ahead of the ecb, that is the story of the day. this is the second highest volatility ahead of an ecb meeting this year. highest was in march. look at the overnight volatility . what is interesting is it shows investors taking positions ahead of the ecb. an extension is widely expected. dropped his preferred inflation taste, highest level since december last year. the ecb releases three-year projections through 2019. will the projection tell us that the ecb will be close to its just below 2% target? that is a refreshing gauge for mario draghi. the corporate story today. russian selling and $11 billion its biggest oil producer to commodities trading. core shares up. state --prise deal on he announced the deal on state tv. it is the biggest foreign investment in russia since the ukraine crisis. in march the turnaround for glencoe, only a year ago raised cash from shareholders. glencoe up three quarters of 1%. it is all about ecb, though. francine: also the rotation from bonds to equities. a gauge of u.k. highs practice house prices r

is up to the ecb and draghi. i think that will be that the market once again, could take one of these negative scenarios. he will see that is very positive and a confirmation of their policy. of course, i totally disagree with that policy, but that is how he will see it and the wording he will give us today, that they remain confident and will stand by italy. and he will be asked about the italian banking crisis, of course. he will say that it's up to the authorities in italy, but the ecb is doing what it can. i think we will get a very confident mr. draghi and ecb talking to the point that the fundamentals are breathing steadily, -- but the metals are improving steadily -- but the fundamentals are improving steadily. the donald trump victory and his, you know, possible stimulus boost has already led to a $2 trillion rotation out of bonds and into stocks. also, to an incredibly strong dollar. has that affected mario draghi's policy prescriptions, or should iit? >> it showed in the sense that the u.s. dollar has b

the ecb. it's a little bit of both, matt. the extension of what we are expecting, but then a smaller extension through december. the: yeah, this is exactly sort of skinnier but longer situation that a lot of people hee talking about and that had intimated in his interview a couple of weeks ago. that isbe an extension until december. it will basically be a nine-month extension, but it will be a reduction of the bond buying program to 60 billion from 80 billion. hence they call it the skinnier but longer, that is what economists who have been watching this and forecasting this up and calling it, and extension. it will be interesting to see how he talks this through in the press conference. because this sort of points to tapering. even though it isn't going to be called tapering five probably mario draghi, he won't use the t word, in a sense, he is tapering off the purchases they are making, which could spook markets, driving the euro up, and blowing spreads out a little bit on the periphery. it

the ecb will unwind. he was stressing various times during the press conference that the ecb will stay in the market. they will keep on driving prices in the market. and that is probably longer also than 2017. i had to ask him why he is actually putting an end date to his program, as they have not reached the inflation target at their forecast horizon end in 2019. so take a listen of what he had to say there. >> our program says -- it goes until the end of december 17 or beyond, and the government council seeing adjustment to inflation consistent. so it is in sense a open-ended. it is state contingent, we will say, rather than open-ended. >> so there's a clear bias between what the ecb is actually doing, trimming the monthly purchases, the flows, so to say, to 60 billion euro, at the same time they are telling us that the inflation forecast will not be reached at the end point of their forecast horizon. that is making a lot of people believe that actually there is a growing discontent to put it mildly ins

the ecb tapering everyone, but the ecb did not use the word tapering. mario draghi said later, and then the details came out. the ecb can buy bonds below the deposit rate, they can buy bonds in the one to 30 year range. that is why the euro is down by after initially rising by .5 of 1% earlier. we rose to the highest in one month ahead of the meeting. the dollar,inst since falling to a mark lu on november 3. adam this amort from pimco said it is essentially a rate cut today. look at the reaction in the bond market. interesting. the yield on the german 10 year rising to the highest since january. this is the difference between the five year and the third year in germany. most inidened to the eight years. short-term bond yields falling today. bond price rising, and the ecb says they will buy bonds deposit rates and purchases will be reduced to 60 billion euros from april. ultimately, abigail, it comes down to inflation. this is drug use preferred five-year-five-year forward inflation rate -- this is ghi's preferred five-year-five-year forward inflation ra

. >> it's all about the ecb today. it's preparing to set out the next steps in its qe program as policymakers decide whether it's time to extend the central bank's massive bond buying program. >>> italy provides a distraction with rome demanding more time to rescue monte dei paschi, as former prime minister matteo renzi officially resigns following the failure of his referendum. >>> tui travels higher as the tourism group's full-year core earnings growth gives the shares a boost in early trade. >>> the gamble doesn't pay off for uk betting firms as the stocks sell off on a report that mps will demand stricter controls over certain betting machines. >> good morning, everybody. welcome. we're being told today is the most important day of all time for the ecb. >> it's always the most important day. >> exactly. european equity markets gearing up for the most important ecb meeting with a slightly higher attitude. up by a quarter percentage point on stoxx 600. asia gaining overnight. a wall street rally. europe higher for th

