we don't know much about what the ecb will say. more importantly, what are the ecb's fears? what are they worried about? what's the reaction function? are they facing growth or a fear of inflation? under mario draghi, it's much more about saying we support growth. the challenge for the ecb is to continue to articulate that in an environment where people are saying worry over. let's restore normalcy. >> do you think inflation will continue to move higher and pose a problem for the ecb sooner than what they might be anticipating? i think it will pose a problem of dialogue, communication, rather than a fundamental problem. sure, inflation can move higher, they'll have voices calling from the inflationists saying you have a problem here. it will be a test of draghi's mettle saying we need to standstill for a long time. european unemployment is high for a long, long time. >> how do you think we'll react to tapering? we've seen tapering already. how do you think we'll react to the complete unwinding of stimulus if, indeed, that's the continued path we're heading down. depends on t

the ecb has had a big, depressing effect on spreads and risk premiums without the ecb, you would seeer spreads and wider sovereign spreads as well. yes, you are pretty fully priced in the credit market. i agree with jeff, which is, you have these for nearly policies right now, but you can make the same case for the fed five years after we no longer have an emergency, they are just now started to take those out. the ecb will be similar. but there several years behind. jonathan: i am wondering if the ecb will have a harder time backing from the acid purchase program -- tacit purchase -- asset purchase program. >> when you withdraw from policy accommodation that you get much more financial condition tightening. i color crossing the river by -- i call it crossing the river by killing the stone. they will do it very small and then stop and look around. that anybody panic? your point is well taken. >> there are two things different between the u.s. and europe. the u.s., the problem is that has is the opposite of the problem they had a few years ago is financial conditions are too easy. the

the tune from the ecb will have to evolve. jonathan: john, is the ecb falling behind the curve?this just early data and the effects are going to fade as the months progressed? jonathan b.: the fed is behind the curve and the ecb is not. we are believers in the fact that this is transitory. they have had an uptick in headline inflation, a small pickup in core inflation. although their mandate is clinic the headline, obviously, they look at core, and from our perspective, we do not see the inflationary pressures there that is going to make that core rate go anywhere close to what he wanted to be. there is a clear trend toward higher inflation. you still have slack in a lot of the countries and even where you don't like in germany, you still don't see wage inflation because you have migration from other countries. our view certainly disagrees with the ecb's long-term forecast. they have been pushing down their forecast and we are below that so we think they are on hold for an extended time. jonathan: harry? harry: if you divided into the numerator and denominator, the earnings in t

coming up, the ecb decision.new york city, you are watching bloomberg. ♪ the: this is "bloomberg daybreak ." coming up friday, alan greenspan joins us. this is bloomberg. jon: from new york city, this is "bloomberg daybreak." moments away from the ecb monetary policy decision. theres firmer, up 25 on dow, positive three on the s&p 500. the euro has been treading water through much of the morning. market, yields up a single basis point. ahead of the ecb decision, matt miller will be in frankfurt. here at the table in new york -- are youio expecting any change in 25 seconds? >> no change today. no change to key policy rates, the asset purchase program. no change to the language. possibly differing everything to june. jon: do you think a change in the language at this point would make sense? >> not given how hard they work they will make sure to be more cautious this time. alix: do they wind up bridging the gap to june in any way? >> maybe in the q&a. there's no reason for them to take any risks here. jon: rates unc

qe in question is the fed titans, what is the ecb's next move? clues as weok for await the march account later this morning. 's advisor -- the chinese president touches down in florida today to begin withirst state meeting president trump. ♪ anna: a very warm welcome to "bloomberg daybreak: europe." i'm anna edwards. matt miller here in berlin. anna: let's start by talking about what we saw in u.s. equity markets yesterday, partly because of what the fed said about equity prices. i have a chart here, a valuation of the s&p versus various global equities. think it about what the fed said, they said levels look high relative to standard valuation measures. putting it in the context of global equities, the s&p over to 2008,is going back not a benchmark people want to revisit too often. if the u.s. is 11% more expensive than the rest of the world, can it be explained away rationally? concerns about what the fed said about the balance sheet and what it does to the rest of that policy, driving things in the u.s. yesterday and the asian session as well.

today is all about the ecb. and actually rose during the ecb meeting. they kept policy unchanged, rates at present or lower levels. qe can be increased in size and duration. the big comment was downside risks have diminished. that pushed the euro higher. however, underlying inflation pressures remain. risk still tilted to the downside. they did discuss whether to .hange the assessment of growth ecb economists suggest that will happen with forward guidance. the euro lower, sovereign bond yields falling today. commodities and cds. deutsche bank shares lower today. in the u.s.,s rising 11% versus 24% for the big five in the u.s. revenue dealing from stocks, which is something that the company has looked at, broadly flat for its u.s. peers. the cryon executive returning to controlled growth after misconduct charges sapped earnings and forced the company to tap shareholder capital. deutsche bank is down today. lloyd's is a different story. 94% of its revenue comes from the u.k. 97% of its business is in the u.k. pretax profit excluding, beat its target for l

