the whole theory right now is that the ecb will have to be easier, the u.s.s well, global inflation. you can have diverging economies. when you look at the u.s., you are seeing strength. it's concerning because everybody thinks the fed will be there forever, and they are not. jonathan: you talked a little bit about the value opportunities across economies. this chart tells the story. walk me through it. >> this chart is showing the inflation differentials across our economy. while not overly significant, you are seeing a trend downward in terms of inflation. we see the united states moving down to 1.5%, 1.7% area. we see the eurozone at 1.1%. the bottom line if the differences are pretty significant. the u.s., where we think it is a transitory decline, we will start to see inflation push back europe, yout in have half the target and you were in a situation where you have a labor market that is very divergent. you have low inflation and unemployment in certain areas, and high unemployment and others. we expect that high unemployment to cause inflation to be lo

the ecb will have to be easier, u.s. will be as well. ave global inflation as well, and divergent economies. the u.s., we are seeing strengthen american economies, best in american economies come and everyone thinks the fed will be there forever but they are not. jonathan: you talk a little bit about the relative value opportunities across major economies, and here is a chart that has the story. walk me through it. michael: this chart is showing the inflation differentials across our economies. while not overly significant, we are seeing a trend downward in terms of inflation on a global basis, and we know that is happening there. we see the united states moving area, we the 1.5%, 1.7 see canada at 1.4%, and the eurozone at 1.1%. we think the u.s. is a transitory decline, pushing back up to the 2% area due to the tightening of the labor market. you have the, target and you are in a situation where you have a labor market that is very divergent within europe. -- lowhave low inflation unemployment in certain areas and very high unemployment

the degree of stimulus that the ecb provides. u talk about complacency around the federal reserve. i cannot understand the amount of nervousness around the ecb. speech fromheduled president mario draghi at jackson hole and the market moves on it because they are expecting something flagged ahead of the september meeting. that is how nervous people are about the next move from the ecb. is it justified? >> high sensitivity is what we -- hypersensitivity is what we call it. i think for the ecb, the trouble is going to be to try to communicate a hawkish message without spooking the market. we saw even a very small nugget of hawkish information caused the bond yields to be prized priced high in a short amount of time. bund yields are specially rich with the treasuries for a long time. if you look at the bund-treasuries spread, it was around 200 basis points early on. now we have come down to about 175 basis points right now, so the bund-treasuries very much in line with the dollar. and bunds are sensitive to what comes out of the ecb.

the ecb is going to have to be easier, u.s. will be as well. ave global inflation that is low and divergent economies. , looking at the u.s., we are seeing strength, we expect to see inflation resume, and everyone thinks the fed will be there forever but they are not. jonathan: you talk a little bit about the relative value opportunities across major economies, and here is a chart that has the story. walk me through it. mike this chart is showing the : inflation differentials across our economies. while not overly significant, we are seeing a trend downward in terms of inflation on a global basis, and we know that is happening there. we see the united states moving down to about the 1.5%, 1.7% area, we see canada at 1.4%, and the eurozone at 1.1%. the bottom line is those differences are pretty significant. we have the u.s. where we think it is a very transitory decline, and in the beginning quarter of next year, we see inflation pushing back up to the 2% area due to the tightening of the labor market. but in europe, you have the target, and you

all the the ecb. but it will be interesting to get to that news conference and see if the president wants to clarify that message. happyl gross is probably because he had a warning letter that central banks must use caution. it could tip the economy into a recession. he also goes on to say a flatter -- now, we have a little bit of a warning. wehe says all the rules thought we knew may not apply anymore so it may be different. >> there's always a riskier. >> you never know. they will be joining us at 2:00 p.m.. again, bill gross sank central banks should be careful because a domestic and global economy are so over levered. whoooo. i enjoy the fresher things in life. fresh towels. fresh soaps. and of course, tripadvisor's freshest, lowest prices. so if you're anything like me... ...you'll want to check tripadvisor. we now instantly compare prices from over 200 booking sites... ...to find you the lowest price... ...on the hotel you want. go on, try something fresh. tripadvisor. the latest reviews. the low

