the ecb is ready to do its part. end ofnnounced at the our last monetary policy meeting in january, the governing council will review and possibly reconsider the monetary policy stance in early march. the focus of our deliberations will be twofold. first, we will examine the strength of the low important light -- inflation and to inflation expectations. size and depend on the persistence of the commodity prices. and the incidence of second-round effects of domestic second, in thes light of the recent financial turmoil, we will analyze the state of transmission of our monetary policy impulses by the financial system and in particular by the banks. factorsr of these two contained downward proves -- price stability, we will not hesitate to act., the policy should put the euro area on firmer grounds. it is becoming clearer and clearer that fiscal policies should support the economic recovery through public investment, and lower taxation. addition, the ongoing cyclical recovery should be supported by effective structural

the ecb is in talks with the italian government. they are talking about buying bundles of bad loans. my question is why? why are you considering this? i can see how this would benefit the italian government, but how in theh could this be interest of the rest of the if this is not a huge fiscal transfer from north to south peter:? ? are we not simply appropriating the savings of the people of the north to help out banks in the south? my question is simply, why? answer, i do not think we would agree with you when you say qe an hour monitor -- and/or monetary policy is not working. it actually has worked. it has worked a lot. have theimate that we ecb about a half percentage -- not have percentage, about half of the recovery we have seen in , it can be ayears drive to our monetary policy. in the last two years, this has been the only one stimulative policy. the only one. we can now face a situation which is quite different from what we had 2, 3 years ago. with the recovery that is gradual, certainly not spectacular, but gradual. it is

what does the ecb do in terms of the reaction function? i think there is a problem with the bank of japan. but can qe all they like, it is the diversion's that is going to be key. this is where we are seeing big changes. ,f the fed is not going to hike we have pulled out two rate hike calls. if that is not going to happen, it is hard to get policy divergence. even if that the oj do qe, i fed is not- idf the hiking, you are not going to get a stronger dollar. jonathan: every economist that i sat down with praised negative rates. >> even though we saw the , it has gone straight up from their point of view. the bank of japan has done negative rates. dollar-young has gone down. the bank of japan possibly competing with a massively undervalued currency. we have the u.k. with lower unemployment rates. and we have the fed with a weak u.s. economy and a global downturn raising rates. it is no longer the market -- no wonder the markets do not know what to do. central banks are taking completely different views with similar circumstances. jonathan:

the ecb is being supportive. we just went through all of these currencies and countries that are now in negative yield, so something with a 7.5% coupon looks attractive, and now it is starting to happen that there are a couple of things that can happen. first, they do count as tier one capital for the eggs, so they are equity capital for the banks -- they are to your one capital for the banks. shutting the coupon office not a default. that can be done. and i think this is overdone, but it is a real risk. alix: could this click over? would turnt, they off the coupon. then, they can be converted to equity, which is white deutsche bank is in the headlines because they are having their equity values stripped away. as the equity price declines, it pushes it closer and closer to the event, and so they become very liquid. now people are reaching up and doing two of things. first, they are by credit protection, and that is why we are seeing every bank wide, and then we go to a concern. contagion. can it lead to lehman an

we've changed our call on the ecb. we expect them to introduce measures to cut deposit rates by 10 basis points, to introduce a tiered system, to accelerate the pace of purchases, and to expand the asset purchase program by an additional six months. if they do carry out those measures as we anticipate, i think that will be a positive. i wouldn't agree with the idea that policymakers are out of ammunition. francine: one of the things we talk about the most, something we cover on bloomberg, is the negative rates. not only negative rates, but the fact that the ecb was probably going to do more. if you look at inflation, this is the one big thing that certain thinkers -- not only economists, but certain people out there saying, they can't really fight inflation. so much limited scope that even if the ecb delivers, he won't really be able to do anything on cpi? yesterday, we produced our quarterly forecast. it will be interesting to talk about growth first. on growth, our views haven't changed much. francine: they have on i

boj carney chastising their and the ecb. there is some possible dental good benefit here -- possible good benefit here. the swedish economy is so interested in interest rates, it is the goal to get out. guy: stay with bloomberg, it will be the pulse. i will present the that could francine is in new york. -- i will present that, francine will be in new york. ♪ >> fragile china. stocks tumbled 2015 month low after the pboc fails to step up stimulus. is it market expected to much from the central bankers? no plan b. the german chancellor wants that greece needs europe's help to deal with the influx of refugees. is this the next greece crisis in the making? zero down. zero zone inflation is expected to flatline in february. will this be the number that forces draghi to do more extra week? ♪

the ecb cannot act alone. that may be the message he tries to deliver. guy: jeff, let's come back to you. the italian banking sector front and center. how much focus is there going to be on the way the mechanism is working? the problems the banking sector faces? we all know, the banking sector has been one of the main sticking points for military policy -- for monetary policy. the ecb has done a lot to try and improve confidence. maybe establishment of supervision. we have seen a conference of assessment to scrub talents sheets in 2014. -- two scrub balance sheets and 2014. i think fundamentally they will not see anything very wrong. that may be a message they try to reinforce. they may try to reinforce the message that the market has oversold the banking sector. ceosyeah, i think a lot of would want to hear that as well. interesting to see italian banks also strongly this morning. it is a day, the opportunity for surprise. he signaled march 10. he talked about it the speech he gave on the fourth. there is no excuse for inaction, we need to step up. is t