if the ecb wants to do anything, it is not the time to act, but the ecb was not expected to make anypolicy this thursday, and furthermore they have made it clear that if there is market reaction, the ecb has the tool to calm markets down ahead of the national bank of austria. we also have a member of the ecb made it clear, we have what it takes to get the job done if we need it. the ecb is going to focus on its main territory, which is the economy and inflation. there is question if the economy is doing well enough for mario draghi to give a hint that they will talk about the exit strategy. let's talk about the 1131, and you will see the gdp is rising in the euro area. inflation has picked up, but getting pretty close to the target of 2%, it pulled back a .it with the ecb giving cover it just wants to hold things as they are now. and we won't know for another couple of weeks but the result is between macron and le pen. that would create more waves if le pen would win. the euro might have to react. haidi: so you are in tokyo, you are on kuroda watch. what are you expecting? change,: n

guy: let's talk about the ecb. mario draghi is paying a great deal of attention to what happened last night. we saw pmi data comes through, strong at this point. is that the next thing the european markets will price and, the fact that exit will be started to talk about? and as a result, this corporate spread comes back to the table? >> i think that is something markets will really focus on, but it is not as easy as that. one of the issues we are seeing, all global reflation trades -- commodity prices continued to sink. last week they really clashed down. oil prices, food prices, even industrial metals bottomed out last week. now it's looking dodgy again today. i think a monday prices are trading so poorly that it won't be easy for the ecb to remove stimulus. certainly growth is strong, but inflation is still not on target, and it looks like downside risks may be creeping back in again. this is a big thing for markets but it's not a clear-cut answer. matt: mark cudmore, thanks very much. our bloomberg macro strateg

whatig takeaway has been has been said by the ecb.io draghi making it very clear that is qe first. we will wind that down, then start to raise rates. up next, it is "bloomberg surveillance." matt miller and i will be continuing the conversation on bloomberg radio. mouhammed choukeir is carrying on the conversation with us. this is bloomberg. ♪ nejra: no deviation for draghi. the ecb president says he's not changing his forward guidance amid scant evidence that inflation is stabilizing. global stocks drop as fed minutes point towards a policy change. will it be sparks or smiles as president trump and xi meet in florida later? the leaders of the world's two largest economies come face-to-face. this is "bloomberg surveillance ."

for thell be reality fed and ecb.e french election in europe, the second round macron and markets are happy, growth has been a good story in europe, then the ecb may back off its tightening -- it's easing bias and go to a neutral stance, setting them up for a change in policy later in the year. the fed will look at the data that comes in and the markets will be looking at that, and we may see the fed to something in june as well. jonathan: michael mckee, thank you very much. let's get you some movers. the cac 40 having a huge move, banks a big part of that, socgen seeing its best day since august 2013, its highest level since 2008, overall a 9% gain. m&a monday.day -- is $24 billion. they will have to add $10 billion in debt. bridge loans are lined up for this one. halliburton come a good read on the oil community, boosting sales in north america. its losses shrank. halliburton also adding 2000 jobs in the first quarter. jonathan: there we go. a big bid on futures, 214 on the dow, positive 27 points, coming up, we tal

to change the ecb.i speaking in frankfurt this morning, saying not strongflation is enough for the bank to alter monetary policy. >> from today's standpoint, i don't see cause to deviate from the indications that we have been consistently providing in the interaction rate statement to our press conference. fed minutesest signal the central bank may be ready to shrink the $4.5 trillion balance sheet this year. "stock iswed that quite high." let's kick the conversation up with christian schulz. l much of things happened yesterday which i'm trying to get my head around. the market to the little bit of a tumble. it could have been comments from the fact thatut tax will take longer to get going. it could have been the comments on the fed about the stock market. what they said about the balance sheet. what are you looking at right now to get a sense of where risk is right now? christian: all of these issues are on the radar. the fed minutes as the fed potential moves -- another to hikes this year, we expect t

macro open the door for ecb is. ct, willion of -- central bank governor mario draghi strike a hawkish tone to the market anticipates, and what will this mean for peripheral bonds. as earnings season hits. in -- swing, we will speak to -- an interview deutsche bank cfo at 10:00 cet. ecb andtalk about the deutsche bank. let's talk about where we are with markets. focus on the since of direction. at this point in time there isn't much. but off with calculations for europe. down a bit but not by much. anbe we will see underperformance and peripheral markets, but no clear sense of direction coming through from equity markets. we are digesting what is happening, plus we will figure out whether or not draghi will provide a surprise later on. they start to the week, market feels like a distracting now. stock little bit about what we are seeing around the world. gmm at the moment pointing to come again, not a lot. we are watching what's happening with the nafta story. drift in thea markets, donald trump providing a few surpr

