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Speaker 1: Comments on negative rates and his comments on the future

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Speaker 1: path for his central bank. It's gonna take a lot

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Speaker 1: to sort out everything that they have done today and

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Speaker 1: will continue doing that. With Brendan Brown from Mitsubishi u

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Speaker 1: f J and Wacom Fells from Pimco. In just a moment,

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Speaker 1: you're listening to continuing coverage of the ECB decision tomorrow

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Speaker 1: RAGS press conference on Bloomberg eleven three oh w b

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Speaker 1: b R New York, Bloomberg w x K S Newton,

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Speaker 1: w j M nine point five h d two, Boston,

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Speaker 1: Bloomberg nine six k n E W Oakland, ko s

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Speaker 1: F one oh three point seven h d two, San Francisco,

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Speaker 1: Bloomberg w an E, w f M Booie and w

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Speaker 1: jay Z one oh five point seven h d two Caytonsville,

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Speaker 1: and of course around the world on satellite radio. Before

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Speaker 1: we get to Dr Fells, Brendan Brown with the two

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Speaker 1: more questions, if we could have been so patient to

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Speaker 1: listen to this historic moment, here's a front line academic

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Speaker 1: dealing with nothing he learned at m I T are

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Speaker 1: you learned with your steam career or what Yakom Fells

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Speaker 1: learned at Morgan Stanley in PIMCO it's original territory. Where

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Speaker 1: does drug go from here? Well, I think where Drag

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Speaker 1: goes from here will depend very much on the reaction

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Speaker 1: from outside the ECB halls and how Germany and German

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Speaker 1: political opinion responds to this, and how eventually US and

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Speaker 1: opinion elsewhere, because what we're seeing here is a an assault,

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Speaker 1: a currency market assault, so that it hasn't been so

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Speaker 1: successful within within the last half hour and m Secondly,

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Speaker 1: we're seeing a massive protect protection program to help bail

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Speaker 1: out for weak European banks, especially in Italy, and I

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Speaker 1: would imagine in Spain too. And thirdly, the corporate bond

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Speaker 1: buying program, which is revolutionary in many ways, is another

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Speaker 1: backdoor subsidization of European finance. Well, that's a key point.

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Speaker 1: And right now Vidor Constasio is explaining the impact as

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Speaker 1: the ECB season on banks of negative interest rates. Bio

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Speaker 1: Drag suggested that they had not seen a negative impact.

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Speaker 1: Will of course be monitoring the news conference and take

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Speaker 1: you right back to it when we get something more

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Speaker 1: on that. But Brendan, just one quick last question. The

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Speaker 1: ECB says there's no impact on banks, but they're doing

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Speaker 1: the t L t r O s there they cut

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Speaker 1: the main refinance rate, all designed to help the banks

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Speaker 1: very much so, and it ready as a puzzle as

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Speaker 1: to how a flattening of a yel cap such as

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Speaker 1: we've seen um, together with the banks not passing our

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Speaker 1: negative interest rates about customers will will not hit European

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Speaker 1: bank profits. Brendon Brown, thank you so much for coming.

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Speaker 1: An honor to have you here with your academics and

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Speaker 1: your books on the challenges of the euro Central Bank.

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Speaker 1: This is we like folks Olivier Blanchard, Brendan Brown. And

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Speaker 1: then we get to go to Yakom Fell's to review.

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Speaker 1: Yakum Fels has been an original thinker on Europe and

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Speaker 1: on international monetary policy at Morgan Stanley and of course

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Speaker 1: now with PIMCO. Uh yeah, come, wonderful they have you

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Speaker 1: with us today. I must go just first to your

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Speaker 1: thoughts are the immediacy of what Mario drug is doing. Yeah,

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Speaker 1: good morning, Tom. Well. I think this is huge um,

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Speaker 1: as Donald Trump would say, I think this is one

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Speaker 1: for the modern textbooks on central banking, because you know,

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Speaker 1: the ECB is really employing the entire conventional and unconventional

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Speaker 1: tool kit here. So it's quantitative easing, it is rate cuts,

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Speaker 1: including negative rates, but importantly it's also credit easing, right

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Speaker 1: venturing into buying private sector bonds. As Brendan just said,

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Speaker 1: that's revolutionary. Um. And of course they are giving a

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Speaker 1: lot of funding at zero or even negative rates to

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Speaker 1: the banks. But what I found remarkable is banks will

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Speaker 1: be able to finance thirty percent of their entire loan

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Speaker 1: book at zero or negative rates at the ECB for

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Speaker 1: four years. So I think this is a big, big step. Well,

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Speaker 1: it's a big step because it's going to enable the

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Speaker 1: banks to lend a lot more, but they're going to

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Speaker 1: be borrowers. Well, I think this is not so much

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Speaker 1: about how that borrow us. I think this is about

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Speaker 1: helping the banks to restore their net their their their

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Speaker 1: net interest margins, helping bank profitability so that banks will

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Speaker 1: be able and willing to lend more. So I think

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Speaker 1: so far the problem has really been on the supply

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Speaker 1: side of credit, not so much the demand side, and

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Speaker 1: this is a big step in that direction. I was struck.

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Speaker 1: And this goes back you, Malcolm, to your thinking that prediction,

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Speaker 1: But you're thinking about a core Europe versus many peripheral

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Speaker 1: Europe and within the European experiment two is careful language

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Speaker 1: paying homage to the fear of inflation. What is the

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Speaker 1: pressure on Frankfurt on a first order condition from the

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Speaker 1: bundes Bank, but in general from inflation Easta's within Europe.

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Speaker 1: But think the interesting thing is if you look at

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Speaker 1: the ECB's inflation projections, they've they've lowered them. That was

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Speaker 1: not surprising, but they're now telling us that they will

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Speaker 1: still miss their target by the end of two thousand eighteen.

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Speaker 1: So they have inflation going up to one point six

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Speaker 1: percent in two years time, um which means that there

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Speaker 1: is a need to do more easing. And I think

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Speaker 1: that the key question within Europe is whether or not

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Speaker 1: German inflation, which is as low as euro area wide inflation,

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Speaker 1: will finally start to pick up. You need that relative

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Speaker 1: price adjustment in Europe. The periphery needs to become more competitive,

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Speaker 1: and that means German inflation will have to run above

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Speaker 1: peripheral inflation. So far that's not really the case. Um.

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Speaker 1: So I think we need to watch what will happen

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Speaker 1: to German wages and prices going forward well with inflation

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Speaker 1: very low, that actually have a depressing effect on whidge

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Speaker 1: demands in Germany, it's looking like, yeah, that's right. I

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Speaker 1: think that there is clear evidence that inflation expectations have

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Speaker 1: shifted downward and that this has affected wage demands um.

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Speaker 1: But the labor market is very tight and the German

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Speaker 1: economy on a relative basis is doing well, so I

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Speaker 1: would expect wage growth to accelerate in the next couple

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Speaker 1: of years. Mike. We see data here with the futures

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Speaker 1: coming back, gold surging in the last ten minutes, complete

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Speaker 1: reversal back up to twelve fifty seven. The euro one

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Speaker 1: or seven is almost round trip from euro weakness to

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Speaker 1: euro strength. And the confusion of what we hear out

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Speaker 1: of the ECB press conference. Much focus going into this

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Speaker 1: on the rate that the ECB is charging uh now.

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Speaker 1: They're also increasing the amount of quie another twenty billion

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Speaker 1: euros a month. The impact of that, in your estimation, well,

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Speaker 1: buying buying more, buying more bonds. I think that will

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Speaker 1: keep a lit on interest rates, on bond yields um.

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Speaker 1: This is supportive for peripheral bonds. We've already seen the

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Speaker 1: Italy versus spoon spread narrowing and so so I think

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Speaker 1: this this continues to provide a cap for interest rates. Yeah. Come.

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Speaker 1: Carl Weinberg has just been on such value to us

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Speaker 1: at High Frequency Economics with his experience on South American

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Speaker 1: workouts and of course his dire predictions for Japan and

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Speaker 1: the challenges of Europe. Dr Weinberg would like to know

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Speaker 1: from YACOLM. Fell's your expertise on that linkage of finance

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Speaker 1: over to what banks actually can do. Are the banks

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Speaker 1: in a position in Europe to affect what Mario dragging wants?