guy: the ecb is also the regulator as well. andrew is going to stay with us, marvin is going to stay with us. you can tune into full coverage of the ecb street by -- speech by mario draghi later. this is bloomberg surveillance on bloomberg television. ♪ francine: banks are rallying in europe. that is sending the stoxx 600 up like 2.8%. european stocks heading for the best two a surge since 2011, optimism is sweeping through european equities, carmakers rebounding. this is president's day so u.s. incks and bonds are closed. the ft, the years on crisis may look less frightening than the original but it is worse in others. the bond yields are not quite as high as they were. banks have lower levels of leverage. andrew bosomworth is still with us as is marvin barth. have yields and europe dropped to low and what does it mean for pimco's strategy? andrew: given the inflation levels, the outlook for inflation, what the ecb is doing, i would not conclude that yields have fallen to low. as far as the periphery is concerned, i think it

matt: it's a couple of weeks until that ecb meeting. we have a disappointing inflation number out today. mark: basically it means get next for next -- stimulus thursday. economists were looking for no change. core in place and rose. that was a mess. ago, that time three years the ecb has been nowhere near its target of just below 2%. the gallo said on sunday that the danger we face is deflation, not inflation. we have to act. that seems to be the case. we will see in march. it's looking pretty certain the ecb will act a week from thursday. matt: the volkswagen ceo has told us the discussion over regulations could take weeks or even months. not say if a solution could be reached by march 24, the deadline set last week by the judge overseeing the case. drasticallyis scaling back its presence. how much progress had they made in getting to the bottom of the scandal? >> the investigations are going on. we have dialogue with all the authorities, especially in the united states. we're looking forward to having a result as soon as possible. is

the ecb must be careful about introducing new measures. more highlights, next. ♪ mark: this is the european close. vonnie: beautiful london picture there. time for the bloomberg business flash. sales of new homes in the u.s. -- contractnth signings in the west held by the most in 5.5 years. shares of lows falling today. depot.ults trailed home they are not benefiting as much from the home-improvement boom. dunkin' donuts faces the cladding sales and tougher competition from mcdonald's. it is revamping its menu boards. overhaulingts is drive-through windows. european central bank president mario draghi has two weeks left to decide how to ramp up stimulus in a way that does not upset his colleagues or investors. hans nichols spoke with one of those colleagues today who gave his take on ecb policy. >> what matters for france's that we do not produce counter -- theive policies , it would notanks we have to design our measures in a way to make sure they are powerful and effective. >> you are open to the idea of having a multitier system. this

people often think banks take money from the ecb. they don't. we actually give money to the ecb. that has a negative effect. this year with expect a further decline of rates from central banks. operate.ifficult. to anna: with that in mind, in a negative rate environment, does it squeeze down on your margins and make you less likely to lend to customers, or does it make you take money away from the ecb? i have heard both arguments? kees: no, no. we are completely open for business with our clients and we see the economy improving in the netherlands, as with the housing markets. we accept more loans from clients now. that is not the issue. we do not take money from the ecb. almost no bank, at least here in the netherlands, takes money from the ecb we book money at the ecb and get negative rates there. manus: that is a paradigm very hard to square away. let's talk to you again about the markets. your exposure to the oil and gas sector -- that is 60% of your comment equities. are you concerned? should we expect more and higher provisions from abn? commodities isy a portfolio of aroun

is it fed versus ecb? patrick: the ecb has the most to do. it will be cutting the deposit rate. francine: what is it helping on? it is not filtering through the real economy. petco it is hard to say. i don't think anyone can -- patrick: i don't think anyone can say this can come from this. you look at the u.s. where it was if he is ago. economy is growing at 2.5%. to say it is doing nothing is a bit too confident. i think it is providing liquidity and risk taking. hopefully that is increased -- hopefully that is taking -- that is creating investment. -- anytime negative interest for 10apan has been 0% years. bubble, i don't know if it is the right word. it is extreme interest. creating top investments. francine: give me your two favorite place in europe -- two favorite plays in europe. petco last year's dividend was one of 15. it is trading around 90 right now. we don't think dividends going to be cut significantly. very industrial companies, siemens, phillips. francine: exposed? patrick: because that is where the real selloff has happened. everyone loves nestle because it is sa

julia caught up with him yesterday, the ecb board member. she's joining us here this morning, legging it back to london. what's his message? is it the same as what he's been saying for quite a while? >> it's always the same. be careful of the stimulus we're adding to the economy here and the unintended consequences. i think we're seeing that with negative deposit rates. at least investors fear about what this means. beyond what his view is on further stimulus in the ecb, i asked him whether he agrees that what central banks are doing is adding to the problems we face rather than providing solutions and whether or not the ultimate answer here is helicopter money. listen in. >> my point is that you shouldn't overburden central banks. they don't have a cure all. they don't have the miracle medicine at their disposal. we can, in a sense, influence prices. we can influence economic activity in the shot tert term, we cannot create growth. my feeling is that time and again central banks are at the core of the hopes of many, and i think we have to s

