bank is expected to unveil its stimulus plans for next year. the president says yellen is terrific but indicates he might want to make his own mark on the fed. trading revenue plunges at deutsche bank and barclays. pressure builds to deliver growth. from new york city, good morning . i am jonathan ferro alongside david westin. this is bloomberg daybreak. let's begin by whipping through the market action. euro-dollar dead flat at 1.18. futures steady and stable after the biggest one-day drop on the s&p 500 in just under a month. ,reasuries find a bit of a bid yields come in by a single basis point on the u.s. 10 year at 2.42. it is a busy day in the united states so let's get things started. revenue- third-quarter

-- they do see fourth-quarter dajusted ebit. at 200 -- ebit -- monthly users up about 4%. the stock up about 5% in the premarket. david: we have earnings at ford,, ford -- out of they are beating on revenue and earnings per share. gap actually reported by earnings per share of $.39 per share as opposed to a $.32 percent -- $.32 prediction. they controlled costs beautifully. they had record sales in the pacific in asia. the one thing that fell short, europe. why? brexit. bob shanks will be talking about this in about 20 minutes. jonathan: the ecb, 45 minutes

away we get the decision. is it that beginning of the end of the qe plan? mario draghi expected to announce a scaling back of the bond buying program and loose monetary policy. running us now from outside the ecb in frankfurt is bloomberg's matt miller. what is on the table? matt: the consensus is for a cut in half, from 60 billion euros a month in bond purchases down to 30 billion euros a month, and an extension of the program for nine months until september of next year. bloomberg markets thinks we could see a little bit more dovish action from draghi, maybe a cut only to 40. maybe that would be a six-month extension and he would leave it open-ended. he does like to leave things open-ended and say he is willing to come back with more firepower if necessary. analysts at jpmorgan think we

will see a more hawkish mario draghi and that would be bullish for the euro. the euro looks like it is set to move either way. it is very thinly traded today as people wait for the decision. david: breaking news related to europe, the sec has just given a essentially get out of free -- get out of jail free card to various brokerages and banks here and there was a question if you charge for research do you have to register as an investment advisor under u.s. law? the sec says at least for 30 months we will give you a pass and you do not have to be subject to onerous regulation. the other big story, matt miller, i want to bring you back in with the chart, the ibex in spain. delivering some nice gains of almost two full percentage points. catalans alone president

-- the catalan president might call a regional election instead of independence. he does not want to talk about politics, does he? matt: he does not but he will face some questions. he will make a statement at 1:30 p.m. and our press conference with draghi is an hour later. bloomberg news has reported he is going to hold elections rather than declare independence again. right wing further or left wing, depending on how you see them, separatists preferred the independence declaration but elections could give him more power. if he wins he will have a mandate to go forward with catalan independence and if it does if he loses it may be a

more dignified way for him to bow out of the standoff -- if he loses it may be a more dignified way for him to bow out of the standoff. jonathan: great to have you with us on the program. first president for dutch question for president draghi. if you were in the news conference, what would it be? jordan: a lot of what you will hear will be like a bad cricket score. you get the e.u. cricket board. 30 billion for nine months of an extension in qe, or could it be 40 for six, which is what we think. what matters today is a lot about forward guidance as well. does draghi keep us on a wait and see for the next nine or six months? ecb's.ne of these weird i have not seen an ecb with so many variables and a low conviction in the market. this seems very light, very nimble.

it is going to be euro higher. jonathan: nine is really, really bad. months seemsr nine to be the central base case that as jordan says it will be difficult to establish where the market is and what it expects. pierre: we see it in line with the market and i would certainly agree that the emphasis is on forward guidance. perhaps the one element i would add is if we get any details about the balance of government bond purchases relative to corporate bond purchases. i think the currency market will focus very much on forward guidance as well the government bond market, but i think credit investors will be focused on any comments about the cspp. david: taking us into that question about buying sovereigns as opposed to a corporate bond, does the ecb have a choice?

do they have to go into corporate bonds because they are running out of sovereigns to buy? , it will almost -- over time it will almost become the default option. from the perspective of credit investors, if european bonds have been well supported by the ecb and it looks that they would put more emphasis on the corporate bond program rather than on the non-sovereigns because of the limit of bonds out there to buy. david: we always talk about mario draghi because he is very much the president. he has a number of people he has to please. how unified are they? is it possible he might have to move a little bit more in the hawkish direction to keep his team on side? we have seen -- deflation risks have abated but

we are not above 2%. we have not seen these inflationary impulses that deal with the hawks in the ecb's and now they need to be slow and steady. if they did a taper tantrum, looking back at 2013 and the experience the fed had, if you have real rates exploding in that manner that would offset a lot of the gains in the program we have had so far so i do not think it will be that hawkish. jonathan: the data just is not there, inflation is not back to target. is this more about the technical constraints of the bond buying program and less about the data and improvement in the european economy? pierre: i would still classify it as a move from extraordinary measures to more ordinary measures in the sense that quantitative easing has been a massive support for the government bond market appeared we are running into technicals, but i think at this point in time if you look at real rate, they are very low whereas we

have seen real gdp growth improve a bit but still at relatively low levels. inflation has picked up but it .s by no means close to target i think for me it is more about a move from extraordinary to more ordinary levels of stimulus. david: we are going to get the decision but then we get the news conference where mr. draghi talks to us. what will you be looking for at the news conference and in particular, is his main goal not to tell us anything to keep his options open? jordan: of course, every central bank wants to keep their options open. we will be looking to see if the emphasis on foreign exchange is a basis. press conference the mention of currency was there and much more frequently -- more frequent. there is no need to signal any need to go in any direction. it has been carefully

stage-managed. nine, there 30 to will be some people who are surprised but the total size of the package will probably be roughly the same and forward guidance will be unchanged. it is hard to give any color that people do not know. for me, i will be trying to figure out if the rate rising shifts. , q1, for one rates will start to shift higher, if draghi pushes that further into the future that will be a euro negative and something we will be looking out for. jordan rochester and pierre bose sticking with us. coming up, bob shanks. we will talk to him about his callers earnings. disappointing trading results, we will hear from barclays jes staley. >> we want to see a better

performance. it is not impacted our market share. our market share has held in given what the other banks have ane, but all of us expect return to more normalized levels of volatility and volumes. ♪

♪ emma: this is bloomberg daybreak, i am emma chandra. it is now all but certain that opec and its allies will extend oil production curves next month. the saudi round prince tells bloomberg he wants to limit that the limits to stay in place -- the saudi crown prince tells bloomberg he wants the limit to stay in place and he wants to make a commitment to cutting costs.

according to a person familiar colonye situation, capital is no longer making a cash infusion into the weinstein company. they have been losing projects after a number of women came forward to say harvey weinstein harassed them. deutsche bank reported a 30% drop in third-quarter trading revenue, choices much as the decline of its u.s. rivals. >> we have actually been holding , especially in fixed income markets where this quarter we are down 24%. if you put together our fixed income and trading and our trading segment, it has been a difficult market for everyone. we held share in that market. emma: john cryan has struggled to deliver on a pledge from last march. that is your bloomberg business flash. david: barclays is another european bank reporting earnings.

in fixed a 34% drop income trading, jes staley says his -- he remains on track. >> we closed a non-core business in june of this year. that had about 23 billion pounds of risk-weighted assets in it. we did incorporate some of that assets back into the corporate and investment bank. for that, our markets business was down about 25%. still, it is not something -- we want to see a better performance . it really has not impacted our market share. our market share has held in their even what other banks have done, but clearly we expect more normalized just a return to more normalized levels across the investment banking space. to finish off, you have been

in these markets many years and have seen highs and lows and lived through the crisis. what irks you the most? record after record in the s&p or the mind of betting against volatility, $2 trillion? $1.4 trillion was the number the market had against subprime so jes staley, are you worried about markets as we go into the back of 2017 or should i join you on a parade? ofi think we are coming out a historic experiment in using monetary policy to try to drive economic growth. we have been running with very low levels of risk free interest time.for a long period of that does funny things to asset values across all markets. as we begin to unwind that molotov policy -- monetary policy we have to keep an eye on

dilation's across the market. that was jes staley speaking to manus cranny earlier today. jonathan: in the markets, there is nothing impressive about this. deutsche bank and barclays stocks treading lower. third-quarter results found trading revenue found more than x -- fell more than expected, exceeding the decline by u.s. peers. tice,g us now is jonathan bloomberg base -- bloomberg banks analyst. revenue drops of around 30 percentage points at deutsche bank and barclays not great. what me through the significance of that. of them say both they are maintaining market share when you put the finance in so from the sales and credit perspective they are struggling.

barclays said earlier they are going to leverage an extra 50 billion from the balance sheet to put into ci be to generate to generateib returns. this is an interesting time, qe unwinds. you are putting more risk on at a fairly unknown period in history. deutsche's end barclays -- barclays -- the trading at both of them was roughly as weak. jonathan: jes staley would probably say you cannot cut your way to growth and growth seems to be the story. how many quarters today have left and how much patience is left amongst the investor base at this point? , ifthan t.: the problem is you look at barclays, they have got a 25% credit card market

share in the u.k. retail over here is very tough. is the point of bringing somebody else in? you have got to give them a little longer but if once they were up -- allocated capital and we have not seen a dramatic improvement on the return of capital allocated, either approaching or at double digits, you would wonder. jonathan: we are in this low volatility regime. for jes staley and john cryan, will they continue to be disappointed? will we remain in a low vol rating? bank ini think any will struggle. it puts the emphasis on those names which have a balance of income which comes from more steady places, such as whether it is equity underwriting or wealth management.