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Speaker 1: If they have the capital, can they actually lend it out? Well,

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Speaker 1: that that's the key question. If they have the capital,

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Speaker 1: they can lend it out. So I think the main

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Speaker 1: constraint on lending in the past has been that they

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Speaker 1: you know that the that regulator, the regulators which you

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Speaker 1: know also sit at the ECB. The regulators at the

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Speaker 1: ECB require them to have adequate capital, and that's been

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Speaker 1: that's been a constraint on lending. Now, what the ECB

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Speaker 1: has done today will help bank profitability. So this should

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Speaker 1: help the banks to build up some capital through making profits.

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Speaker 1: I think that's the avenue how this will affect lending

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Speaker 1: over the longer term. Very quickly, Um we're seeing the

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Speaker 1: yield curve flatten in Europe, German yields in particular. Why. Well,

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Speaker 1: we're in a negative interest rate world, so I think

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Speaker 1: investors are reaching out for bonds that still held positively

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Speaker 1: and you can only find them at the longer end

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Speaker 1: of the yield curve. So I think this will this

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Speaker 1: will keep pushing investors out the curve, and this will

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Speaker 1: drag longer day to heelds lower and lower our coverage.

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Speaker 1: This morning on economics, we begin with Olivia Blenchhart with us. Now,

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Speaker 1: howcome Fells of Pimco. We will continue with Mr Fells

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Speaker 1: Right now we continue with Mr Wilson, who got an

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Speaker 1: equity market gift from Mario dragging this morning. Do you

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Speaker 1: see in US equities moves up? Well, you're seeing it

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Speaker 1: in the European banks that trade here, no question. You

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Speaker 1: look at Deutsche Bank up four and a half percent,

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Speaker 1: i n G up four and a half percent, and

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Speaker 1: then the Spanish bank santand they're also up four and

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Speaker 1: a half percent. B b v A with a gain

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Speaker 1: of more than five percent in really trading. So it's

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Speaker 1: definitely showing up here, no question. Uh, just a couple

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Speaker 1: of stocks beyond that Valiant Pharmaceuticals up three percent. The

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Speaker 1: drug maker reached a settlement with RNO Pharmacy, which was

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Speaker 1: part of a drug store network with ties to Valiant,

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Speaker 1: and Rno was among the pharmacy studded at a short

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Speaker 1: sellers October report that sent Valiant shares tumbling. Earnings out

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Speaker 1: today from Dollar General the stocks up five and a

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Speaker 1: half percent. The dollar store chains Phisical fourth quarter profit

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Speaker 1: beat animlysts high assessment in the Bloomberg survey. Sales also

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Speaker 1: surpassed projections, and Dollar General raises court lead dimdend by

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Speaker 1: fourteen percent to twenty five cents a share. Yahho's up

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Speaker 1: one percent. The web Portal filled two board vacancies, bringing

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Speaker 1: the number of directors to nine. Of course, Yeah Who

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Speaker 1: considering options to split up the company, which owns stakes

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Speaker 1: in China's Ali Baba Group holding in Yahoo Japan. One

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Speaker 1: more quickly for you. Nuanced Communications down five and a

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Speaker 1: half percent. The speech recognition software maker is buying back

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Speaker 1: five million dollars of stock from billionaire investor carl I Connewards,

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Speaker 1: a shareholder. The repurchase will cut Icons holdings to about

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Speaker 1: eleven percent from twenty percent. David Wilson thank you so much.

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Speaker 1: We're with yacolm Fells. We will continue this discussion. Michael

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Speaker 1: McKee looking at the nuanced headlines out of Frankfurt as well,

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Speaker 1: with futures up thirteen down, futures up ninety three uh.

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Speaker 1: The euro round trip weaker now stronger one oh nine

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Speaker 1: sixty seven on euro dollar. Let's get caught up on

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Speaker 1: world of national headlines now with Michael Barr, Mike Tom.

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Speaker 1: Thank you very much. It could be a very valuable

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Speaker 1: memory stick. Germany's federal criminal police say the stick contains

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Speaker 1: files on Islamic State fighters. Authorities believe the information is authentic.

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Speaker 1: Britain's Sky News reports that on the border with Turkey

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Speaker 1: and Syria, a former fighter gave them a memory stick

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Speaker 1: containing twenty two thousand Islamic State files with fighters, real names,

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Speaker 1: where they were from, telephone numbers, and even names of

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Speaker 1: those who sponsored and recruited them. President Obama says Libya

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Speaker 1: is a mess. President Obama, speaking to the Atlantic magazine,

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Speaker 1: blamed lack of support from European and Gulf allies and

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Speaker 1: longstanding tribal divisions within Libya. Five years ago, the US

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Speaker 1: intervened Olibya. The top of then Dictator Momarket NAFI. The

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Speaker 1: second day of a public viewing Financy Reagan begins today.

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Speaker 1: The body of the former First Lady lies and repose

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Speaker 1: at the Reagan Presidential Library and Simi Valley, California. Global

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Speaker 1: News twenty four hours a day, powered by Hours journalists.

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Speaker 1: I'm Michael barn Tom, Michael, thanks so much. It is

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Speaker 1: an historic day for monetary economics. Mayo drag in Europe.

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Speaker 1: brokers dot com slash, c m E Group US DOCK

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Speaker 1: index futures are higher. They did a trim a rally,

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Speaker 1: as European Central Bank President Mario Draggy said he doesn't

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Speaker 1: anticipate more rate cuts, though risk of the euro Area

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Speaker 1: growth outlook remained to the downside. He we do check

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Speaker 1: the markets are fifteen minutes throughout the trading day on

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Speaker 1: Bloomberg an SNP even the future is still up nine

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Speaker 1: and a half points, Dowie Mini Future is up sixties

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Speaker 1: seven and NASDAC EVENI futures up twenty six. The acts

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Speaker 1: in Germany's up one percent. Pen your treasury down nine

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Speaker 1: thirty seconds, the yield one point nine zero percent. Nimex

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Speaker 1: screwed oil down to ten percent or nine cents to

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Speaker 1: thirty twenty barrel. Comax gold is up three ten per

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Speaker 1: cent or three dollar seventy cents to twelve sixty one

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Speaker 1: announced and the euro now at a dollar ten forty one,

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Speaker 1: the yet one thirteen point seven nine. That's a Bloomberg

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Speaker 1: business flash. Tom and Mike Karen Moscow, thank you very much. Well,

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Speaker 1: here's where we are. The European Central Bank today cutting

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Speaker 1: all three of its rates the main refinance rate to zero,

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Speaker 1: the deposit rate to negative forty basis points. They increased

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Speaker 1: q E by twenty billion euros a month, and they

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Speaker 1: announced a new program of loans two banks, essentially letting

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Speaker 1: banks borrow money for free, or ECB may actually pay

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Speaker 1: them to take money to try to lend it out.

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Speaker 1: Since we've been gone, Mario Dgy has been taking more questions.

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Speaker 1: He says the TV expects substantially easier financing conditions because

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Speaker 1: of this. There are very strong synergies, says between all parts,

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Speaker 1: synergy synergies. And interestingly, he says that there was no, uh,

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Speaker 1: no real argument against taking the actions. He notes that

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Speaker 1: the voting rotation had no impact on the discussions. Ends

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Speaker 1: Widman from the hawkish Bundesbank was not a voter this time,

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Speaker 1: but Joggy says the overwhelming majority were in favor of

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Speaker 1: the decisions. Today's outcome, he says, dispout dispels doubts about

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Speaker 1: their willingness to act. It has been a most interesting day.

