Global growth softening, and specifically having caution because of trade concerns. We will talk with the ceo of dow in this halfhour, Jim Fitterling. Alix also looking at other names like 3m, surprisingly reaffirmed its growth organic sales. , sor names coming in weaker when you have Companies Like 3m , that is positive. Boeing is extending cuts, help withthem to their pricing power. Terrible news for airliners, and then all of a sudden better. David exactly. In the meantime, we have an announcement out of the turkish central bank. Mr. Erdogan has his way. They are going to cut the one 19. 75 , downe to from 24 . The turkish lira is coming down on the news, a little under 0. 5 now. Alix that is a 425 basis point cut. The market was expecting 250. This is definitely more aggressive on that side. David the got the message. Alix we are just about an hour away from Mario Draghis press conference. Eurodollar goes nowhere. Crude up by 1 . Basically, wait for the next hour. [laughter] david time now for the winning brief. At 7 40 five eastern, we get the ecb rate decision, followed by a News Conference with mario draghi. We get u. S. Economic data, including weekly jobless claims, inventories, and trade balance numbers. At 1 00, the u. S. Treasury sells fiveyear notes. After the bell, we get alphabet and amazon earnings. Alix we are joined by Michael Mckee and luke kawa. Here is the facebook cfo on the call yesterday. We continue to expect that our Constant Currency Revenue Growth rates will increase sequentially going forward. We also expect pronounced deceleration into the quarter and 2020, partially driven by uncertainties. Alix luke, explain. Intentionink the really cause them to reverse to be read at one point, but the point remains that all of these investigations, they dont have any material effect on facebooks business yet. It is still exceeding topline estimates. The revenue deceleration is better than deceleration going on everywhere else. People keep walking back to these bigger growth names. David fair enough, but this is the first time i heard facebook saying this could affect business going forward. Some of these changes could affect the way we read the money. Michael you get a rare bipartisan agreement in washington about the evils of the Big Tech Companies right now. If republicans, who normally keep hands off of business, are willing to go along with at least some sort of sanctions, theres going to be headline risk down the road for not just facebook, but google and amazon, other Companies Like that, that investors are going to have to Pay Attention to. David lets go to volkswagen and automobiles. We had a talk with the cfo of volkswagen. He warned as well about softening in the auto market. We know that the overall environment is weakening. We are fully aware of that, and that is the we that is the reason we have to be cautious about our costs and Pay Attention to it. Ford took estimates down. Tesla we will get to. The Auto Industry is having a tough time, at a time when they have to invest in electric and autonomous vehicles. That is exactly what investors arent looking for right now, heavy, intensive, low margin business. Autos underperform. In the case of tesla, theres clearly a degree of self cannibalization going on. In terms of low, tesla kind of brought that on itself in terms of their sales. The suv, highermargin mix is the only way to make investors happy unless you are cutting costs, which is not something that can sustainably be done across the broader Global Economy. Alix but thats ok because the ecb is going to cut rates at some point, and so was the fed, which is our third story. You see the expectation continuing to climb in the market. What do we expect today, but more importantly, why care . Michael the disappointing numbers we keep getting out of the euro out of europe have people talking about the ecb maybe moving today. There are certain things they can do. Forward tightens, an additional cut in the deposit rate in negative territory, or qe. Then signal to the rest of the world theyre going to cut rates in september. Have to set up some sort of system, it is widely believed, ring the deposit rate to help banks, so that may take to that may take some time. They may do something to get ahead today. Mario draghi is known for doing whatever it takes. David does he have what it takes, is the question. Does this really address the problem . If the problem is slowing growth and trade, why does cutting rates help . Whatever it takes is not enough. Luke accommodation is never meant to be the permanent fix. The fed is essentially trying to steer away from rocky waters. They are not turning these things into seaplanes or anything. Thats not how its going to work. But essentially, if you are betting on centralbank disappointment, a lack of dovishness at any time this year , you have draghi and powell coming up, and this will be the time for action and less a time for talk. David a new statement, putting rocky statement, turning rocky boats into seaplanes. [laughter] alix bloombergs mike mckee and luke kawa, thanks for being here. Coming up, we have an interview with the german finance minister in the next hour. Dont miss that. Of s pup, about 1 3 companies out with earnings for the quarter. Misses, and projections for the back half of the year. We want to show you what is happening with the lira. Themmediate move lower as Central Bank Cuts 425 basis points, well more than what the market was expecting. This is bloomberg. From a profitability standpoint, we expect to be probably around breakeven this quarter and profitable next quarter. I feel pretty confident about that. David that was elon musk on the tesla Earnings Call you. In premarket call yesterday. In premarket, the stock is down marginally. Ives ofnow is dan Wedbush Securities, who has a neutral rating. That is a step down, is it not . Dan yes. The profitability and Business Model is going to be a big focus today as bears take hold. David we talked about extended. Emand im not sure thats innovation. If the coffee shop down the street cuts costs, they will sell a lot more coffee. Can the Business Model be profitable at this level . Last night, the big thing was gross margin. Think the silver bullet, and its going to be the focus. That calls into question their Business Model. Can it be profitable . David exactly. You cant make it up on volume if you are losing money on every car. And actually, the margins on the scars have been going down. What can they do to on these cars have been going down. What can they do to turn this around . Daniel theyve pushed profitability further out, and they talk about things like in areas where that can become profitable over time. I think that is the worry for , how they can be profitable based on the current Business Model. Ultimately even in overall demand picture, our opinion that is an uphill battle. Alix is tesla still a growth stock . Look, it is a complex question because it is a group stock in terms of the model three a growth stock in terms of the model three. Overall, i think you are starting to see the bloom come off the rose as a growth stock, which is why profitability, cash flow is so much more important. Lastdidnt deliver there night, and thats the issue. Alix dan ives of wedbush, thank you. They issued debt, and inventory reduction, and costcutting. David and they will spend a lot of that money to get into china before the end of the year. They said we are going to get in there, no matter what. Alix with us now is Steve Chiavarone, federative global investors. How do you look at earnings . Steve i think 20 20 is everything right now. When the market was trading at 14 point five times, all you needed was the market to stop pricing in a recession. And almost didnt it almost didnt matter what earnings did. You really need those 2020 numbers to come through in order to have more up site more upside on the market. So far, so good. Upgrades have moved up a little in the season. But you still have trade out there is a risk to 2020 numbers. Have a lot more earnings between now and the end of the season. Right now if you are an investor, the things you need to our earnings is coming through ok. David and yet we keep making records in the s p. How much of that is just sentiment rather than fundamental earnings . We were at 18 times last september, 17 times forward now. I think it is repricing back to , we were pricing in a recession earlier this year, and it didnt happen. We went from 8 overweight equities down to 3 . We put some chips in our pocket. In