buried in the news is the ecb meeting. is a huge dealing cannot rise above the news flow. calline: when will the ecb it from the markets and underpin what we are seeing from asset classes? let's get to first word news. jeffr: an admission about sessions by president trump. he says he would not have appointed sessions if he knew sessions would work use himself from the russia investigation. recusal unfair to the present here john mccain has been diagnosed with brain cancer . his office says he and his family are reviewing treatment options. he is 80 years old. more than five years in a prison cap after being shot down during the vietnam war. its monetaryept stimulus unchanged. they have pushed back their timing for reaching 2% inflation pure they expect to hit it around april 2019, one year later than previously projected. toresa may is being urged assure businesses over her brexit strategy. she will have her first consultation with business -- businesses since taking office more than a year ago. global news, 24 hours a day,

julie: what do you think we will hear from the ecb? e recent communication has been a little bit more delicate given the market reaction. what do you think will happen this time? danny: i think they've got to be a little delicate and a little bit concerned about where the data are going. not least the inflation data. i was just looking at it ticked down from 1.9 in april to 1.4 in may and one point three in june. inflation headed below target, reasonable amounts of growth. let's get real, the european economy is -- an unemployment rate of over 9%. italy is at 11 -- 11% and france's in the 9%. rbc they have to because schists and there seems to be evidence of the stimulus has been working, but i think it is too early to say the gain is up -- the game is up and it is time to pull back. i think there will be caution and we will hear disagreement, but i don't think we will see much change in what they say tomorrow. isra: it is a rough -- it .ejra in london d think this caution will come because of the fundamentals you talked about or will m

i cannot understand the amount of nervousness around ecb. get u a scheduled speech, and the market moves on it because they are expecting something to be flagged. that is how nervous people are about the next move from the ecb. is it justified? >> yes, hypersensitivity is what we call it. for the ecb, the trouble is going to be to try to communicate a hawkish message without spooking the market. very small nugget of hawkish information caused bond yields to reprice very high in a very short period of time. bund yields especially are extraordinarily rich. if you look at the bund treasury spread, it was around 200 basis points earlier on. now we have come down to about 135. it is very much in line with the dollar. bunds are extraordinarily sensitive. jonathan: set us up for next thursday. there was some kind of debate about whether the market misjudged the speech he delivered at the ecb for. is that his job to clarify that message next week, and does that mean we could end up with a dovish ecb? >> he might try to clarify in a bit, but i don't t

robert: the ecb has been running the wrong policy.he negative rates from absolute scored on that system, so it is time to wind down the qe and bring the rates back to zero will help them balance. in the u.s. they have been behaving as if the 2% inflation preemptivelyand tightening policy. we will get a lesson next year. we will get a new fed chief. they may be more of the same of what we have, or maybe somebody intent on hitting the job growth agenda -- donald trump growth agenda. i think the long rates is at or above fair value in the u.s. i think the spread have a ways to go. returns will be good. i think the risk is on the equity side, it is at the bottom of the capital structure and higher risk bonds if you get a hawkish view. jonathan: the federal reserve worried about risk and high risk tolerance, yet the focus of the market was on the risk-free assets. make sense of that for me. is it the risk with the risk-free asset or where it usually is? oksana: making the risk-free assets armor risky for that reason. we have talked about t

the degree of stimulus that the ecb provides. you talk about complacency around the federal reserve, i cannot understand the amount of nervousness around the ecb. you get a scheduled speech and the market moves on it because they are expecting something flagged ahead of the september meeting. that is how nervous they are about the next move, is a justified? >> high sensitivity. i think for the ecb, the trouble is going to be to try to communicate a hawkish message without -- the market. we saw even a very small nugget of heart this -- hawkish information caused the bond yields to be prized high in a short amount of time. with the been rich treasuries for a long time. if you look at the spread, it was around 200 basis points early on. now we have come down to about 175 basis points right now, so that treasuries in line with the dollar. nds are sensitive to what comes out of the ecb. jonathan: set us up for next thursday. there was debate around whether the market misjudged the speech that mario draghi delivered. is it his job to cl