i'm talking what the fed minutes on the ecb minutes. i think the fed a minute yesterday were -- there is nothing really new in them. they were consistent with what we heard from the chair the week before" we heard from rosen the night before. between thehift december amendments to the january minutes. we see a bit of a shift. i think i would not be surprised if we saw a material change. guy: i don't think you're alone in that. richard: it is funny they have an immediate wake of the december meetings 4 hikes in 16 versus maybe 2. now we are nothing priced in. again lives in the market lead the fed in terms of what the rate profile is going to be. guy: when you look at what is happening and tell the central banks will lean into that talk us through how the blessing markets will evolve from here. overnightexport data pushes them towards the yen weakening. ecb, we know what could happen. the other pair, how do they move? richard: the big change in their narrative is that whenever we's thought central banks were doing 2016 at the end of last

it looks like the ecb has way more to go. last yearthe end of everybody was talking about divergence between the fed and ecb, we haven't been talking about that this year. maybe we should start talking about that word again. be interesting if people come back on the show and start talking about the divergence again. so much of it depends on where oil prices go. searchdy is clearly on a or yield. it has been described as a big rolling ball of money. looking for sizable returns. the ball money became -- money again shifting away from stocks. the ball money began shifting away from stocks. it is just north of the border in hong kong. the red line, it is climbing the fastest pace in china as investors switch out of the most expensive stocks. the latest move to boost the housing economy. the past 12 months, up 52%. joe: so much for rebalancing the economy. that of the big question, where does it go next. you can see all these charts and more on twitter. alix: i want to bring in our guest, joining us from the manhattan office, bill

then i guess we'll find out how aggressive ecb wants to be. certainly what we got out of draghi yesterday was not really a lot of new information relative to what we had before. he spoke for 2 1/2 hours almost in front of the european parliament, answering a lot of questions about what policy tools ecb has at its disposal. he basically said everything is on the table. we have the tools to get inflation back to target. i guess for the markets, it's not obviously words that matter. it's action. everyone is waiting for the 10th of march 20 see how aggressive ecb is and what other measures mario draghi might put forward. >> of course, the big question now is just exactly how much negative interest rates can go more negative given the banking system in europe. is there a sense there's not as much room to maneuver? >> we think there's room to maneuver. from our perspective, i think e drrks b can cut the rate by another 30 to 40 basis points without necessarily affecting banking ability that much. if you look at bank profit margins, they're relativel

we have the ecb in a few weeks -- this will be lost on them. and germany is meant to be the engine of europe. if it starts to folder, that doesn't figure very what -- to falter, that doesn't figure well with the rest of europe. guy: and draghi will do what? richard: there is still an internal debate -- what do they want to do? do they just want to extend qe? it will make the debate that much more interesting. we have got about 10 or 12 basis points price for march, so should they choose to surprise the market, they might have the impact on the currency, which i think is one of the things that is their major concern. guy: what did they say yesterday about sterling? what to expect today? richard: big move yesterday. we are consolidating at lower levels. there is a feeling that this will be a very long campaign, and it will be choppy. but it will be interesting to hear what carney says today. up until now, the bank has been but youite on brexit, know that lawmakers will have some direct questions. they will be interesting to see if they offer an o

the ecb will have to consider going into more negative territory. we'll get you oil and the right price very shortly. i think that may be copper. let's get onto copper because this is where we see some of the biggest falls overall. get to the bloomberg first reviews with nejra cehic. nara? declinesl has extended after iran says -- was ridiculous. iran's oil prime minister says it is unrealistic demands on his country. should-cost producers bear the burden of the surplus and has reaffirmed the kingdom's commitment. donald trump has won the nevada caucuses. the nomination -- the when makes him the victor in three of the four steps that have voted on the desk for states that have voted on the republican side. 45%.night we had tomorrow you will be hearing you know if they could just take the other candidates and add them up. if you could add them up, because the other candidates amount to 55%. that whenforgetting people drop out, we are going to get a lot of votes. nejra: -- policymakers should be prepared to consider raising interest rates in march. sp

what we hear when european banks are at risk is oh, no worries, mario draghi has your back some of the ecb will help you, there is a lot of liquidity. in terms of profitability, mario draghi cannot help them with that. chris: you're right. lloyd blankfein was speaking at a conference, and his words were, the european banks have access to ample amounts of funding, and he was more worried about the counterparts, the suggestion of that, the share price performance. european banks in most cases have got a long, long way to go until they actually get way studies eight u.s. banks are in. as you know, a lot of u.s. banks buffer the cost of capital at the moment. alix: exactly. what is the next wave of trauma for the european banks? chris: i suppose it is whether or not the ecb will take rates down further and there will be more, sort of, soul-searching about what do negative interest rates -- if the ecb suggests a goes down, what does that mean for profitability, and does that have another negative impact? is there any growth out there, which will start -- if you want to alleviate that problem? s

