in such a meansof global motility there is an overwhelming probability, something over 80% probability of staying in such an environment going forward. that is an environment in which

you really want to add riskier portfolio and not the other way around. jonathan: a lot of people are focusing on adding european risk. what is your view? >> we love europe, we love european stocks. we see a lot of growth momentum and we see attractive valuation and investors positioning still giving a lot of room for inflows given how much was flowing out last year. this is one of our favorite regions right now. jonathan: i went to lunch as today with a strategist which means you have to be done europe a little bit. we listed all the things you would want to materialize to have low european risk. the french election, cleanup of the italian banks, the ecb remaining accommodative. all of those things have materialized. yet, the united states has still outperformed europe in terms of the equity market. everyone sits around the table saying buy euro while the u.s.

is still outperforming. from a u.s. perspective we're seeing a lot of flows with investors looking outside the u.s. at the weak dollar. we think in december, the eight year run of the dollar we have seen came to an end and we are more in a period of sideways weakness. we advocated looking outside the u.s., s&p companies with international exposure. but the point earlier about we need a correction because we are due, a lot of people go broke at the roulette well thinking you are due for red or black. to say we are due is not a great argument. david: if you look at individual sectors, to you prefer sectors occupied with companies who make more money across border or more domestic? region.pends on the

definitely we are seeing a global sustained expansion. they will outperform. traditionally that means european and japanese emerging-market corporate stew better. positivelso very domestic growth stories in most of these economies. in terms of sectors or in terms of factors in that phase of the cycle. what does well is momentum. and value the chief stocks and we talk about that earlier -- c heap stocks. euro remains strong. -- when do things started by? >> if the euro keeps creeping higher, that will hurt. in terms of data rolling over,

we don't think we're there yet. we had seen and saw earlier some acceleration. now we are more in a phase of steady expansion and we think they can continue for quite some time. there is a lot of capacity in europe. quality momentum has turned positive. the global expansion is continuing and providing a lot of tailwind to the european corporate. we don't see any reason to worry about a significant role in over of data at this juncture. jonathan: great to catch up with you. we will be sticking with us. 10 or 11 minutes until the session. stocks move a little lower on the dow, about 1/10 of 1%. that&p does close there, is a record high for the 28th time. alone.

you get desensitized in the bond market. following president mario draghi , a stronger euro in the face of dovish talk. the market is not buying it an exciting some kind of tapering announcement in the fall, depending on what you define the fall. this is bloomberg. ♪

♪ up on bloomberg markets, chairman, president and ceo of you and pacific railroad. this is bloomberg.

-- union this if it railroad. david: six months into donald trump's time as president and people are taking stock about how he has done so far. here is chief washington correspondent kevin cirilli. they've taken on health care. how are they doing? kevin: it is anyone's guess. this summer news is senator john mccain's health and having a brain tumor. that is one less republican that will be likely to vote should the majority leader's efforts to click to bring a vote to repeal the health care bill actually makes it to the floor. earlier today i spoke with rand paul about where all this stands. he has been a critic of the leadership. , i asked about the frustration not just with health care of what the republicans'ability to a net other parts of their agenda. >> frustrated in general my party was not more consistent. we ran and won.

kevin: republicans trying to advance their agenda. i'm awaiting a press conference by committee chairman jeff hinterland. he is working to repeal parts of dodd-frank. that meeting still very much underway. david: there is also news halfway down pennsylvania avenue at the white house and the justice department, for the attorney general today through someone else says he is not resigning which is an extra everything six months into a term. the president talked to the new york times and said he would not have appointed him because he recused himself on russia. is the president trying to send a message to a cabinet member? that bombshell interview the president gave to the new york times or he essentially says he will not have offered of job to jeff sessions, one the first if not the first senator to endorse him.