order to get more aggressive, i want to feel more confident or have a pullback to our current numbers. Alix what are you selling . Steve we sold a little bit on the inside, and in the u. S. We emd value a little bit of on the inside, and in the u. S. We sold value. Some of the secular themes continue as the pickup and growth we were hoping for in the immediate is pushed back. You need a trade deal to get cyclicals and sentiment moving. David at the same time, 20 20 is Election Year and there may on the tradet issue because he was to get reelected. Steve chiavarone, stay with us. , dowg up, Jim Fitterling ceo, will be joining us next. This is bloomberg. David dow chemical reported secondquarter earnings this morning, and said it will see more, but slower, Global Growth, citing trade and geopolitical uncertainties. ,e welcome now Jim Fitterling dow ceo. You have a bit of an earnings trough. Is this an indication you have hit the bottom and are coming back up . Jim great to be with you today. We had a good quarter. Our revenues are in line with estimates. Our operating was in line with estimates. Yearoveryear comps are tougher. We saw a big decline in oil pricing, and some slow down and some chains. I would say youre dealing with a Global Economy running kind of on two different speeds. In the United States, the consumer is still strong, especially on nondurable items, consumable items, travel, those types of things. Big ticket items around the world have slowed down a bit. House purchases, health construction, consumer durables like appliances, consumer electronics. In autos, we probably see more of a slowdown in china then we do in the u. S. , but theres some. Lower growth having said that, we are coming off of one of the strongest years of the last seven. As we go through this trade environment, that has shaken a little bit of confidence in the value chain. People being more hand to mouth, especially on bigticket items in those value chains. We are just adjusting to make sure we can deliver results for shareholders. David how much is asiapacific holding you back right now . Jim we had good growth in china. We were up 4 yearoveryear. We had doubledigit growth in packaging and silicones. I think what tariffs have done in some businesses is because a little bit of a pause, a little bit of reluctance, for chinese purchases to buy american goods. That shifts some of the demand around. We may not be sourcing all the time from our lowestcost positions in china, but we source from where we can. I do think we will get trade resolved. Im just not sure it is going to happen before the end of the year. The issues are pretty finite, but pretty complex. The intellectual property issue on our side is strong, and the chinese have some strong points as well. David you mention some of the import cost issues. Explain how that affects dow and your product. Spreads really affect your profitability. Jim they actually helped us this quarter. We saw some expansion in our flexibility. We typically use natural gas liquids from a dominantly to make liquids predominately to make plastics and other materials. That spread widened over the last few quarters. Polyethylene prices have come down yearoveryear. Overall pricing was down about 9 . Were flat,y, prices but our costs came down, so we were able to hold onto margins. On top of that, we delivered 175 Million Dollars of costs synergy savings, so we continued to deliver savings out of the margins. 45 million of that was actually reduction of stranded costs, and we will get that done this year. David you had a big target on cost savings, i think 600 million. Are you going to make that number this year . Jim we will make that number this year. Deliveredclose, weve 1. 1 billion of cost efficiencies. Also, on our results, our cash from our operating activities was up yearoveryear 200 million. Thats about 26 increase. We delivered 1 billion from operating revenues in the quarter. This year we will spend around 1. 2 billion dollars on separation costs. Even in light of that, we are generating an increase in cash from operating activities. Next year we will see about 1 billion of that cost go away. We are setting ourselves up so that next year, we have a much lower cost position, more competitive cost position. Our goal is to be the best in our class from a cost position and market position standpoint. David operating expenses is one thing you cant control, unlike the price of oil and things like that. Another thing is capital investment. The report is you were going to cut that from 2. 5 billion to 2 billion. What is the rationale behind that . Jim our depreciation and amortization every year is about 2. 8 billion. Our goal was to spend that or below. Im going to cut that to 2 billion for the year. We will not cut our highgrowth projects. Weve got some very incremental high return, highgrowth projects. Things like our silicone downstream applications, coating formulations, some of our eo derivatives, and some debottlenecking at our plants. We will continue to do those, but back off some of the new greenfield investments. We dont really need to push into brandnew greenfield investments. We said we would back off of a fourheaded 50,000 ton polyethylene expansion in europe. Tonff of a 450,000 polyethylene expansion in europe. Debottleneck existing facilities. Incrementalt 18 expansions at existing locations around the world. We will complete those all this year. We are also going to make an acquisition of half of a joint hppoure in thailand, our joint venture in all your things in polyurethanes. Immediately creative to our return on investment capital, and that will close sometime in the back half of the year. David thank you so much. Good to have you here. That is Jim Fitterling, dow ceo. Alix good interview. The world negative yielding debt is inexplicable according to former fed chair Alan Greenspan. We will break down that interview. This is bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. Keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Try it yourself in any west elm store. Or order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Experience the leesa hybrid mattress. Right now, its on sale. Order today. Go to leesa. Com. Alix this is bloomberg daybreak. Welcome to the dovish centralbank world. Dow jones futures up. Three, reaffirming its fullyear forecast. Southwest pushing 3m reaffirming its fullyear forecast. Southwest pushing back. In better thanng estimated, but still warning about future road bumps for auto stocks. The eurodollar surprisingly is going nowhere. We had terrible data from germany. Business confidence terribly weak, the lowest since 2009. The currency goes nowhere. It feels like a race to the bottom. When whatever it takes is no longer enough . David and part of it is waiting for mario draghi. Hes going to have the answer, right . Alix magically, in the next few minutes. We get a huge rate cut from the central bank. Bring ourwe want to bureau chief in from london. Youve got to ask plane this one to me. Reporter it is youve got to explain this one to me. Reporter it is indeed surprising to everyone. Makingkish central bank a big rate cut. Everyone was expecting a live read decline after the decision, and there was a kneejerk it is now in positive territory against the greenback. We think this has to do with the fact that investors are now looking past the rate cut because turkey is offering some of the highest real yields in the world compared to its peers such as india, russia. It is now on par with mexico in terms of real yield. It still has got some room. David thank you so much. Is it possible that president everyone is right, that you can cut the rate that president aird gone is right that , thatent erdogan is right you can cut the rate that much . Get the problem is you can as much as you want from the market, and it is still not enough. David it is certainly true for the fed. Ecb, with many expecting at least a signaling of further easing, going beyond what is already a 40 basis point negative facility deposit rate. I spoke with former fed chair Alan Greenspan yesterday about negative Interest Rates. id never contemplated that you never get negative, because thats what it is. You would be trading something which you are losing in the process. It cant exist. Interest rates in the united are not alln china that much different from where they were several hundred years ago. Human nature has not changed. Time preference has not changed. Data, and then we run into this particular phenomenon in recent years. David