alessandro: the system is uncharted for the ecb. -- the situation is uncharted for the ecb. usually, the supervisory board, which decides independently from draghi and the monetary policy side, makes their decision, then goes to the council. they usually have two weeks to object. if they do not, the decision becomes binding. and the council usually does not intervene in supervisory decisions because they're supposed to be a separation of power between those two arms of the ecb. it would be quite unprecedented if the council reverses this decision. david: it feels like monte dei paschi is running out of options. if the ecb could -- thought qatar would come in, they probably would not do this. so who will take the job? yalman: maybe this is why renzi was waiting, so he did not have to do this. and hoping that the caretaker is only a caretaker for a short period of time and will not have to worry about the political repercussions. i am guessing on this, but it is tough. when political uncertainty is so , maybed there's turmoil that is the time they can do it and it will not be

higher than the ecb is at the moment. the ecb is going a bit earlier in terms of economic conditions. and a rise in bond deals, particularly in a country like italy, you are seeing those tightening conditions at a time when maybe the ecb doesn't want to go that fast. think it does reflect a better outlook for inflation. is going to struggle to convince investors that you won't see further tapering. sounds like he's going to have a credibility problem. seeing this reaction now in the bond market and as you say he's going to struggle to communicate, what effect is that going to have? guest: don't forget the fed -- forget when the fed started seeing tapering -- drug is trying to hint ever so gently we are not finished yet, but on the glide path of finishing quantitative easing. at the same time not just wanting to rip the iv trip out of the patient. i have some confidence it will be all right. mark: thanks a lot. average yield on the 10 year in germany is 3.4%. i never knew that. that breaking news that 21st century fox's in

the ecb needs the politicians. matt: we did not get a chance to talk about banking profitability, but i am sure we will have ample time for that. thank you for your time. thank you, joerg kraemer. back to you. anna: matt miller, in frankfurt. joerg kraemer will be on bloomberg radio at 9:45 with guy johnson for more on that ecb meeting. manus: we will have ful l coverage of the european central bank meeting. and then you can follow the meeting on your bloomberg at top . anna: how is the domestic picture looking? manus: and a bang or a whimper? can the ecb president mario draghi give the year can economy one more shot in the arm? they get into that conversation. stake inncore takes a rosnet, marking a dealmaking come back for the ceo. we take a look in the next hour of "daybreak." this is bloomberg. ♪ manus: welcome back to "daybreak." a.m. in new york. record after record after record. that is what is happening with the s&p 500 and the dow jones. it is a beautiful day. anna: let's get to the bloomberg busines

frankfurt story and the ecb. but politics continues to be the dominant theme. mario draghi was referencing this very clearly yesterday. it is a story that is present in asia. south korea's parliament this morning voting to impeach president park. rosalind chin is live at the national assembly in seoul with the breaking news. what happens next? what does this mean for the presidency? what does this mean for seth curry a? -- for south korea? rosalind: it means that will bet park geun-hye suspended from her presidential duties, and the prime minister will take over. a for mr. will address the nation at a clock p.m., at a couple of hours from now. lawmakers in300 south korea's national assembly, which we are standing outside, voted to impeach her. that means this issue will now go to the constitutional courts to look at it. nine judges on the constitutional court can agree to put forward this motion and to approve it. then, the president election will be held within 180 days. that is a long time. this process, if you

fresh action from the ecb. president mario draghi warning the newest stimulus might not be the last as it strives to reach the inflation goal. cutting deals to shake up economy markets. they join forces to buy a stake. we are awaiting a statement from the u.k.'s attorney general. mark: have a look at what european equities in trading under 30 minutes until the end of a session. go. it will extend until the end of qe 17. the caveat, the ecb can expand or extend if the outlook worsens, it can buy assets below the deposit rate if needed and abide bonds maturing between one and 30 years come a whole load of measures. look at the move in the market come equities are rallying and we see the euro fall and bond yields are rising. let's look at the other big stories. it is a month since the u.s. election, the $2 trillion shock is what some could call it because since last november 8 a month ago today we have seen global stocks, the blue line is risearket capitalization by $2 trillion and the bond market, the bloomberg g

the ecb decision also led bond yields higher in the u.s. let's turn to other markets open across the asia pacific. we are seeing australia gaining, that's up by .3%, but we're seeing the kospi down .25%. we'll see the markets open in just under a halfen hour. >>> executives at two japanese power companies say they're going to start importing shale gas at the end of this month. a joint venture between the tokyo electric power company and-oez the fund plans to import up to 700,000 tons by january 2018. the gasoline will be used for a thermal power plant. import prices of natural gas usually are linked to crude oil but they fluctuate based on their own supply and demand. other trading houses are planning to import shale gas. she'll she'll -- shale is a type of gas that can be -- >>> india's cash based society are continuing to struggle one month after large bank notes were taken out of circulation. the government suddenly announced early last month it would abolish 500 and 1,000 rupee notes the next day. they said it was an attempt to fight co