up next, it is the ecb.l be on any signals from mario draghi has the bank is debating at exit from the extraordinary stimulus. we're joined by james bevan. and andrew bosomworth. good morning, andrew. you. start with has macron opened the door to the exit from the ecb? that is for me? sorry. well, i think the data is opening up the exit for the ecb. the ecb has been fixated on focusing on risk and the downside scenario that could potentially happen in geopolitics. but their message was overtaken by the economic data. the growth looks pretty good for european standards. the problem is, from their perspective, there is not much in the way of wages coming through. things like wages and oil -- very important for inflation -- they are outside of the control for the ecb. they are getting to the point where we will have to change the narrative and recognize and acknowledge that the data is getting better. today -- whatomes has the right trade around there? we have seen spreads pining in europe. is it the right posi

ecb. >> you minuentioned the ecb. draghi talking about lou thehowb policy remainsen changed. remains unchanged. >> we think inflation is coming off in europe. we're not seeing a lot of core inflation. in our view, ecb will extend qe next year, continue with the 60 billion euro per month and this is in line with that view. this is not a lot of underlying inflationary pressures in europe in our view. >> a more dovish ecb, but more hawkish fed, if you will, for the markets. you say the quantitative tightening is moving closer. that would lend more strength to the dollar, wouldn't it? >> on the short-term, that's the thing we're seeing, relative rates will tend to support the dollar on the short-term. of course the story about balance sheet, then you have more complicated things like the basis effect and so forth. basis market. i think the overall theme is slightly stronger dollar in the short-term given the move in relative rates and some expect taeg expectations about political uncertainty i

that is a very problematic reality for the ecb. it brings to the focus what happened, which there is a communication issue coming through from inflation rising and what is the next step. ultimately, what we saw today is these cams coming back together like in 2012, 2013. one cap wants to keep conditions easy and the other camp wants to be more in touch with reality. it depends on mr. draghi's view. it comesis is what down to. he was talking about inflation. here i have the euro, five year, five year, inflation swaps. what is your view on where inflation goes for the eurozone, and what does that mean for asset allocation? number, that is going sideways in the eurozone. that is something that is important to watch. at this moment in time, a lot of -- our only sort of stimulus is the monetary policy. if there's a misunderstanding about the market about the ecb plus into chen, this can tighten. you could have a situation where you have a growth and then a fault in inflation. that is something mr. draghi wants to avoid. madee: the feder

>> i think the ecb will be cautious.t's a much more political animal, i think, than some other central banks. they're all influenced by politics, but the ecb is much more influenced than others. they will be careful in what they say. there are signs of better growth coming through, but it doesn't want to cut those off too quickly. i'm not sure we'll hear much from the ecb. but the pressure is off the ecb to do anything in addition. a year ago, two years ago, there was pressure to take more action, do more. try to pump more money in. i think we're reaching a turning point for central bank policy. we're through that turning point in the states. even in europe i think -- the next thoughts are going to start to shift towards what happens in the next phase of monetary policy? it's not further ooez ieasing? >> what does happen? >> we need to start normalizing. we have to say what happens in the early stages of the normalization process? do you suddenly put the brakes on growth? you probably won't. that's the key. it will give

ecb has expanded the balance sheet. so the next hurdle or catalyst is the ecb meeting with u.s. we got data from the u.k. this morning on employment. wage growth was disappointing. does the market care about that stuff right now? i think most people i think moe 2010 average growth of q1 was 1.1% and the rest were 2.5%. so a lot of people see the week first quarter -- yes, and then there is a reseller ration of the u.s. economy. francine: thank you so much for that insight. was marc chandler. he does stay with us. we are getting headlines from imf.irector of the christine lagarde is finishing the q&a and then she is coming to us. she is saying that the risks to the global economy include political uncertainty and ejection is him. she wants more cooperation and she is also talking about the greek debt and that restructuring is needed. this is bloomberg. ♪ francine: this is "bloomberg surveillance." we are from brussels and new york. this is where christine lagarde at this conference. she is talking about the greek debt restructuring. of theseven days ahead world bank imf meeting.

that's basically the ecb's target.will keep interest rates and pace of purchases unchanged. stephen,management -- schenectady with the ecb in mind. you areut what expecting. expectations for actual change today are low. but it will be all about the quizzing he gets around the hour. that risks arey balanced for the eurozone? >> he has got to recognize that the european economy is looking much better. it's clearly growing stronger than the united states, which gets all of the attention. the person tick -- purchasing management index which is the best real-time indicator is much sharper in europe than almost anywhere of the major economies. so yes, europe is looking better. this reflects a global improvement the middle of last year, the one europe has felt it needs. most significantly. daye working towards the when they will reign in their asset purchase program. it is not going to be talked about today, he probably will say we've had no discussions. they won't change as you say, but we are moving towards that. now the gu

>> ecb. >> ecb >> ecb? le pen in the second round? yes. >> no. minus 1.5%?es hit >> no. >> no.athan: would you hit 100 your debt western mark -- >> all-day. thanks to our guests. that does it for the berg real yield. come up, coverage of the first round of the french presidential election. you have been watching bloomberg. ♪ .. .. ♪ them alive from bloomberg headquarters in new york. let's get a check on where the markets are now. abigail: not much action on the major averages. 500, andhe dow, s&p the nasdaq all lower. all three major averages are higher for the first time in three weeks. it is the small declines that suggest investors are basically consolidating yesterday's big move. we have the french presidential election on sunday. this chart mesa just what could be ahead for the s&p 500 irrespective of what the outcome is. in blue is the 50 day moving average. quickly slicing through that 50 day moving average.