i think right now is the other colleagues have mentioned, it is something that we are going to have to bear through these kinds of markets for names which have more trading exposure. jonathan: jonathan tice of bloomberg intelligence and pierre bose will be staying with us. from new york city, this is bloomberg. ♪

♪ david: this is bloomberg, i am david westin. ford announced its third-quarter earnings, beating estimates on earnings and -- we welcome bob officer.ord's chief you beat both on revenue and earnings per share.

how much of that is topline growth and how much is cost control? is: the vast majority of it good cost management, cost control. we had over $700 million of good ,ews on a year-over-year basis so the team did a really good job in terms of delivering strong cost performance. what is encouraging is it was across many aspects of cost and also across several very important parts of our business. , andy excited about that see it as a down payment on our efforts to improve the overall fitness of the company. david: that is a word the new ceo has used more than once. is it too soon to see the jim hackett affect on these earnings? bob: i do not think it is too soon. i think this is a good example of the focus that we have had in terms of the overall fitness of the business and efforts of the

team on a broad basis. there are a lot of work streams underway that would be more addressing, if you will, the way we do what we do so we think about it as redesigns as opposed to cost management. you will see some interesting things over the coming months and years, but i see this quarter as a good town payment -- down payment. mixd: you have a product issue as do all auto companies. as ford turning into a suv and truck company as opposed to a car company? bob: it is what is happening in the broader industry and it is not an issue, it is an opportunity because the margins are in general better. consumers are moving away from cars to utilities and trucks, and certainly that is good for us because we have some great products on the utilities side, and a wonderful set of franchises on the truck side. that is good for us in an absolute sense. inid: one of the big shifts

the auto industry is toward electric vehicles and mr. hackett has been very clear he wants to move as fast as he can. where are you in that process? you may be a half step the hind some of your competitors. -- behind some of your competitors. bob: this will be a relatively long transition in the sense of pure electric vehicles. we will have a dedicated that are he electric vehicle and 2020 and we talked in new york about accelerating those efforts and doing more in that space. willeally important period be in the next decade where you see the transition from internal more that engines the is electrified, including various types of hybrids and battery electric vehicles. faster, willing

that be increased capital investment or shifting away from internal combustion? bob: i think that will largely be reallocation. one of the things we did talk about is taking down the investment we have over the next number of years and decreasing combustion by a third to allocate our election -- electric vacation effort. david: thank you. about 20 coming up in minutes we will break the ecb policy decision and 45 minutes after that we will go live to frankford for president draghi's news conference. we pulled back from all-time highs in yesterday's session, futures are positive. ♪

♪ york, this is new "bloomberg daybreak." two hours away from the opening bell. yesterday we have the biggest one-day drop on the s&p 500 since early september.

we are up about 1/10 of 1% on s&p futures, dow positive -- dow futures positive by around 35 basis points. rot very quickly in the treasury selloff. balance story, going into that news conference, 1.18 almost dead flat on euro-dollar. it is the story of two data points. yesterday, gdp surprised on the upside. today, a bit softer. the cbi index plunging at the fastest annual pace in eight years. it looks like a brutal chart. is it noise or news? let's look at the cross accent picture -- asset picture. the mostis one of

anticipated european central bank meeting since mario draghi became president. the ecb meets to discuss how and when the should end its launch -- large-scale bond buying program. trump u.s., president says he is thinking about giving janet yellen another term as chair for federal reserve. he would like to put his own stamp on the fed and at the same time he says yellen is terrific and "we are obviously doing very well together if you look at the market." the leader of catalonia may be backing down. call regional elections this week instead of declaring independence. spanish authorities are finalizing their plan to oust the rebel administration. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: today is the day for the budget resolution of congress,

with the house scheduled to vote to go along with the senate approach and that would open the way to tax reform legislation instead of talking. kevin cirilli is here to tell us what happens today and what comes next. is today the day? be the day butd even into late last night and early this morning, there are some factions within the house republican caucus, mostly over exemption of the state and local .ax issue some republicans in states like new york as well as california have reservations about this. i would anticipate this vote does happen sometime later today and does advance. the president and the administration pushing for it, gary cohn pushing for it. it will be interesting to see. assume -- and that is a dangerous word -- let's assume they get it passed.

when will we see legislative language of what a tax know would be? already youweek and are starting to hear from people like representative kevin brady, how they will pay for this. the tax plan would likely begin to be made public on november 1. i would anticipate that the tax rate hearings would start as early as next week or the week after that for these public hearings. david: how much compromising are we expecting? said statebur ross and local taxes, we will have a cap on it here it up to a certain amount of income you can have the deduction. ' commentsretary ross yesterday clearly signal to those on capitol hill, like representative king of new york to have reservations, that they are willing to negotiate. that is a contradiction from some within the administration,

within the president's economic advisory board who suggested that salt is not negotiable. ross is a dominant figure, still saying that is on the table and the 401k still very much on the table. that is making some folks nervous and congressman brady saying yesterday that is still on the table. a lot of asset managers have a lot to say about that. we will be hearing a lot more about that. david: kevin cirilli, thank you for joining us. the house is going to be doing the budget today but president trump is spending his time picking the next fed chair. he said he has narrowed his choices. >> i really have it down to two and maybe three people, and i think over the next very short period of time i will be announcing it. it will not be a big shock.

david: still with us is pierre rochester.rdan he says it is not going to be a big shock and you follow this from an fx point of view. what would not be a big shock? what would you expect? big shock in markets and politically, republicans have had taylor testify for years. he is one of the favorites amongst the republicans. it would be a market shot -- shock. not because of what taylor says how marketsecause perceive him. i think he is a lot more hawkish than they say. the slow and steady, same old yellen policy, just being in a different form and face. it is a political shock. and a market shock. onid: take us through that

jerome powell. what happens to the dollar? does it stay where it is or soften a bit because taylor was built in? jordan: taylor is built in only little bit. if you look at the prediction markets, the doves are the favorites to be there. you have jerome powell and yellen. together it is probably much taylor.han warsh and if taylor is nominated, that is a big shock for the market. jerome powell is less of a shock . the dollar a little bit softer but not much on that announcement. jonathan: if you look at the position versus the federal reserve seats next year, is this hawkishness as opposed to dovishness? whoever comes in is predicting higher forecasts than the market currently predicts. jordan: that is absolutely true,

and you seen a significant difference between the. lot and what markets are pricing -- dot plot and what markets are pricing. i think we are at the point where in terms of economic activity or in terms of inflation, the market will be very sensitive to assumptions not even over the course of the next six months but from six months until 18 months. whether we potentially do see the fed go at a faster pace than the market is currently pricing. i would tend to straightly abstract from whether it is powell or yellen or perhaps john because he is not quite as hawkish as the market is currently discounting. i think the diversions join market expectations and sale expectations is different. jonathan: pierre bose sticking with us. david: the sec is giving banks a

30 month reprieve from so-called mifid. joining us is ben bain he in washington. you reported on this in advance. was it your sense that washington would be delighted are disappointed? .en: they will be thrilled it is probably too early to start drinking what people are probably happy on wall street. u.s. brokerages have been saying they were worried that these new european rules when up and the research model. it is clear that a lot of big banks will bundle research and analysis with trading execution services. that is how it has been done for decades. the new european roles basically do not allow that to happen. they require that people pay for investment research separately. is sayingec is doing for the next 30 months you can accept payments from european

clients, but keep bundling it for your u.s. clients and wall street will not have to change its business model. david: you do not have to register as an investment advisor and be subject to all those regulations, isn't that the real problem? ben: that is the issue. if you register as an investment advisor, a label usually reserved for firms or individuals that manage money, you have a whole lot of responsibilities, fiduciary duties, and it can be expensive and complicated. what the brokerages did not want to do was deal with that said they are basically getting a get out of jail free card or the next 30 months and we will see where things go. now, it is definitely a reprieve for wall street. david: great reporting, that is ben bain from washington. jonathan: the ecb decision just over five minutes away, we will break that decision and 45 minutes later we go live to

frankfurt for president draghi's news conference. futures are positive and stable in the united states, a decent gain in frankfurt on the benchmark. the dax up one third of 1%. ,he story in the fx market euro-dollar positive and negative at 1.18 flat, cable at 2.23. this is bloomberg. ♪

♪ emma: this is bloomberg daybreak, i am emma chandra. coming up, metlife's chief market strategist. this is bloomberg. we are minutes away from the ecb policy decision.