the one hope is that the ecb will be the lender of last resort. the more active they are on that front gently has been celebrated as a good thing. you're right. we have a fed meeting in one week from now. the fed is expected to raise rates and take away the punch bowl. no matter what central banks do the focus is on fiscal policy, higher inflation. >> overall, it's a reminder of the fragility of the situation in europe. this stimulus may be needed. you add to that what's going on in china, which has been strong recently. but it's stimulus led, not fundamentally led. could we be in january, where regardless of having hiked the rate -- seeing rates hiked once, we know how much that derailed markets last january and february. that's one concern. the other one is on the ecb meeting today. we could have volatile moves. yes, consensus is for a six-month extension of the 80 billion euros per month bond buying program. it's not a strong consensus. some people expect more 9 to 12-month extension. some people thinking they could taper in the opposite direct

most people in the markets wouldn't think that the ecb has the courage to do that, even though inflation is rising to what, 0.6%. even though growth is improving. even though many of the fundamentals are on the right trajectory. they would think that the ecb pulling the trigger now would be too premature. >> it is very simplistic. but if we strip the political uncertainty out and say, where is the eurozone and the economy itself? it's ready for tapering and not in the position that it continues to need 80 billion a month for buying. later in politics, when is it appropriate to message that? when is it more inappropriate to run at this pace than gradually in the market. we saw squeezing because of what qe is taking out of the system. so because of the political uncertainty, they will probably try to buy as much time as possible. it's probably close to a coin flip whether they punt that to march versus a small extension to june. but i think people in the market that are looking for the ecb to cart launch an extension of $80 billion through the end of 2017, i just don't think the ecb is the

case the ecb couldn't do it. in the short run it was clear more of the burden should be put on fiscal policy in a number of countries and the ecb have a bit more there. jonathan: we really appreciate your time and insight on the situation in the eurozone. from the peterson institute for international economics. -- commenting that global markets is shedding 300,400 clients --300,400 3400 clients. the number largely circulated in the press late last week, the confirmation in that memo. becomingfor 2020 is more complex as markets are shedding 3400 clients. let's move over to abigail doolittle for some movers. : a stock that has been over the map, now up slightly. all of this as the company has announced it has extended its agreement with mentor graphics. is up nearly 200% year to date on big hope that the ceo -- on big hope under the ceo. we will see how trading finishes out on the day. well -- goldman cut its rating to a cell. .nalysts marked delaney he thinks all the catalysts are priced at this point. he cut his

the strength continues off the back of the election, ahead of the ecb meeting tomorrow. dow futures up, along with the s&p and nasdaq. higher yields have been driving a lot of the action and strength in banks for instance. 2.37 is where we are now. backing up just a bit. we'll see where we go through the morning. >> let's look at european equities. strong monday, strong tuesday. again those first positive starts to the week because the fall out from the italian referendum was thought to be less bad than some initial fears. they are continuing strongly today. as you can see, up over 1%. this now based on the hopes that the ecb will ease policy a little bit more given the political pressures across the region. as you can see, about 1% of gains. the ftse 100 up 1.3%. the pound is soft this morning. uk manufacturing data came in weaker than expected. that's moving the ftse 100 and the pound. in asia, we had weaker than expected gdp out of australia overnight. down a half percent quarter on quarter. quite a significant surprise decline there. all of the rest of the markets, h

meanwhile, the ecb -- what you expect the ecb to do this week? economics bring -- economists bringing forward -- expecting more this time around? >> he will probably have the ecb fromng the current length 3-6 months but send a signal about tapering. there are likely to get a two-point message. want to bewe expensive but this will not tapering very long with deflation out. anna: a two prompt message. thank you very much. up next, more about italy. we're live in rome. ♪ taylor: holding on. renzi will put his resignation on hold until next year's budget is signed off as italy's president seeks to minimize political instability. monte dei paschi successfully complete one part of its capital increase plan, with the debt for equity swap of just over one billion euros. the bank will decide in the next few days whether to proceed with the capital raising, as it is still seeking anchor investment. setting the stage. german chancellor angela merkel's cdu is said to issue a tough stance on migration as she prepares for her reelection. we are alive from th

the ecb woes. the bank of japan has been trying for decades. post-brexit, the bank of england wanted to get in with monetary policy. for a lack of imagination, more qe government bond buying is probably the part they will take. to mean: someone repeated over and over again the boj and the ecb looking for ways to carry on expanding the balance sheet but recalibrating to enable them to do that. how do they do that? continuew them to expanding the balance sheet without bumping credibility issues everywhere? -- every quarter? simon: we don't know. the technical committees want to spring something more honest than just an extension -- on us than just an extension. it is highly likely that always see is increase in the concentration limit on bonds. that should be enough to give us another six months without looking at the heel floor -- y ield floor or t, both of which would be toxic. jonathan: in the background of this is the attention of italy. it will be addressed in the news conference in the q&a. how