complement the ecb move to consummate further negative rates has to be a constant with the ecb as well. i think they're going to be tightlipped on that because they're having a wider asset market application. jon: is or anything they can do to cut the deposit rate? as if you're talking about how they can read jake the program or rethink it, the shock absorbers are and all of this, tell me how draghi can take it? >> the banks with steeper curbs. have done a credible policy. but what happens when qe works. what happens after the last year wentthe ecb really gangbusters with negative rates and increased other asset purchases? the yields actually rose. you could argue that was because of the eurozone exposure to emerging markets. if you do not have that china shock made it would've been more sustainable. if you take more of the bad news which could affect the curve, then you actually inject negative rates and you get the curve to steep and again that would actually help the banks credibility. this is why you need to do as much as you can while you still can. jon: do you change the composit

may have to back off a little bit from the support but the ecb is still there. hans: when we look at this idea of a tiered structure for bank deposits, if you bring that rate lower, more than 10 basis points, do you think the transmission functions available can wall off parts of banks' assets so the banks aren't seeing their earnings evaporate as the ecb try system like the economy? >> i think there's a bit too much focus on the banks earnings. what this next move by the ecb building,s confidence but also making sure that the euro doesn't strengthen any further than it has. that is the big point. we are focusing a lot on the banks, i said for a long time that i am not big banks at this stage, because their earnings are under pressure in a you low yield and -- in a low yield environment, but i think we have seen over the last weeks that there is enough support behind the banks that they will not be one of the major problems. guy: you don't worry that the main credit channel in europe is the banking sector? that the banks are unwilling to lend more money? maybe i

overshooting -- overshooting inflation in the ecb? is that wishful thinking? rob: that was interesting, as well. the bank of japan has played a similar game. there 2% inflation target, not getting a million miles close to it. it is priced targeting by another name. if we undershoot for so long. you need to allow for a period of overshooting. you need activity to rise to make inflation happen. you can't keep depreciating your currency to make that happen. it is fake. we are seeing through. markets are seeing through it. the stock market sees threat. time to finish with this madness. anotherdan: let's take numbers in the u.s.. what does this mean for the labor market in the u.s.? rob: i think if you look at the federal reserve's own measure of slack and cumulate them from before the crisis to where we are now, there is very little slack. probably a little slack, but the aal question is would you, as central bank, wait until you have eliminated all of the slack before you start moving policy back to more normal rates? i always thought they were behind a game on t

ecb president mario draghi prepare us to speak ahead of a march fed decision. stimulus search, japanese -- post is biggest gain in seven years. the pboc is the helping hand. he wants urges to the most -- the yuan surges the most in a decade. ♪ francine: welcome to the pulse. live from european headquarters, i am francine lacqua. let's tackle the markets. we have a busy day ahead. in the u.s., bonds, stocks are closed for president's day. if you're watching from the states, happy residents day. -- happy presidents' day. on the rise. i'm tishri japan -- i want to show you japan. japanese yen falling for once. let's get to bloomberg's first word news with nejra cehic. nejra: china's yuan surged in the most -- surged the most in a decade. the central bank support the exchange rate. the currency advanced the most july 2005.ations -- hsbc has decided to keep its global headquarters in london, saying the u.k. is an important and globally connected economy. the vote was passed unanimously on sunday. hass these it -- hsbc remained there for 20 years and it is importan

ecb's next possible measure. he expressed some caution over stimulus that could backfire for the economy. here he is. >> what matters is we don't produce counterproductive effects did -- counterproductive >> at -- fx. the effect on the stability of banks on measures produced the opposite of what we want, then it would be smart -- francine: a morning were this morning has been lloyds bank. shares jumping the biggest gain in five years. tripled its dividend, introducing a special payout. by more, we're joined richard. we look at lloyds, the share price -- does we make of it it is a lot more healthy than we thought? is it just because of dividends? richard: the outlook for the year ahead is better than most investors expected. .hey were looking at guidance how profitable the bank is. in this environment where interest rates are going to continue to be low, the bank of hurtnd, that is what to banks in this type of world. lloyds growing its profitability measure which is very kurds and to investors. as long as that is

the ecb has the same problem. in their minutes yesterday they said, we can't sound gloomy about the economy. central things globally have a tough task ahead of them. guy: the market surprising there ir ability. thank you for your time howext, we take a look at crude prices are being affected. ♪ guy: welcome back. you are watching "on the move." let me show you what is happening with european equities. the stock since hundred is down by 4/10 of 1%. 600 is down by 4/10 of 1%. index is down by 1/2 a 1%. the ftse 100 is clinging to the flack line right now. 4/10 ofx 600 is down by 1%. we can now look at what is affecting crude prices and how badly. caroline hyde has the chart of the day. caroline: the chart shows you have a billion barrels are stuck. this is the highest we have same since 86 years ago. seene highest we have since 86 years ago, since the great depression. we are now at 504 million barrels of oil stuck in the u.s. meanwhile, we can see the opposite reaction in terms of the oil price. we are now at $31