discussing the ecb and merry of draghi.kyo because we also have the boj as well. let's start off with the ecb. talking about this freeing up mario draghi. is that his reaction to this race? >> we shall see, risk. mario draghi and his colleagues at the european central bank, the factors they have to consider in front of them when they decide if it is time to get ready to put together that exit strategy and moved to normalize policy as the federal reserve is currently doing. that's what they call when they start tightening policy from an easy stance. handed there been an extreme reaction in the euro, in currency markets today, obviously that is something they would step back and let everything: down, but that is not happening. no actual change was expected at any rate this thursday, but yes, the question is, a strong reaction to the election is off the table, so what will they decide? could they decide to start dropping those hence? this is #1131. gdp is growing, a staircase pattern, but steadily up for the last three quarter

the ecb is tortured.they not taper, they will start getting upper limits of owning one third of any security next year. i think the important thing is to address negative rates early. just in the same way they came incutting rates when qe was place, they should raise rates. francine: how early? we will never the french president is by may 8, then you have uncertainty surrounding italy and the banks. but then you have the german elections. then you have brexit. is there an ideal moment where we can talk about tapering or hiking rates? >> there are two challenges. one, it is clearly a french election. the political cycle is always there. the second is, the biggest challenge to the ecb, they feel their waited for guidance. if they change communication, they need to do it softly. the intense debate in the last few shows how agonizing it is. at the next meeting, they could talk about opening options but they need to do it very gently. at best, the second half of this year you might see us what -- slight tweak.

so the euro flat ahead of the ecb meeting. lot of euro strength off the back of the political landscape as opposed to expectations from the ecb. a bit of dollar strength following the yen, but dollar weakness against the pound. the other one we should mention is that the peso and the canadian dollar have strengthened against the u.s. dollar on talk that nafta, of course, is not going to be outright pulled out of by the u.s. immediately. more broadly, of course, the dollar very soft this week at or near lows not seen since november. gold prices down 2% for the week as a whole. >>> the top washington news, the white house says president trump has agreed not to terminate the nafta treaty at this time and will attempt renegotiation. trump called the leaders of canada and mexico to reassure him of his perspective. there were news reports earlier yesterday that the trump administration intended to bring the process of withdrawing from the trade agreement. the peso since the election, let's look at the chart. it's up about 4%, but it

the ecb a little more room to wait. the french election behind it, one way or the other, we clear the path to see how well the economy is doing, and when it is time to signal the market. that is what will be closely watched on thursday. anchor: since you are i tokyo, what do you think we kuroda?t out of it seems like the focus will be on the latest outlook when it comes to inflation and birth. kathleen: absolutely. the question is, will they tweak either of those a little bit? boost inflation forecast for a couple of our bloomberg news teams? anchor: bottom line here is what they are watching. again, patience. bloomberg intelligence says no change in the gdp or inflation forecast and actually, you can be pretty sure better job .utlook is aiding the move the 2% inflation target is still a long ways away. home theth driving point rid #7942 on the bloomberg. targets.hree you take out fresh food prices and that is the core, the boj's may number. that is one of the reasons governor kuroda has been optimistic. energy prices o

♪ anchor: next stop is the ecb.o policy changes, traders are watching for hints on a qe withdrawal. waiting president trump's tax proposal. details are sparse but there is a one-off levy absorbed. russianisters to meet counterparts to push for production curves the on june. 12 -- welcome to "bloomberg markets". a caution, not surprising as we talk about the boj. goe a look at the gmm function, you can see the mckay nikkai is consolidating. saying,eeing the and warning signals on the index. you are seeing chinese equity markets continue to fall. the declines, gdp data showing economic growth accelerating in the first quarter. being helped by a cheaper one, still on the market there pessimistic. crude it down .5% after two days of gains. in vectors weighing expanding crude reduction against easing bloated inventory. we do have treasuries falling animation trading. markets across asia remain a little bit mixed. it is all to do with president trump. expected, not much details when it comes to that tax reform plan. ancho

markets are waiting for that to shift the balance within the ecb governing council. opinion from the ecb and the strategists, then i think the euro carries on as strengthening. that's what people will be looking for. there has been a big shift in one survey and economists are already saying the ecb is getting ready. once they start, they could raise rates quicker. qe might be quicker so the process might be pushed forward? exactly, that could give europe the confidence it needs. euro-dollar is a balance. the u.s. could get tax reform this week. the euro is looking strong at startment and that will to come through the general conference of the ecb provided core inflation -- mark: we are not expecting anything this thursday? one shockwave with the french election in one week is enough. the second round of the french vote but the ecb is pretty consistent saying wait until the end of the summer to see the core inflation going up. they want to see it's stable and here to say. that's when they can start to and eventuallyqe think about what they will do with interest rates