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Speaker 1: Nice summary. Michael Olivia Blanchard with US and now Yacom

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Speaker 1: Fells of Pimco Yacum Fells. When you look at this

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Speaker 1: historical moment. I go back to Olivia Blanchard and the

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Speaker 1: courage he had to say we must reflate, and reflate

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Speaker 1: now four percent was the operative number. We are miles

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Speaker 1: from that. Is there still an appropriate now or immediate

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Speaker 1: future to reflaming? Can Mario drag effect with Olivia Blanchard

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Speaker 1: try to suggest four and five years ago. Well, at

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Speaker 1: least he's trying his best. Um. I think, you know,

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Speaker 1: the power of monetary policy to reflate is obviously limited.

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Speaker 1: They're all kinds of headwinds, falling inflation expectations, a very

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Speaker 1: difficult global environment. UH, And I think what we need

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Speaker 1: eventually is support from fiscal policy. So I think Mario

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Speaker 1: drug is doing the best he can, and he made

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Speaker 1: a big step today, But in the end, if you

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Speaker 1: really want to see successful reflation over the next few years,

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Speaker 1: we need more support from governments from fiscal policy. There

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Speaker 1: are some encouraging signs on that front. Uh. Fiscal policy

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Speaker 1: for the first time in many years, is now becoming

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Speaker 1: supportive in the West, in Japan and also in Europe.

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Speaker 1: But I think more should be done. Well, all central

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Speaker 1: bankers seem to feel that way, but we're not getting there.

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Speaker 1: So I wonder. Mario said today they can go lower

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Speaker 1: if they need to, but how much lower can they go?

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Speaker 1: In other words, has he's thrown the kitchen sink at it?

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Speaker 1: Does he have much more left? Well? I think central

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Speaker 1: bankers are slightly moving away from the idea that they

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Speaker 1: will push interest rates ever more negative. I think the

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Speaker 1: reaction the negative, the adverse reaction of bank stocks and

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Speaker 1: equity markets and markets more broadly to the Bank of

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Speaker 1: japan announcement of negative interest rates. I think it has

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Speaker 1: led to some rethinking. So the focus, and we see

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Speaker 1: this in today's decision. The focus is now again much

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Speaker 1: more on credit easing, supporting the banks, and also importantly

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Speaker 1: venturing into buying private sector assets. So this was a

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Speaker 1: big step from the ECB today announcing that they buy

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Speaker 1: corporate bonds. Are they going to compete with Pimco, with

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Speaker 1: Scott Mather's corporate desk to buy corporate paper in Europe?

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Speaker 1: When you want to buy a Siemens piece, are you

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Speaker 1: going to compete with Frankfurt? Well, I think they will

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Speaker 1: compete with private investors. Yes, My expectation would be that

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Speaker 1: they won't buy huge amounts. I think this is not

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Speaker 1: so much about quantity. It's more about sending a signal

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Speaker 1: that they are willing to buy private sector assets. And

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Speaker 1: I just view it as a first step if needed eventually,

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Speaker 1: if if more is needed, I think eventually the ECB

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Speaker 1: could even venture into buying equities, and so I just

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Speaker 1: view this announcement of buying corporate bonds as one step

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Speaker 1: in that direction. You can do much bigger quantities on

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Speaker 1: equities than you can do on corporate bonds. Uh. The

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Speaker 1: question raised about that though, and tomorrow Dargu says there

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Speaker 1: will be a committee that will just side which corporate

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Speaker 1: bonds to buy. More details will be announced later this

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Speaker 1: afternoon in Frankfurt. But is there a risk that credit

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Speaker 1: allocation becomes the e CBS job? Yeah, I think you

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Speaker 1: can put it this way. I wouldn't. I wouldn't say

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Speaker 1: it's a risk. I think if you go back in

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Speaker 1: history in the old days, in the really old days,

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Speaker 1: central banks were lending to the private sector. They were

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Speaker 1: discounting trade bills. Um. So this is just going back

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Speaker 1: to the roots where the central banks also lent to

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Speaker 1: the private sector. And part of the reason for this

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Speaker 1: is that the banks, for various reasons, are not really

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Speaker 1: doing it what will this do to the currency? And

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Speaker 1: I know it's called the litmus paper of the system.

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Speaker 1: Does this reaffirm not the drama of a currency war.

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Speaker 1: Does it reaffirm stronger dollar, weaker everything else? I'm not

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Speaker 1: so sure about this. I think we have opened a

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Speaker 1: new chapter. So this is not so much. Today's move

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Speaker 1: was not so much about pushing the currency lower, and

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Speaker 1: I think the FX market got the message. We had

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Speaker 1: to reverse it initially the Euro weekend, but now it

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Speaker 1: is stronger on the day, and I think this is

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Speaker 1: because the market understands that the ECBs focus is now

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Speaker 1: on credit easy, it is on supporting the banks, it's

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Speaker 1: on supporting the corporate sector, the private sector, and so

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Speaker 1: you could argue that this is actually euro supportive. So

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Speaker 1: so in a way, I think we're now in a

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Speaker 1: new environment where it's no longer about currency wars. This

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Speaker 1: is much more about focusing on easing domestic monetary conditions.

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Speaker 1: Compels from PIMCO, thank you for joining us today on

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Speaker 1: this day when the ECB has it's in the words

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Speaker 1: of I didn't say this words of many people throwing

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Speaker 1: the kitchen sink at the economy in Europe. Term it

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Speaker 1: is fun Eliza volun Chart, Brendan Brown, yakham Fels. That's

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Speaker 1: pretty good. Stay with us, Bloomber Surveillance. We're cutting you

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Speaker 1: down to the opening Bell, brought to you by the

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Speaker 1: Jeep Grand Cherokee, the most award at SUV. Ever, the

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Speaker 1: interior and legendary four by four capability. Drive one at

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Speaker 1: your local jeep dealer Today broadcasting live to New York

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Speaker 1: Gloomberg eleventh wo to Washington, d C, Bloomberg nine nine

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Speaker 1: one to Boston Bloomberg dwelve, on to San Francisco, Bloomberg

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Speaker 1: nine six to the country Serious Exam Channel one nine

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Speaker 1: and around the globe the Bloomberg Radio Plus Appen Bloomberg

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Speaker 1: dot com. This is Blomberg Surveillance. Good morning. I'm Karen

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Speaker 1: Moscow along with Tom Keene and Michael McKee and the

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Speaker 1: Opening Vale brought to you by s C. I imagine

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Speaker 1: when investment operations predictively respond to regulatory change. See how

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Speaker 1: I sees Global Operating platform can be your cantalyst for

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Speaker 1: business transformation at se i C dot com. So imagine

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Speaker 1: US stocks are higher at the open. The SNP five

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Speaker 1: is up two tenths per cent, or it's about four

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Speaker 1: points now at nine two Dow Jones Industrial average up

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Speaker 1: a tenth of upper cent or twenty points to seventeen

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Speaker 1: thousand nineteen. And then aztecs of a quarter per cent

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Speaker 1: or eleven points to forty six eight five ten. Your

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Speaker 1: treasury down to thirty seconds. The yield one point eight

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Speaker 1: eight percent yield on the two year point nine one

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Speaker 1: percent non max screwed oil down two point two percent

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Speaker 1: or eighty three cents to thirty seven forty six of

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Speaker 1: barrel comex s gold is a four tenths per cent

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Speaker 1: or five dollars forty cents to twelve sixty three announced,

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Speaker 1: the euro at a dollar ten thirty seven, and the

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Speaker 1: yen is at one thirteen point seven three. Tom and

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Speaker 1: Mike Karen, thanks so much, Michael McKee, we're getting some

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Speaker 1: interesting headlines. Draggy says e c B has averted disastrous deflation.

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Speaker 1: We need stable, solid recovery to return to price stability.

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Speaker 1: What else do you see? He's clearly defending the e

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Speaker 1: c d S program so far. Um He says, it's

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Speaker 1: what they've done today is the best answer to the

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Speaker 1: question and of whether central banks have any ammunition left.

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Speaker 1: Of course, that just moves the question forward. We've got

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Speaker 1: two guests to provide answers to the question forward. Kitchuks

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Speaker 1: will join us here in a bit right now. Christopher

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Speaker 1: Wheeler has been such a great help with us. I'm

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Speaker 1: a reality of financiers and bankers to work within this

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Speaker 1: original territory. Christopher Wheeler, to have you play macro economist.