that is pretty bad news for the ecb and the bank of japan. mark: they were also asked how much lower rates could go and for how much longer. paul: what did you discover? economists feel that negative going to work, central bankers have pinned their hopes on them. the view was, they are going to be around for a wild. the key is that the negative devalue your currency for a while. but if you are in a take economy, you end up sparking a currency war. the euro and the yen have both risen against the dollar this year. what happens? we have negative rates for a long time. we don't get the boost in growth. you might get unintended consequences. that is worrying some economists and policymakers as well. mark: bloomberg's paul gordon. great story. sanjiv shah, cio at some global investors, you described low rates as a war against savers. do you worry about the unintended consequences? sanjiv: i don't understand negative rates. when i did economics, the textbooks said the rate couldn't go below zero. i don't understand what it means, borrowers have to

negative rates from the ecb. ecb goes to negative rates a second time. the bank of japan starts negative rates. markets are not convinced. the equity markets are not convinced that negative rates are the salvation. >> you are right. they are being seen as a symptom of a problem on the growth side. , that was two or three weeks ago. what has happened over the next three days -- the last three days is different. you have been greased risks -- you have increased risks that are not correlated with possibilities. that is a different beast, a different ballgame. that requires a different way of looking at what the banks should do and so on. manus: this is what i want to get. ubs was talking about recession in manufacturing. they say the markets are discounting something much more significant. you concur with that. salman: if you look at here , but servicesdata are doing fine. itever, the problem is that the financial sector remains under pressure, we will have a recession. that is why i am a bit more worried. at least in the short term. now the market is sayin

where do you think the ecb will go to in terms of its negative rate policy? what is your current thinking? it all goes back to begging the central bank for more stimulus. >> as i said before, that is somewhat worrying. when they talk about different scenarios for equity markets, i think that is primarily because we are overdue a correction with equity markets. it got too high in may last year. bear markets typically last a minimum amount of time. what i am trying to say to people is be cautious before you add or money to your equity positions. if we have a decent sized rally, review your overall portfolio to make sure you are not over invested. having a bit of cash in your portfolio is a sensible play. i don't know what the right thing for the ecb to do is yet. investors are looking for bailouts. anna: you say on brexit you don't want to have a position, but the reality of uncertainty in the markets is here for your investors to deal with. how do you advise investors to protect themselves? are you going into specific strategies with investors at the moment? >

there's talk of whether the ecb needs to do something equivalent to t.a.r.p. stephanie link was just saying that the european banks haven't done as much as the european banks to actually clean up their books. and even though it's been years and years and years since the u.s. banks did it, maybe it's about time for the european banks to have to do this. there are also questions about, why is this spilling over to the u.s. why are banks like wells fargo reacting when it's really a european bank story. and i want to show you a chart of chesapeake in the last year. we know that stock well, we know that it's down about 90%. i went through the credit agreement. it has about $4 billion in a revolving credit facility, but here's what's important. who those lenders are. wells fargo is the co-syndication agent for chesapeake's credit facility. it's going to need to lean on that in order to pay $500 million in debt that's coming due in march. so, all of these things are separate, but they're all intertwined. there are just too many issues for the banks on either side of

is the ecb going to try and calm the market? are they going back-and-forth with deutsche bank on how they can offer more clarity? guys? francine: coming up later on bloomberg surveillance, we speak , closingf director maria manaus -- closing maria von niles. we focus on that next. ♪ ♪ look at: let's take a what we are watching for the rest of the week. will today, the fed chair appear before the u.s. senate banking committee and a meeting of euro area finance meetings -- finance ministers. withg out of negotiations the u.k. on brexit. john kerry and russian foreign minister will be among those meeting for the annual munich security conference. they are expected to discuss iran, syria. the global round is continuing. oil traded near a 12 year low. ise to discuss the impact moment months or -- is mohamed mansour our -- mohamed mansour. has that affected your operations? mohamed: 2015 was a record year for us. the largest dealer in the world. we are top five worldwide. we did a lot of work for caterpillar in the canal business

we've had over $300 billion of extra capital put into this sector between 2007 and 2014 when the ecb took over the supervisory regulation. ie, yes, there are huge problems, i mentioned those, but they have a lot more capital than they did previously. >> steve, great stuff. thanks for joining us. >> beyond the janet yellen testimony, look for jobless claims, it is thursday, 8:30:00 eastern time. and we'll get results from pe i pepsico and kellogg and manchester united. yellin testimony is going to be key especially as she comes in with another backdrop of global turmoil. will she change her tune? she didn't explicitly take march off the table in terms of raising interest rates. wonder if she'll sound a little more dovish. >> let's bring in dennis gaurtman. we got at that bit of a reprieve yesterday. the main selling has been the european banks. they're selling off sharply again today. what does that tell you, and is there too much selling at the moment? >> i don't think there's too much selling at all. i think there's going to be even eveven more selling. and i think the manner in whi