the ecb still they need to appeal to younger audiences. the american wrestler bambi then england captain alastair cook. but perhaps if you are the reason behind this controversial move. surrey and england all—rounder zafar ansari has announced his retirement from cricket with immediate effect saying he has other ambitions he wants to fulfil. ansari is only 25 and began playing with surrey at the age of eight. he made his test debut only last 0ctober, shortly before he obtained a master's in history. he plans to explore another career, potentially in law. he's told me on a few occasions that cricket is just a part of his life, it's not his whole life. he is a highly intelligent individual, he's got more degrees and everything else than most of us put together. he has seen this as, yes, he's played for surrey and england, and now he's going to explore new avenues, and have a different type of career. former world number 1 maria sharapova is playing herfirst competitive match since returning from a 15 month doping ban. the russian controversi

the ecb continues to be concerned about inflation. they don't see inflation at above 2% across the eurozone as they did during the recovery in 2013. they don't see inflation as self-sustaining because it has been driven by commodities prices as well as package vacations which really boosted inflation over the last month because easter was pulled forward. it is just not at the level they want it to be. vonnie: he did sound more confident and said downside risks had abated somewhat and are more global in nature. matt: he did sound a lot more confident about europe. he said the pressures are coming more from outside of europe than from inside of europe. he didn't specifically mention the french election. he took pains not to mention the french election. clearly the ecb feels more comfortable having gone through the first round. he also said back in 2013 when we got the recovery, we said the economy was fragile and recovery was uneven. now we are saying that it is solid and broad. certainly seemed a little bit more confident about the eco

the ecb is being patient.odoes not want to have start rolling back on support, and see the inflation numbers roll over again, and have to reinflate again. it wants to make sure that the policy has worked, that there is momentum behind it, it is sustainable. once we have seen all of that, they will feel more confidence in believing they should rollback. thecine: the tape -- mark: tapering begins when, early next year? charles: arguably, you could say they have already taken in. they deny it, but they have slowed the pace of spending. they are not going to hard stop. at some point, announce an extension of qe. mark: that will lead to something else, possibly. charles: a dovish taper or if hawkish extension, whatever way you want to phrase it. they will start declining by around 10 a month, probably, so that by the middle of next year, you are pretty much run off. mark: up next, treasury secretary steve mnuchin calls the imf outlook for the u.s. a little conservative. the president signals a big tax announcement.

what is the ecb going to do now? >> we don't think the ecb will be looking at oil prices in terms of what that means for inflation. said, hastion, as you been stubbornly stable. we saw a lot of these pickup and the last few months. the economics price index coming in stronger for europe than for other markets. lead to inflation finally getting an upward lift. that has been the one area lacking consistently in europe for quite some time. stay with us. later on in the show, we are going to talk more about central banks. we'll also get a reality check on the dubai real estate market. details of thehe latest economic report on the kingdom. we will talk you through the implications. ♪ yousef: you are watching bloomberg markets: middle east. moody's says the stable outlook on saudi arabia is some ordered i a strong the scope position, but it warns its finances are weakening and volatile -- vulnerable to oil prices. contractionild gdp due to laurel -- lower oil production. the credit worthiness by 1%. bring in the head of m

then i need to price in my ecb normalization trade. think about what's going on in europe. signaling the ecb might is important. manus: let's put up the graphic. we just got a new poll of the timing. sequencing of -- what might have been. the consensus seems to be there will be a shift in rhetoric, and a shift in terms of quantitative easing. do you join that consensus? >> i think in june, they might roll back on the dovishness they've had recently. papering versus hiking, we think they taste first. at one stage we were pushing against a growing consensus to raise rates. no matter what, the euro will be heading higher. it has been undervalued. -- iasier trade will be think there's an undervaluation. how you looks of at this result, we still have made the seventh to get through, then the referendum to get through. existentialgh this threat to the euro, or do you have to refocus on that when we get to italy? >> we have had a pause. i don't think the german elections will give us anything to worry about. the italian side will be interesti

takashi: the ecb is far behind in terms of monetary policy.rlation tokyo are better than expected. we still have a very weak momentum for inflation. that is the actual inflation. slow.ld be very [indiscernible] it will not be achieved. as the boj mentioned, they argue that they can reach 2% inflation target in between fiscal year 18. i think it is realistic. bojhat sense, i think the must prolong the current motivation. much, chief you so japan economist at nomura. plenty more to come. this is bloomberg. ♪ betty: we have big tech earnings in the after hours. su keenan has more on the headlights of amazon, alphabet. a big tech week this week. su: a little light on the revenue in terms of the data center. we will see how that translates through to the more positive earnings in the friday session. the good news is, we can take a they have boosted their revenue by back by about $10 billion. let's look at microsoft. this is a stock many believed was priced to perfection. they hit a record going into the earnings. many believed as they transitioned