we are joined by pm bos of credit suisse and john rochester from london. -- pierre bos of credit suisse and john rochester from london. oris it 30 billion for nine a long one so 12 months? that would be the dovish outcome . do they change forward guidance? do they say words such as we are going to continue the asset purchase? for nine months and we look to end it at some point? those are the sort of cheat sheet i am looking for. jonathan: what are you looking for? pierre: we look for the announcement on the line of 30 billion for nine months. much more for that in terms of be supportiveould for government bonds and less than that you are looking at currencies. jonathan: if we get a gap lower

and a dovish move is that a gap you would buy? term --the media medium-term is higher. we have seen equity flows picking up on the etf tracked so it is still biased toward a weak dollar and stronger euro. it depends what he does. if it is really dovish it would be a move to fade but if we are talking 2%, that is a move that has gone far. jonathan: do you share that view? pierre: we think the euro-dollar will be range bound. jonathan: we count you down to the ecb decision, let's get you set up on where you are. and equity markets, futures are a little firmer in the united states and europe. the ftse up for tens of 1%, the dax up around one third -- the ftse up 4/10 of 1%, the dax up about one third. thesury basis --

all-important euro-dollar 1.1814,balanced at pretty much dead flat on the session as we approach the ecb decision. the decision do any second. , 0.25% oniously at 0% the margin lending facility and -40 basis points on the deposit rate. it will be all about the asset purchase program. we will get that decision right now. thes unchanged, 0% on refinancing rate. facilityeposit rate also remains unchanged at -40 basis points. we sit here and wait to find out what happens with the asset purchase program. it currently runs at 60 billion a month. the present level for an

extended period, these rates at the present level well past the end of qe. we still wait for the asset purchase program which runs at 60 billion. the ecb reiterating the bond buying will remained that 60 billion a month until december. we want to know what happens beyond the end of the year. the ecb extending asset purchases into 2018. they will buy 30 billion a month and assets from january through september so it is 30 billion a month for nine, through september 2018. market reaction was as expected in terms of the asset purchase program. for nine months they will bring it down from 60 billion euros to 30 billion euros. the ecb keeping rates unchanged. the asset purchase program extending the bond by program at 30 billion a month from january

through september 2018, keeping the option to increase the size or duration if needed. the ecb reiterated to reinvest maturing key assets. a better euro weakness coming through at 1.1785. , no bid for the euro. matt miller is outside in frankfurt. i feel like mario draghi did not even really need to show up for this. mr. market could have done this himself or herself. it is exactly in line with consensus. some people are saying maybe they will only go to 40 and stay a little dovish, and jpmorgan saying maybe they will go further to 20 and get a little bit hawkish. consensus was on 30 and that is

what they did and consensus was also for nine months. consensus said they will not hike until thee end, until long after the qe program is done. mario draghi job owning the ning the- jawbo purchases of 30 billion a month and they are always willing to get the bazooka out again. they reserve to write -- the right to spend more, saying they are in line with consensus and they think about it quite dovish but he is no test has no reason to get hawkish. -- has no reason to get hawkish. david: given what you have learned in the last jonathan: -- given what you have learned in the past couple of minutes is that a gap stop you want to buy? >> we have to wait until draghi

takes the stage to make that final decision. do they maintain the reinvestment's as part of that new package or is that on top? i am looking for the details now. it will be extra purchases next year and not that hawkish outcome. on bonds you are lower but this is not a new trend. -- for : four bunds, bunds, we are down about four basis points. how difficult will that trade be through 2018 with the ecb holding its presence? we have seen a little bit of nds, but thebu longer-term emphasis will be on forward guidance and to the extent that that drives the 10 focusesd yield the beyond the end of the program.

to the extent that that forward guidance continues to stress that interest rates will only rise well past the end of the qa program, and i think they will continue -- qe program and i think they will continue to be supported. -- then: the rate change rate unchanged. drop down18 we will from 60 to 30 and we will go for another nine months, that is the communication from the ecb today . the rates will remain at a present level for at least now and beyond the asset purchase program. they will reinvest debt for an qe.nded period after what is your first question for president draghi if you get it? matt: my first question for him is what he expects as far as euro movement. what i think is so amazing is how in-line this decision, at

least so far, is with consensus and how stuck in a range these asset classes are. 1.17, 1.18 has been there forever. i feel like i have never seen a different handle on the bund so the question is will he say anything that will move these markets out of this super tight range. thinking if anyone is about rate hikes at the ecb, how premature are those thoughts? jordan: pretty premature. we have another year to go. toward the end of next year is when we should be thinking about that so maybe next summer, but we still have a long way to go. jonathan: given the data so far, is there a risk they should not have moved from 60 to 30? how much of this really was about the technical constraints and not so much anything to do with economic data even though it has been positive?

sothe data has been positive a central bank moving towards normalization of ultra-loose monetary policies rather than the other way around, is it very quickly? it is actually quite slow. they are doing a pretty good job at getting us back to where we for normalizing policy whilst trying to sustain inflation, and data is on their side. i do not know why i would be worried about deflation risks at this stage so the ecp is in a good place. dust ecb is in a good place. -- ecb is in a good place. isathan: the two-year spread not for 230 basis points and bit.again bunds catch a i am wondering how euro-dollar can be up here with a spread that wide. >> we have done a lot of work on this.

it is more than just the two-year but on the long end. when qe is being slowed you are sliding up.end after the french election, huge equity inflows into europe, that will sustain growth as well. your chart is showing it is more than just fixed income, there is the equity market and with the political stuff in europe calmin g down as a whole, that has been the support for euro and that is why you have this detachment from where rates should be. the euro rate should keep steadily heading higher so that is the long-term story. 2017 was a positive story and the politics has been defined by what happened in france, but to what extent will 20 be defined by italy? jordan: i love to look at these consensus tail risks. when it comes to the italian

election, if they get through this reform on how the election harder, that makes it for the tail risk of having a majority. we will have to keep an eye on the polls. they currently say it is no on net between five-star and every neckt on net -- neck on between five-star and everyone else. jonathan: matt, do you want to jump in? and: you brought up italy, i think one of the more interesting questions other than the election is what does the single supervisory mechanism do about the current stock of nonperforming loans? that is like 350 billion euros. the have made a rule for future nonperforming loans but italy is sitting on a ticking time bomb of nonperforming loans and if they make a rule that is too

painful it could crush their banks and draw their economy to a halt. jonathan: the kind of issues that matt rings up, the data may -- improved but it is still a big issue, isn't it? >> it is a very big issue, perhaps not necessarily to tier one lenders that the stock is large enough for nonperforming loans that you have to work down that stock slowly and it has to be gradual. you need to modify those loans and agree to new terms so the market has the chance to absorb them and the pricing effect is not disproportionate to the impact that the economy can handle. jonathan: great to catch up with you as we breakdown that decision. thank you very much. if you just tuned in, rates unchanged at the ecb, remains at zero. -40, it waste of

all about the asset purchase program that remains at 60 billion euros through the end of the year and drops to 30 billion euros a month until september. longiso the longest -- de will be joining us. 90 minutes away from the opening bell in new york, futures positive, equities firmer. bid and so do treasuries. and 1.1760 is2.42 how we trade on the single currency. this is bloomberg tv. ♪

jonathan: the euro drops. the ecb extends its program by

months. in the race for fed chair -- fed -- and trading revenue plunges at deutsche bank and barclays. from new york city, good morning. this is bloomberg daybreak. i am jonathan ferro alongside david westin. let's get you up to speed on market action following that ecb decision. the euro lower. down by 4/10 of 1%. a weaker euro story emerges. for the u.s. equity market, 90 minutes away from the opening bell. the biggest one-day drop since september. we find a little bit of stability, today. the main event for markets, the ecb extends its bond buying program for nine months at 30 billion euros a month.

markets are waiting to see what president mario draghi will say at the conference. joining us now in frankfurt is bloomberg's matt miller. let's go through what we got versus what we expected. matt: what we got was exactly what the market had expected. 30 billion euros in bond purchases per month from january through september, that is a cut of half from where we are now. pastcb maintaining well the end of qe, if it does choose to end qe at that point. they left all of their rates unchanged. the interesting thing, and you were talking about this, they are going to reinvest 15 billion euros worth of maturing dividends and maturing bonds and

that is going to be on top of the 30 billion euros and asset personages -- asset purchases. that makes a total of 45 billion, maybe a little bit more dovish than the market had expected and maybe that is why you are seeing the half percent move in the euro. an open-ended program we get to any nine months time when we continue reading reduced pace -- continue at a reduced pace? matt: definitely a question draghi is going to get. he is going to shy away from the word taper. he prefers the term recalibration. for janett question yellen and mario draghi is how are you going to get your inflation target? qe, you areing back not going all the way down to zero, but you are so far away.

his term ine to end 2019. could he and his term without ever reaching his target -- and this -- end his term without ever reaching his target? jonathan: alessio de longis with us from oppenheimerfunds. is it about changing the paradigm, the parameters around this asset purchase program? i think it is a bit of a distinction without a difference. he has always been very sensitive to market psychology and communication after the taper tantrum. simply changing the messaging around the same content may be part of their strategy, but it is a distinction without a difference. is thathas accomplished

he did not want to provide a window into a sudden stop. what matt described was right. at the end of the day, we are decreasing the pace of easing, at a time when under the previous paradigm, when you were this low, compared to your target, you should have increased your monetary accommodation. i want to come back to you, matt because there is one thing we have not covered. one of the things the ecb said is they will continue quantitative easing until the inflation path has sustainably adjusted. what does that mean? where is inflation? right now, we are looking at such a low inflation number that they don't expect to get to their two-year target in their forecast. not next year, not 2019. one thing that draghi may mean

is maybe we are in a completely -- maybe we are looking at this through the wrong paradigm and we are in a completely new age. structural changes make inflation -- make the phillips curve a little flatter than they would have expected it to be. this is one of the things i am itching to hear, how mario draghi can explain because as alessio points out, when you are so far away from your target, you should be extending qe or loosening monetary policy. id -- i feel like he has been backed into a corner because the markets expect him. jonathan: does the things people were eager to find out, one is what the pace of qe would be, the other would be who is the next fed chair -- the other is who would be the next fed chair. yellen out of the race according to politico, citing a source.