the ecb was causing the euro to .eaken the last three policy actions by the ecb have resulted in the euro actually strengthening. so, i do think at the end of the day be dollar has been weakening , not only against the euro, but against the yen, and by the way, that is quite bullish for s&p earnings. it is one hand out of the other. alix: what is on your shopping list? rollwe see the leaders over so much, but it would probably take a lot of xanax to want to buy energy right now for example? tom: i think investors want to look stop by stock. there are so many stocks pricing in a recession. you can use multiples or you can use technicals like relative strength -- and i am talking a lot davidson, you know, of retail, a lot of transports, even a lot of asset managers. so, what you have to say is, if there is a recession, how much downside? that is what is interesting. you have groups that have been taken to a wood chipper, not even a woodshed. laughs] tom: i don't think you have to go to energy to find these names. alix: he is so calm. brendan: i know. there is a big if you could drive a

we hear whenat european banks are at risk is oh, no worries, mario draghi has your back some of the ecb will help you, there is a lot of liquidity. profitability, mario draghi cannot help them with that. >> you're right. lloyd blankfein was speaking at a conference, and his words have the european banks access to ample amounts of funding, and he was more worried about the counterparts, the suggestion of that, the share price performance. european banks in most cases have got a long, long way to go until they actually get way studies eight u.s. banks are injured as you know, a lot of u.s. banks buffer the cost of capital at the moment. alix: exactly. what is the next wave of trauma for the european banks? chris: i suppose it is whether or not the ecb will take rates down further and there will be more, sort of, soul-searching about what do negative interest rates -- if the ecb suggests a goes down, what does that mean for profitability, and does that have another negative impact? is there any growth out there, which will start -- if you want to alleviate that problem? shery: still ahead,

then, you moved to the ecb. the more you look into it, as you get into deeply negative territory, we are not there yet. to deeply negative territory, you have to balance -- in an economy, in europe, in terms of patterns, i think we are losing the positive, especially after the doj's lukewarm reception. francine: you go further than that and say this is counterproductive. it in courage as people to save more. james: i think it is dangerous to have negative rates. it is end of the day, primarily about trying to engineer economic recovery. observing, people are saving, not spending. francine: thank you. coming up next, we talk to the ceo of the bank. we will last about the troubles in russia. we will talk about consumption around the world and margins. this is "bloomberg surveillance." we are back in two. ♪ tom: futures up 20. yields higher across the board. nymex crude gets a bit. the whole back story away from the liquidity crisis is oil, not finding a, not record lows. lower for longer. vix elevated over the t

willveryone expects ecb cut rates again. if two-year german bonds are at -50 basis points, it is telling you the direction of travel. rates are coming down, they will probably do something else with the quantity of bonds that they are buying. policy is going easier. did anybody in the room think it is going anywhere else? manus: you have been in bond markets for -- steven: too long. [laughter] manus: how concerned are you about negative rates? the ecb have said the lower buying can open up. currency markets are ignoring negative rates in japan. how worried are you buy the consequences of negative rates? we had a discussion the other day, their view was that it does little to propagate the growth. teven: it is the latest iteration of unconventional policy. of 2%ne has the sort inflation target, some from underneath some are symmetrical. if that is the imperative, why not have -1% rate and except he did only hit +1% on inflation. -1% is the rate you have in the nordic countries. it is the direct some travel for the ecb to go l

see much more meaningful easing from the ecb itself? >> i think there's definitely a need for more easing out of the ecb. i don't think it's been a forcing of a hand. but what i think markets are coming to the realization of is more cuts and more qe just hasn't been enough. it hasn't been enough on the inflation front. it hasn't been enough on the growth front. specifically with the eurozone, you now have issues within the banking system, within eurozone risk premium getting priced in. so really, i think the question that markets are looking for from draghi is how is he going to address this? just cutting rates by ten basis points, that would be a disappointment if that's all we get on march 10th. if they begin to look at how they purchase the bonds, how they can begin to address this issue of the widening spreads, that's much more meaningful. not only just for the euro and where the currency would trade but really, what is the tact of policymakers from here going forward? they're certainly getting challenged by the market. >> rich, let

european stocks extended games -- gains as the ecb president spoke. isio draghi repeating he ready to act should the recovery come under threat. mario draghi: in recent weeks, we have increasing concerns about prospects for the global economy. trade data has been weaker than expected. markets have intensified and commodity prices have declined further. in the light of the recent financial turmoil, we will analyze the state of transmission to our monetary policy. in particular, by the banks. , the pricers stability. we will not hesitate to act. the falling prices was amplified by the perceptions that banks may have to do more to adjust their business models to the lower growth. the lower interest rate environment. and the strength and international regulatory framework that has been put in place since the crash. angie: are these mario draghi othds enough to so the savage beast of the markets? he said he will do whatever it takes. do you believe him? do you put your money behind that? that phrasing? thanks very much for having us this morning. we saw ma

this ahead of the march 10 meeting of the ecb. euro-dollar, not much reaction. cpi, not exactly looking great at the moment. in terms of the kind of way this is going to work with draghi, i think we have something to talk about later. no inflation, certainly an issue for japan. inlation was at zero january. it puts bank of japan governor kuroda far away from his 2% goal even after adopting negative rate policy. some economists are forecasting further easing after that negative rate announcement. how far away, ramin nakisa, are we from full monetization of japanese debt? policy toolsk his seem to not be working. whether he's going to step back from the brink is not clear. i think more purchases is the most likely option. but his history has actually been a very good one in terms of surprising markets. he does a very good shot and awe story to markets. guy: but it hasn't got inflation. ramin: it hasn't. guy: he said he would have 2% by now. we are not there. ramin: from our point of view, it is stimulating markets. if you look at what happened to risk assets in ja