but isnt is a strange nickel asset to the bond market, or does it tell us something about expectations for the future . Alan this is exactly the issue which i spent more time on, every time i get somebody whom i know is very knowledgeable. I asked him that question. What i find astounding is how few people care about it. Is notot good, but it evidently destroying anything as yet. But certainly, Interest Rates have got to have a critical fact do in somey always key measure of what valuation of property is. So i know less now about the economy than i did 50 years ago. David speaking of Interest Rates, right now there is talk about a possible socalled insurance cut in rates. In 1998, as i understand it, you cut three times when we had the aging crisis developing. Does ite sense make sense . After that, you came back and raised rates. Does that make sense for the fed to be considering that, an insurance rate cut . Alan yes. Forecasting is very tricky. Havein forecast outcomes far more negative factors. Act to sense, you will reduce the risk of those types of events, and that is a valuable thing to do. I remember very distinctly on a rates of cases, we cut not because we thought that it was highly probable that it what be necessary, but would happen, if indeed it did happen, was relatively large relative to other events. So it was a relative balance. Arejust consider that there certain small probability events which could be very dangerous. It pays to act to see if you can fend it off. David it doesnt strike me he says he knows less about the Economy Today than 50 years ago. Alix you can make the argument that every economist and central banker feels the same way. With us still is Steve Chiavarone of federated investors. What do you do as an investor in a world of negative yielding rates . Steve i think thats why the fed is going to cut next week. Alix closer to zero . Steve no, to not get to negative rates. If you see any potential sign of weakness for those big negative outcomes, may be the base case is into recession. But if there is some risk of that, if Inflation Expectations cut now because that ounce of prevention is worth a pound of cure. Maybe that gives the economy the needed kick, that little dose of antibiotics that keeps you from developing a full cold, and then you dont have to cut more aggressively. You dont get into a recession scenario. You get rate hikes a year from now at a modest pace. I hate the Term Insurance cut. It is a Risk Mitigation cut. Alix im glad you brought up antibiotics because a lot of articles have talked about the fact that you are now getting resistant to them. I feel like weve seen turkey aday, which is selffulfilling prophecy. Steve if the economy is a healthy 20yearold, Interest Rates around 5 , then absolutely right, acting too quick doesnt make sense. But if you are an older, more sickly person, i im not going to wait for that cold to develop into something more significant. It is not clear that negative rates have worked or done anything positive anywhere in the world. I think what you are trying to do is stimulate to avoid having to go to extraordinary measures. David it is a pretty extraordinary world where we are pumping much fiscal stimulus into the economy as we are. Stimulusmping fiscal as fast as we can, and yet we have to go down in our Interest Rates . That is pretty extraordinary. Steve it is, but you have to keep several things in mind. Are probably so low because they are negative everywhere else. Global demographics are slowing. Not in the u. S. That is why this is so important. We dont have to go that route. We dont have a demographic timebomb these other countries do, so lets not japanify ourselves. Alix what and what isnt working with this world of lower rates . We spoke to the cfo of Deutsche Bank yesterday on the impact from lower rates. Heres what he had to say. We are very aware that the outlook deteriorated during june. Frankly, it does represent a revenue pressure for us and all of the banks if rates from here go down further. Alix but then i look at the bank index of the s p versus the 10 year, and it hasnt tracked yields lower. Some bond proxies are not having the traction you thought. Why is that . Think one of the issues is when you look at corporate debt, corporate debt is kind of concentrated in bond proxies. Theres been a lot of fears about the end of cycle. We dont necessarily subscribe to that. If these companies are loading that isbt, i think holding that back. Alix coming up, we are moments away from the latest ecb rate decision. We are looking at near record lows for the german bund yield, 39 basis points. This is bloomberg. Viviana this is bloomberg daybreak. Coming up in the next hour, finance minister of germany. Heres your Bloomberg Business flash. Southwest airlines became the first carrier to drop the grounded boeing 737 max for the rest of the year. Southwest taking the plane off its schedule through january 5. The airline is the largest operator of the 737 max. Capacity will shrink up to 2 . American airlines also removing 737 max from its schedule, but through november. American posting Second Quarter profit that beat estimates. Hauser bush in bev anheuserbusch in bev reporting stronger growth than expected at the Worlds Largest beer maker. Bev says volume grew at the fastest pace in five years. That is your Bloomberg Business flash. Alix thank you so much. We are moments away from the latest ecb decision. Phone is bradthe fx,tel, jeffreys head of and with us still is Steve Chiavarone of Wedbush Securities of federated investors. Brad, what you think . We should seecut, euros through 1. 10. But if they are just setting us up for september, euro is probably going to squeeze a little bit into the weekend. Alix is that why we are seeing higher euro today despite the terrible data out of germany . Is that Short Covering ahead of the meeting . Brad i would agree with that. It hasnt moved a whole lot, but people have been getting short into the meeting, so it wont be surprising to see them take some of the shorts back after the fact. David just 10 seconds away, mario draghi does like to surprise. The Christine Lagarde transition, he might just do a set appear. Thats what i think. Alix 39 for the german tenyear, and eurodollar actually higher. I mentioned the weaker evo data. You have the deposit rate staying the same, 20 basis points. Marginal lending rate, staying the same. No movement on the deposit rate in any case. We want to hear what is in the statement. They change their policy language to allow for an Interest Rate cut. Setting themselves up for a cut later on down the road. You see euro around the highs of the session. You dont cut. You just prep the market, you have a stronger currency. That is kind of crazy. David you know what this means . It means that News Conference is really going to be interesting. Lets find out where they are going. Alix and i feel like the ball is in your court, fed. We are going to see how it goes. The euro now around the highs of the session. They also see rates at present or lower levels for as long as needed. I feel like that was a change, potentially, in the statement after the end of qe. Bloombergs maria tadeo is live in frankfurt, looking through duty decision is looking through the decision as well. What do we know . Maria we were hoping to get clarity on whether or not mario draghi would cut rates today. The market has positioned itself for a september cut, but we had those very poor manufacturing numbers out of germany yesterday and today, so there was speculation that draghi would want to get ahead of the market and cut today. That has not been the case, but when you look at Forward Guidance, there is very clear signal that the European Central bank is ready to cut further, but also that made it openended for as long as necessary. Openended,ing this really prepping the markets for a cut. That is pretty clear. Likely now to happen in september. We are expecting may questions at the press conference about the shape of this rate cut, but also q2 and perhaps the reintroduction of tiering. That could have repercussions on all european banks and make the debate around tiering become more heated up. David as im watching the headlines across the bloomberg right now, it appears that part of what they say is they have ordered a review of the options, including tiered systems. How long is that review likely to take . Will they have it in place by september . Maria it could happen, but that is going to be essentially the big question here. What weve seen, and