for the year 2016 the ecb had a set phase at 10.76%. now they are saying they must keep the phase of the ratio of at least 9.5% from january. this just hitting the wires that the new capital ratio requirement is 9.51% for 2017 is below deutsche bank's current level required. so this coming, of course, after the settlement deal we got in principle between deutsche bank and the department of justice to settle mortgage backed securities, the u.s. saying that sum coming in just above 7 billion. that was shy of the upper limit of 14. they are gets a bit of a break considering they have to pay the sum to the u.s. authorities. as you can see deutsche bank shares off 1.2%. and rather quiet day trade. >>> dan collins is with us. looking at some other things you think can be worth watching. you talked about tesla and how they are raising prices in the uk. >> 5% set off by currency fluctuations which means they think it will be more expensive because of brexit. but they are going forward because of a variety of issues. >> consumers saying they are

there has been no policy changes in the ecb, and massive changes in the u.s. if they fail to deliver a clear message here, the possibility of a sharp rise in yields has to be realistic. so, 15 to 20 basis points almost immediately. guy: scott thiel is staying with us. michael spencer will be joining us. i will be going around the corner to talk to michael. that conversation is coming up very shortly. this is bloomberg. ♪ guy: welcome back. 16 minutes into the equity market trading session. let's check to see how the equities are doing. it is on the front foot, now 1.5% from entering a bull market. equities generally, as you can see, well bid across the european continent. let's talk about what is going on with brexit. brexit agreement should be reached 18 months after the u.k. triggers article 50. thet is safe to say that negotiation could start a few weeks later and an article 50 agreement could be reached by october 18. our european governor reporter is here. can he impose this kind of time limit? what are we learning about the way he is going to progress

the ecb adjusts qe. open a stock markets little lighter. >> we have seen the offshore you lower since these tweets. monthhas been a monster since donald trump's election. investors tell us what they expect when he takes office. >> the consensus will be good for some markets and bad for others. >> i'm looking for a 2% economy. 3-4% economy. >> we are hoping to do better. it is all straight ahead on bloomberg best. scarlet: hello and welcome. i'm scarlet fu. this is bloomberg best, your review of the most important business news and interviews from bloomberg television around the world. let's start with a look at the top headlines. the week began with change at the top in italy after voters rejected their prime minister's proposal for political reform. the prime minister says that he would quit in the early morning after losing the referendum. thatthink the expectation the result of this referendum would have a disruptive impact on italy and possibly on the eurozone, were grossly exaggerated. it was not co

why did the ecb keep going? stories about the possible hint of tapering. here is why, inflation is still weak. 4442, the yellow line is the 2% target. inflationline shows rising 0.6% year-over-year, far from the target. forecast previously the ecb was 1.2%, 28 teen, 1.6%. our bloomberg intelligence team says when they are looking at the economy, they will have a forecast that is weaker for inflation than the ones they have here. rishaad: tell me something, ecb will updating its economic forecast as well. what do we know about that so far? >> bloomberg intelligence saying not too much change. in the third quarter, area gdp year,3%, 1.2% year over maybe they will be looking at something like 0.4% in the fourth quarter. withight be surprised that surprises politically that they're not be more cautious on gdp, but here is what they are suggesting. dentt has not made a big in the u.k. or european economies as people thought it might. trump's election has led to rising bond yields, but not such a big hit yet, and even though t in the u.k. or european economies a

good news for the likes of the ecb and mario draghi. good news for the boj. not so good for the consumer. in terms of where the pb oc stands, analysts could expect them to tighten at a moderate rate. numbers expected in a little under one hour in beijing. yvonne: joining us live from beijing. china, putting more cars on the road with retail sales headed for a record. deliveries surpassing last year's tally. year, what is driving these sales? >> pollution concerns aside, we are seeing consumers try to get in the new set of wheels in times for the tax break. we are seeing a pickup. this tax cut is on small engined cars, up to 1.6 liters. we are also seeing super luxury car buyers looking to get in their buying before an additional tax is imposed. l arewe are seeing as well a the sales through november, 21.1 million. that is the fastest we have seen since last year. yvonne: are they going to have to extend this tax levy? is not a clear indication as to whether authorities will extend this tax break. there was a hint in october, but there is no certainty. with th

around whether the ecb will use the word tapering. if you remember from the fed days of ben bernanke, it can be misunderstood and associated as a dirty word. there's a good chance mario draghi will avoid using that term. he did say that qe would not be ended abruptly. that indicates that tapering at sign point will take place -- at some point will take place. at some point next year, you can see the tapering that is not called tapering introduced. manus: i found this other chart, the purple line is the ecb. it's doing the second-biggest quantitative easing, the ofond-highest to gdp ratio any central bank. if that continues into 2017, we have the fed in hike mode, what does that do to the euro? camp?u part of the parity >> no, i am not. you expect the ecb to go down and the fed to go up. our anticipation is that the market may have overdone the fed rate hike scenario. right now we're anticipating and and his -- and interest rate hike from the fed. a lot of the talk is overdone. it will correct a little bit from the movement we've seen