the ecb is expected, likewise with the bank of japan. how would you describe negative interest rates? are they weapons of value destruction for investment? they are, perhaps -- where would they rank in terms of your challenges? one of our top three challenges. our top three challenges are very low interest rates and expanded regulation across the world on many friends. -- many fronts. the third is the digital revolution. those are the three major challenges of the company. in terms of the low interest rates, to answer your question, this is a challenge for us every day. we reinvest at lower rates than maturing investments. an2016, our portfolio needed average 6.2%, 10 basis points lower than the previous year. we hold our assets for a longer view of time, matching assets and liabilities, and we bring it at 2.1%. this is an ongoing challenge for us, which we manage with a strong discipline. we have spoken to a number of insurers who look for infrastructure investment -- where is it pushing the investment strategy? what are the consequence

critical.this is redline, -.3%, that is the ecb deposit rate. ecb can only buy debt with yields about that redline. the yield is below the deposit right. what can ecb do if they want to qe?ease they can only by above that redline. the constraints they have if they want to increase that qe program. matt: this is what you see a flattening of the yield curve. if they can only by at the higher end here, they will be pushing down yields here and they cannot get them down here. let me finish off with a look at oil because we know the correlation has been very tight lately. oil continues to come down throughout the day. have uti much worse than brand. wti much worse than brent. jonathan: airbus shares down this morning despite the company plus profits rising by 1.5% from last year. company's profits rising by 1.5% from last year. >> down in line with the markets. the analysts fairly impressed with what we've heard from airbus today. let's talk to the cfo. thank you for the time today. we saw what happened with boeing when they had production issues. as

we have a situation where banks are having to pay to deposit money to the ecb. they also charge more to lend to their customers, which is just the amount of customers borrowing. i think you're going to see npl's, which are already much higher than they should be and are going to get worse. shock comingential from market events. i keep on going about these financial mass destruction weapons. they're going to see something occurred there initially and there's a good chance we will bonds kick him could that will generate and that wave of negativity. at the end of the first quarter, we will see a lot of the holders of these bonds to wake up to the reality that they are no longer priced at par. some of them are down into the 70's. they have to sell them. you have a wave of selling hitting the market and that will contagion and impact bank prices further. is this a time to step in and by thanks? uy banks? no, it's not. wait. now is thet is coupon going to be honored? clearly, deutsche bank proven the other day that there liquidity coverage ratios were massive liquidit

i also think the ecb is worth watching. has come out that has suggested the ecb should be in march, but there is also this conversation about what our negative rates achieving around the world? vonnie: another 10 basis points? >> i think people will look at each other and say, another 10 basis points, what does that get us? the ecb is notoriously slow in developing programs. i think we could going to be march meeting and they disappoint again. vonnie: we are out of time, but where will the 10-year treasury be after the elections? 's.low to mid 2 on the 10-year treasury. vonnie: thank you for joining us. wish we had more time. to give you some of those quotes -- the 10-year is .ielding 1.75% we have brent crude trading at 34.70. the market closes next. ♪ early scarlet: moments away from the closing though. bell.sing ♪ u.s. stocks closing higher this afternoon. joe: the question is "what'd you miss?" scarlet colin a winter tantrum has had no impact. digging deeper into the technicals. 500 andt says the s&p gold miners cou

we are not that far away from the next ecb meeting. euro-dollar is comfortably above levels that will make the ecb very uncomfortable. jonathan: that was my question. i am looking for to march, nevermind the fed and janet yellen. march when two-year yields in germany is negative around 60 basis points. -- what iswhat it's currently being priced in any way. the euro-dollar is north of 110 but much of it is week. how much can you push back? guy: it will be interesting to see? has done the other way. board are the germans for negative rates? jonathan: richard jones so much to discuss. thank you for joining us. that was bloomberg tv. the pulse is up next. jonathan: the pulse is next. plenty more to discuss on this front right -- on this busy friday morning at a payroll. ♪ ♪ we live in a pick and choose world. choose, choose, choose. but at bedtime... ...why settle for this? enter sleep number and the ultimate sleep number event, going on now. sleepiq technology tells you how well you slept and what adjustments you can make. you like th

the ecb more dovish. i think that is contributing this morning to the better risk environment. >> but an 8% drop? i mean, in -- well, 8% rise, excuse me, in the price of oil. i'm thinking of the massive drop in the dollar. aren't we seeing the dollar drop overdone? >> i think the pullback of the u.s. dollar is a function of both the higher oil prices and also a function of the fed being more dovish. that is very positive for risk. i think oil itself, a rebound in oil prices, especially if it's driven by hopes of production cuts, is not really going to change dramatically the risk environment. for me, that would be a negative supply shock. that's never that positive for the economy. what makes a difference here is also that the fed is getting more dovish and the market is noticing that. >> stanley fisher did say he doesn't know, you know, when the fed is going to move. he said that just in his recent comments. at the same time, then we look at the swedish central bank, the danish central bank, the eu, japa