mario draghi walks a tightrope as the ecb president looks to shift away from easy money without royaling markets >>> ab bpob posts a weaker than expected second quarter. >>> deutsche telekom adds more than 1 million customers in the latest quarter >> we've been fortunate in the first quarter again following a good streak of acquisitions last year we extend with a disciplined approach our portfolio >>> we've seen a broader and higher open in europe with the stoxx 600 up over a third of a percent. taking its lead from more record closes in the u.s. overnight and a raft of earnings results are out today. on the whole broadly positive which has signaled the market opening higher you can see that reflected in the key movers in the markets today. let's look and see how the individual bourses are shaping up the xetra dax is in the lead, up 0.75 cac 40 up over a half percent. the ftse 100 up over 0.40% negative statements out of easyjet, yes, it managed to deliver higher unit revenue, but the issue is that there is overcapacity in the sector and it gave a bearish outlook for what's ahead let's l

the fundamentals of the european economy and what is the resolve of the ecb? the resolve of the ecb in terms of maintaining was financial conditions is very significant. the ecbet was viewing as being a bit more hawkish one month ago, and moving with the fed as far as moving accommodation, not likely to happen when you have inflation atning in your up -- europe half of the ecb target and weakness in the southern half of europe. i do not think it can last forever. jonathan: lisa, is this a message to the affects market or the bond market, or both? because he market, is saying let's not get your hopes up. let not yet -- we will not yields go up too high. we will keep them low. it makes me wonder how much it will allow inflation to pick up in the eurozone, which is supportive of the economy, and looking for a legitimate reason for the euro to get up, and also how much is the euro strength? simply, it is a dollar story. we have seen the dollar sank as prospects for the fiscal stimulus plan here has faded. >> i think it has been interesting to watch the euro streng

what is priced to the ecb? we have the story running this moaning talking about the fact he may wait until the autumn. we have the sequence of the meeting coming up tomorrow. we have jackson hole coming up as well and then we get into that autumn period. how is the market feeling about the sequencing, the timing of the communication shift from the ecb? people seem to be fairly comfortable with the idea that this is going to be a slow-motion decision by the ecb. it will be very gradual and mirror what the fed did under janet yellen. she has done everything and a steady pace, she has tried not to shock the market, a little bit at a time. america seems to be taking his cue from her. we are getting more information but it is being pushed in sue the future. we will get more tomorrow and a bit more at jackson hole and more in september. providing they continue with this slow and steady movement, they probably will not disrupt markets too much. ok. we are in for a quiet summer. that could be a slow and steady move into

the ecb is said to be working on policy. policymakers have not yet held formal discussions on the end of bond purchases. ,et's bring in kamal sharma joining us from the london office. thanks for coming on. there is a lot of focus on the ecb, but what would be the upside for mario draghi to give us a plan on how they start tapering? >> i think it is the break of 1.15 in the euro-dollar. obviously, there has not been a significant move sense the central comments. we are of the view that there will be a tapering of using purchases -- of easing purchases over 2018, but that discussion will be left until september. we have the jackson hole symposium coming up in late august as well. for the moment, the ecb governing council, and draghi in particular, will want to play this flatback to the debates on how easing and tapering will comence. francine: do you worry that actual inflation will pick up? there is a strong argument that inflation will pick up because of structural concerns with the labor market, meaning we are not trading qu

the ecb. t the voice we are hearing in those kinds of stories? we are waiting to hear mario draghi speak in jackson hall. he seemed to signal the ecb would talk about this question when they taper to october. too early for him to deliver the clarifying speech markets want to hear. david: that leaves the fed all alone in the corner. kathleen: starting to look that way, david. the fed made it clear, we want to normalize the balance sheet. yes, inflation has been low. we are doubtful, but want to forge ahead. note out today, no change from the fed. they will not see anything from the balance sheet. he says they have not done enough to prepare markets. --means usn global font u.s.l bond markets -- the and global bond markets. the jp morgan not looking for a big change. yvonne: great work this week in tokyo. let's talk about the australian pushingnd -- market, centcloser to the 80 u.s. mark. let's get the latest from paul allen in sydney. we are expected to hear the governor next week. what will be