, your thoughts if she is out? it isit is -- alessio: down to taylor and powell, then. powell represents more continuation of the yellen regime. david: you have to remember that donald trump owns the miss america pageant and the way this is playing out, you have a third runner-up, a second runner-up. jonathan: it is like a game show. david: it really is. ecbthan: do you think the is winning the war right now in terms of indication? alessio: i think they have been, for a very long time. mario draghi is sort of the master of communication. given where their policy stance was and the importance of managing that communication. to be fair to the fed, the fed was much closer to the exits reggie or their communication has been voluntarily mixed at

different points in time. reggie where -- exit strategy where their communication has been voluntarily mixed at different points in time. some of it has been better communication by the ecb, but some of it was intelligent by the part of the fed, to create some miscommunication. jonathan: as we await the next fed chair, to what extent has the ecb helped the federal reserve out in a way that the fed could help the ecb? alessio: that is an extremely important point. let's not underestimate the massive impact the boj is having on global bonds with anchoring 10 year yields at zero. fun markets are global. that is part of the failure of domestic monetary policy framework.

when you get this type of influence from the ecb and boj, it is making the job easier for the fed, in terms of managing the exit strategy with minimal market impact. jonathan: matt miller, without we loop -- we would be talking about spanish politics in the news conference. that might have changed. going into 2018, with this reduced asset purchase program, then the reinvestment of the maturing stock as well, whether that is enough to insulate a place like italy when we could have a choppy political world ahead for us, and europe. -- in europe. some italy still faces problems and a lot of them are on the regulatory side of the ecb. they keep separate from the monetary policy side. one of the interesting things you bring up is the interrelationship between the ecb and the fed. that thed be a reason ecb and the market feels that

the ecb needs to start its taper or recalibration now, because the fed is going to start going into a period of hikes, whether it is with yellen or with jerome who has never dissented, so clearly he is a guy that is going to stay in line. taylor may be more hawkish. what you don't want to see is the equilibrium get out of balance because the currencies could be so volatile if that happens. one thing they have definitely managed to do is keep vol down to a bare minimum. , euro-dollarssio down by half of 1%. would you want to buy that? bunds catch a break. do you want to short that? how do you look at the euro-dollar payout and the bund market? alessio: let's look at the bond

market. the current outcome really argues for a continuation of strategies across all markets. the french curve, when you look at the 10 to three months slope, it is still one of the steepest out there. u.s., butine with the far better than the u.k. or japan. that term, premium harvesting is still there. next year, you may be confronted with italian risk, that is when you want to play carry trades. euro, we believe the euro is likely to remain in this range until the end of the year. within the context of the range, with this event, i will be a buyer of euro, given the ongoing positive strength we are seeing in the economic data.

even with that two-year spread against you? alessio: you are raising a lot of interesting paradigms. relationshiper that has gotten the market interested. it is not just the two-year spread that has broken out with relationship to the euro, but also the long end. manifestation of what we have seen in the past, the euro is rallying despite dovish messages. since 2010, there is pent-up demand for european assets, unwinding of euro hedges because since the french election, the structure will fear that the euro was about to break up, any moment is unwinding. the question is will the italian election bring that fear again?

-- jonathan: alessio de longis of oppenheimer, thank you. matt miller, we have to let you go. thank you very much. in just a moment, we will go live, to frankfurt. in just under 20 minutes, to hear from this guy, ecb president mario draghi. right here on bloomberg. as we count you down to the opening bell, as well, one hour 20 minutes away. let's call it a rout. the biggest one-day drop on the s&p 500. stability for treasuries and bonds and euro-dollar. this is bloomberg. ♪

>> i really have it down to two or three people and in the next very short period of time, i will announce it. it will not be a big shock. david: that was president donald trump speaking out on his choice for fed chair. we got a report out of politico, saying that janet yellen is out of the running as a successor. andl with alessio de longis joining us now is bloomberg's adviser, michael mckee. the u.s. dollar has gone up since that report came out, which would indicate the market think if it -- it yellen is out, it will be hawkish. michael: i am too late

on this, but i would say don't trade on this report. yesterday,o a source who is familiar with trump's thinking and yellen is out and many rights and that i talked to another source who said no she is not, because trump changes his mind every day and then we just play the video from the president last night on fox business, saying yellen is still in it. nobody really knows. this is a three cornered quote in only one corner got reported. i would not put money on it, yet. they could be accurate but there is no way to know. david: it is never too late to correct the record. alessio, is this the way you read this? is janet yellen on the dovish side of the alternatives? clarify, is and to think the continuation of the current path would be considered the dovish alternative between the two on the table.

powell yellen alternative is somewhat similar but on the opposite end, they taylor alternative is considered more hawkish because we are going around with this fear that a strict implementation of taylor arguedould have almost for policy -- taylor has downplayed the need for implementation of that rule. david: as we watch this, what you are saying is there were two choices, either yellen or powell because they are quite similar, or taylor. so it is basically taylor or not taylor. alessio: that is what the market reaction goes down to. three names, two outcomes. the bet -- the dollar moves this much. michael: when you get an

announcement, there is going to be what i call the roulette wheel reaction in the markets. andget that we bet this way it is this way so we have to move money over here. others would call it a short squeeze. even if it is taylor, you will not see a major change in fed policy, not one you would have an investment on, because it is going to take a long time for him to convince the fed that rates should be higher, faster. jonathan: interesting point because managers i have sat down with this week have made that point. you get the knee-jerk reaction and then people like alessio would come in and fade it. 20 basisyou get that point reaction on the first couple of days, but here is the important difference. a differentcrisis, chair can make a big difference because in times of crisis, you are in a situation where you have to react quickly, based on

limited information. the way information is coming, it makes it -- it makes that job very difficult as you are relying on that belief, that ideology because -- that way you think the policy should be run. today, if the premise is that the u.s. is normalized, that we are out of the crisis, and that the fed is normalizing policy in that context, i think this difference is less important because ultimately, the outcome of the data, the growth and inflation path will set the course around the base case, around which deviations may be more limited. jonathan: this confirmation hearing might be more interesting, about how they would react to the crisis.

statistically, they will be overseeing, most likely, the next recession. michael: it is said janet yellen still wants to use qe, for guidance. what would john taylor use? that is the interesting question. jay powell, we would assume is in line with janet yellen. what do they see as their next crisis fighting tools and how high do you think the fed funds rate should be and how often do you think you will get to the zero lower bound? alessio nailed it, exactly. it is not where they go from here in terms of normalizing, it is what do they do the next time they have a problem? david: michael mckee, many things for being with us. alessio de longis of oppenheimerfunds, staying with us. matus of metro life is going to be joining us. this is bloomberg. ♪

emma: this is bloomberg daybreak. it is now all but certain that opec and its allies will extend oil production curbrs next month. the saudi prince says he wants theustain current -- past current expiration date. ford is writing if the trucks to profit. the automaker increased earnings with's -- with strong third-quarter sales. forecast narrowed its from the higher range it had given, recently. twitter is showing signs of life, beating sales estimates and adding more monthly users in the fourth quarter. the ceo has shifted their focus to videos and live events in an attempt to boost audio growth. that is your bloomberg business

flash. david: twitter came out with earnings and although sales were down, it also had reduced losses and added some users. still with us is alessio de longis of oppenheimerfunds. let's talk about twitter and then tech, more generally. talk about tech and the faang stocks. can they keep driving this marketplace? not an: mentioning, i am expert on tech, but if you take the tech sector and its behavior in the context of the broader market, the outperformance of tech is absolutely in line with the impressive acceleration in .arnings that we are seeing you see that the acceleration is really happening in tech and so it is probably justifying its

outperformance. the tech outperformance also make sense at this stage of the business cycle and that is why we can expect it to continue. at this stage, when you look at investing, this is where growth stocks have outperformed the best and the tech sector is actually very representative of both of those styles. sense,at global macro that standpoint, we can see this tech outperformance continue. david: growth of performance is where tech falls. we have seen tech stocks come off, a little bit in recent days. should that because for concern or is that just a blip? given the factors you just went through, will be continue to have momentum and growth? blip, i would put

in the context of that framework. we would be expecting a continuation of that outperformance. that did could be explained by the renewed headlines or hopes around tax reform. cuts rathert tax than tax reform. in that context, tech would be expected to be one of the sectors that benefits the least. in that context, we can place the temporary underperformance of tech. our best case is still for no tax cuts, at all or such a diluted version of this proposal that it would be irrelevant in the context of continuation of the cycle. jonathan: for a lot of people, it has been how far can you get down the corporate tax rate. what does it get to? ofssio: it is all a function

how much you want to get to that tax reform versus how much you are able to fund it. i doubt without concessions on the funding side, you will not be able to get down to 20%. maybe 25%, 27.5%. it looks far less like a reform and more like a temporary adjustment. jonathan: let's get you back your beat, back to the ecb. let's get to the markets. a decision to drop qe to 30 billion euros a month at the turn of the year and then run it for nine months. the story for the market is a dovish one. euro-dollar drops, gapping lower by about a half of 1%. that is very much a weaker euro story off the back of that ecb decision. the story in the bond market as follows. many people wanted to short bunds.