the ecb talks about buying bad loans. three things bothering the world right now. a lot of stalk still but at least they're talking about the main issues. right now the dow up about 100 points. back to you. >> thanks so much. despite today's gain the nasdaq still down about 13% so far this year. the s&p tech sector down about 10%. dennis i won't ask you about the ecb but we are trying to get a sense as to how this repricing evaluation how it's being taken in the valley for instance. >> i think people from outside the valley look at it and say there needed to be a correction. some of the valuations are high. from other folks we start to see investors pulling back a little bit. we're very fortunate. a couple of weeks ago it was great for us continuing to build all the great things that we're building but we're hearing that investors are being gun shy on things. >> it seems that risk is off for the time being. people don't want to put money into momentum or high growth but high risk stocks. how does that play out across the tech sector? >> well, i think specifically w

and you know the boj and the ecb are nowhere near that. interestingly, in the fed, alan seem to view the vast holdings of debt as a vast tool rather than the residual from the crisis. ony say they are not bulging their balance sheet until they start to raise interest rates. it is a brilliant chart. downward nominal wage rigidity. see you later. [laughter] the fed goes,r as they have been ok cap the rest of the central banks on when they are going to shrink that balance sheet, particularly recently. both solicited an implicit have said we are talking about it right now, we will get there. we have a lot to think about before we get there. i love this charge. it is a general rule to never have more than for life will unless one line takes off -- more than four lines on one chart, unless one line takes off . and you can really see the story there. if you just to public debt as a percentage of gdp, it would look like the same chart. quick question, windows the fed really start to think about reducing its balance sheet? ar.e me a clear ye brenda

the unwind of that equally -- the ecb is doing a fantastic job. more easing is exactly the response needed. francine: are they not doing too much? when this in's, it could end very badly. the impact on yields is huge. nicholas: arguably, they are not doing enough. we could look at it the other way. think of the scale of the problems. growth in the eurozone will be 1%. inflation will struggle to get a little bit above 0%. that is not satisfactory. optimally, central banks need to do a lot more -- ultimately, central banks need to do a lot more. francine: there is extra stimulus qe. nicholas: that is a counterfactual there. ultimately, it would be worse if they do nothing. francine: we are getting to breaking news about this meeting in the heart between qatar and saudi and russia. we're speaking to our energy minister. we are understanding he is also there get we are understanding that venezuela was there. these talks ended quite successfully. we are getting headlines. they are agreeing to free the oil production. this is extremely interesting. let'

policy fromations the ecb has somewhat tightened over the course of 2016. it is an obvious caveat around the european economy about transmissions through headline inflation for the economy and the financial volatility, the impacts on the european economy. given those two precursors, you hope you get something and large, but not the bazooka everyone is looking for. thedan: we get minutes from fed tomorrow. what was you look for? jeremy: i'm not sure how much part of we will get as these minutes. i think we will get a lot of the stuff that we got from the testimonies last week. laying out exactly what the fed's thinking really is. everyone is talking about central banks. a lot of central banks are sounding similar. if you look at the fed, the bank of england, and not the bank of japan because you cannot trust them at the moment -- but everyone else's talking about local issues, domestic issues are ok. some unemployment markets are particularly strong. it is the external headwinds they are worried about. mark: of central banks lost the ability to alter rates o

and the ecb has put britain within the drunk. the united kingdom firmly within the eu, while out on the u.s. to integrate further with confidence. -- we arend markets more sure about the capacity to act jointly in a spirit of common responsibility. we should prove them wrong. cool over apple as the most fellow company in the world. saleson strong online and . it is the first earnings report. day andews 24 hours a more than 150 news bureaus around the world. baird standing by for the deputy markets around pressure and we have a story out of a china and makes back. yes, we have a little bit of a sinking feeling when it comes the markets. we are seeing a bit of it going towards japan easing. itsjapanese markets and will be going down 1/6 of a percent. across the region thatne in energy producers will go in japan. topicsoing into the which is down. it has put on about 5%. they're down by 1% into the recession. we haven't a number of divisions. saying it will go into market volatility which will raise. also, holding down which will sa

it is less than two weeks until the next ecb policy meeting. i will inflation data be received by policymakers? you've been looking heavily at inflation today. getting a lot of data. mark: we have spanish inflation, german inflation, french inflation. -.9%, theflation worst since september the german inflation -.2%. it leads up to the ecb meeting on march 10 with negative inflation likely to be confirmed at the eurozone level next monday or near so. much action of how do we get and will mario draghi disappoint like he did at the beginning of december? they're interesting because on a day when we here in the u.s. get our personal consumption expenditure, the inflation measure the fed likes to look at most, better than expected or higher than expected. we are just four months away from the so-called brexit boat. -- a vote. policymakers at showing much inside of the debate they are in come including the finance minister from spain. thatis is one element could be instrumental to everybody. the brexit is not a real alternative. it will increase the