>> i think the ecb has been running the wrong policy.he negative rates were an absolute scourge on the system. for them to wind down the kiwi and bring the rates up to zero will help their system, on balance. in the u.s., it has absolutely been behaving -- this 2% inflation target is a ceiling. preemptively tightening policy. we're going to get a new fed chief next year, and they may be have,ite, more of what we maybe somebody intent on hitting the trump agenda. i think long rates are at or above fair value. in the u.s., i think that spread has a ways to go. i think the risk is on the equity side. i think the risk is at the bottom of the capital structure, and higher risk balance if you get a hawkish fed. jonathan: that's what i found interesting about this week, the federal reserve worried about high risk tolerance, get the focus of the market was on risk-free asset. make sense of that for me. is the risk where wrist traditionally is? >> it's concerned where risk traditionally is, making it more risky for that reason. we have talked abo

the ecb as such a long way away from that. are still purchasing bonds. ,fter listening to mario draghi you get the feeling he is in no hurry to take that step. behind the fed. in fact, mario draghi said are from needing to question the idea of withdrawing stimulus, the euro area needs more monetary stimulus. said the last thing the european central bank wants to see is a tightening of financial conditions. he had a lot of reasons why he sounded like a ready dovish person on this ear it in fact, he is saying i am not ready to change the sense of where i am going, and that does not seem to be anywhere fast. >> unanimous in communicating no change to the forward guidance, unanimous inwere whenng no precise date for to discuss changes in the future. it has become a global story. the central bank feel they took unprecedented steps to cut rates dramatically in the financial bonds, start buying ending up with huge balance sheets, then they look at their inflation picture and it does not seem conducive with starting to take steps, at

the ecb not expected to announce the policy change.raghi will prep on whether september will see news of tapering. views are split on whether the president will if needed. carefully, strength would come locate the inflation talk at best target. kind of problem the fed had. joining us now is alessandra. off inset the fireworks portugal. is he going to walk back from that? is he going to be excited when? say itdra: what we can is going to stay the european eg well. more patients, at the same time the stimulus can be eventually pared down when the time comes. as the economy improves. this is what he had said. there was a strong market reaction. he is going to completely contradicts at the same time he is going to sound no rush here. stop -- he stop the euro from going up aggressively? alessandro: it is just the nelnet they are taking apart -- in account. the last time was 2014 when the euro was really strong and draghi verbally intervened. whether he will try to talk down the euro is one of the things to look out for today. guy: why see g

i think that will be the same with the ecb. nejra: yeah, i get what you are saying, of course the fx market is not the ecb's mandate. but a difficult for mario draghi to ignore. i have a chart that shows of the levels andat pre-qe2 that does have an in-flight -- impact on inflation. do you see and concern of what you're looking got with a tightening of financial conditions? lookaume menuet: when we at financial conditions, we do the average in the second quarter which is a standard deviation above, which is very good, the highest since 2011. when we look at what happened in july, we lost two decibel points . ecb's potential advice -- twice as fast. what you see in the euro is probably on the trade weight because it is on a tear. what we monitor is the trade weighted and is up 3%, 4%, 5%. .1 ofuld maybe shave off the 2018 and 2019. they will have inflation ballparks, the same as in june. by then, growth will have been revised up. the ecb is in a difficult position, they have to announce that qe's extended but cannot know how to a

we are seeing possibly more hawkishness from the ecb. nge the mood and have asia turn hawkish? see a spikewere to in food prices for whatever reason or if energy prices, oil started accelerating. or wage increases in the developed markets. it would of course put pressure on the central banks to rein in or taper stimulus. but we are not there yet. india is backing loan sanctions. china is keeping rates at record lows. australia has been tightening because of the appreciation of the exchange rate. there are factors when we could see have the central banks in asia would have to change gears. it does not seem those ingredients are in place yet. yvonne: if there is any asian central bank you think could be joining in on this hawkish party, what would it be? jesper: it could be the people's bank of china. importantwe have an party leadership reshuffle coming up in october. if there is, from china, a more pronounced commitment to ease fiscal policy, it could indeed be the central bank of job -- china that is the first to hike. koll, thank you fo