mark: still ahead, jean-claude touchÉ share his opinion on the ecb, and the fed.oomberg. ♪ london inm new york, i mark barton. vonnie: i'm vonnie quinn. central banks cannot be the only game in town -- former ecb president jean claude trichet spoke to francine lacqua in brussels earlier today. it is designed for 19 countries as a whole and it is up to each country to take that into account and, knowing thathe curncy will be stable , inflation will be in line in the medium-term with the definition of price stability, it is up to them to have the national policies that could be appropriate. let me say that taking the 19 countries as a whole, we see that growth is there. we see a lot of derivatives are going in the right direction, including unemployment, which is going down regularly. all this is encouraging. encouraging for the policies which are pursued, and encouraging for the ecb policies . now, of course, a lot of hard work needs to be done. i would say that the ball is in the camp -- up to the governments parliament -- central bank cannot be the only game in t

the ecb is a technical institution with political backing.you have france electing an the-eu, anti-euro president legitimacy of that action on behalf of the eurozone -- there is a fundamental contradiction. take on ab really situation in which the eurozone 's second-largest economy is no longer playing by the eurozone rules? i think that is an open question. vonnie: we have the debates, 11 candidates hitting themselves against each other. will that be a turning point? >> the debates are important. if you look at the first debate on march 20, you did have a significant change. partly on the left, with the socialists dropping significantly. but if you look at the actual polling numbers, emmanuel macron and marine le pen, who tied for quite some time, marine le pen -- macron was bumping up just underneath le pen at 2425%, consistently in the week ahead of the debate been after the some of theting her time. clearly he has moved up a point from an exact tie. 10 million people watched the debate. you've got 44 million voters in france. this is an i

mike: i think it is easier for the boj and ecb, maybe more directly for the ecb.e were very concerned about the french election. i have heard it from investor after investor over the last few months. after the first round people are breathing easier. up in the final is coming 10 days, give or take. central banks have to be marked confident thinking about policy than they were a week ago. they need to lower their inflation forecast? mike: maybe not dramatically. changing it all the time or every other meeting is not productive. we do not see a big shift in the inflation forecast at this point. betty: i want to bring up another chart. don't know if you can see it, but you can imagine what it looks like. it shows how much the boj is off the inflation target. know, way below, as you their 2% inflation target. as these yields continue, it seems that they continue to fall. where do you expect capital to go? are we going to see more capital outflows from japan? it is a terrific question. i spent the last few days in tokyo. i was asking client after client the same questi

why don't we start with the ecb's potential exit strategy?nt draghi has indicated that the stimulus plans will remain intact, but the head of the bundesbank says that perhaps a discussion of the forward guidance is legitimate. where do things go from here? what do tell investors? yves: it is quite clear that at the last voluntary -- monetary policy meeting, there was a very broad, if not unanimous opinion that the european recovery still needs an extraordinary amount of monetary stimulus in order to continue in the direction that would achieve our price stability objectives. kevin: do you personally as a member of the executive board think the forward guidance needs further discussion now, perhaps even a little bit of tweaking? wes: we, all the time when meet, have to reassess the situation. all ourknow that instruments which are encompassed by forward guidance, whether the interest rate or the qe, are time- and state-contingent, meaning that we need to reassess the evolution of the economy in view of the efficiency we can see coming from our

mark: how will markets respond to a less loose said, ecb -- fed, ecb, boj? >> we have had years of a gradual fed exit from the altra ultra-stimulus they had. a little taper tantrum here. it was for markets briefly a big event, but if you look at the economic data, it it did not impact the economic data, so markets got back to their senses shortly afterwards. holger: now, having had that taper tantrum in the pass, we are forewarned. i do not expect massive negative market reactions to what is likely to be a very gradual pace of stimulus removal free economies in the western world that clearly cannot stand slightly less accommodative monetary policies. mark: say there. schmieding, valentin marinov. here is nejra cehic. nejra: nestle has reported first-quarter analyst growth that it exceeded estimates as it raised prices on nescafe in europe and asia and sales accelerated. they said sales rose 2.3% on and a granite basis. nestle's new ceo abandoned the sales and profit forecasts for the company had held onto for a decade and replace them with a goal to jumpstar

the ecb are hoping to attract some of the best place to this competition but it does not have universalinst and kent abstained, they worry about future smaller counties once the competition is in being. what will be the effect on the revenue, will it split dressing rooms with others being left behind so will it create a slippery slope which will be the end of county cricket. existing competitions will continue but the ecb feels the need to make a clean break to appeal to younger audiences. they did some market research and found more schoolchildren recognised the american wrestlerjohn cena to alastair cook. that gives you the rationale behind such a bold controversial move. five—times champion ronnie o'sullivan is out of the world snooker championship, beaten 13 frames to 10 in the quarter—finals by last year's runner—up ding junhui. a fantastic match was settled by a century from ding — after o'sullivan had made a tournament best break of 146 earlier in the session. o'sullivan warmly congratulated ding at the end who now goes on to met mark selby in the last 4 in a repeat of last year'