this is is that pretty clear, european banks are struggling to make money, and they certainly cannot compete with american banks because rates are so low in europe. Things are going negative, and the market has priced in a 10 basis point cut that would take it to 40 basis points, but theres nothing to say the European Central bank could not to 50 or 60. This is going to become a major question when you look at how of qe is effective for the economy. Hintedqe2 mario draghi there for the end of the year. David so everything is on the table. Thank you so much to maria tadeo, reporting from frankfurt. For reactions on the latest ecb decision, brad bechtel of jeffreys and Steve Chiavarone of federated investors are still with us. What does this tell us about what people were expecting . Where they expecting a cut this time . Brad i think the market was priced around 5050 in terms of, if you look at futures and rate markets, and the euro flows. The market was definitely around 5050 for a cut. Theres a tad bit of a surprise in terms of where the market was weitioned relative to what ended up getting come about at the same time, the ecb is putting all options on the table. If they are talking about new assets, talking about tiering, talking about rate cuts, everything is on the table. Maybe even in terms of the Forward Guidance, extending that out to as long as needed. They are very dovish. They are stepping on the gas pedal a little bit on the other side. On the dovish side. The press conference will be quite interesting. Alix agreed. This is the perfect dovish hold. Steve, what is your take . Steve if they held today to get their ducks in a row for something that is more comprehensive, because just another rate cut probably isnt going to do it, but getting the qe, i think that is a good move. I think it is ironic, though, that an economy that has clearly Slower Growth and inflation sits in the crosshairs of the trade war and has future demographics right now thats going to be later to cut than the u. S. , which has a whole series of better cards to play at this point. If the pause allows them to get a more comprehensive package of stimulus, i think that is worth the wait. Alix you are seeing record low bund yields as well, a huge move in italian debt. Do you have a favorite trade off of this heading into the presser . Brad again, it is probably eurodollar maybe squeezing a bit higher. They showed us where we are at. Now we are going to hear more about the thought process behind what those alternative assets might be or what those hearings might be. I would probably take back the shorts if you have them on. D1 currency pair that did move over the last several weeks was euro swiss. Im kind of curious to see how that plays out. Euro swiss obviously more of a proxy for auto safety. The swiss has rallied quite a bit. We will see if euro swiss gets any moves to the upside now that we had this news. Denhing in the euro, euro euroyen, eurodollar, euro swiss, im watching all of those. Made a bigo draghi difference in the world. Is this a case of the boy who cried wolf . They say, if inflation falls short of aim. Ive got news, it has been short for a long time, and they havent fixed it. He runs some risk of that, but the alternative, which is to be stubbornly stoic, i dont think is a better alternative. See what you can do and try to keep this thing going. David very true. You very much for being with us. Coming up, facebooks 5 billion fine. What increased regulation may mean for the future. That is next on bloomberg. Alix if you are chipping into the car, listen to bloomberg channel 119ius xm and the Bloomberg Business app. This is bloomberg. Facebook betrayed the trust of its users and deceived them about their ability to control their personal information. This is what accountability looks like. As part of a settlement, we have to pay a major fine, and there are now very clear rules around how we need to operate on this. David that is Mark Zuckerberg at a facebook town hall meeting for all of the employees yesterday. Facebook is what im watching today. They announced their earnings and did very well across the board, but also said going forward, it might not be quite as good. Revenue growth may slow down because of all of that regulatory problem. Alix this is what , beingability looks like tone deaf to a 5 billion fine that investors were worried about. David it is a very large fine compared with others like equifax and british airlines. I think the larger question is this is not just the United States. Looking intoope this as well. Coming up on this program, more on earnings with bank of analystmerrill lynch joining us next. This is bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. Keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Try it yourself in any west elm store. Or order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Experience the leesa hybrid mattress. Right now, its on sale. Order today. Go to leesa. Com. Alix ford cutting its guidance and volkswagen morning of risks ahead. And the ecbs big dovish hold. Central banks looking at office for the central bank looking ering. Ions for ti we was big german finance minister about when it is the governments turn to step into help the economy. David welcome to bloomberg this thursday, july 25. The ecb has said we are not going to move anything now, but it is all on the table. Alix i feel like these are historic moves we are seeing on the bond market. The euro dropping like a stone, italianwing again btps down again. David it is incredible. They are all down. Italy is 1. 4. The sovereigns can borrow money at a very low rate. Alix what else can they do . They are determined to act if inflation outlook falls short of their aim. They see symmetry in the inflation name. They are going to order options for tiering and examine options for potential asset buying. I feel like it also turns the page on the race to the bottom. David it is, but you also wonder how much this will move the markets just by signaling. At what points to the market say youve actually got to do it . And then if it doesnt get the inflation rate up, then what they got . , when isis like whatever it takes not enough . Thats where the ecb is. S p futures are now up by six points on the highs of the session out of the dovish ecb. Eurodollar down 2 10 of 1 . It was up on the news because you didnt see the ecb cutting butbut now down now down. Record low bund yields at 39 basis points 41 basis points, below the deposit rate in europe. Even more expectation of a cut coming from the ecb. Crude pausing, gold popping. David it is time now for the morning brief. At eight 30 this morning, ecb president mario draghi will hold a News Conference to explain all of the options the bank just told us are on the table. We will get u. S. Economic data, including weekly jobless claims, durable goods, wholesale inventories, and trade balance numbers. After the bell tonight, we get alphabet and amazon earnings. Lets find out what is going on outside the business world. Viviana hurtado is here with first word news. Viviana new british Prime Minister Boris Johnson has made it clear hes willing to go for a no deal brexit. Today in parliament, johnson said he would turbocharge preparations for a no deal divorce with the European Union. Earlier he met with his new cabinet. 18 of the 29 numbers under theresa may are no longer in the job. The part of we can governor gave into the hundreds of thousands demanding his resignation. Next week he will step down. That means more uncertainty for the u. S. Commonwealth. The ricoh is still recovering from a deadly eric puerto rico is still recovering from a. Eadly hurricane south korea says north korea fired at least two short range falls into the sea northeast of the peninsula hours after u. S. National security adviser south korea. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This is bloomberg. Alix thanks so much. The wayabout 1 3 of through earnings season. Estimates for the third and Fourth Quarter dont look so promising. Joining us is so vita is ubramanian, bank of America Merrill lynch head of equity. Can Central Banks support earnings estimates for the back half of the year, or do they come down . Is a pivotal quarter. What we are hearing on guidance for the second half and next year so far isnt that great. Are right now, weve got deaf percent are banks, a itket at alltime highs, so feels like something has got to give. What i do think is priced into the market right now is this idea that the economy is struggling. One of the things weve been looking at is the valuation of defensive areas of the market trading at alltime highs relative to cyclical areas, so even within tech, software is alltime high. Lets thick about what happens over the next couple of quarters. One of the things we are worried about his trade friction, with slowing growth, companies have basically stopped spending money and planning for the future. If that corporate paralysis continues, that could be negative for the economy, for some of the more cyclical areas of the market. In theory you want to buy some value and offload a little bit of growth, but you look at facebook, and they totally crush it. We have google and amazon after the bell. Are you seeing a lot of people continue to go to these . Savita yes, i think the marginal buyer for highgrowth is hard to argue for when these stocks are already so over owned. If you look at the average mutual fund, faang stocks r 61 overweight at this point. Everybody is already there. I think the idea that youre going to make money just by sticking with these really crowded names is not necessarily as easy to argue for today. Thed we talk a lot about search for yield. Is there a search for demand . Savita oh, yeah. David it looks like theres unlimited demand for people to go on your site because so does that explain the winners and losers here . Savita i think you are totally right. Think the two defining are demand andks growth. These are the companies that are continuing to see demand. What i worry about is lets say we dont see an economic recession. Pretty muchts are saying what is happening right now is cyclicals are pricing in an economic recession. , if we the trick is dont see a recession and the economy actually does ok over the next 12 months, cyclicals are going to work a heck of a lot better than these relatively over owned growth stocks. David if the demand comes back. Recessionve along a that doesnt have a lot of growth in demand. In the past, we thought we can do this by cutting Interest Rates. When it comes to go back to facebook and people like that, it is not really interestrate sensitive. Youre not going to get a lot of people demanding facebook because Interest Rates are lower. Do we see Central Banks more on the side . Savita weve been in an unprecedented, easy Monetary Policy cycle, and it hasnt necessarily stimulated demand. It hasnt stimulated the animal spirits or capital spending. I think we are at a point where something is a little bit different. Say we avoid economic recession. The fed is doing a lot more insurance cuts. They are not necessarily seeing a need to cut Interest Rates. I think they are hyper accommodative at this point to extend the cycle, keep things going. In that scenario, if we do get even a minor cyclical recovery, i think the sector rotation will be pretty violent. David what are we looking at in the second half of the year . Savita i like financials in an area of the market where the quality and the yield are completely ignored by investors. Paying the same dividend yield as utilities. These companies have all passed their stress test. They are returning more cash, aggressively buying back shares. Multiple utilities is double that of financial. I think that is a glaring yield at half buy the price tag of the regulated utility sector. David so there are lots of bargains out there. More on the ecb rate cut signal. Have an exclusive interview with the german finance minister, coming up next. This is bloomberg. Alix its the ecb dovish hold, signaling a rate cut is coming. For now we turn to berlin, where bloombergs matt miller has an exclusive interview with olaf scholz, german finance minister. Matt im here with olaf scholz. Thank you for coming into our office here. Let me ask first what your reaction is to the ecb decision. We see now that mario draghi is clearly laying the groundwork for rates to go further negative, for more quantitative easing. Weve seen the buns now publish a low, and alltime low of negative 41 basis points of 41 basis points. That we are in a situation where anyone of us has to deal with the road by develop at of the economy. We know, due to all the tensions we have between china and the United States, the knots their development in the question of brexit that has an impact on the economy, mostly in the way that many corporates are willing to invest waiting for the next month. I think anyone of us is waiting for a solution to have an impact on the growth. Matt are you concerned we might be stuck in a japanese vicious cycle, where low rates beget low inflation and low growth . Guest i dont think so. We are expecting we will see better growth at the end of this year and next year. This goes back to what ive said already. We have all these tensions, and something we could not expect that this would be this year, but we will have a better growth rate worldwide, and this will have an impact on the economy, and especially on the economy of global, which is airily excited he exporting and importing from all over the world. I think this is what we should understand. Matt we have these global issues, the trade war, brexit, et cetera. Yet, u. S. Banks are doing quite well. U. S. Banks have never fully recovered from the financial crisis. Rates have been punishing to a lot of banks, especially here in germany. Regulations has been difficult. Loosen. Is starting to up. Olaf i think a lot of the banks did a very good job in the last years. As you know, they made a lot to reduce risks, and this is what we worked on also in the political agenda. We had a very big success with the banking package over the last year, which is now implemented. We will continue to work on that. Necessary we do now the next steps, and one of unions forming a banking so that the whole euro zone, the is acting as a marketplace for banks, and this will make Better Business for them also. Matt you mentioned the reduction in risks. Its almost like theres a pendulum between stability and growth that, since the financial crisis, has swung too far towards financial stability. You think regulation and rates need to come back a little bit to allow for growth . There is enough room for growth for banks, and also the economy. We have the highest number of. Eople employed if we have people coming over the borders of germany and looking in the right places, they will have a job. Is this nothing where you cannot have the perspective that better growth rates will come. Matt we have german pmis flashing the lowest level in seven years, the index dropping from the 10th month and 11th economists are concerned that the German Economy has contracted in the Second Quarter. What is your expectation . Think this is not a critical situation. Everyone is waiting for a better develop it worldwide. E are doing our job in germany we released low income people from taxes, and this helps a lot. We will do further things like this. Burdens which was put to the people after german reunification will be released now from 90 , the solidarity tax. This also will help the situation in germany that there is good growth. If you look at the figures, you will find that really there is stability coming from the market in germany. Matt sources tell us you are studying the possibility of a Corporate Tax cut to boost competitiveness in germany. Is that the case . Olaf we want to make our Corporate Tax system much more effective at looking at the global scale, but we are not discussing about reducing tax rates. Att what about the possibility of fiscal stimulus . Germany has a lot of surplus. You get paid to borrow, and you. Ave a lot of things olaf the reality is we have the highest applicant investment figure ever. We increased it very much, and all of theng to get money. We just wanted things to be done, and this is what we already did. My view on the question is that we are not in a situation which makes it necessary to act as this we would be in the crisis. It would have the wrong effect. If you put some money somewhere and the only things rising prices, this has low impact on the economy, and once again, the real question for all of us, you can see it in a very export oriented country like germany, is that we have some problems in the Global Economy coming from political tensions. If we are able to solve these tensions, this would have a better growth rate for all of us. Matt from the outside, it looks like you need to spend money on more planes to work on nato missions. You dont have enough submarines, soldiers, rifles. Youve got a commitment that you signed on to to spend 2 of your gdp in the military defense sector. Do you think you will achieve that in this government . Sometimes it is useful to look at the picture. In three years when i am minister of finance, we increased it more than in all the years before. You still need equipment and soldiers. Olaf we followed the line last year. Matt but you wont reach the 2 you pledged . We will reach the expedition in 2024 which is 1. 