it means they would do it without the ecb. vernment insists that they will not time this for pr reasons, they will going when the timing is right. that is their line. that said, we mentioned that the government of greece was in the market three years ago. since the start of the debt crisis in 2009, if they can sell five-year bonds at a yield of equaling the year of 2014, i am sure they would welcome that. marcus, thank you so much. we are looking ahead at the close of european equity trading. let's see with a are. down for the first time in five days. the stoxx 600, as you can see there, down more than 1%. the dax down more than 1.3%. not up by quite as much. 2/10 of a percent. -- 2/10 of 1%. this is bloomberg. ♪ whoooo. i enjoy the fresher things in life. fresh towels. fresh soaps. and of course, tripadvisor's freshest, lowest prices. so if you're anything like me... ...you'll want to check tripadvisor. we now instantly compare prices from over 200 booking sites... ...to find you the lowest price... ...on the hotel you want. g

with the federal reserve tightening, the next step the ecb tightening. retty unclear about the next step for the boe. the only front we have is over in asia, the bank of japan, for the most part right now. that said, whether a central bank is supporting or detracting from risk demand in a given market, it's defined by whether they are tightening faster or slower than what is priced in and what is priced in right now for most central bank action is a relatively gradual pace of tightening. if we do get tightening that is at priced in, that poses modest problem for risk assets. i doubt it is a huge one. the issues with high yields are and tiesout valuations to the equity markets rather than bank policy. jonathan: everyone seems to be confused by bank of england policy. stick around with us. let's get you up to speed on the markets this week. what a week it has been. yields higher by a margin of three basis points, the big move further down the curve, 13 basis points higher. as we get back up to 2.82 on the 30 year treasury. still ahead on this program, the f

one of the reasons for that, where does that leave the ecb? esearch that said the real show comes in september, we will not hear much this week. is that your expectation? holger: yes, of course. over the last two weeks see be say nothingins to significant in july. they will likely want to calm nerves. decisions will come late and the ecb will continue to tiptoe, to move very slowly. it's about as interesting as watching paint dry. manus: i can't remember the analogy, essentially a replication of a temper tantrum. i zoomed in on the bottom of your note. you talk about a reduction in qe starting in january 2018, although a rate hike remains a possibility in december, but we may have to wait until later on 2018 for that. why do you think there could be a rate hike before the end of qe , and are the bond markets remotely prepared for that? holger: first of all, it's fairly unlikely that the ecb does anything on rate this year or early next year. if you think about the seat, if the economy were to do so well that cb would get really restless, which

the ecb is not in firefighting mode anymore. lls been extraordinary with extraordinary circumstances. we've seen domestic growth pick up as the economy continues to recover. there isn't any great need for additional stimulus. at is what is going on. anytime they find more assets, it is additional stimulus. it is only natural they bring that to an end. they will be more cautious about withdrawing stimulus. we are not expecting to lift rates until 2019 just because we are not expecting inflation to resurface. jonathan: i know we've in the eyes of many people. sinkure they would love to this will be gradual and we will do it by $20 billion every six months and wind things down slowly. but investors are not going to hang around. best if you say it draws to a close, are they sensitive to what could happen in the bond market on the back of that change and how sensitive are they to something like the fx channel with euro-dollar trading where it is in the last 24 hours? moderately sensitive. we have seen them trade market reactions aroun

mark: moore to come on what to expect from the ecb minutes tomorrow. er, monte paschi givien lifeline from the tying government, why something's the restructuring plan is a turning point for the bank. this is bloomberg. ♪ vonnie: live from bloomberg world headquarters in new york, i'm vonnie quinn. mark: i am mark barton, 60 minutes away from the european close. let's carry on chatting and talk about what is happening today. let's talk about the ecb. mario draghi, did we misinterpret him in centra? >> he has one of the hardest jobs trying to communicate. markets. not upset the ecb is facing three difficult parameters. the first, inflation rates will remain low. thatecond grandmother is best parameter is that they did not -- parameter is they did not extend qe. the first quarter or half of afterwards, other countries ownership. they need to -- given the fundamentals are improving, they do not need to increase but they have to communicate in a way that the do not undo what they are trying to do -- we do not have that much space. to 118, the delta in terms