i want to talk about the ecb and aftermath. this chart represents every day on this index2008 and as you can see, today's move at the very right and of the chart is the biggest jump in the spread since 2008. it really sort of speaks to how investors have interpreted this move, which means higher rates more growthterm for and inflation and stuff like that, but not nearly as high in the short-term as this stimulus is going to continue. taperlly the thought was and then people reinterpreted that move and actually, it looks like a lot more bond buying for on for aould got while. lower rates in the short term. scarlet: "what'd you miss?" european central bank will add money to its bond buying program and extended to the end of next year. mario draghi stressed these measures are intended to maintain the ecb's accommodative presence in the market with draghi repeating that it is not tapering. andrew said that the ecb's reduction of asset purchases is a hawkish move. >> it is a stealth rate cut. they are cutting rates without actually

the ecb decision tomorrow. you can put any asset class into this yellow box here, then see what the range of possible movements will be after the decision. the green line is the upper bound average over the last year, the red line is the lower bound average over the last year. >> there are 30,000 functions on the bloomberg, and we always enjoy showing you our favorites. here is another function. quic . it will take you to the quick takes where you can get fast insight into timely topics. here is a quick take that explores fake news. ♪ >> a pretty crazy idea. >> that was one of the many quick takes you can find on the bloomberg and on bloomberg.com with business news and analysis 24 hours a day. that was "bloomberg best". thank you for watching. this is bloomberg. ♪ >> we are starting just like this? >> i don't know. >> when you grew up you do not have a lot of money, was it something you thought about? >> people seem to blame goldman's for more of the sins of wall street more than they blamed anything e

the ecb has to stand behind that as well. as long as we have that faith that we have not reached that -- the kitchen seat moment -- at least the increments are getting smaller. a billion here, a billion there. but the negative emphasis is fading. getould be nice to actually to that point where we feel like we really know what these numbers are. anne: what with this and legal settlements in the u.s. around allegations in the united states , the banking sector is not a quiet end of the year, is it? investment officer stays with us on the program. minutes away from the open. up next, we look at the movers in today's trading. bp secured a deal viable worths -- a deal by woolworth's network of australian gas stations. this is the sunrise over london. 7:55 here in london. anne: welcome back. 7:54 in london, 8:54 in berlin or paris. minutes away from european equity trading. let's look at stocks. bp in focus, buying woolworth's australian gas stations for 1.3 billion u.s. dollars, around 1.79 australian dollars, billions of course.

we had the flow on effect from the ecb decision. super mario draghi surprising markets with that lower for longer qe program. we had a good pop from asian equities, but you are seeing weakness, the casino stocks, pulling down the hang seng by .6%. .lso worth looking at is korea we are seeing it likely that president park geun-hye will face an impeachment vote. the kospi has been up 3.5% this week. some yen fluctuation, the yen quite significantly weaker at the moment against the dollar, so the nikkei up by .9%. index tradingpix at highs of 2016. australia's market getting a good boost on that rally in energy prices come up by .25%, but their casino stocks coming under pressure, and the story of dollar strength weighing on emerging markets, jakarta coming online, down .3%. shanghai is positive, that inflation data beating expectations. having a look at currencies, the againstening further the dollar, pushing past that 114 to the dollar handle. also worth looking at, the offshore and onshore renminbi. , thatfshore down by .1% dollar s

the ecb has been very happy with the announcement yesterday. they are only doing 60 billion a month all the longer end of the and theelds rising removal and deposit rate, yield moves fall. manus: the german first, you know, it is the biggest steepen are in must eight years. to your mind, does that momentum continue? michael: i think it could. the implication of it, if you have lower short-term yields, that could weigh on the euro. the ecb would be happy and euro.e with a weaker the other impactor of this reflationary trade and steeper yield curve is that it wavers the banks. they clearly -- it favors the banks. if you see medium-term, long-term bond yields continue to rise and in other parts of europe as well, that would continue to favor european banks. i think the clear takeaway from the action yesterday is to favor value stocks over the more defensive stocks in europe. manus: it is interesting. to what extent does the italian -- also stories. denials, decry also, whatever. we are not looking for an extension in monte dei paschi getting our c

ecb: that is something the is very aware of. the italian banking sector has been the focus of concerns about the banking sector although there are other parts of europe to worry about also. ecb has a role to play here away from their -- monetary policy. jeremy: we have to remember that the ecb under the single supervisory mechanism is the guardianship of the banking system. and the weakness of the banks has been one of the concerns as they think about the euro and the perception of their performance of the euro. it was notable that when you looked to those ecb decision's week about the adoption or the desire to get -- about the the banking system across europe is exceptionally weak. provide some impetus to the banking system and a boost to the balance sheet. manus: looking at what is on track for the balance sheet. the ecb is going to use -- is in termsusurp the fed of the size of the balance sheet by the middle of next week. the ecb is very much in participation mode despite the debate last week about paper. what does that do t