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Speaker 1: Will these historic actions today allowed Deutsche Bank or Sentendair

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Speaker 1: to loan out more money to provide investment and create jobs. Well,

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Speaker 1: good morning or good afternoons from here? Um, I guess

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Speaker 1: the answer to that is in steely and that's what's

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Speaker 1: obviously Tank is playing on. That is exactly what they

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Speaker 1: ought to be doing, because clearly, if you have the

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Speaker 1: option of placing your money overnight with the ECB at

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Speaker 1: negative interlessly so actually getting out into the hands of

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Speaker 1: the customers who are paying obviously a much higher yield,

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Speaker 1: you want to be doing it. Um. The question is,

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Speaker 1: you know, is the economy strong enough to support that

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Speaker 1: or is the banking system strong enough to support that?

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Speaker 1: We're from just Staely this morning. He's not focused on

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Speaker 1: loan as he's focused on operations. Is there an appetite

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Speaker 1: in Europe to do more banking business. Yeah, that's an

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Speaker 1: interesting quote from just Daily because clearly we've talked on

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Speaker 1: before about the problems of trying to get the banks

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Speaker 1: platforms in order, banks like obviously Deutsche Bank that you

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Speaker 1: talked earlier. But I guess if we look at the

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Speaker 1: banks for they supplying if you want the economy in Europe,

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Speaker 1: so you know the the the Italian, the regional banks,

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Speaker 1: and that the Spanish banks, the German spark hass and

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Speaker 1: you know the French mutual banks. For these these guys,

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Speaker 1: these are the guys who should be out there lending money.

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Speaker 1: And while you know their systems aren't pustine, I think

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Speaker 1: I would say, you know, these guys have much simpler

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Speaker 1: business models and therefore the better position to get out

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Speaker 1: there and lend that money. How far are the banks

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Speaker 1: away from being reasonably healthy. There's been a lot of

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Speaker 1: concern or commentary going into this that said, whatever drug

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Speaker 1: he does gets partially marked up by the fact that

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Speaker 1: banks need more capital in Europe. I think it's it's

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Speaker 1: a mixture, and what we have is some banks alound

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Speaker 1: of politically where you're allowed to said, the southern European

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Speaker 1: countries where we still have bellivale high levels of non

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Speaker 1: performing loans, and so that's a glade concern. But on

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Speaker 1: the other hand, we have, as I said, banks in

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Speaker 1: those legions who are also pretty healthy. You can get

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Speaker 1: out there and lend um you know, some of the

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Speaker 1: bigger banks. The problem again is not so much getting

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Speaker 1: their capital and levelage in order, because they've they've done

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Speaker 1: a lot of work in that that earlier. The problem is,

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Speaker 1: and again we keep talking about this is actually if

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Speaker 1: you want sharpening up the operational side of their business

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Speaker 1: while they while we're going through, actually feel it's where

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Speaker 1: the levenue generation is pretty dull, particularly around the capital

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Speaker 1: market space. I have been here Mike for what is it,

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Speaker 1: thirty two years, thirty seven years? Mike, you've been here

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Speaker 1: for fifty four years? Is it? From June? Here's the

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Speaker 1: we've never seen. Drug didn't really think or talk about

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Speaker 1: helicopter money. I'm serious that the headline drug didn't really

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Speaker 1: think or talk about helicopter money. Every listener, Christopher Wheeler

428
00:25:08,560 --> 00:25:11,399
Speaker 1: knows that's, you know, logical idea. If you put a

429
00:25:11,480 --> 00:25:16,520
Speaker 1: Sikorski over any city capital in Europe and you dropped

430
00:25:16,680 --> 00:25:19,800
Speaker 1: money from the helicopter, what would be the effect on

431
00:25:19,960 --> 00:25:24,280
Speaker 1: your banking industry? Well, yeah, that's a that's a very

432
00:25:24,320 --> 00:25:26,520
Speaker 1: good point because what you know, I'm just I'm suddenly

433
00:25:26,600 --> 00:25:28,000
Speaker 1: some of the blocks that are coming thus in the

434
00:25:28,080 --> 00:25:30,680
Speaker 1: experts in fixed income and I'm not not one of those. Maybe,

435
00:25:31,080 --> 00:25:34,160
Speaker 1: um is the concern, of course about you know, when

436
00:25:34,280 --> 00:25:36,600
Speaker 1: what happens when the music stops, because you know, if

437
00:25:36,640 --> 00:25:39,520
Speaker 1: it isn't enough, that's that's a major issue. The second

438
00:25:39,560 --> 00:25:41,640
Speaker 1: thing is you're going to start thinking ahead to say,

439
00:25:41,680 --> 00:25:43,920
Speaker 1: how the heck do we unwind this situation and get

440
00:25:44,000 --> 00:25:46,720
Speaker 1: back to some kind of normality, And you know that's

441
00:25:46,760 --> 00:25:49,240
Speaker 1: going to be a big, big question. And it placed

442
00:25:49,280 --> 00:25:53,520
Speaker 1: to your question about Sikorski. Well, they have kicked this

443
00:25:53,720 --> 00:25:56,520
Speaker 1: can way way down the road with four year t

444
00:25:56,720 --> 00:25:58,960
Speaker 1: l t r O s um. They're gonna lend money

445
00:25:59,000 --> 00:26:02,639
Speaker 1: to banks for four were years to make up for

446
00:26:03,040 --> 00:26:07,119
Speaker 1: the negative interest rates. So, uh, we don't have no

447
00:26:07,200 --> 00:26:09,560
Speaker 1: idea what's gonna happen between now and then. Well, I

448
00:26:09,600 --> 00:26:12,359
Speaker 1: think that's that's the that's the point. And he's the

449
00:26:12,400 --> 00:26:14,040
Speaker 1: one thing you can see in his speech is the

450
00:26:14,080 --> 00:26:16,359
Speaker 1: fact that he's saying it's going to stay low for

451
00:26:16,440 --> 00:26:19,399
Speaker 1: an awful lot longer. And I think that's one of

452
00:26:19,440 --> 00:26:22,280
Speaker 1: the big factors here. Um. And as you say, they're kicking,

453
00:26:22,320 --> 00:26:24,920
Speaker 1: they're kicking the can down the load four years and

454
00:26:25,600 --> 00:26:27,879
Speaker 1: you know the wall is this is just going to

455
00:26:28,480 --> 00:26:29,680
Speaker 1: go on and on, and you know, and you know

456
00:26:29,840 --> 00:26:35,120
Speaker 1: it's now is this classes started? Chris Mate textbook would say,

457
00:26:35,680 --> 00:26:40,440
Speaker 1: you see bank combination transactions, you see is there a

458
00:26:40,920 --> 00:26:44,040
Speaker 1: template in Europe? I mean, I remember Fortis Bank in

459
00:26:44,160 --> 00:26:46,800
Speaker 1: Belgium and all that. Do you just assume there will

460
00:26:46,840 --> 00:26:52,320
Speaker 1: be mergers or because of nationhood and culture that's impossible. Look,

461
00:26:53,080 --> 00:26:55,239
Speaker 1: that's a really good question. Tom. We we kicked back

462
00:26:55,280 --> 00:26:57,200
Speaker 1: to and flow. I think at the top end of

463
00:26:57,280 --> 00:26:59,159
Speaker 1: the big, big banks, that's not going to happen, just

464
00:26:59,240 --> 00:27:01,520
Speaker 1: as in the United States, I see Mr cash car

465
00:27:01,720 --> 00:27:03,920
Speaker 1: is just called a conference on too Big to Fan

466
00:27:04,000 --> 00:27:05,920
Speaker 1: up in Minneapolis. This thing will go on and on

467
00:27:06,000 --> 00:27:08,080
Speaker 1: on big banks. But if we go into the legion

468
00:27:08,080 --> 00:27:10,560
Speaker 1: they were going to Italy, we're going to Spain. Um

469
00:27:11,040 --> 00:27:13,920
Speaker 1: to an extent portable, I think we absolutely will see

470
00:27:14,200 --> 00:27:17,359
Speaker 1: combinations of banks to try and deal with these issues,

471
00:27:17,560 --> 00:27:19,480
Speaker 1: but it's not going to happen amongst the big players.