we talk about the ecb next. ♪ guy: u.s. health care flatlining. ns will oppose the bill. mitch mcconnell's obamacare replacement bill. what does this mean for the rest of the trump agenda? the rba says economic growth is brighter, sending the aussi dollar to a two year high. but is there more to come? will the bank start to walk the market back in little bit on this one? and getting some good momentum. the ceo of novartis says the momentum gives them more options with that business. will they dispose of it, put it on the market, or keep it? we will get an' analyst's opinion. you are watching "bloomberg markets: the european open." european equities, they do not have a clear sense of direct and they are softer than they were this morning, down by 0.5% around europe. the german market, underperforming. lufthansa, the standout story, , consideringrprise the numbers it has posted. erickson is off pretty sharply this morning. yara is off pretty sharply this morning as well. in terms of where we sit, the equity markets are interesting, but i think the bi

francine: the ecb does not want to rock the boat.ction in the market and they are trying to manage that. it is important that any rise we see in the eurozone is gradual. task.a complex they don't want to rock the boat. we had a conversation that emphasized the loss of vision in the fiscal space. do you pine for more fiscal spending in the united kingdom and in the united states? >> no. what everyone would like is going back on more sustainable footing. that can only happen with robust economy. that is where policymakers are .rying to tip toe towards on the fiscal policy front, people talk about austerity. we are not in austerity. the u.k. is running a sizable deficit. that needs to be repaired. after the recovery that has been running for seven years without we are not going to get there soon, we are going to have another problem. traditional spending by traditional fiscal spending? granular, wemore could deliver. you are arguing about the continent of europe. couldy, the netherlands do with more fiscal spending. if you target that,

the ecb introduced qe, the selloff would be the trade if the ecb must too fast. n that we expect a slow exit we will still be long that the fact that it is not selling off as much, the market expects an exit they do not expect a mistake. long: if you want to be the euro and long the euro against the dollar, where's the stuffing off point? whenever the euro approaches 115 you hear some comments from the ecb sources, they try to talk the euro down. this is what happened last week. that is why we are -- we have seen the euro-dollar so it is safer to be short the euro on these levels. stays thanos vamvakidis with the daybreak team. bloomberg 10 tv .you do get it has video streaming, everything, the charts, the functions, everything you see on the screen, you can click on it. you can ask the guest of question. at the bottom of the screen you have an editor on watch. responds to demands for reform. the u.s. and kuwait result -- step up efforts to resolve the crisis. this is bloomberg. ♪ manus: welcome back. it has gone 6:48 a.m. in london. if you are in boston, tune

we will keep an eye on the ecb, meeting on thursday. the agenda in terms of that central banking story. bloomberg first word news with juliette saly. juliette: thank you. donald trump is planning to shake up his legal team and is evaluating options for his communications. according to a person familiar with the president must thinking, the longtime attorney is likely to be eased into a less prominent role within trump's outside legal team as the fbi congressional investigation into his campaigns possible ties to russia -- mitch mcconnell has delayed plans to vote on a bill to overhaul the nation's health care system this week after senator john mccain said he would eat at home, recovering from surgery, leaving republicans short of the votes they need. citing york times medical experts to report mccain's condition could be more thought, and may delay his return to washington by a week or two. the brexit secretary has push for progress on resolving saudi issues. david davis's comments, as the second round of divorce talks begun in brussel

we have higher markets across the board in aasia in europe the ecb will make a policy decision later day. the last time we heard from mario draghi, his comments thought as hawkish and sparked a rally in bond yields he might want to step those comments back give than it pushed the euro higher this morning in anticipation of the ecb european markets are up -- not across the board italy and spain just turning red. in washington news, the congressional budget office releasing new numbers on overhauling obamacare. according to the nonpartisan group, repealing the law would reduce the deficit by 4$470 billion. the number of uninsured would increase by 32 million, and premiums would double by 2026. the white house responding to the new numbers telling cnbc it continues to believe the cbo's methodology is flawed. >>> senator john mccain has been diagnosed with a brain tumor, that's according to his office sarah is live in washington with more details >> reporter: good morning. according to doctors at the mayo clinic where he's being treated. senator john mccain has been diagnosed with gleobla