the ecb adjusts qe. china's stock markets open a little wider. and a few trump tweets make a lot of news. >> we have seen the offshore yuan versus the dollar trade slightly lower following these tweets. >> we do not really know what the back story is here. scarlet: it has been a monster month for market since the election. investors tell us what they expect when he takes office. consensus breaking down will be good for some markets and bad for other markets. >> i'm looking for a 2% economy. not a 3% or 4% economy. >> maybe the dollar should not be as strong as it is now. scarlet: and opec has a deal to curb oil production, but they have more to do. >> we're looking to do better. scarlet: it is all straight ahead on "bloomberg best." scarlet: hello and welcome. i'm scarlet fu. this is "bloomberg best," your review of the most important business news, interviews, and analysis from bloomberg television around the world. let's start with a look at the top headlines. the week began with change at the top in italy after voters rejected their prime mini

what is the reason for this rejection? >> the ecb has not really spelled that out. the word came this afternoon in frankfurt. that is the way things are going right now. there is drama going on after that word came out. the chairman of monte paschi and the ceo met with government officials in rome. there is some plan that is being hammered out now. i would like to put this story in context. why is monte paschi so important , not just to the italian banking sector, but to europe as a whole? if it were to get into more dire trouble, what kind of consequences would that have? >> it is the oldest bank still in operation. it has continuously been one of the weak links in the european banking system. that is symbolic of the whole system. as everybody knows now, the italian banking system is way down, about 360 billion euros worth of troubled loans. fixing monte paschi would be important or the entire system. mark: thank you for joining us. reporting on that big story that is coming out today on monte paschi and ecb rejecting their capital raising extension plan. let's get

to buy bonds, the ecb has to have a yield that is above the deposit rate. if something is above zero or 0.2%. bottom line they are going to tweak the role and change something about the relationship to the deposit rate but give themselves a way to why the bonds they need to where they need to buy them along the curve. technicals, the market watching those as well. >> harks critics plan to file a motion for her impeachment. >> our next guest says he sees asia entering a reflationary environment after ending 2016 on a strong note. this is bloomberg. ♪ >> you are watching "daybreak asia." china mobile and alibaba say they are expanding their alliance and the face of rising competition. [indiscernible] china mobile has also agreed to partner with baidu who will help digital advertising and facial recognition at the carriers stores. has agreed to sell in what is the country's biggest privatization. equal shares. russia is trying to raise cash after the collapse in oil prices . yvonne: volkswagen has been hit with a record fine in korea for false omissions rati

the ecb busy right now. they haven't ecb deadline at the end of the year and that is fast approaching. the ecb has put a new number out there as to how much capital the bank to raise. how nervous does this make you? >> it is a concern regarding the italian banking sector in general. smaller lenders seem to be having some issues. the italian banking sector has the highest share of all of europe. a climate ofeates uncertainty on that whole spectrum. yusuf: you mentioned the smaller lenders. enough,llion euros given what is at stake? >> what is at stake here, at ais point, is not necessarily solvency issue, is more of a liquidity issue. it is still manageable, but the question is, how much new money , how muchovernment will it strained the relationship with other european countries and hearing that package.as a rescue anna: they're calling it a cautionary recapitalization. that is the difference in getting this through the various legal hoops they have to get through based on new allocations. it's to be expecte

followed by the next day, by a policy announcement from the ecb. on friday, european commission president jean-claude younger gives a keynote speech at an the event working the 25th anniversary. coming up on "daybreak," keyboard warrior. the commander in chief elect, donald trump, takes another shot at china after speaking to taiwan's president. see you in court? the uk's most senior judges deliberate whether brexit can still mean brexit. will that derail the government's plans? and one last her a. the economists see another euro area boost from the ecb reaction to mario draghi, but will it be the last? this is bloomberg. ♪ manus: 6:22 here in london. a beautiful day. you are looking over tory harbor. christine has the business flash. christine: thanks. rom unicredit, according to people familiar with the transaction. is valued at as much as 3.5 billion euros. a purchase of pioneer, which oversees about 226 billion euros, would be the biggest acquisition for amundi can propel it into the top ranks of global money managers with almost 1.4 chilean