5 , and we explained to them where weng a budget dont want to make extra debt, it is something where we look at the questions from yeartoyear. If you look at the last few years, we have a quite good development. I think sometimes looking at the reality is better. Tt Christine Lagarde is going to the ecb. That leaves her imf position open. European ministers cant come to an agreement as far as i know on who they want. Do you have an idea who should be in that seat . Olaf i have an idea. Matt would you share it with us . Olaf no. [laughter] olaf but we are working intensely on finding a common proposal, and it looks like we would. Matt if you cant, do you believe someone from outside the European Union would be put forward . Someone are finding from the European Union to put forward. Matt last week, french lawmakers passed a tax on Global Digital companies, a 5 tax with revenue globally of almost 1 billion or so. What do you think about the Global Digital tax and this framework . Olaf we are very successful working on the question of how we can have a better and fairer taxation worldwide. There are two questions now on the table where i think we will reach agreements in the next year. We are working hard together with our european friends and including other g20, the United States, that we will this. Way to do having found an agreement on this question, we will implement it in europe, and this will have a very good effect on fair taxation. The other question is about how we deal with the new aspects coming from the digital companies. Aspects just a question of fair taxation. It is the same for all the other corporate. Taxes where there is nearly no tax. Soin the United States it is in the United States. But the model is completely different to what we learned services and goods in the past. You are not selling something or a service to someone. You are just offering it without getting paid, and you get paid by others paying for advertisements and things like that. It is not fitting exactly in the way of how we deal with the economy new you need to find a framework for taxing these companies. Olaf we need to have a new framework in the system we already have, understanding that we tax corporates where they produce things, develop their services, and things like that. That we should find a solution for that, and without workingnd with all our groups and debates at g20, and think we france, i will be successful. It looks like we will get there for europe and the rest of the world. Matt youre going to continue to build on that. Thank you so much for your time. Olaf scholz, the german finance minister. David, back to you in new york. David thanks so much. Still with us here in new york of bank ofubramanian America Merrill lynch. Weve got negative rates in a lot of the world, and some u. S. Corporate that is negative yielding. Spokee to ellen i to Alan Greenspan, and he was just before by this. Alan how in the world did we end up with negative Interest Rates . I dont know. But the only thing that has come along in generations, which i find an explict both but it is the only thing that has come along in generations, which i find inexplicable. Savita i kind of agree, it is an explicable. But i think what it has done is created this reach for yield that is unprecedented. Anything that offers a dividend yield has traded higher. ,hat is the world we live in and it doesnt sound like it is ending anytime soon. We are pricing in just three rate cuts this year. This is a new world. It is a little different from the normal environment we are used to. I dont think we see rates go negative in the u. S. , but the fact that they are negative elsewhere does create a real demand for dividends that we see. David stay with us. It is time now for three companies we are watching this morning. First we start with volkswagen, coming out with earnings that actually did better than expected, although they said it is really soft and we expect worse to come. Onalso had ford disappoint earnings, and tesla disappoint on soft demand and a lot of costs. Alix it is really ugly. You wonder how you can have nonfiscal stimulus, being being exempt from germany. You have American Airlines oning a 400 million hurt the 737 grounding. Before, they end up getting to cut capacity because they dont have the max, but that is probably not the reason that you want to have less capacity. David there was a report today that they may pull the plane altogether, boeing may pull the plane. Alix and stop production. David the Third Company we are watching today is 3m. Brooke sutherland joins us now. So they made their numbers. Brooke they did make their numbers, finally. They beat pretty significantly on secondorder estimates. I will say, those estimates had been coming down as people had very low expectations, but it is a testament to 3m getting back to basics. It has long been a really reliable operator thats proven to be somewhat defensive when you get into a downturn. That perception has been challenged by their underperformance over the past couple of years. This is getting back to the ways of old where they are operationally strong. I am puzzled as to why they are maintaining their organic Sales Guidance for the full year. Line withdown, and. Hat ceo mike roman flagged to get to the height of their guidance, you have to have stabilization in china. You have to have recovery in autos. You look at what you just mentioned from ford and volkswagen, im unclear as to where that is going to come from. Alix i know you have industrials that are still undervalued, but how do you buy them but the clouds . Savita 3m is not changing their Sales Guidance, and it is a really good point. What is worth paying attention to is that in china, the consumer hasnt faltered. One of the things we noticed in earnings season last quarter and so far this earnings season is oriented products with china segments have actually seen better than expected growth. I think that is one thing to keep in mind. Theres manufacturing and consumer, and they are very different. Like industrials for reasons that have nothing to do with industrials. Hated, trading over session air multiples. Seeyield. Ink we will what is not to like about 3. 5 dividend yield. Alix Brooke Sutherland of bloomberg opinions. We do have some data dropping. I want to point out what is happening in the market. You are seeing equities rally on a more dovish ecb. It is what is happening in the currency market that is important. The you have the eurodollar hitting a twoyear low. 11 if you wind up having shorts coming back on the mark. Record low bond yields in europe. A move on yield as yields dropped like a stone. David interesting economic numbers out in the United States. Durable goods orders up 2 . It was down last month. If you take out transportation, a little bit of a version up there and a significant beat. 1. 2 as opposed to the survey at. 2 . Alix to your point of the u. S. Actually holding up, it begs the question how bad is europe . Play, youive value have. 2 basis points in bund yields. The data for the most part is holding up. It is fascinating. I think you still by u. S. Over europe. It is too early to buy europe. This is exactly what we are talking about. , butorld is not that bad sectors are pricing in a recession. That is the key. Positioning has gotten so crowded into either defensives or highgrowth stocks and there is this world of cheap cyclicals that are paying healthy dividends that are commensurate with defenses that nobody owns. I feel like that is the real opportunity, to look for quality no one else is describing valuation multiple. Alix brooke, i said goodbye to you but im bringing you back in. Retail inventories down. 1 . Where are we in the inventory cycle . Caterpillar was out with their numbers and inventories dipped up. They said they were at healthy levels but on the other hand their backlog was down 1. 