the asset purchase program at the turn of the year, alessio able run for another nine months. rates remain unchanged. was in thede longis room, what would be the question you have for him? alessio: more clarity around what are the minimum criteria, the minimum conditions required to actually consider additional easing. going back to the question we asked earlier, he has highlighted that they can step qe, if inflation does get to a sustainable path. some more clarity about what would be considered sustainable. at this point, it is a way to spice it up. jonathan: let's use that language. dovish and of expectations, i guess. do you believe that there is any

chance we get to september 2018, and the government counsel and president draghi increase the size or duration of this program? alessio: under the current economic backdrop, no. we will get there on a relatively smooth path and continue with this readily -- gradual policy normalization. comes,e next slowdown what are the tools, because then we really have to start talking about issuer limits and coming up with new creative tools. all of those were self-imposed constraints, so the ecb can always tweak around it. it is similar with the fed. anythinge room to do when the next serious deceleration or deflationary shock occurs? i can see real difficulties emerging because we are late in the cycle and in europe, the upturn has just begun.

you look at where credit is, it is already immensely tight, just as the economy is turning to pick up. and they are starting to step back. does credit follow the ecb, or does credit follow the economy? alessio: when you look at the lens of credit spreads, credit spreads have been expressive. they have been very tight. it is an equilibrium condition that can last for a long time. you can build up much leverage in the system and see the weakening fundamentals and see --dit spreads not brought but. the key is credit spreads are at risk if and only if you have a combination of rollover in growth coupled with tightening in lending standards. what the ecb is doing is exactly that. it is supporting growth, it is monetary policy. the lending surveys show boy is

credit conditions and improving credit conditions. i am not worried by credit spreads being low. they can stay there for a long time. if you invest in credit markets, you are in it just for the kerry. you cannot expect much more. that is the difference. and demand. supply if you have the ecb buying left, just buying less bonds in the u.s. as well, what might it do? alessio: i would not be worried. you cannot assume there will be pressure as a result of one fire missing. jonathan: lunch time president mario draghi walks in with vitor constancio and takes a seat. .hey were getting this over breaks, zero on the refuge rate. rate andn the deposit

qe extended for nine months at the turn of the year. we will listen in. >> ladies and gentlemen, vice president and i very pleased to welcome you to our press conference. we will now report on the outcome of today's meeting of the governing council, which was also attended by the commission vice president mr. dabrowski. based on a regular economic and monetary analysis, today we conducted an assessment of the .ocket -- outlook for inflation the risk surrounding this outlook and the monetary policy entered. as a result, the governing council took the following

decisions in pursuit of its price stability objective. the ecb interest rates, while cap -- were kept unchanged. we continue to expect them to remain at their present levels for an extended time and well past the horizon of the net asset purchases. regards no standard monetary policy issues, we must continue to make purchases on the asset purchase program as a current monthly pace of 16 billion euro until the end of the december 17. 2018, the net asset resources -- purchases are intended to continue at the monthly pace of 30 billion euro

until the end of september 2018 or beyond if necessary, and in any case of the governing council sees a sustained adjustment in the path of interest in consistent with this inflation aim. if the outlook becomes less favorable, or if financial condition become inconsistent ath further progress towards sustained adjustment in the path of inflation, we stand ready to increase the abp, the asset purchase program, in terms of size or duration. system willuro reinvest purchase payments from maturing securities purchased under the asset purchase program for an extended time after the end of its net asset purchases.

and in any case for as long as necessary. this will contribute both to favorable liquidity conditions and to an appropriate monetary standard. and number four, we decided to continue to conduct the main refinancing operations and three-month longer-term preparations as fixed rate procedures with full allotment for as long as necessary, and at least until the end of the last reserve maintenance. d of 2019. today's monetary policy decisions were taken to preserve very favorable financing conditions that are still needed for a sustained return of

inflation rates towards levels that are below but close to 2%. recalibration of our asset purchases reflects growing confidence in the gradual convergence of inflation rates towards our inflation aim on account of the increasingly robust and broad-based economic expansion, the uptick in measures with underlying inflation, and the continued effective pass through of our policy measures to the financing conditions of the real economy. domestic pricee, purchases are still muted overall, and the economic outlook and path of inflation remain conditional on continued support for monetary policy.

in ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium-term. supporttinued monetary is provided by the additional net asset purchases, by the sizable stock of acquired assets, and the forthcoming reinvestment and by our former guidance on interest rates. thise know explain assessment in greater detail starting with the economic analysis. the economic expansion in the euro area continues to be solid and broad-based. real gdp increased by zero point seven cents quarter on quarter

in the second quarter of 2017 after 0.6 cents in the first quarter. the latest data and survey results point to unabated growth momentum in the second half of this year. our monetary policy measures have facilitated the deleveraging process and continue to support domestic demand. underpaidnsumption is by rising employment, which is also benefiting from labor market reforms and by increasing household wealth. the upswing in business investment continues to benefit from very favorable financing conditions and improvements in corporate profitability.

construction investment has also strengthened. in addition the broad-based global recovery is supporting .uro area experts -- exports sterling euro area growth outlooks remain broadly balanced. on the one hand the strong cyclical momentum as evidence in recent developments in sentiment furtherrs could lead to growth surprises. on the other hand, downside risks continue to relate primarily to global factors and developments in foreign exchange market. euro area annual interest rate bcp inflation remain unchanged at 5.1 cents in september. looking ahead at the basis of --rent future surprises

prices for oil, annual rates of headline inflation are likely to temporarily decline towards the turn of the year. mainly reflecting base effects in energy prices. time, measures of underlying inflation have picked 2017.erately since early they have yet to show more convincing signs of a sustained upward trend. wage growth has increased costhat, but domestic pressures still remain subdued overall. underlying inflation in the euro area is expected to continue to rise gradually over the medium-term, supported by our monetary policy measures, the

continued economic expansion, the corresponding gradual absorption of economic slack and rising wage growth. analysiso the monetary , broad money continues to expand at a robust pace. an annual rate of growth of 5.1% in september 2017 after five cents in august. and in previous months, undergrowth was mainly supported by mostly three components, a narrow monetary aggregate, expanding the annual rate of 2017,- 9.7% in september up from 9.5% in august.

the recovery in the growth of loans to the private sector observed since the beginning of 2014 is proceeding. the annual growth rate of loans to nonfinancial corporations increase 2.5% in september 2017 august.0% in why the annual growth rate of loans for households remains stable at 2.7%. lending area bank survey for the third quarter of 2017 indicates that that loan increases continued to for all loan categories. credit standards have further eased for loans to households while they remain broadly unchanged for loans to enterprises. thanks overall terms and

conditions on new loans have continued to ease for all categories of loans. the pass-through of the monetary policy measures put in place since jen -- june 2014 continues to significantly support growing conditions for firms and ,ouseholds, access to financing notably for small and medium-sized enterprises, and credit flows across the euro area. sum up, a crosscheck of the outcome of the economic analysis with the signals coming from the thetary analysis confirm need to recalibrate the policy to ensure the degree of monetary accommodation necessary to secure a sustained internal inflation rate towards levels below but close to 2%. rip the full benefit --

read the full benefits -- reap the full benefits, other areas must continue with the strengthening of longer-term growth potential and reducing vulnerabilities. the implementation of structural reforms in all euro countries needs to be substantially stepped up to increase resilience, reduce structural unemployment, and boost euro area productivity and growth potential. , allding fiscal policies countries would benefit from intensifying efforts towards friendly a more growth composition of party finances. the full transparent and consistent implementation of the stability and growth and the macroeconomic procedure over time and across countries remains essential to increase

the resilience of euro area economy. economic and monetary union remains a .riority the council welcomes the ongoing enhancings on further the institutional architecture of our economic and monetary unions. now we are now at your disposal for questions. >> the first question is about the composition. youyou disrupt just did discuss the composition of the epp starting from january so the proportions of the different components? the second question is the alternative scenarios. what did you discuss a part of the one that is finally making the cut? thank you. thank you.