this is what happened after the last ecb meeting. a lot of ecb members sounding a lot more dovish.uch more do we have to price out? euro?es, bunds, the james: this is all about the asymmetry. we talk about the forward guidance telling you there's an asymmetry to their reaction function. it is rational that the market looks towards tightening a policy. the yield curve at the front and to be up we have seen the czech central bank. dovishness being rolled back again jon:. we had a conversation about federal reserve normalization. balance sheet normalization and what that would mean for the treasury market. let's talk about the bund market as the ecb tries to recalibrate, their communication over the coming months. there's a self-correcting mechanism that comes from the nature of the european government bond market. the biggest beneficiary has been the italian government bond market. if we talk about stopping thehases, the first call is least competitive nations, italy is front and center of that, out -- the dynamics are somewhat different. it probably means volatility in bunds. not ne

and the comments from the ecb suggests that the ecb meeting last month was misinterpreted or overinterpreted level of dovishness. and another ecb going back on that, too. the euro is up but we pulled back. amazing how that turnaround in the euro has come around, 106. >>> economic data out of japan overnight sent japanese manufacturers business confidence improved in march. here's a look at the trade for you today. the nikkei up a little bit. hong kong is up a little bit. chinese and taiwanese markets are shut for holiday. several economic reports coming ought of europe this morning. uk manufacturing falling short, 54.2 versus the prior month of 54.6. and expectations it was going to rise. soften nicely by 50. across the continental data better. the german pmi came in at 58.3. and expectation of 55.4. and lastly, overall, the manufacturing number coming into 56.2 showing the fastest growth in 71 months. so the take-away from that is strong for the eurozone. strong and a little disappointing for the uk. markets for europe, as you can see, a little bit mixed today. i'd say the difference isn't

us -- nt the ecb faces a challenge.hrough the french election and start to look at a virtuous cycle of growth of element, it is hard to claim the status quote -- status quo is the same as when they introduced these. adjust --essentially potentially are just purchases. that is challenging, because it impacts the risk premium. so i do not think you want to go there in europe. has talked about what they call a reversal rate. where if you go to negative, you start to affect the banks, and the bank transmission of europe. so there is a case for them to a potentially talk about increases in the rate, which benefits bank and thet transmission, european economy. miller,arrington pitt janus capital equity analyst. thank you for joining us. vonnie: time for our global quick takes. china's $27 trillion pile of debt is a threat to the global economy. or maybe it is a manageable by product. either way, the buildup has been breathtaking. inh darling quadrupling seven years, by one estimate. soared inrrowing 2016. surge in thehe u.s.

the banks and the ecb declined to comment.reasury department wasn't immediately available for comment. toshiba shares have slumped in tokyo trading after a report that the struggling conglomerate will seek more funds after its westinghouse nuclear unit filed for bankruptcy. the company is to hold a lenders meeting and ask for additional assistance to cover a temper research in losses. -- temporary surge in losses. tesla is no more valuable than ford after elon musk sperm reported 25,000 vehicle shipments in the first quarter, exceeding estimates. tweeted, stormy weather in short bill. that is your bloomberg business flash. thathe wasn't going to let one go. juliette, thank you. south africa has lost its investment rating grade for the first time in 17 years. this in response to the cabinet purge by jacob zuma. what are the political implications? how does this ripple back into politics? >> that is the big question that is going around today is how will this change the stance on jacob zuma. leadership ancs top will be meeting t

a man waiting for political clarity and inflation as well, talking about the ecb.et's get best are and more with first word news headlines with paul allen. paul: thanks. mario draghi made a small concession to policymaking colleagues wanting to discuss of come up marking a change in his carefully weighted comments. and june 8, the ecb scrutiny on how skewed to m and when it should wind down stimulus. in earlyour meeting march, the cyclical recovery of the euro-area economy is becoming increasingly solid and the downside risks of further diminished. european union leaders meet in brussels on saturday, saying it is all for one against the united kingdom, they will members talkning up unity and warned britain against trying to sew division in their ranks. the eu is increasingly confident it can speak as one when it comes to brexit talks to preserve stability. isna's campaign to clean up .eceiving endorsements they called on the authorities to continue to despite stocks falling to a three-month low. oils gradual recovery is easing big energyr china's companies. profit,

next year, we are more bearish on the ecb. for the ecb, there is no inflation. somewhere in germany, you would think inflation is the place, the labor market is tight. the reality is we are not getting rage -- rate hikes. in italy, a lot of slack but you can see how difficult it is to get inflation. without inflation, the ecb will be stuck with the race and continue quantitative easing. alix: the president saying we have to tailor a buying program in a year and time for the ecb thetep aback, it is like rhetoric we are what to say that is not material change? to hear the unusual german, northern europeans to talk about some of the easing. you have to look at the end of the line fundamentals and without inflation, mario draghi will say we cannot afford to take our foot on the accelerator. the quantitative easing program carried on through this year and probably talking about tapering in 2018. we think there will be accommodative support through 2018. >> last night, we saw a shift from the fed talking about a predictable manner to reduce the balance. how do you int