continues and it is affecting equity markets yesterday the european markets hit an 11-week low ahead of the ecb minutes. we're on track to end the week flat let's show you the markets one by one all the major markets are in the red. xetra dax off by 0.3%. ftse 100 off by a similar percentage one of the worst performers sector by sector, oil and gas is underperforming dramatically today this is in part because oil and gas stocks are lower on the back of oil prices falling quite significantly. wti crude back below 45. brent crude off by 1.6%. this is on the back of a rise in u.s. output. that seems to be outweighing news yesterday of falling inventories. just want to draw your attention to the fact that you're watching live pictures in hamburg where protesters are gathering to demonstrate around the g20 summit as leaders have begun arriving tough talks on issues of trade, climate change and international security await the world leaders as the g20 summit kicks off in germany. all eyes are on president trump and i h and his counterpart, vladimir putin. meantime president trump and chancellor angel

that is not a big deal for the ecb. ation rate of around 5% to 80% to start ringing -- 5% to 8% to start ringing alarm bells. brusselsad the eu in this week. and then we have a special about on ouriting wonderful cover with lloyd blankfein. we really think that for that. it is the new bloomberg businessweek. must read for global wall street. this is bloomberg. ♪ ♪ johnson in london. tom keene in new york. d wimbledon of the weekend. i just had to throw some sports in their at some point just to balance out other things like game of thrones. gdp increased in the second quarter. it increased 6.9%, beating the estimate of 6.8%. economicsasia correspondent joins us from hong kong. there is a subtext surrounding china, and that is about debt. at the moment, i think this economy is moving along successfully. nothing seems to be going wrong at this point. do you think the chinese are happy? if they are happy, why are we so concerned about risk? >> good morning. i think is on track to interviewed about one third of global growth

the ecb should is the technical need to terminate ecb qe lying in 28 -- buying in 2018 and draghi did very much focus on that inflation outlook. there was somebody saying it was about immigration, inflation, inflation. richard: for the ecb, they have a single mandate, all about inflation. in this inflation gets some sort of upward traction, they are going to want to carry on. they are going to have to do are because there constraints. until inflation picks up, and it has not so far in durable ways during the qe era, the ecb has a problem. they need to continue its policy but the technical impediments are there. nejra: do you think we'll have draw their -- do you think we will have draghi say anything more? richard: there has been anticipation. it could be that is the continuation of the incremental approach that they seem to be taking towards edging to some sort of announcement. you would think he would take that opportunity to say something, but after today, i think it is not as nailed on in terms of market expectations as it was before he spoke today. ,onnie: the bank of japan richa

the ecb has had it. his is significant because it encourages like central banks that have no compulsion to hold negative assets to return to the market. tom: this is well said. are we there yet? my opinion is we're not even close to there yet. how much price damage do we need in microsoft stock held by the swiss national bank before we go this is not a good idea? we are not there yet. kamal: i think the direction of travel to the ecb has signaled it is going to be a slow pace. we are looking at a 2018 story rather than a 2017 story. guy: quick question on this number chart. -- bloomberg chart. a fundingen become currency? does the euro go up? if it accelerates to the upside, how big is a problem -- how big of a problem is that? kamal: this is consistent to what we saw last week. the bank of japan came in to market forcefully. be thek the yen will funding currency of choice. we are thrilled you are with us to get us started this monday. kamal sharma of bank of america merrill lynch. we will look at the ret

and theoned the ecb governor was signaling no reason for the bank hiking rates ahead of the ecb. tral banks will be very slow in that process of removing accommodation. the riksbank is interesting because growth has been incredibly strong in recent years. a lot of market participants have been looking for a stronger swedish krona. yet it keeps underperforming. one of the reasons that we are still relatively bearish on the swedish krona in the near term is precisely because the central bank is unwilling to deliver that hawkish bias. anna: one generally on the outlook of central banks and rates, i know one of your colleagues saying that the biggest risk to markets, not the best case scenario, but the big risk is we see a lot of typing from central banks. that leads to a combined selloff in equities and bonds. is that the biggest risk out there? what chance that happens? elsa: it's certainly a risk to be aware of because the implications are very unusual. we have become accustomed to either risk on or risk off markets. bonds and equities move in opposite directions or indeed markets