472
00:27:19,920 --> 00:27:22,440
Speaker 1: Thanks getting a boost today and Europe Deutsche Bank in

473
00:27:22,520 --> 00:27:25,920
Speaker 1: Europe two point seven percent, SA two point five pc,

474
00:27:26,400 --> 00:27:30,240
Speaker 1: un credit up six and three quarters percent. Who's longer

475
00:27:30,359 --> 00:27:33,320
Speaker 1: term going to be the biggest beneficiaries of what the

476
00:27:33,520 --> 00:27:38,080
Speaker 1: CB did today? Okay, well, I suppose it's it's a

477
00:27:38,119 --> 00:27:41,080
Speaker 1: bit of a mixture that I mean. The the the

478
00:27:41,200 --> 00:27:42,879
Speaker 1: argument is that on the one side, you know the

479
00:27:42,920 --> 00:27:46,560
Speaker 1: additional queue which is putting on the table and this this, this,

480
00:27:46,760 --> 00:27:49,919
Speaker 1: this long dated lending facilities, then you're going to probably

481
00:27:49,960 --> 00:27:52,480
Speaker 1: say the banks have got the biggest element of netting

482
00:27:52,560 --> 00:27:54,840
Speaker 1: sustincome on their balance sheet, in other words, the banks

483
00:27:54,880 --> 00:27:57,840
Speaker 1: mostly exposed to the to the late. On the other hand,

484
00:27:58,119 --> 00:28:01,639
Speaker 1: you know, the problem you have is again looking at

485
00:28:01,960 --> 00:28:06,240
Speaker 1: how you know whether the very big banks are going

486
00:28:06,280 --> 00:28:09,159
Speaker 1: to benefit most, because obviously they perhaps have less net

487
00:28:09,200 --> 00:28:11,200
Speaker 1: ins lusted income and they're going to benefit from having

488
00:28:11,280 --> 00:28:13,560
Speaker 1: higher levels of fee income which protects them. And you

489
00:28:13,600 --> 00:28:16,960
Speaker 1: know that the problem negative inslessly so it's really anybody's guests.

490
00:28:16,960 --> 00:28:19,600
Speaker 1: But clearly the unique credit move is telling you that

491
00:28:19,920 --> 00:28:22,280
Speaker 1: the Southern European banks are being favored by the market

492
00:28:22,359 --> 00:28:24,959
Speaker 1: on the basis that this four year facility is going

493
00:28:25,000 --> 00:28:27,440
Speaker 1: to be very beneficial to them. Thirty seconds. Have you

494
00:28:27,560 --> 00:28:32,240
Speaker 1: amended your Deutsche Bank view of Christopher Wheeler. I don't

495
00:28:32,240 --> 00:28:34,040
Speaker 1: think I amended it at all. I think they have

496
00:28:34,160 --> 00:28:35,880
Speaker 1: so much on the table at the moment in terms

497
00:28:35,920 --> 00:28:38,160
Speaker 1: of least ructural in the business that are actually looking

498
00:28:38,200 --> 00:28:40,640
Speaker 1: at the funding of the fundamentals of if you want

499
00:28:40,720 --> 00:28:43,840
Speaker 1: the flows of lending and doing business at the moment,

500
00:28:43,880 --> 00:28:45,960
Speaker 1: it is probably secondly to seeing you know, the bank

501
00:28:46,000 --> 00:28:49,680
Speaker 1: in a position where it's it's operational platform is totally repaired.

502
00:28:50,080 --> 00:28:53,000
Speaker 1: Christopher Wheeler, thank you a great update with atlnticiquities and

503
00:28:53,760 --> 00:28:55,760
Speaker 1: moving us forward with a great set of guests. This

504
00:28:55,880 --> 00:28:59,600
Speaker 1: warning will synthesize all this with kitchu here in a

505
00:28:59,680 --> 00:29:02,880
Speaker 1: minute if you're just joining us. We knew it would

506
00:29:02,880 --> 00:29:06,680
Speaker 1: be interesting because we're a bunch of nerds, but it

507
00:29:06,920 --> 00:29:10,400
Speaker 1: was extraordinary. There's just no other way to put up Mike.

508
00:29:10,800 --> 00:29:14,400
Speaker 1: The headlines speak of it. The whip saw within the

509
00:29:14,520 --> 00:29:22,240
Speaker 1: market week euro strong euro now euro strength one, yields

510
00:29:22,480 --> 00:29:25,000
Speaker 1: all over the place, gold all over the place, up

511
00:29:25,040 --> 00:29:28,760
Speaker 1: five dollars now twelve sixty two, the ounds, the Dow

512
00:29:28,880 --> 00:29:31,840
Speaker 1: up thirty three points SMP up four points of VIX

513
00:29:32,440 --> 00:29:38,640
Speaker 1: eighteen point one three DA. Let's chick in with Michael

514
00:29:38,640 --> 00:29:41,440
Speaker 1: bar and get the latest world in national headlines by time.

515
00:29:41,480 --> 00:29:44,719
Speaker 1: Thank you very much. Tonight it's the Republicans turn to debate.

516
00:29:44,920 --> 00:29:48,040
Speaker 1: The four remaining presidential candidates will debate in Miami. It

517
00:29:48,240 --> 00:29:51,840
Speaker 1: comes as Ted Cruz is hoping former presidential candidate Jeb

518
00:29:51,880 --> 00:29:55,640
Speaker 1: Bush will throw his support behind him. Last night, Democratic

519
00:29:55,680 --> 00:29:59,680
Speaker 1: presidential candidate Hillary Clinton and Bernie Sanders clashed and bear

520
00:29:59,840 --> 00:30:03,480
Speaker 1: to aid on Univision. While they disagreed on several issues,

521
00:30:03,520 --> 00:30:06,560
Speaker 1: they agreed about Donald Trump. Trump was in the middle

522
00:30:06,600 --> 00:30:12,120
Speaker 1: of the so called birthal movement trying to de legitimize

523
00:30:12,440 --> 00:30:15,560
Speaker 1: the president of the United States of America. I called

524
00:30:15,640 --> 00:30:18,720
Speaker 1: him out when he was calling Mexicans rapists, When he

525
00:30:18,920 --> 00:30:24,120
Speaker 1: was engaging in rhetoric that I found deeply offensive, I said, basta.

526
00:30:25,000 --> 00:30:27,720
Speaker 1: Thousands of people already have been evacuated as a second

527
00:30:27,840 --> 00:30:32,040
Speaker 1: round of rain hits an already inundated northern Louisiana. Flooding

528
00:30:32,080 --> 00:30:35,000
Speaker 1: in some places is up to the rooftops. Three people

529
00:30:35,080 --> 00:30:38,880
Speaker 1: have drowned in Oklahoma, Texas and Louisiana. Germany could have

530
00:30:39,040 --> 00:30:42,720
Speaker 1: some valuable information on the Islamic State group. The country's

531
00:30:42,760 --> 00:30:46,800
Speaker 1: federal criminal police say they have files containing personal information

532
00:30:46,920 --> 00:30:50,840
Speaker 1: on militants and believe that information to be authentic. According

533
00:30:50,880 --> 00:30:54,160
Speaker 1: to Britain Sky News, the stick contains about twenty two

534
00:30:54,240 --> 00:30:58,080
Speaker 1: thousand files with telephone numbers and real names of the

535
00:30:58,160 --> 00:31:01,120
Speaker 1: Islamic State fighters. Globally was twenty four hours a day,

536
00:31:01,200 --> 00:31:04,400
Speaker 1: powered by our two hundred journalists more than a hundred

537
00:31:04,440 --> 00:31:07,680
Speaker 1: fifty news bureaus from around the world. I'm Michael bark Banca.

538
00:31:07,800 --> 00:31:10,320
Speaker 1: Thanks so much. You're gonna job forty kitch u sas

539
00:31:10,480 --> 00:31:16,360
Speaker 1: to synthesize this historic day and monetary economics. Next Bloomberg Surveillance.