let's talk with the ecb -- about the ecb.ng around europe, the middle east, they feel like the fed is being clear about what they are doing, and that makes it ok for global growth and for global equities and global markets. i think the key here is -- clients and the markets see the action by the fed driven by good,, and it is underlying economy, and hoping they will coordinate to some extent where global growth is going. it is when you think they're moving too fast or he thinks global close -- grumbl growth is being deterred by some for such as trade wars. alix: to wrap it up, your clients and asia, how are they looking at the u.s.? how are they allocating their money with president trump? sheila: across the world and especially in asia, people are looking at president trump and his administration and seeing that he has chosen some white pragmatic people to be -- quite pragmatic people to be part of his change and hoping that the adventists -- t pragmatistsh win. will tax take longer and excited, will infrastructure take long

in the credit space, given what the ecb has been doing, or in the sovereign space where you can see 10ear bunds at 20-something basis points, oat's 10-years at 90-something basis points? even the likes of btp's, 200 basis points over bunds, incredibly low nominally. where's the biggest distortion? carl: i think you can make an argument either way. both are overvalued due to ecb buying, in my opinion, but on the margin the sovereign base is just too low. jonathan: too low for stock in the sovereign space so the big question around this table is whether you want to be active or passive. last week we had a lot of active managers saying it is time to be active. as a guy that sets up etf's, you give me a reason to be passive as a fixed income investor. fran: i think without hedging my response, using fixed income etf's, even passive ones does not mean you are being a passive investor. you can look at the lineup -- hit etf on the bloomberg -- and there are a wide variety of products in a wide variety of spaces so you can get longer or shorter duration vi' etf'just a passive portfolio. y

should one cell high-yield bonds and credit with the ecb paper? the next big risk, that is an exception out there. >> we have definitely seen around about recently where we had spreads winding and that was on the back of negative lows. we have seen that receipt climbed back in and that is often a good reminder of the fundamentals. the fundamentals are that we freewheeling on the cycle. a lot of the energy sector have been wiped out or restructured and now we have this underbid on the energy side so we would agree that the value is not screaming by like it was four backdrop, but in this of very little global inflation, what we have tended to do is own a lot of those middle risks, high yields, emerging market, hard currency desk. when we do our own inflation risks we tend to that in -- tend to do that in u.s. risks. when it starts to build that is the most likely region. but yes, we wouldn't be as negative as that. mark: jonathan rowe, head of multi-assets legal and general asset management. we will be talking about emerging markets. vonnie: it is a

for inflation, they are still well below the ecb's 2% target.n't have a deflationary scenario anymore. that was already acknowledged in the march ecb meeting. the messages, steady as she goes. draghi will have to face a problem. the problem is trying to temper expectations. it is pretty clear that some members of core europe, germany, austria, otherwise, they will want the ecb to say, this is how we are going to get out of what we're doing at the moment. that is a risk. ecb, we mayg the end up with some kind of fudge on it, but it is clear the direction of travel is, we are getting out of this. mark: does that mean the direction of travel for bond yields is higher? peter: modestly so. if you look in germany, where 10-year yields are 35 or 37 basis points, in the context of german inflation, and better growth all over the eurozone, that looks a bit strange. mark: the spread between that and the u.s., some would say -- hang on, doesn't make sense either. peter: indeed. the thing for the bund yield is inflation expectations. in the absence of that

guy: a validation of ecb policy? well be a validation but it could also be sadly a reflection to the fact that austerity may not have been a successful policy. as you slow down austerity, which is what qe has allowed you to do, qe has been a smokescreen to allow countries not to see austerity. that is perhaps why the data is improving. tom: this is really important. the great distortion in europe, is that the same as the great distortion in america? if we has depressed domino -- nominal yields and real yields, if we are worried about a little bit of inflation, stealing that inflation-adjusted yield, is it the same mathematics and dynamics in europe that it is in america? >> it is a different story. in america, the fed did not need to distort markets so much because they dealt with the bank nonperforming loans and the bank illiquidity problem early in the cycle. we have not done that in europe because of regulation and anti-rules. we are still dealing with the banks. many politicians, many regulars look at the ecb and

yousef: the other story is around the ecb. been to struggling italian lenders to be solvent. the financial story. a lot of people have been concerned about the italian financial sector for some time. thanks in that sector need bailouts. bloomberg understands that the , they given an estimate need 6.4 billion euros to bolster their balance sheets. the crucial factor here is that the -- the ecb considers these to struggling italian vendors -- under the eu's bank failure rolls, if you want to put more capital into the banking sector are, without having that way on bondholders, it needs to be solvent by the ecb. merge, inanies won't what is being called a capitalization. we will watch that sector at the open. yousef: plenty to look forward to in a few minutes. let's get you some of the key traits we are watching for you as it unwinds, or gets underway. we have a change their from price. in terms of the seven pounds and 70 has been cut to neutral. also watch out for saudi electricity, they downgraded the company. it is one of the b