no, we did not discuss composition. there will be a press release, a communique at 3:30 detailing more about developing transparency and detailing more about how the program will involve in 2017, but we did not discuss the composition. the only thing that i can say about that is that we will continue by sizable quantities sizable, -- buying sizable quantities of corporate growth. some of these things you will see shortly. so as of january 2018, the euro system published the monthly redacted about each component of

the epp for the euro system as for the following 12 months. system conducts the reinvestment in a flexible and timely manner in the month they of subsequent two months if they are needed -- or a subsequent two months if they are needed. three investments will take the same jurisdictions as principal redemption with the aim to minimize deviations from the g. you get a press release shortly after the press conference, but clearly the press release will also devote some space to they communicate how this is becoming more important, is going to be carried out. actually can discuss alternative scenarios. the discussion was -- let me say

this. the atmosphere was pretty .ositive all of the governing council members in their interventions emphasized the better conditions , the growth momentum as i just momentumbated growth and the improving labor market conditions, the stress how these numbers, 7 million jobs in the last four years, actually continues to increase. the unemployment goes down, and both private consumption and private investment, which is remarkable, because for a long time we have not seen any significant upward trend in investment, is actually picking up. how the emphasized earning capacity of the itseholds is increasing, so is actually increasing because

of gains from greater employment. wealth isuseholds increasing. this also is being supported by our monetary policy. course, thison of positive feature on the growth side is different because inflation is still not at our objective. we foresee 1.5 this year, 1.2 this year. and we foresee a shape for inflation mostly due to a base price effect of of the oil of energy. then 1.5 the year after. end converged the on this scenario that i have just presented. of course there were some difference views on aspects of this, but the scenario that was discussed this morning was the

one i just mentioned. >> mr. president, on the new guidance you provided on reinvestment, that it will continue for some time and for as long as necessary, for you explain more of what you mean as long as the sincerity, and how this guidance interacts with the one of rates? is there a sequence for the same time, more or less, and a second question is on qe, you said you are still going to expand duration if necessary. is it possible to expand in size ? do you still have room to expand

the program, or do you foresee there could be scarcity problems going ahead? how credible is this commitment to expand the size of qe if necessary? >> thank you. the guidance on investment is not related to rates. the secrets stays what it is, namely the interest rates will stay, remain at the present, are expected to remain at their present levels for an extended time, and went past the horizon of the net asset purchases, net asset purchases. however, as you move forward, not only this year for in previous years with the amounts we purchased, the stock has become more and more important. and as we continue asset purchases, it will keep on

increasing. so the commitment of the euro system has taken is it will reinvest the principal payments for maturing securities, maturing securities purchased under the apv for an extended time after the end of its net asset purchases. and as long as necessary. so these specific links with interest rates, no, there is no link here. importancetress the of reinvesting. in december 2015, and one of my press conferences like this, we announced a series of measures and said, we are going to reinvest this. and basically there was no reaction. it was actually considered to be marginal, and in fact there were

ofy sort of wrong estimates what these potential reinvestment might be. since then, we have had a lot of things. this has become sizable and become an important component of this continued monetary support. it is provided by net asset purchases, the sizable stock of acquired assets and the forthcoming three investments, so the stock and three investments, and by the word guidance and interest rates -- forward guidance and interest rates. .hey interact and act together on the flexibility, i think on the credibility and potential you havets, i think been asking this question, will you make it?

since the beginning of the qe program or the regular intervals, we gave plain evidence that the design is flexible enough to cope with the potential limits, and we gave we did nothat discuss parameters or limit anything today. >> i have a question on reinvestment. year, ining at next september, the official program nd, would reinvestment pickup from the volume side for the qe? so in volume, how big are the investments? you must have calculated that.

mario draghi: you will get much investor -- information from the press release. we have a number on that. the investments will be in a flexible way and modalities under investment will be described in the first press release. let me address one thing. we will continue buying these according to the present december. until as far as any clarification is concerned about the future, we have time until outside december, even earlier. concerning the market, there is not a lot of bonds left you come to an end and timber. so how credible do you think suspect that might be going flatrd like to have a very extension program to the? mario draghi: that is a the same question as before.

investment,g is our and it will be massive of course. i want to say --? >> you will have the numbers because we announced at half past three, we will start disclosing the amounts of reinvestment for the following 12 months. you will have all of those numbers which are quite sizable per month. i think on average we are talking about many billions. there are differences from month-to-month because it depends on those dates of when the bonds reach maturity, but reinvestment is sizable, like $10 billion -- euros per month. but to restore the amount of the

stock and the amount of the stock in itself produces an effect. we are talking about asset markets where the stock is always potentially in play. the stock is also important for transmission of monetary policy. let me make one point. the press communique will not contain a number at 3:30. it is going to be carried out in the way i cannot describe before , and a flexible way. you will get more information in the press communique. on the other questions, the same as before. so far, all of you have been asking this question on and on. basically our program is flexible enough that we can it size -- its size.

we can carry through smoothly. juste council's meeting committed to that. this time we will also have the reinvestment of the existing, the maturity, and we saw guidance. so in terms of our capacity to achieve or to have monetary policy which will support the ,ustaining inflation objectives we are well placed. >> financial times. first question you emphasized in recent weeks the forward guidance on interest rates, that rates will remain on hold well past the horizon of qe, which you have said more about what is

meant about well past. we have some market protecting a hike in 2020. is that right, or would you say 2019 is a more reasonable estimate? my second question, the bank for international settlements is advancing the argument that national central banks have far less control over inflation because wage setting goes more to global and technological factors than it does domestic demand. would you accept that argument, and how do you adapt to that? mario draghi: thank you. that is suchcept that it should anchor interest rate, short-term interest in a way that is supporting the achievement of our inflation, namely the self sustained,

durable convergence of inflation to our objective of inflation rates below for close to 2%. as for the second question is concerned, i would not rule it out. there are international global factors underlying the inflation development. we will know about the global value chain. we about certain production centers, and more generally the globalization and different retail networks that are operating today. but our view and our policy is on a viewnd faced on aqueduct andt the looks at the unemployment rate, defined in various ways of course. we are looking at the broad definition of unemployment, and

it looks at the factors that will cause an increase in inflation as the unemployment will decrease and it will shrink. our attention today is really more on the factors that are close to us. there may be global factors, but we can't do anything about that. we can do a lot about domestic factors. first and foremost is the speed and responsible little wages to the closing outlook gap. that is where monetary policy becomes essential. that is what our monetary policy has contributed for more than 7 million jobs in four years. >> good afternoon.

live squawk news. recent statements in the creek -- indicate the increased role on the market. with reduction plans set to take effect in you are than 70 days, just fewer than 70 days, how are you communicating to the public? there is a lot of differing views with the governing council according to what people say publicly. what the council unanimously day with regarding the longevity of the plan? far as thei: as first question is concerned, my understanding, when understanding is market reaction was muted to our announcements, policy announcement, in spite of the fact it was a policy announcement of certain important. which seems to say that our communication to the market has been pretty effective.

also we are going to have a communication conference in two weeks' time, so you are invited to participate. it is organized with the federal reserve. it will be here in frankfurt. i am sure there will be many interesting insights about communication there. now the second point, no, it was not unanimous. there were different viewpoints. theuld characterize discussion as ranging between consensus, brought consensus of several issues -- brought broad consensus and other issues. let me step back. i have said many several times that the present situation is a situation that does call for

confidence that we will be able to reach our objective. after all the overall economy, the growth rate, unemployment, the labor market, it is all positive indications. there is also increasing that we, it is positive are moving that we are moving towards [please stand by]

mario draghi: or other parts of the problem. it comes to views about where it should have been announced or not, but again this is the area where it is a large majority enough consensus, the can prefer toty openit under -- opera -- ended. >> does it, involve a greater provision for the evaluation of credits? with the monetary policy and against the phase of economy of

some countries, and the second question -- excuse me for a direct question. is it the truth that the central ofk at the expansion ceiling 2000 500 billion? thank you. mario draghi: i will give the floor to the vice president for the first question. both questions if you want. no? [laughter] questioning the first let me recall the first decision that was announced. it is a decision about new loans and new flows of loans and potentially new payouts. there is then a target for the newation of provisions when details would emerge so that the whoation of provisions

would have to go up to 100% of the exposures in two years of the case of the exposures, are not secured by collateral. secured by are collateral for seven years. so it is the decision that was taken. so it means of course that with a stronger economy, and that the management of credit risk have levels for new loans, should be way below what they were during the crisis of course. we are talking about a total different reality. and the second thing is at the same time next year, enters into force the interest -- international reporting standard nine, which changes completely the calculation of impairment of

provisions, meeting from january -- meeting from january next assetsny new financial like the loan that goes into the books of the bank already has to calculate the expected loss during the less 12 months -- next 12 months. there will be some provisional charge for any new loan as a result. somef after that there is of thation of prospect asset not performing well, then the counting growth and new growth, that the expected loss for the whole life of the asset has to be frontloaded and immediately recognized. so these accounting rules reinforce very much the treatment of new details.

going the same direction can be meaningful because indeed as i said, may lead to a full recognition of losses for the .hole life of the asset so that means the new rule, the new target for the treatment of less can be more or appropriated by what will be the position of the new accounting rules. not having perhaps too ifrs 9 wouldthe impose. the targets are important but at the same time they are reasonable. and in complement with the change in the accounting rules. so that is formed to ensure that from now on the banks are

careful enough in managing credit risk, so that there is no npl's. accumulation of now there is the announcement we are looking at stocks. but nothing has been decided about that. we are looking very careful because it is different to deal with presumably the new and the for the.l with targets your final comment, the targets , they buildfined the implementation and with this and the supervisory dialogue. the banks will have to comply for explain. they can explain as they have and doe utmost to comply not do it for small reasons.

so in the dialogue, these new targets the applied in order to contain for the future these problem of npl's so we don't have against accumulation that critics as we now are seeing, problems to the profitability of banks. mario draghi: i did not understand your second question. what did you mean? [indiscernible] mario draghi: no, the answer is no. second try. in the middle. >> mr. president, in the u.s.,

the fed has opted for a wind down of the purchase is, and now the ecb has taken a different approach. why? , thecond question today decision comes at a time where ratesd has already raised and the bank of england might raise rates soon. the globalhink monetary cycle is turning? thank you. thank you.i: the monetary policies of different jurisdictions reflect the different positions. they are in achieving their objectives. and the different positions the economies have in the business isle, as such, the recovery way more advanced than ours, and

inflation developments, because we are concerned about stability, are way behind. that justifies a difference in monetary policies and. our decisions today are consistent with the feedback ,ule we have been having also when the general conditions improve and we see that our inflation will objective is closer, we will downside asset purchases, and the fast, or we have upside them in the past as well. this is following the same logic . on one hand it does reflect an increasing degree of confidence in our capacity to reach a self sustained inflation will objective. on the other it takes stock of

the fact we are not there yet as i -- headline inflation if anything will decline in the , and there are annual projections i mentioned a moment ago for 1.4 this year and 1.2 next year and again there year after. so we are not there yet. difference inthe our stances basically. >> the catalan government sends the mill to the ecb and a letter to you. politicalhat the instability in spain will have an impact with euro.

we have seen to banks moving into headquarters and impact in the deposit. , in catalonia now reason for financial instability in spain and the euro area? it is veryi: difficult to comment on developments that change every it is just very difficult. of course we are following what is happening. the importance of what is happening is significant. to conclude now that there would be financial stability would be premature. see what is going to happen. -- we have to see what is going to happen. we look at that with great attention.