9 billion. That tells me this is a soft demand environment and it will be interesting to see how these dealers work through their inventories, especially at a time when so many industrials are trying to raise prices. Higher labor costs, rising commodity costs. I do not know that we have through all of that buildup we had ahead of the terror companies trying to get ahead of the taffif companies. Alix and i really will thank Brooke Sutherland. We can see mario draghi getting settled. Ecb. Ish hold from the david the more you may have more papers to shovel. Alix or he wants to delay. Lets listen in to the head of the central bank. Mr. Draghi i can now report on the governing council, which was also attended by the Commission Vice president. Based on our regulatory and Monetary Analysis we decided to keep the key ecb Interest Rates unchanged. We expect them to remain at their present or lower levels at least through the first half of 2020. In any case, for as long as necessary to ensure the continued sustained convergence of inflation over the mediumterm. We intend to continue to reinvest in the principal payments for maturing securities purchased under the Asset Purchase Program for an extended we start the date when raising the key ecb Interest Rates. In any case, for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation. The governing council also underlined the need for a highly accommodative stance of monetary. Olicy for a prolonged time as inflation rates, both realized and projected, have been persistently below levels that are in line with its pain. Accordingly, if the mediumterm inflation outlook continues to fall short of our aim, the governing council is determined to act. In line with its commitment to symmetry in the inflation aims. It therefore stands ready to adjust all of its instruments as appropriate to assure the inflation moves toward its aim in a sustained manner. In thiscontext context, we have tasked the relevant euros system committees with examining options, including ways to read forward Forward Guidance, mitigating measures such as the design of a tiered system for reserve renumeration camera and option reserve renumeration, and options for asset purchases. Incoming information since the last governing Council Meeting indicates that while further employment gains and increasing wages continue to underpin the resilience of the economy, softening Global Growth dynamics and Weak International trade are still weighing on the euro area outlook. Prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets is dampening economic sentiment, notably in the manufacturing sector. In this environment, inflationary pressures remain and indicators of Inflation Expectations have declined. Therefore, a significant degree of monetary stimulus continues to be necessary to ensure financial conditions remain favorable and support the euro area expansion. And support the euro area expansion the ongoing buildup of domestic price pressures and headline Inflation Development over the mediumterm. Let me explain our assessment in greater detail, starting with the Economic Analysis. 0. 2 ing the rise of the Fourth Quarter of 2018, euro area real gdp increased by 0. 4 quarter on quarter in the First Quarter of 2019. Incoming Economic Data and information continued to point to Slower Growth in the second and third quarters of this year. This mainly reflects the ongoing weakness in International Trade in an environment of prolonged global uncertainties, which are particularly affecting the euro area manufacturing sector. At the same time, activity levels in the services and s areruction sector resilient, and the labor market is improving. Looking ahead, the euro area expansion will continue to be supported by favorable financing conditions, further employment gains, and rising wages. The mildly expansive euro area physical stance, and the ongoing growth in global activity. The risks around the euro area of Growth Outlook remained tilted to the downside, reflecting the prolonged presence of uncertainties related to geopolitical factors. The rising surf protectionism and vulnerability in emerging markets. Euro area annual hiv see 2019tion increased in june from 1. 2 in may. Inflation excluding food and energy more than offset lowerpriced inflation. On the basis of current futures prices for oil, headline inflation is likely to decline over the coming months before rising again toward the end of the year. Levine through the recent volatility due to temporary factors, measures of underlying inflation remained generally muted. Indicators of Inflation Expectations have declined. Labor cost pressures have strengthened and broadened amid high levels of capacity and tightening labor markets. The passthrough causing pressure to inflation is taking longer than anticipated. Over the mediumterm, underlying inflation is expected to increase, supported by our Monetary Policy measures, the ongoing economic expansion, and stronger wage growth. Turning to the monetary stood at growth money 4. 5 in june 2019 after 4. 8 in may. Rates of broad money growth reflect ongoing Bank Credit Creation for the private sector and low opportunity costs of holding m3. The narrow monitoring aggregate continues to be the main contributor to broad money growth on the component side. The annual growth rate of loans toward financial corporations inains unchanged at 3. 8 june 2019. Notwithstanding some moderation from the peak recorded in september 2018, the annual growth rate of lowest to nonfinancial corporations remains robust. The growth of loans to households remained unchanged at 3. 2 in june, continuing its gradual improvement. Overall, loan growth is still benefiting from historically low lending rates. The Euro Area Bank Lending survey for the Second Quarter of 2019en indicates of indicates low Growth Continues to be supported by increasing demand across all loan categories. At the same time, credit standards for loans to enterprises tightened in the Second Quarter amid concerns about the economic outlook. They remained broadly unchanged for loans. Measures,ry policy including the forthcoming new series of targeted longerterm ,efinancing operations, tltro 3 will have will help to safeguard Favorable Bank Lending Conditions and will continue to support access to finance, in particular for small and mediumsized enterprises. A crosschecked of the outcome of the Economic Analysis with the signals coming from the thatary analysis confirmed an ample degree of monetary accommodation is Still Necessary for the continued sustained convergence of inflation to 2 overhat are below the mediumterm. In order to reap the full benefits from our Monetary Policy measures, other policy areas must contribute more decisively to raising the longerterm Growth Potential and reducing vulnerabilities. The implementation of Structural Reforms in the euro area countries need to be substantial euro area to boost productivity and Growth Potential. Reduce structural unemployment, increase resilience. Specific recommendations should serve as the relevant signpost. Policies, theal mildly expansionary stance is providing support to economic activity. At the same time, countries were Government Debt is high need to continue rebuilding fiscal buffers. All countries should reinforce their efforts to achieve a more growth friendly composition of public finances. The transparent and consistent implications of the European Unions overtime and across countries remains essential to boast the resilience of the euro area economy. Improving the functioning of economic and Monetary Union remains a priority. The governing Council Welcomes the ongoing work and urges further specific and decisive steps to complete the Banking Union and the Capital Markets union. Your disposal for questions. Mr. Draghi, could you elaborate further this decision to preannounce a potential package as soon as september that was taken unanimously . The second question would deal a potential app. Are there restrictions in terms of investment classes, but are you looking at the whole of what is out there. Mr. Draghi thank you. Me give a summary account of our discussion as it has taken place. First of all, the first discussion was broad agreement and convergence of views over the assessment of the currency. You still see signs of strengthened economy but as i just read, the labor market and nominal wage growth support consumption. Generally speaking you have resiliency. The service sector. At the same time, this outlook is getting worse and worse. It is getting worse and worse in manufacturing and is getting worse and worse in this country where manufacturing is very important. Because the value chain, this proper its all over the eurozone. This must be taken into account. Reasons were found to be in the general uncertainty that has been