540
00:31:21,520 --> 00:31:24,200
Speaker 1: Bloombergs announces, brought to you by sc n B d

541
00:31:24,320 --> 00:31:26,240
Speaker 1: Bank for businesses on the move. Are you looking for

542
00:31:26,280 --> 00:31:28,960
Speaker 1: the right banking partner? Go to SCNB dot com to

543
00:31:29,080 --> 00:31:31,200
Speaker 1: learn more. Now open in Long Island City. Get your

544
00:31:31,240 --> 00:31:39,360
Speaker 1: business living with sc n B Global Business News twenty

545
00:31:39,400 --> 00:31:42,360
Speaker 1: four hours a day at Bloomberg dot com, the radio,

546
00:31:42,440 --> 00:31:45,880
Speaker 1: plus mobile and on your radio. This is a Bloomberg

547
00:31:45,960 --> 00:31:49,320
Speaker 1: Business Flash and I'm parent Moscow. This updates brought to

548
00:31:49,400 --> 00:31:53,640
Speaker 1: you by American Arbitration Association. International trade or business dispute

549
00:31:53,840 --> 00:31:57,120
Speaker 1: resolve faster, with the International Center for Dispute Resolution the

550
00:31:57,240 --> 00:32:00,800
Speaker 1: leader in alternative dispute resolution around the world. I see

551
00:32:00,920 --> 00:32:04,560
Speaker 1: d R dot org. U s docks are higher AMID

552
00:32:04,640 --> 00:32:07,880
Speaker 1: expanded its stimulus measures from the European Central Bank, it

553
00:32:08,040 --> 00:32:10,320
Speaker 1: was tempered by concern the moves may not be enough

554
00:32:10,360 --> 00:32:12,600
Speaker 1: to counter a dim growth outlook for the region. We

555
00:32:12,680 --> 00:32:15,160
Speaker 1: do check the markets every fifteen minutes throughout the trading

556
00:32:15,240 --> 00:32:17,760
Speaker 1: day on Bloomberg and the SNP five hundred is up

557
00:32:18,040 --> 00:32:20,400
Speaker 1: three tenths per cent or five points in nineteen ninety

558
00:32:20,440 --> 00:32:23,280
Speaker 1: four Dow Jones Industrial average of a quarter percent or

559
00:32:23,320 --> 00:32:26,200
Speaker 1: forty three points to seventeen thousand, forty three, and then

560
00:32:26,280 --> 00:32:28,840
Speaker 1: Aztecs of four ten percent or eighteen points to forty

561
00:32:28,920 --> 00:32:31,880
Speaker 1: six ninety two ten. Your treasuries up one thirty seconds,

562
00:32:31,920 --> 00:32:34,040
Speaker 1: the yield one point eight seven percent to yield on

563
00:32:34,080 --> 00:32:37,320
Speaker 1: the two year point nine zero percent. NIMEX screwed oil

564
00:32:37,360 --> 00:32:39,400
Speaker 1: down two point three percent or eighty eight cents to

565
00:32:39,480 --> 00:32:42,360
Speaker 1: thirty seven forty three of barrel comacs. Gold is up

566
00:32:42,400 --> 00:32:44,440
Speaker 1: six tenths per cent or eight dollars ten cents to

567
00:32:44,480 --> 00:32:47,479
Speaker 1: twelve sixty five forty an ounce, the euro dollar ten

568
00:32:47,600 --> 00:32:51,120
Speaker 1: forty one, the yen one thirteen point seven to. Filings

569
00:32:51,160 --> 00:32:53,840
Speaker 1: for US unemployment benefits fell last week to the lowest

570
00:32:53,960 --> 00:32:57,160
Speaker 1: level in five months. Jobless claims dropped by eighteen thousand

571
00:32:57,440 --> 00:33:00,520
Speaker 1: to two hundred fifty nine thousand in the weekending mark fit.

572
00:33:01,120 --> 00:33:04,160
Speaker 1: Yahoo filled out its board, adding to independent directors at

573
00:33:04,160 --> 00:33:06,680
Speaker 1: a time when the ones dominant internet company is facing

574
00:33:06,840 --> 00:33:10,520
Speaker 1: major strategic decisions and pressure from a shareholders about how

575
00:33:10,520 --> 00:33:13,320
Speaker 1: to salvage itself. Yeah, who shares down one point six

576
00:33:13,400 --> 00:33:16,320
Speaker 1: percent today? And that's a Bloomberg business flash. Tom and

577
00:33:16,400 --> 00:33:20,160
Speaker 1: Mike Karon Moscow, thank you very much. Well, here's where

578
00:33:20,200 --> 00:33:23,240
Speaker 1: we are. The European Central Bank, it's around the kitchen

579
00:33:23,320 --> 00:33:26,480
Speaker 1: sink at the European economy, cutting all three of their

580
00:33:26,680 --> 00:33:30,800
Speaker 1: interest rates, including the deposit rate, to negative forty basis points.

581
00:33:30,840 --> 00:33:35,600
Speaker 1: The increased que by twenty billion euros a month. They're

582
00:33:35,640 --> 00:33:39,160
Speaker 1: introducing a new loan program, essentially allowing banks to borrow

583
00:33:39,640 --> 00:33:42,240
Speaker 1: at almost no cost or possibly would have the ECP

584
00:33:42,360 --> 00:33:45,560
Speaker 1: pay them to borrow for four years not much more.

585
00:33:45,680 --> 00:33:48,040
Speaker 1: Mario drag he could have done. And what has happened

586
00:33:48,080 --> 00:33:53,520
Speaker 1: to the Euro? It has gotten stronger now. One Tenet

587
00:33:53,600 --> 00:33:57,320
Speaker 1: Jukes is in charge of following the moves in the

588
00:33:57,440 --> 00:34:01,360
Speaker 1: markets for Associated General and he is with us now.

589
00:34:01,480 --> 00:34:04,200
Speaker 1: Kit for those of us not in the market's a

590
00:34:04,240 --> 00:34:06,600
Speaker 1: bit of a head scratcher the market reaction a lot

591
00:34:06,680 --> 00:34:09,680
Speaker 1: of people noting that drug. He said, we have done

592
00:34:09,880 --> 00:34:12,640
Speaker 1: an enormous amount and maybe we won't have to do more,

593
00:34:12,800 --> 00:34:16,080
Speaker 1: and that's enough to turn the markets around. Yeah, at

594
00:34:16,160 --> 00:34:19,200
Speaker 1: least the initial reaction sense of the market was he's

595
00:34:19,200 --> 00:34:21,120
Speaker 1: throwing the kitchen sink at it. But he hasn't got another.

596
00:34:21,160 --> 00:34:24,120
Speaker 1: Think there's no sinks in any other room in the house. Um.

597
00:34:24,480 --> 00:34:28,440
Speaker 1: And so we took the euro, I guess one and

598
00:34:28,440 --> 00:34:31,480
Speaker 1: a half cent lower, and we held onto that for

599
00:34:31,520 --> 00:34:35,080
Speaker 1: a bit and now now we've spounced back. Um. And

600
00:34:35,160 --> 00:34:38,879
Speaker 1: I think that will's you know, to in a sense.

601
00:34:38,960 --> 00:34:40,319
Speaker 1: If this is the limit of where they can cut

602
00:34:40,440 --> 00:34:42,400
Speaker 1: races too, it's going to be hard for them to

603
00:34:42,480 --> 00:34:44,440
Speaker 1: do much more on their own that the series of

604
00:34:44,520 --> 00:34:48,080
Speaker 1: moves that they did look on the surface, probably better

605
00:34:48,160 --> 00:34:50,719
Speaker 1: for risk sentiment, better for equity markets. Now they might

606
00:34:50,760 --> 00:34:52,879
Speaker 1: be better for the SMP than they are for the Euro.