>> in the past you have always addressed when you were buying 8 million or 60 billion of debt that there would be no approved and to the purchases. , willr the new amount there be any saving out of purchases, or some debt level if possible to stop from one month to the other? and a second, you have stressed sequencing between purchases and interest rate hikes. is there such sequencing between balance sheet? the fed and the u.s. have argued onceit would only start the interest rate was well underway? is that a pattern you would also follow? mario draghi: the answer to the second question is we have not discussed it. we have not at all.

and to the first question, i said before the decision today is for the open ended program, it will stop that suddenly. it is not going to stop suddenly. it has never been our view that things that -- things should stop suddenly. it is open ended, and the large majority of the council expresses its preference for keeping it open ended. for as because basically variety of reasons. one is to reaffirm the commitment of the governing council to pursue the price stability objective but also due to the fact there is a large amount of uncertainty, therefore prudence has inspired many governors to opt for this possibility.

how it is basically that is what we decided. >> the second question, we have a sequence was is defined and reaffirmed today. mario draghi: the question was about that asset purchases defined today. actuallyequence was the same question i have received before. there is not any see between the balance sheets, the stock and the interest rates. we have not discussed that. >> the expression well past in terms of your sequencing? if i go back to the example of the head, they took 15 months before they raised rates after they stopped their purchases.

is that the sort of timeframe you have in mind? you don't like to be compared to the fed from previous answers, but the situation might be different. but is that the sort of timeframe we are thinking of, or is it six months or 12 months? another point is, were there governors were members of the council that were not as theident as you are about objective? as far as the second question is concerned, we are talking about new answers. the general picture is a picture of a part of the world, which is doing pretty well. growth is growing and momentum is also growing and labor market .nd everything i can't remember how many quarters of consecutive growth.

17 i think. as it is 0.7% growth mentioned, which was higher than the 0.6 that was expected. at the same time we don't expect to see an encouraging sign either in the nominal growth nor the under flying -- underlying inflation. but that is higher than it was at the historical trust in the year and last year. but it is still quite far from any historical average. so the large majority if not consensus was in for a solution, for a decision which was prudent . the bottom line is prudent, which was full confidence but also patient and persistent.

timeframe, i think i said it before, we don't have a fixed timeframe. when we define medium term, it is not a certain timeframe. it depends on how we are purchasing to the achievement of our objective. and i think comparisons with other jurisdictions are not really appropriate because of what i said before, institutional differences but also different visions with the business cycle, different formations, mechanisms, labor markets, seeds of response. sense, our experience with monetary policy has been quite different from what the fed has done until now.

? that was mario draghi having his news conference after the interest rates unchanged but revealed their plans of qe3 2018. we want to cover the tail and of that. you can watch that on life go. the story for the market, euro-dollar comes down just a little bit, half of 1%, then bouncing off that level. the qe plan in focus. next year, it will drop from 20 -- 60 billion euros a month, then continues. mario draghi had new english calling it ample monetary accommodation. the story of the bond market, the bonds are catching of it. yields lower five basis points to 0.4 percent. a lot of headlines coming up. we will do that with the chief market strategist here. in september 2018, is qe

done, or does it continue? >> we will have to see what happens. i do think they will be responsive. bear in mind this year's growth is going to be above the u.s. i think they are following a pattern similar to what the fed did. draghi's assurances aside. jonathan: maybe they are really about communicating. we will not start with a getting to zero. is that the communication >>? >>it is, and it will be until another six months or so. and closer to september, we need to check in with scarcity issues, where is the macro picture? we will have more of a year worth of data. so i think it is, their desire is not to do the sudden stop, but if we are in a successful

position, i don't see up problem doing it because they do it many times. that is one piece of how they see accommodations area they can do a sudden and deliver a dovish message. it is the first time, downside risk to growth includes affect of development. that is about how -- to me what is the most interesting line of today because usually he referred to fx volatility and mostly in the context of inflation because he creates baseline effects and pass through to inflation. voluntary, was it specific? the usually means what he says. it is something to keep an eye on. my other take from this meeting is the management leader, for the foreseeable future, ecb meetings will be largely global

activity events. in the context of euro-dollar, the ball is on the u.s. side with headlines, the fed and the balance sheet reduction. so let's see where the euro goes and where they execute on that message about growth and fx development. david: so they may have delivered on what they may be doing here but not on what they promised in terms of inflation. he said it will actually wrote down. why tapering now? they have been looking at the fed. when they talk to the fed, they are worried about inflation acceleration in the u.s., maybe people feel like they are behind the curve. one of the reasons why the fed has been talking so much about hiking in december is because the market is going to allow them to do it. if seems that they are worried if the market has this priced in

december, whether they think it is good or not, if they don't deliver, they are worried about what markets will do in that dovish scenario. great to have you with us. thank you very much. theking news with the -- chief executive officer of deutsche bank resigned after he became embroiled in an insider trading. they want to focus energy back on the clients' business and avoid further burdens by the ongoing investigation. the opening bell is around the corner. this is bloomberg. ♪

♪ jonathan: moments away from the opening bell in new york. futures are positive by about 0.3%. 0.1% for the s&p 500.

about over a month, the s&p 500, so stability for futures and maybe we could get stability once the opening bell gets going. the story in the bond market, treasury yields find a firm footing as well. we are at 242 after a selloff of gains. 1.3%, 94 handle on the dollar index. it is really a story of euros on following the governing council decision to drop to 30 billion and to run for another nine months. so going at the open, let's get that for you. good morning to all of the viewers, and we have the tiptoeing back into the markets after yesterday being the worst since month, the worst the beginning of september. the buyers are back, the dow is creeping towards what could be a

record closing high. no all-time highs, but pretty impressive considering the bearish action yesterday. the choppy action, we are looking at two days into down days. the first time we have seen -- and to down days. the dow is on record -- is on pace for record closing. week, the cell signal, she is continuing here full-time pullback something to refresh the year end rally. at this time. let's take a look at the movers on the open. it has everything to do with earnings. the shares trading higher, that is all about pickup. it was the best third order relative to pick up for ford in 12 years, but those shares having their best day of the year. , they beatry up 12%

on most metrics, importantly monthly users. those were up or million in the third quarter versus the flat second quarter. this stock having its best day, bristol-myers squibb down 3.5%. they beat earnings -- mr. earnings, but it looks like it is not enough for investors. those shares are trading lower. at gcb meeting, if we look #btv 1552, the dollar has been suggesting that dovish tone to come out of the meeting is not surprising. looking at the dollar index in white, trading higher for september lows. on pace for its best month of the year, and not surprisingly, that is giving a tailwind to the 10-year yield. so this is a tell to the tone we got out of mario draghi. one down, want to go.

next up, a decision over the future care of the federal reserve. that was a big paper market this week. politico reporter said janet yellen is out of the contenders for the fed grade they cited a single source. outside of her, there is jerome the stepper professor of economics jerome taylor. s&p 500 teachers fell on the fell on thetures report. equities opened higher as well. metlife is back with us. let's go through the political report. talk about who is going to be the next fed chair. >> lace-one source saying yellen is out. and then in the next they cite another source saying she may not be, and they say that president went on television and that he likes for very much. there is no definite answer to

the politico report. it was a compilation of things. it may be overplayed, which is why you are seeing that come back. jonathan: how can we follow these headlines and make some decision? >> you have to look, or other options that would be worrisome? the answer is no. if someone was put forward that was worrisome, will they get through the senate? the answer is probably no. like the harriet miers supreme court thing. the next candidate is good and easy to work with. is not to overreact to any of the headlines and just wait and see what happens during any one of these three will do a reasonable job, will have international standing and will do fine. we caught up with jordan rochester earlier and said the politico surprise which would be fed chair janet yellen because republicans would like taylor.et --

the jacobi taylor and the inverse of the political surprise, certificate with politics or what the markets want? >> you pick the third choice, and i think it is actually shows there is kind of a logical process playing out here, which is you have the existing choice which you should be paying attention to and thinking about. you have someone favored by maybe some of your politico allies, then you have another option that thread the needle between the two. that should give us comfort that maybe this process is more well-thought-out than the headlines and rational headlines are suggesting. said this might be worrisome. let's go back and say what might make a difference in your investment decisions. ,erome powell versus mr. taylor wouldn't make any difference in

any investment decision? -- would it make any difference? >> the answer is no. shorter term for people in the markets on a short-term basis, who get picked is important because you can imagine a market response to each of them. i think the market would respond favorably to yellen getting reappointed. if you are looking for risk assets doing well, the yellen reappointment is the headline that might get you that one day move. i'm not interested in what they move though. jonathan: living a lead from that, how much is your 28 vision is impaired by two things? you don't really -- you don't know what the board will look like, then you don't know what text cap, tax reform, but how can you make plans for the next year? >> for the next year we have to drive back to fundamentals. fundamentals in the u.s. economy

suggest low risk of recession. if we look at credit consumer real estate. as are the mechanisms at metlife suggesting them are reasonably good shape but not overheating. so for us the forecast for 2018, which we have put out his up from 2.2% this year. this your people thought we were high, and it seems like the consensus has moved to it. fundamentals are more important than the personalities. jonathan: thank you very much. we are seven minutes into the session. let's see potentially all-time highs, the doubt of 400 points, .he s&p up 2.5 we make another come back, and will be deliver another record high? this is bloomberg. ♪