with us for several months, more than a year. This relates to trade wars, geopolitical tension, to the possibility of a hard brexit is another factor to take into account. The slow rotation of chinese economies, all of these factors are affecting the present outlook and weakening it. That is the situation. Suggestingrojections we might have had a rebound in the second part of the year. Now incoming signs show weaknesses of growth in the second and third quarter. This rebound becomes less likely. Riskn all, the balance of was assessed to be on the downside for the reasons just mentioned, and also for the fact that the simple prolonged lingering of this uncertainty is a multirealization of one of these risks. On the inflation side, we saw inflation which is below our aim and we see projected inflation that says convergence is further out in , the though as i have said informational content of marketbased inflation also the sbf has also gone down. That is what led the governing , theil to these proposals various proposals. If i can go through them again. First of all, the introduction of the easing bias through the ,ntroduction of the word lower and at least to the first half of 2020. In any case, for as long as necessary to ensure the continued sustained convergence of inflation to our aim over the mediumterm. Set of see in the proposals, a consistent degree of optionality very much in the same way we have done on other occasions. We intend to continue reinvesting the principal payments from mature securities purchased under the Asset Purchase Program for an extended time past the date when we start raising the key ecb Interest Rates, and for as long as necessary to maintain fewer volatility conditions. Then we moved to this point where besides underlining the need for a high year commerce dance of Monetary Policy for a prolonged time and the knowledge meant that inflation rates, both realized and projected, have been at levels in line with our aims. This is new to our language. Accordingly, this is the trigger for our action, which basically reflects what i said. Accordingly, if the mediumterm inflation outlook continues to fall short of our aim, the governing council the determining act determination to act. This said we stand ready to adjust all of our instruments as appropriate to be sure inflation moves towards it same in a sustained manner. Part is we passed the relevant euro system committees. We not only affirm our, but we move a step forward and we task the committees with examining options, including where to enforce Forward Guidance on policy rates, mitigating measures such as the design of a tiered system for enumerations and potential new asset new net asset purchases. We have a broad discussion. On certain things we converged. On other things, most people converged, otherwise we would not have this in the introductory statement. , youver we have a package would expect people have different answers about different parts of the package. Approved as it was a package after a fairly broad discussion, but convergent to what i have just read to you. That is what it is at this point. You asked me about the mandate to the committee. It is a broad mandate. We have all the lease. That is where we stand ready to act. That is what we have had in the past. That is what the language says. Thank you. The first question is about the ecbs objective. The close below 2 is no longer in the Monetary Policy decision. It is in your introductory statement but not in the decision. Does that mean something we can expect the ecb to rephrase, redefine its policy objective . The second question is about the constraints the ecb is choosing to toss upon itself on the pspp. There are two key constraints. One is the issue limit. There both the choice of the ecb, the issue or limit has to do with the issue of not becoming a blocking minority. Does that mean that constraint should be regarded as harder and more difficult to get away from, rather than which is entirely discretionary. Mr. Draghi on the second question, i will be in a better position to answer you in september. We did not discuss that. For the time being, you can refer to my language, the traguage in my speech in cin when i talked about how to view the limits. On the other point, there is no change. It is true it is not there in the first page, it is on the fourth page. About a discussion signatory, and there is a sense in the governing council that it should be a reflection on the closeive, namely it is a but below 2 or should we moved to another objective . There were Different Governing Council measures suggesting we should carry on a reflection on this. It is an important change. We just want to think about. The main theme in this introductory statement is that the governing council, i think ive said this many times, now it is open, the governing council, we reaffirm its commitment to symmetry. It is close but below 2 . At the same time we say we do not like the current inflation. Accepting a lower inflation as we have seen today, i think these things must be readied together. Line of the discussion are reported to you before is basically we do not like what we see on the inflation front symmetry means that there is no cup of 2 . We do not accept permanently lower inflation rates. Symmetry means the governing council really act with the same will react with the same determination whether inflation is above or below inflation aims. I think that is important. I would like to follow up on your answer. You mentioned there was some disagreement about nuance. Would it be possible to detail them a little bit more . Was there any debate on any size or of any scalar time being a rate cut. Most people suspect it will happen in september. My second question, we see a lot of the data, particularly on german manufacturing and German Companies more broadly. Abouted to expectations today. Was there any discussion of that at the governing Council Meeting this morning . Mr. Draghi discussion about the situation taking action as soon as today to do a rate cut or taking other measures as soon as today . Mr. Draghi thank you. , not only, about whether we should have a package, what to do first. Doubts whether you hear there would be constitutional measures with doubts about the twotier system. If we areate can say too low all of the extremes, that would be calmed. The answer and thats short of nature in that sort of nature, there is no absolute that is a reflection of any instrument and that is reflected well in the breath of the mandate given to the committees. On the second point, you asked whether there was any discussion today. There was not. There was not because the sense seee see in outlook we an outlook. On the inflation front we do not like what we are seeing. Outlook at the last g7 meeting, i said it is. Ifficult to be gloomy today the present situation is one where you see signs of strength. See insame time, you different sectors weekly deteriorating economic outlook. Projectionsast june and decided if we will see the next projections before taking action. Also, the sense that all of this is complex and needs preparation. Good afternoon. My first question is about the curing system the tiering systems. You mentioned you tasked committees to look at that. Are you taking any of the systems in place in various countries as your Reference Point . You are probably the only Central Banks with negative rates that does not have mitigating measures. It has been introducing you interest them in the conspiracy. If you would tell us a little more about that. My second question is you talk about the committees. You said they will look at the options of other sites and the composition of the net asset purchases. Does that mean you do not exclude the possibility that other assets could be added to the program if it is really launched. Thank you. We placed ourselves in the hands of the committee. The first question is what saved what shape will be tier system have . We have to have the committees work to design the system. Certainly other country Central Banks will be an important element, but we are at the hands of the committee, the same thing of the second. We want to do have a growth mandate, physically leaving us some leeway for the committees to reflect because of the complexity of the situation. They had to process many aspects of the current outlook. This new language on the symmetry of the ecbs target, is that something that has formally changed . There would have to be some kind of formal
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