607
00:34:53,000 --> 00:34:55,000
Speaker 1: At this point in time. They are going to put

608
00:34:55,040 --> 00:34:57,560
Speaker 1: more money in We are having the prospect and hangled

609
00:34:57,560 --> 00:34:59,960
Speaker 1: in front of us of them buying continuing to buy

610
00:35:00,200 --> 00:35:02,359
Speaker 1: wider range of assets if they need to do more

611
00:35:02,400 --> 00:35:06,279
Speaker 1: of that over time. But what really took the euro

612
00:35:06,400 --> 00:35:08,600
Speaker 1: down from the one twenties down to down to this

613
00:35:08,760 --> 00:35:10,919
Speaker 1: level a year ago was the move to negative rates.

614
00:35:11,760 --> 00:35:16,120
Speaker 1: And while I think cutting rates further can help um,

615
00:35:16,200 --> 00:35:18,800
Speaker 1: they know they didn't only cut the time basis points

616
00:35:19,040 --> 00:35:22,600
Speaker 1: and the hint that maybe they're done on that has

617
00:35:22,640 --> 00:35:26,439
Speaker 1: definitely paused the market. So if you're it goes lower

618
00:35:26,520 --> 00:35:28,719
Speaker 1: from here, it's going to go lower because the yield

619
00:35:28,800 --> 00:35:32,120
Speaker 1: differential between the United States and Germany in particular will

620
00:35:32,600 --> 00:35:36,400
Speaker 1: probably widen further, and that will put money towards treasuries

621
00:35:37,239 --> 00:35:39,120
Speaker 1: and it will widen further. Will do We'll do more

622
00:35:39,160 --> 00:35:41,520
Speaker 1: if if the Fed looks like raising rates in June,

623
00:35:41,560 --> 00:35:44,600
Speaker 1: is say, but but it's gonna be pretty flow. We

624
00:35:44,719 --> 00:35:47,759
Speaker 1: have to regroup from this, and part of regroup is

625
00:35:48,000 --> 00:35:53,200
Speaker 1: expectations he will manage them. All central banks will react

626
00:35:53,280 --> 00:35:56,439
Speaker 1: to what Mr Drag has done today. But the only

627
00:35:56,520 --> 00:35:59,279
Speaker 1: expectation I got is QUI one, q E two and

628
00:35:59,360 --> 00:36:05,040
Speaker 1: on and on on. Why will QUEI ever end? Um,

629
00:36:06,120 --> 00:36:09,600
Speaker 1: A good question. I mean, I think QUI. You know,

630
00:36:09,719 --> 00:36:12,160
Speaker 1: I think que either either does something it hasn't done yet.

631
00:36:12,560 --> 00:36:14,200
Speaker 1: But which is you know, QUI, so far as we

632
00:36:14,280 --> 00:36:16,880
Speaker 1: can see your side of the Atlantic, my side in

633
00:36:16,920 --> 00:36:19,200
Speaker 1: Atlantic has done quite a lot to boost acid prices

634
00:36:19,239 --> 00:36:22,799
Speaker 1: and very little to boost aggregate demand and to get

635
00:36:22,920 --> 00:36:25,239
Speaker 1: growth happening. Now, central bankers will say, we don't know

636
00:36:25,239 --> 00:36:26,759
Speaker 1: what would have happened if they haven't done it. But

637
00:36:27,560 --> 00:36:30,000
Speaker 1: you know, at some point, either we get some growth

638
00:36:30,080 --> 00:36:32,320
Speaker 1: and we feel less need or we turn around and

639
00:36:32,400 --> 00:36:36,080
Speaker 1: we say, okay, we we need Plan B and we

640
00:36:36,200 --> 00:36:38,719
Speaker 1: haven't gotten that far. I mean and I and I

641
00:36:38,760 --> 00:36:41,799
Speaker 1: think that is to my concern is you know, if

642
00:36:42,080 --> 00:36:44,880
Speaker 1: this is a law of diminishing returns from buying more

643
00:36:44,920 --> 00:36:50,000
Speaker 1: and more assets, Um, it's it's not obviously not obvious. Well,

644
00:36:50,239 --> 00:36:52,080
Speaker 1: you know the reason for it ending is what's the

645
00:36:52,160 --> 00:36:54,960
Speaker 1: point going on buying more and more? It puts more

646
00:36:55,000 --> 00:36:58,560
Speaker 1: and more distortions into the global economy enough already that

647
00:36:58,680 --> 00:37:01,400
Speaker 1: that would be the argument against. I would rather they

648
00:37:01,440 --> 00:37:04,919
Speaker 1: had cut rates more into negative territory and not bought

649
00:37:05,000 --> 00:37:09,080
Speaker 1: more assets. Today, in my opinion, they seem to feel

650
00:37:09,160 --> 00:37:12,080
Speaker 1: that that would be difficult. Then it would have an

651
00:37:12,120 --> 00:37:16,520
Speaker 1: impact on banks. It must do at some point because

652
00:37:16,560 --> 00:37:19,480
Speaker 1: if the banks don't pass negative rates on down the line,

653
00:37:19,520 --> 00:37:23,560
Speaker 1: and you know, um, imagine, imagine you're checking account in

654
00:37:23,640 --> 00:37:27,759
Speaker 1: your bank in New York, costing you money every every month,

655
00:37:28,520 --> 00:37:30,800
Speaker 1: and how unhappy would you be. You can imagine that

656
00:37:30,880 --> 00:37:34,480
Speaker 1: the first bank that does that and most to negative rates, um,

657
00:37:34,960 --> 00:37:37,040
Speaker 1: they're gonna be pretty unpopular and they might they might

658
00:37:37,160 --> 00:37:38,719
Speaker 1: lose that, so no one wants to do it. So

659
00:37:39,320 --> 00:37:42,080
Speaker 1: negative rates are attacks on the banking system at the

660
00:37:42,120 --> 00:37:43,640
Speaker 1: same time as you're trying to get a benefit in

661
00:37:43,760 --> 00:37:46,560
Speaker 1: terms of say a weekly currency. So yeah, that that

662
00:37:46,719 --> 00:37:49,400
Speaker 1: you know, and it's not going to be popular with

663
00:37:49,760 --> 00:37:52,319
Speaker 1: the German banking industry. Say if you do it, if

664
00:37:52,320 --> 00:37:55,000
Speaker 1: you do it from the ECB. So there are limits.

665
00:37:56,080 --> 00:37:58,160
Speaker 1: I'm not sure they're quite there yet, but but that

666
00:37:58,360 --> 00:38:00,359
Speaker 1: that's what you know. I think that's what we're within

667
00:38:00,400 --> 00:38:01,840
Speaker 1: the e c B was about. But that's what we

668
00:38:02,000 --> 00:38:04,040
Speaker 1: like to have you on, is the limits. I mean,

669
00:38:04,160 --> 00:38:08,600
Speaker 1: if it's calculus and we're limiting out to some point,

670
00:38:09,360 --> 00:38:14,919
Speaker 1: did Mr Drag identify the vector the glide path where

671
00:38:15,000 --> 00:38:18,400
Speaker 1: we hit that asent? I mean, I do I just

672
00:38:18,480 --> 00:38:21,480
Speaker 1: don't see it. I think he's telling us that, you know,

673
00:38:21,520 --> 00:38:22,880
Speaker 1: in a sense, and I would have said that he

674
00:38:22,880 --> 00:38:25,239
Speaker 1: would have had more impact if he had more negative rates,

675
00:38:25,640 --> 00:38:27,680
Speaker 1: but he couldn't get rates further. So he's doing more

676
00:38:27,719 --> 00:38:30,920
Speaker 1: considative easy and effectively. He's doing the easier thing to

677
00:38:31,040 --> 00:38:34,880
Speaker 1: do because he feels in you know, within within the

678
00:38:34,960 --> 00:38:38,920
Speaker 1: European Central Banks Governing Council that he's not got the

679
00:38:38,960 --> 00:38:41,960
Speaker 1: support for putting the pain onto the banking sector, you know.

680
00:38:42,239 --> 00:38:45,000
Speaker 1: I mean there's a there's a big line where once

681
00:38:45,160 --> 00:38:47,440
Speaker 1: once banks start passing negative rates onto you and me,

682
00:38:48,000 --> 00:38:50,040
Speaker 1: I suspect once one does, everybody else will do and

683
00:38:50,080 --> 00:38:51,919
Speaker 1: will grumble. But I'm not sure what else will happen.