the ecb, was it more hawkish? >> the ecb is trying to give everybody something. the one to buy was deutsche bank in the cross hairs of the justice department. what an opportunity. >> yep. all right. we'll see you in under five. when we return, we'll have some more with our guest host and final thoughts from richard. stay tuned. we'll be right back. a basketball costs $14. at team spiritorth a basketbheers)sts $14. at twhat's it worth to talk tyour mom? whate valuofalue of capil is to ea,s? not just wealth, but things that matter. mo stanl >>> our guest host this morning is richard lafrack. it's been awhile since we played your theme song. you used to come on just to hear it. >> that's right. freak out. >> since the election, have you done anything with any of your property, said i got to do this, buy this, sell this, anything? >> no. the only thing i did was i said i got to make sure i finish all my refinancing because interest rates definitely moving a little north. >> what we try to do with some of the sacred cows, whether it's mortgage interest or charitable o

could look for in the euro after the ecb decision tomorrow. this is the ecmi screen on the bloomberg. you can put any asset class into this yellow box here, and then see what the range of possible movements will be after the decision. the green line is the upper bound average over the last year, the red line is the lower bound average over the last year. scarlet: there are roughly 30,000 functions on the bloomberg, and we always enjoy showing you our favorites. maybe they will become your favorite. here is another function you will find useful. it is quic . it will take you to our quick takes. you can get asked, contact -- content, and insight into timely topics. here is a quick take that explores the recent phenomenon of fake news. ♪ >> of pretty crazy idea. ♪ manyat was one of the quick takes on bloomberg. you can also find him at bloomberg.com, as long as -- as well as the other news and analysis. that does it for "bloomberg best" this week. thanks for watching. i'm scarlet fu. this is bloomberg. ♪ ♪ >> doing the deal, oil produ

does the part that the ecb or does not buy? bob: the are a lot of corporations that are doing well that are industrial companies that should benefit from global inflation. jonathan: i will ask you and unfair question. you started by saying this is not about price, and yet you have to tell clients what is in the portfolio. if they ask you how you price it, and you tell them you do not know. how do you do that? bob: you tried to think what is the proper level for the ecb get to and where should government yields be. i think in all of this, we are feeling this global reflation. the policies we are seeing are progrowth and inflation. that is good for corporate earnings. credit spreads should continue to come in. that is the one area of the markets, whether it is europe or the u.s. or emerging markets, that should look attractive. david: where is high-yield in all this? bob: high-yield looks awesome. it has done great. i get it. yields are at 6.25%. what has happened is that high-yield has absorbed most of the backup in treasuries i

julia, where would the ecb come in here? >> the ecb has been saying to them we need to see a recapitalization. the deadline given was the end of this year. the question is in light of the political instability we're seeing here, will they give banca monte dei paschi more time or the deadline holds and you have to make a decision here, either a private sector solution or we need to go to extreme measures. that will all be part of the discussion. >> thank you very much for that. >>> head online to our blog, worldmarketslive to vote in our poll. should the world's oldest bank in operation, banca monte dei paschi siena be protected from going to the wall? let's discuss this further. joining me now are dave lau lafferty, and igis. let me kick things off with you, dave. do you think banca monte dei paschi should be saved? >> coming from the american side, i think that's a little harder to make that argument. one of the advances that we've had in the u.s. was that we forced some recapitalizations on to the banks. we forced some los

we're being told today is the most important day of all time for the ecb. >> it's always the most important day. >> exactly. european equity markets gearing up for the most important ecb meeting with a slightly higher attitude. up by a quarter percentage point

the reason is the policy differences between the bank of japan and the ecb on the other. we don't think there will be a change to max the bank of japan, that the ecb will change -- is changing our view. -- ecb will exit quantitative easing during the first half of 2018. a big contrast to what is going on in japan. as an fx person, i prefer dollar-yen, over short euro-dollar. 2018.ne: first quarter of -- first half, stronger growth or because they realize qe is not working? steven: good question. our view, this is very much about inflation. qe from the ecb was always focused on inflation. it was to try and avert disinflation or the flexion, -- d-inflation. expectations are rising. if you look at what we think will become the ecb's new forecast, it will see inflation moving higher. had 0.2% inflation on average this year in the eurozone, next year that is 1.2%. very much going in the right direction. francine: what happens to yen? incredible targets, first of all. what does he do from here? look at dollar and think, they are doing the tightening for me. steven: that's right

the ecb is taking it down a little bit. is jeffreynow voegeli, banking reporter for bloomberg news. >> this is good news for deutsche bank. i would assume they would like lower interests. one, this is not a surprise. we are expected to lower the requirements for the bank next year. s have dropped down to 8% by 2%. maybe deutsche bank is better off now but it didn't sustain as much as others. vonnie: why is the ecb doing this? how does its criteria work when it comes to the different banks? why does the ecb have a lower ratio than deutsche bank? >> i don't have any insight into how exactly it is calculated with each requirement. the reason this has dropped is the european central bank has decided to make a hard requirement public. and the other hand, there is a so-called guidance, where the bank will get a phone call from the regulator telling it to do before this is hit, which would have an impact with bondholders and shareholders who had to forgo a dividend. vonnie: is there anything to suggest that deutsche bank will actu