>> i am emma chandra. coming up on bloomberg markets, scott keogh, of audi, and this is bloomberg. ♪ david: twitter was out with earnings this morning and beat expectations on the top and bottom lines and added 4 million active users. more tech earnings are on the way. amazon reporting with microsoft. the securityw is research analyst and bloomberg news tech reporter selena way.

i want to start with you. some low expectations. we feel better about twitter? >> you can feel better their user base is growing. it was up 4 million. that was up, a good sign something we were not comfortable they could deliver. they are clearly cutting costs. earnings were up because they managed costs. their revenue is down year-over-year, and their advertising revenue down 7% year-over-year. they still got a long road ahead of them to return to revenue growth. if you listen to the earnings call him a they are doing the right things. they are engaging users. they mentioned dea was up. more engagement is good, advertisers fall -- follow eventually. the revenue issue because it was not long we were not hearing much about don't

worry about average growth because they will monetize. now we want to the attention to growing users. why aren't they getting advertisers? >> the ad load is up and end rates are down 40%. they are only down 7% in a context of 40% lower pricing. that means more ads, and they are not monetizing as well. they have difficulty explaining the value cap -- advertisers. advertisers are not convinced they can target the mail viagra user, the 50-year-old man, when they are advertising on twitter, but they can comfortably do that on google and facebook. david: so now amazon, what do we expect? >> every quarter they have blowout sales and end up allowing that into investment, ranging from robotics to their web services and warehouses. this quarter, are those investors going to pay off?

there will be questions about how the amazon-whole foods integration is going on. the big question is, are amazon's huge bets, will they pay off? jonathan: beyond that, the whole foods integration, when will we learn what the plans are for the company? have heard some updates. there were some releases where they had details including prime intruder -- integration and savings for customers. we had some stories as well storesng whole foods have seen increased traffic and sales. not sure if you have got to whole foods recently, but they are very busy and selling amazon echoes in my local store, so we are seeing some integration. we will have more to come in the few months. michael and selena, thank you. investmenthe metlife

manager will be staying with us. what to jump over to spain where the catalog process is taking again. there was some suggestions that the catalog independence -- catalan independence would give the markets that they got the security. the president said to call for regional elections and step back away from that declaration of independence. maybe that takes the risk out of this situation in the short-term. 14 minutes into the session, here it is, cross assets, beginning with equities. we traced some of the move on the dow and s&p. the biggest one-day move since september this year in over a month. we come back up a third of percent. frankfurt, it is nice on the dax. we reclaimed 13,000. we were up 0.75%.

the story in the fx markets of of risk appetite in europe, the weaker euro story on the back of the ecb decision to drop qe from 60 billion euros down to 30 billion euros and extend plans. the cable rates i can tell you, a bigg at the big gdp punch lower, fueled by a lot of things including the u.k. cbi retail. after the route of the last couple of weeks, we find some resting. the yields are going nowhere. this is bloomberg. ♪

♪ jonathan: 70 minutes into the session -- 17 minutes onto the session. it is a big day for the s&p 500. we are up about a half of 1% on the dow.

we can now crossover to tom keene and bloomberg surveillance david gura standing by with a rather special guest. it is ray dalio of bridgewater. you will want to listen to this conversation. we welcome all of you on the radio and television. it is like the old and new testament. ray dalio, david durant and i agree there are some huge individual initiatives in here to think better and do better over the career of mr. daley out. one more financial question we have been talking about, the david wants to go to what the nation's looking at right now. we see every day kathy burton in our team, hedge funds people returning money from hedge funds. have you ever had to do that? have you ever had to return money to investors because things do not feel good?

we have had some gaps and we have returned money over a long time. tom: there is the reason underperformance of pressure -- hedge funds and the pressure to give back. do you wait until you get to the right volatile environment? >> i should explain how it works. frost we separate alpha and beta. is a pureut the, this elbow funds, people attach that to whatever data they want. so with your alpha, they get that plus whatever beta is. if they have cash and compare it with equity return, that is not smart to do. some clients compare it with the asset class they put it against. because we have added value in the last 60 years, it is less than we normally do because volatility has been less, but we

are adding value. they are getting positive output. they have in our case, they give us money when there is an opportunity. the question is, what is a hedge fund? if that is compared against the stock and you are producing value added, and you are disappointed, you are probably naive. if that is against the equity markets, that is passive. so the investor has got to pick because when the bear market comes along, how duty -- how do they deal with that? the smart investor, they have to separate alpha, beta and that : seems like all the doom and gloom comes out with higher interest rates and lower stock prices. you predict -18% on the equity market? ray: we have been long consumers

getting into the position. tom: let's get new. i am saying the answer to our question -- we are in a different environment. >> then jump in here. until 2017,m 2008 we were at a certain type of environment. the environment is one in which there was the pushing of interest rate down to the point of creating negative interest rates. with a positive carry by doing quantitative easing to push money into the system. of endinge transition that around the world. we are entering a new era in which there will be and there is the raising of interest rates and reducing of educative easing. that action they took produced significantly that real interest

rates. they are about half a percent. next to nothing. the breakeven inflation rate for 10 years is 1.8%. those numbers are very low because of repression to get the economy to do that. we are in a transition, a new environment. that is the equivalent during the late stage of the cycle. then there is tightening. tightening becomes more concerning because as you move along, they are more and more difficult to get perfect. so as we are progressing, we are entering greater risk in the nature of the markets. when you look at the bond market, there is risk in the bond market. it looks like a significant amount. now let's go to the policies. the good news is ray dalio

is not on this short list. ecb,: we heard from the and let me ask you a two-part question. how much does personality matter? is right, that guy has principles of his own, held throughout his career. what would you say to the next chair of the fed for what they need to focus on with the health of the u.s. economy? a bunch of questions. personality. the real question is principles. if you were to write them down and articulate, that is a good thing. they also have very different principles. such as matters in terms of quantitative easing and whether it is too tight end to lose. i think they could matter a lot in terms of what the monetary lessee is, particularly the notion of quantitative easing and whether it is too tight or too easy.

it can matter a lot. we have the pace of which the fed policy, since we are talking about it, the unwinding of the balance sheet. i look at those and i do not think they will be able to continue that. it is the equivalent of 2.5% gdp. if you have that happening at the same time with increased budget deficit, we could have the increase of another 1.5% gdp. this is a big number. there will be that amount of selling of credit by the federal reserve. tom: you talking about with the text reform proposed and all those other things, we are going up five, six, or 7% of deficit to gdp? ray: we will have a significant move in that direction. you can either in the market action. on days where it looks like they are making more progress, it is

more a lot. days they are making -- there is going to be probably a larger deficit. that means more selling upon at the same time that there is selling by the federal reserve in terms of the balance sheet change. they will be cautious, but in this part of the cycle, it is very difficult. this is not just the fed. this is movement in the ecb will be analogous to that. with today's meeting, what is the pace of that? we know the direction. we know the direction in japan a little bit slower. you know that the -- the direction in china from the 19th congress, there will be more tightening of credit. so the complexion of the world we are in is changing. every decade practically has a defining characteristic areas the 1960's was strong growth, not much inflation. we will have a time, it will be

quite difficult. tom: i have eight ways to go. jonathan: that was ray daly of sitting down with david gura and tom keene. that does it for us on bloomberg daybreak. with jonathan ferro and david westin. more action coming up. as for as equities concerned, there is strength. dax.rmany as well with the frankfurt is up 0.8%. a switch at the board, the euro-dollar not a move south by 0.8%. treasuries with -- this is bloomberg. ♪ ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. york,is 10:00 a.m. in new 3:00 p.m. in london. from new york, i'm vonnie quinn. mark: live from london, i mark barton. welcome to "bloomberg markets."

♪ vonnie: we are covering the ecb, earnings, and lots more, but first, we start with making economic data on housing. julie hyman is here. julie: looking at pending home sales here month over month unchanged. that is disappointing. analysts and economists had been looking for a half a percent gain, and now we are seeing no change month over month. this is in sharp contrast to yesterday's new home sales number that came in at a high since 2007. pending home sales is a more forward-looking indicator. the new home sales number from yesterday was from the prior month. so a little more backward looking here. aol more mixed housing data.