684
00:38:51,960 --> 00:38:53,680
Speaker 1: And then they'll find they have more ammunition. But so

685
00:38:53,800 --> 00:38:56,440
Speaker 1: now I think they really do think they are pretty

686
00:38:56,520 --> 00:38:58,600
Speaker 1: much out of ammunition. I think that's that's the problem.

687
00:38:58,680 --> 00:39:02,520
Speaker 1: And we'll come back to the currency market and say, unfortunately,

688
00:39:02,600 --> 00:39:05,000
Speaker 1: to get the Euro significantly weaker, you need the US

689
00:39:05,080 --> 00:39:07,680
Speaker 1: to do most of the heavy lifting. It's it's how

690
00:39:07,719 --> 00:39:09,600
Speaker 1: many times since the fed rais rates will be the

691
00:39:09,640 --> 00:39:13,280
Speaker 1: big driver here and he's he's limited on that. And equally,

692
00:39:13,480 --> 00:39:15,840
Speaker 1: you know, if you send equity indusseries higher on the

693
00:39:15,880 --> 00:39:18,920
Speaker 1: back of this buying because you've got an expectation of

694
00:39:19,000 --> 00:39:22,360
Speaker 1: lower rates for even longer, that that makes them more volatile,

695
00:39:22,480 --> 00:39:25,360
Speaker 1: because they're more vulnerable. If everybody, if anybody ever talks

696
00:39:25,400 --> 00:39:29,040
Speaker 1: about this, this game ending the game of musical chairs,

697
00:39:29,080 --> 00:39:32,440
Speaker 1: because you know that the equity market is so disconnected

698
00:39:32,560 --> 00:39:35,080
Speaker 1: from the from the earning stream of the companies. So

699
00:39:35,960 --> 00:39:38,440
Speaker 1: we are we're running out of room. Really, we're very

700
00:39:38,520 --> 00:39:42,000
Speaker 1: close to it now. As that sinks in, Is this

701
00:39:42,160 --> 00:39:45,040
Speaker 1: what we're going to see with the markets, the reaction

702
00:39:45,120 --> 00:39:46,800
Speaker 1: that we've seen in the year old of flattening in

703
00:39:46,880 --> 00:39:51,320
Speaker 1: the European yield curves. I think we'll continue to flatten

704
00:39:51,320 --> 00:39:52,719
Speaker 1: the key yel curve as we say, all right, if

705
00:39:52,760 --> 00:39:54,600
Speaker 1: we can't do much more when we've not got you know,

706
00:39:54,760 --> 00:39:58,080
Speaker 1: we've still got not enough credit growth and GDP growth

707
00:39:58,160 --> 00:39:59,880
Speaker 1: of just over one and a half per cent of

708
00:40:00,000 --> 00:40:02,720
Speaker 1: the moment that people are gonna look forward and say, Okay,

709
00:40:03,080 --> 00:40:05,640
Speaker 1: I need to buy moderation, I need to buy more coprophones.

710
00:40:05,680 --> 00:40:08,160
Speaker 1: I think you'll get You'll get money pushing out into

711
00:40:08,280 --> 00:40:12,719
Speaker 1: riskier assets looking for yield um and yes from the

712
00:40:12,760 --> 00:40:14,960
Speaker 1: whole thing, the whole thing, could could you know, sort

713
00:40:14,960 --> 00:40:17,719
Speaker 1: of drift down and we may get more volatility and

714
00:40:17,800 --> 00:40:21,640
Speaker 1: equity markets. Um and unless of all the county. And

715
00:40:22,680 --> 00:40:25,840
Speaker 1: here's a here's a headline that came out at three am.

716
00:40:25,960 --> 00:40:30,000
Speaker 1: This was made for Kit Jukes ECBC Euro at one

717
00:40:30,080 --> 00:40:35,200
Speaker 1: eleven this year, one twelve next year and one twelve

718
00:40:35,280 --> 00:40:38,240
Speaker 1: and two thousand eighteen. Kid, if you made that prediction

719
00:40:38,320 --> 00:40:42,120
Speaker 1: at sock Jen, you'd be out of a job. What

720
00:40:43,600 --> 00:40:48,560
Speaker 1: what is going to happen? What is wise? When? What

721
00:40:48,640 --> 00:40:50,759
Speaker 1: do you call on your ow? Can you make some

722
00:40:50,840 --> 00:40:55,719
Speaker 1: newsier and amend your call this morning? Um? I think will?

723
00:40:55,840 --> 00:40:58,480
Speaker 1: I think we will. We will get to a point

724
00:40:58,560 --> 00:41:00,640
Speaker 1: where the beneficiary of this is probably gonna be the

725
00:41:00,760 --> 00:41:03,840
Speaker 1: SMP that will have us knock on effect to the

726
00:41:04,000 --> 00:41:06,560
Speaker 1: timing of the next federate hike and expectations of it.

727
00:41:06,680 --> 00:41:08,319
Speaker 1: And I will get the euro down to one oh

728
00:41:08,400 --> 00:41:10,360
Speaker 1: five round about the back end of this year, but

729
00:41:10,400 --> 00:41:12,839
Speaker 1: it's going to be quite slow. I'm gonna find other

730
00:41:12,960 --> 00:41:17,480
Speaker 1: currencies more interesting. Kit Chukes, thanks so much for joining us.

731
00:41:17,719 --> 00:41:21,920
Speaker 1: Historic quite amazing. I have to say, of all the

732
00:41:22,080 --> 00:41:25,840
Speaker 1: observations anybody has made today, the best came in a

733
00:41:25,960 --> 00:41:30,840
Speaker 1: tweet from Alberto Gallo. Very good that Mario Draggy was

734
00:41:30,920 --> 00:41:34,239
Speaker 1: wearing the exact same tie today as he wore on

735
00:41:34,360 --> 00:41:36,839
Speaker 1: the day he made the Whatever it takes to teach

736
00:41:36,840 --> 00:41:39,120
Speaker 1: you a couple of years ago, so take from that

737
00:41:39,360 --> 00:41:43,320
Speaker 1: what you will. The market up eight advances, seventeen thousand,

738
00:41:43,400 --> 00:41:47,000
Speaker 1: one hunderdone, the Dow SMP five hundred over two thousand,

739
00:41:47,080 --> 00:41:52,440
Speaker 1: two thousand, three punch bowl full equities rise and with

740
00:41:52,560 --> 00:41:57,240
Speaker 1: it risk on yields. After a tumultuous, indeed historic morning,

741
00:41:57,320 --> 00:42:01,000
Speaker 1: the tenure yield one percent two year. Now making a

742
00:42:01,120 --> 00:42:03,399
Speaker 1: dash for one percent, we blow it out to point

743
00:42:03,520 --> 00:42:08,200
Speaker 1: nine three on the two year curve, flattening in the

744
00:42:08,400 --> 00:42:11,720
Speaker 1: US to show how odd things are. Oil south thirty

745
00:42:11,800 --> 00:42:14,279
Speaker 1: seven seventy on nimax. Don't want to make a big

746
00:42:14,320 --> 00:42:17,120
Speaker 1: deal about that. Gold up six dollars a year, one

747
00:42:17,880 --> 00:42:23,400
Speaker 1: six up all seven pips after being much weaker earlier.

748
00:42:23,560 --> 00:42:26,440
Speaker 1: We need to give a major shout out to our

749
00:42:26,560 --> 00:42:31,320
Speaker 1: European economic and government team for providing us with assistance today,

750
00:42:31,400 --> 00:42:35,600
Speaker 1: particularly with the news flow out of Frankfurt, Germany. We

751
00:42:35,680 --> 00:42:39,240
Speaker 1: are produced by y U E. N Our Global technical

752
00:42:39,280 --> 00:42:43,799
Speaker 1: director is kind of FAILU. Stay tuned to Bloomberg Radio

753
00:42:43,880 --> 00:42:47,320
Speaker 1: for much more on this historic ECB action. It's Bloomberg

754
00:42:47,400 --> 00:42:47,920
Speaker 1: surveillance