has the ecb artificially suppressed of them? >> you can definitely say the ecb has artificially suppressed of them. that doesn't mean that they don't get some credit. very active, they are buying government bonds. the central banks into the whole idea of this is to keep spreads down and try to help the business cycle along. it has the side effect of putting spreads narrow. david: how much can we expect of the ecb? there are underlying fundamental economic factors that have europe diverging. are verytterns different. you sent around a map, the average people work in the different countries in europe. there is a substantial range between germany and england, more than 38 years down to less than 33 in some other countries. can the ecb still knit that together? headache is that they were all trained about macroeconomics. now there are so many other things, there are structural issues that remain unchanged. there are a number of political issues. what is the willingness of different countries to stay around? it will hang together bec

we saw that big fall in the euro after the ecb announcement. the dollar is stronger against the yen and the pound is stronger against the dollar. again, relatively flat compared to what we saw yesterday after the ecb move. look at oil prices up again today. crude above $51. brent is above $54. there's some hope that non-opec members maybe looking at production cuts. there's a meeting over the weekend. let's head over to wilfred. >>> the latest on the are trump cabinet. president-elect trump tapping andy puzder to be labor secondary. puzder, the ceo of carls juniors and hardee's. to get reaction on potential possible presidential announ announceme announcements, let's join tracie potts. >> democrat joe manchin is scheduled to meet with president-elect trump today to possibly talk about being energy secretary. he is from a coal state. that plus the pushback on puzder has him on defense. president-elect trump talked about his cabinet choices and china last night. >> they haven't played by the rules. and i know it's time that they're going to start

on my terminal is the ecb bond spread. i want to show you what the last few days looked like because the market got a little bit more relaxed over the last few sessions. yes, we have retraced some of that. but we are not up here, given the size of the lost, someone expect to say, why not, that we are looking at the complications surrounding italy. matt, it is not just italy, though, is it? matt: no, obviously, european populism has been an issue across many countries, many different elections. that right-wing populist movement has suffered a setback set to be austria next president. he is a green party backed candidate. hedefeated the freedom party told reporters that his win was a signal for your. >> "bloomberg daybreak: europe it is -- >> it is a signal to the rest of europe, all of europe, and the european union. matt: still with us is kevin gaynor. kevin, do you see this as a turning point, that you know, a pro-european candidate can win, and it is maybe not all about right-wing populist movements sweeping all over the

of the ecb. overall, they tried to argue the amount and size of purchases. and i believe in the second half of the year when they start talking about what is next, the market realizes that the ecb has reached its limits. >> they can reduce the amount of purchasing per month, but they expanded the timeframe. so net on net, they are still pumping money smoo the market when you look at the total bonds they are buying. doesn't that come into play? >> that's true, they are doing less for longer. but the market was not expecting them to stop qe next september. so from this point of view, i don't think this is additional easing. and i think the problem with the ecb is that the fed can justify why they are doing less. i don't think it was -- it is political negotiations with germany pushing one way and another pushing the other way. that is why the euro/yen has been appreciating. >> why is japan more powerful, though? sorry, i was leaning to sitc comfortably. >> well, i think they have to sustain adjusta

ahead of the ecb decision tomorrow with the hope that the ecb will extend the bond buying program. that rally is not extending here at this time. another reason for global investors to be optimistic. will be going to the bloomberg, this is a chart of analysts bringing up their profit forecasts. we can see all the way to the side that analysts are bringing up the profit forecast on the goals basis to a level not seen since 2011. this is very positive and stocks at the end of the day trade on profit outlook so perhaps this that investorsse aren't sharing? when we take a look at the euro ahead of the ecb meeting, it might not support the idea that the ecb and ecb president will expend the buying program. we see the euro trading higher. if investors that it was going to be extended, typically that would weigh on the currency. but it is worth noting that the euro is down after the u.s. election by about 5%. and finally, a quick look at health care stocks, trading lower. this is after donald trump said that he is planning on bringing drug prices lower. that is not good for the distributo

the absence of macro drivers, we have the ecb tomorrow, markets at least this year have tended to move up. now is the story right across markets. you look at what is happening. been trying to push these new highs on the dow jones, two point short of the record. we are looking at gains. we asked a lot of people why, a lot of money in the system. gains across these three markets. australia, up ahead of the gdp report, going to be a very busy kind of data released this wednesday. on top of that, you have trade out of malaysia. trade out of taiwan. the rate decision out of india. you look at the forecast, the foreignone, china, reserves report. a lot of people looking at that in terms of whether or not they really intervene and how much they have to spend to smooth out these violent flows in the fx space. currencies, nothing much. this is what happened tuesday. the euro, dollar-yen, interesting note from analysts. going tore we are not get a lot a movant in dollar-yen up until say the holidays. a lot of central-bank decisions. when you look at liquidity, that might lead to some price actio