someone who really did usher in sense itf nuance and a was a time during the campaign when many wondered if anyone in the senate with back donald trump -- would back donald trump. in the russian meddling investigation continues. next week on capitol hill the senate committee is setting up the stage for people like paul manafort and donald trump jr. to testify. david: thank you so much. us to discussth the trump presidency and how markets are reacting is isabelle and paul. for the markets due in six months? you brought a chart. what have you historically found. talk about howhe huge the gains have been in the trump presidency, if you look back at historically, it is line with the

median gain for the dow. there is a caveat. -- marketscans typically declined about 1% of republican presidencies. one with theonly only one better is the first president bush. alix: we can't judge went on six months? that is crazy. how do you factor in with going on in the markets? it is hard to make a case for why do we care. although it is also hard not to follow it completely. the saving grace is the u.s. economy is in pretty good shape. left to its own devices it is going to perform well. that is what we are seeing. initially there were high hopes a bunch of policy measures were

taken that would boost growth significantly. we have not seen that. markets have stopped hoping for anything much. if we do see a bit of policy action, that will be a positive surprise. if not, the economy will keep growing in performing for several years in this expansion if there are no policy mistakes. this remains a constructive environment, even if the government isn't completely in shape to deliver a strong reforms. alix: bank of america have their money management survey. they say money management is the most underweight since 2008. what is going to make them change that? will it be a catalyst from d.c. or just the relative value play? >> yes. the relative value argument is a strong one. this is one we would agree with. we don't dislike u.s. equities right now but we see a lot more

value in other parts of the world. having said that, if you're focusing on the u.s. market as an environment, we like equities better than bonds given where we expect the direction of travel to be. we don't see the six pension coming to an end anytime soon as long as the fed does not rush into normalizing and the policies adopted in washington are not completely counterproductive. this is not a gun market to stay in. the you want to be overweight? probably not. and particularly not if you have a more global portfolio. alix: thank you so much. great to see you. if you have a bloomberg terminal, checkout tv . indirect with us directly. go to tv on your terminal. this is bloomberg. ♪

♪ >> a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium-term. jonathan: that was mario draghi after leaving rates unchanged, stimulants -- stimulus unchanged. up.-dollar trade.is how we strategist, get is up to speed. what should be made of the rhetoric of mario draghi and the reaction in the market that followed? >> i think it is a tale of two

markets. we are seeing periphery spreads tightening, core yields a little lower. substantial accommodation is still needed. there is standpoint very much a continuity with what he has been saying all along over the past few press conferences. i think the euro is pushing higher because when he was asked the question about euro strength, he push back a little bit but not vigorously. i think we have seen the euro rise to reason high levels but not pushing a lot higher because it on think there is any to terribly revolutionary there. the euro is pushing higher because he did not respect to hard. on the right side we are seeing spreads tighten as a result of the continuity and recognition they will have to be in the market and doing qe. for a considerable amount of time jonathan: they will take a decision in the fall.

we assume that means september 7. >> although he did push back at that idea. jonathan: can we assume economic conditions will be there to justify a move? >> we don't know. the ecb is focused only on one number, the inflation figure. inflation at this point does not show signs of cooperating although we got higher oil prices. i can see alix smiling. ecb looks at the headline number, not the core. they may see some progress by then but it is hard to know. economists will chew on his comments all throughout the weekend. david: was that his goal? that was mario draghi's goal for the bond market? >> i think he is probably playing for time. the updated staff forecast in september, we have a little bit

more data to look at. i think michael is right in saying inflation really is not playing ball, and that is their single metric. they have one mandate. until that starts to pick up i think it will probably look to play it on the patient side, the safe side. we could get some sort of utumn,cement in the a but we have discussed this before. we can see a tweaking of the qe amount, but they will still do it for a considerable amount of time. maintaining stimulus at a slightly slower rate. david: the question right now is inflation is not playing ball in europe. penny janet yellen might say the same thing. what is going on? >> nobody really knows if it's a secular cyclical change in inflation. i spoke with the former atlanta fed bank chairman. he said it might be time percent

for banks to start rethinking their view of inflation. if it's not going to come back, if they can't generate it, they have to come up with a new model. jonathan: always great to catch up with you. thank you very much for your time. the market about 26 minutes into the session. the s&p 500, we have had a series of records on the dow, nasdaq and s&p. if they close here, the 28th record close. the story is in the fx market. the dovish europe draghi -- mario draghi. you are watching bloomberg. ♪

vonnie: in the days 10:00 a.m. in new york, 3:00 p.m. in london, 10:00 p.m. in hong kong. i am vonnie quinn. nejra: i am a vucevic -- i am

nejra. welcome to bloomberg markets. vonnie: here are the top stories from the bloomberg and around the world. is keeping the door open for further euro area stimulus. doesn't it make good news for investors? and united states, president donald trump to revise his plan to reveal and -- repeal and replace obamacare. we are seeing concerns about the u.s. reaching the debt ceiling this fall. and bondholders are heading back to court to recover money from puerto rico's bank rep c. -- bankruptcy.