that will be a difficult balance to keep with the ecb. , but not so high as to put pressure on the ecb to move too fast to the exit. market expectations right now might have run too far compared to where we stand fundamentally. growthhat if we see wage in the u.s.? real tangible wave -- wage growth you can security the data -- think your teeth into, with that turn it around? has beenge growth elusive and a problem in the u.s., that we see in the eurozone. we have some very low on them -- unemployment rates and yet wages haven't risen like they have in the past. of the silent reserve come all of the people who don't show up in the employment state but come back into the market as the economy improves and that has been a factor at keeping wages low or rage growth low. if that were to change, that would change the outlook for inflation. might put pressure on the fed to move. judging by what janet yellen said, the fed is more concerned about the lack of more aggressive inflation dynamics. obviously, that is a concern for central bankers around

it is something that speaks to everyone and something the ecb factors in. the unemployment gap and the potential pressure it will eventually generate. that is the biggest difference. i was going to ask you if there is space for repricing? at what point does their fair value given the fundamentals? i was going to say the political landscape has changed and it also has a major impact on the longer-term fair value. again, assuming the ecb so,tually ends qe, but hope then they likely come closer and is likely to be in a more optimistic range relative to a couple of months ago. they most likely have a window of positivity that could lead to a more efficient euro area. at some point, this is a game to higherd could lead threats. frederick, you talked about the decline in unemployment and the pressure it theoretically puts on inflation. it does the ecb have the same structural challenges to conventional models we are seeing where the relationship is not perhaps a solid as people think between unemployment and inflation? >> absolutely. it is most likely flatter and

trick the ecb has to do. at they are acknowledging is the economy is doing better than the beginning of the year. in international comparison, the eurozone economy is doing quite well at the moment it isn't just in the headlines doing well but a very broad recovery, where a lot of focus has been on today. said inf economist has 20 years, we have seen little divergence entering growth rates in various countries as we have at the moment and that makes it resilient because it is a broad-based recovery. the ecb is in talks about what john -- what they have withdrawn with lower interest rates. they had taken that away. they have said the economy is talents. the next thing to talk about is what to do about the acid purchase program. -- the acid part -- asset purchase program. that includes interest rates and so on. if they move too fast, that could dampen growth quickly. they have to be patient. that is what we are focusing on today. vonnie: if they decided to take that wouldnguage increase bond buying if necessary,

we're looking at minutes from the ecb out shortly. e themes is the traveling with the first lady lady to a different poland. -- holds watch at the white house and is with the president on this get-go. this is a different trip in the last one. isn't it? this is a different track. -- he paring for the g-20 is comparing for the g-20 but he stopped in poland. they are accepting the first shipment of the u.s. natural gas and the president said he would be willing to do more deals. he also talked about the fact north korea needs to be dealt with, and he says he is considering severe options for handling nuclear ambitions of the north korean leader. tom: there was quite the pageantry at the castle within the last hour. maybe the most important guy in the room was wilbur ross, the commerce secretary, sitting behind the president. this is all about is nice. liquefied natural gas and such. what does the president's constituency want out of the three seas initiative? toluse: the president wants to open up this region of the world for contract ene

marketsuro, because the are going to be repricing the ecb. back to that shortly. steven saywell stays with us. coming up later on daybreak, the conversation with nicholas burns. this is bloomberg. ♪ ♪ tom: "bloomberg surveillance" in london and new york, thank you for being with us. business in new york until 12:00 noon. we welcome you all for programming through the day. francine, you will be with us tomorrow. downine: i hold the fort for three hours tomorrow. trading is quite low in terms of volume because of the fourth of july. independence day. tom: tomorrow night, coast-to-coast on bloomberg television and radio. let me bring this up. this is eurosterling, not the usual cable we look at. the blue circle, brexit as well, going on to stronger euro, weaker sterling. how important is this to the future of prime minister may? >> that is a good question. i think it is probably not the key factor because until now sterling has taken the brunt of brexit concerns when you look at financial markets in the u.k. the markets are used to the pound bein