Anna a very warm welcome to bloomberg daybreak. From here in the city of london, i am anna edwards. Manus i am manus cranny. Brace for volatility. The euro has [inaudible] against currencies. Iscks are up 2 but this volatility in the fx market and we are getting back to the levels we saw in brexit. Anna this is the volatility we saw spiking ahead of the ecb meeting. The expectation is there will be an extension to quantitative easing but by extending it, you invite the conversation about when it ends. Manus is it longer and thinner . Eurodollar according to ubs, they say the dollar rally is going to peter out next year. They want to be long the euro, they favor being overvalued the euro against the dollar. 112 in the next three months or you anna [inaudible] journalists are mentioning it. Will mario draghi use that word . Here is where we are. 1. 0772. They are likely done with rate cuts. Manus in the past month, a great number, go to your search for trump on your bloomberg and 2 trillion comes up. That is what has been added to Global Equities. And 2iapacific up trillion lost in the bond markets. That is the biggest loss ever on record for a month in the bond markets and you have got that, they are gathering again. 49. 90. Thesewe are stronger on asian equity markets. And touching new records. State seeing a euphoric and that seems to describe what is going on in markets since trumps victory. Angie perhaps this is what is supporting it. Angie lau here with your headlines. Chinas exports rose last month, sapping snapping a losing streak. Shipments increased euro. 1 from a year earlier compared with estimates. Rose 6. 7 versus a projected 1. 9 decrease. That is the biggest rise in two years. 44. 06 dollars billion, 44. 6 billion. Unexpectedly cut its rating of thirdquarter growth to 1. 2 , down from a preliminary estimate of 2. 2. The revision was driven by drops in business spending and private inventories. The governments projections to the overall size of the economy rose thanks to changes in the way gdp is calculated. Matteo renzi formally resigned late yesterday. The countrys president still will not let him leave. He said he will delay accepting the resignation as he begins italys main political parties. Randy is stepping down after suffering defeat in sundays referendum on constitutional reform. Obviously have to go through an internal transition which i think will be hard. It will be very hard as we have to be transparent which is needed for Great Democratic Party to stand out but that, in my opinion, that will need to come after we tackle the process of government that is about to formally begin. Michael jordan has won a partial victory over usage of his name in china. The countries he has the right to the characters that translate his name into chinese and he is a well recognized person. The court denied his claim to the company word, selling sportswear under that title. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg. I am angie lau. This is bloomberg. Manus breaking news for you. The whole china story, the retail auto sales. This is according to pca. Into,oes that translate 21. 21 million units. This is january november. By november, it was up. That is china for the Global Markets. Anna just as donald trump has been putting the chinau. S. Relationship front and center politically, we get weakness in the yuan and boosts in chinese exports. Lets check in on the Market Action in asia. Are seeing a rally once again across asia up for a third consecutive session. The regional Index Holding at a onemonth high. Seeing australian stocks close up at 1. 2 . That Index Holding and highs not seen since august. Also another strong rally on the nikkei closing up by 1. 5 . A lot of these buyings we are seeing an asian equities and bonds has to do with your part of the world. A lot of expectation on Mario Draghis shoulders that the ecb will push out that Bond Buying Program asked the march deadline. We know mario draghi has disappointed markets before. It has been a very solid day of buying. Apart from in china in late trade, we seeing pretty flat on the shanghai composite grade despite the fact we had that very strong import number that angie was just talking about. If you have a look at the bond market, particularly in australia, yields on the 10year note down by almost seven basis points. At the lowest levels of yields in a month. You seeing a lot of money coming into not only stocks but also bonds today. You. thank the latest on the markets. That is decision day for mario draghi. Investors are widely anticipating that he will extend the asset purchases at the current pace of 80 billion euros a month. Anna the big thing to watch out for is whether mario draghi gives any signal as to whether qe will and. When qe will and. End. Acts a difficult balancing perhaps ahead for mario draghi. Matt difficult because he has to decide how much to tell markets, convey to them that he is going to continue this qe and maybe tapering will not happen so quickly. On the other hand, he has to say as little as possible because he is not exactly sure how much support he is going to get from euro area governments. The most important thing is going to be how the tapering, that trajectory of that tapering is going to look. Most economists we surveyed expect an extension of the qa program for six months at the current run rate of 80 billion euros. Euros a month. The question is when that and, how quickly will he have to bring it down . Manus that is going to be the debate. It will be a hugely watched nuance, every word he uses will be nuanced. How are events in italy, his home country and the referendum is going to play in two Mario Draghis strategy. There is one story, it is a massive risk in italy, isnt it . Matt yeah, he had said in the last week that he depends on, the ecb depends on the extraordinary support of governments for his monetary policy. What you saw happen in italy is very bad for mario draghi as the head of the ecb. Another question is going to be much they are going to be able to buy. As you know, in a lot of countries they have already bought as many ons as they can buy. Portugal has reached a limit. There are a lot of bonds that are offlimits because of other selfimposed rules. Those changes are also going to be key to analysts and economists and investors watching todays ecb meeting at 1 45 p. M. Local time. Anna thank you very much, matt miller braving the cold in frankfurt. We will have full coverage of the events that matt was referring to. 1245 p. M. London time. You can follow the meeting on the bloomberg. Now with us in the studio, the chief global economist at [inaudible] lets talk about the ecb and how they managed this balancing act. On the one hand expectation in the market is that we will see an extension to the program but if you extend it, that invites a conversation about for how long and the end date looks large. Guest it certainly does. I would be along with the market consensus to think they will add another six months. I do not know if they would say anything about tapering. I am guessing they will add something to it. Linend prices get out of in italy although i doubt they will mention the name. They may say that the European Central bank will do kind of whatever it takes in order to keep spreads in line. Likemight make a comment that. As you were saying a little bit ago, the european economy is doing pretty well. I think mario draghi can feel he has done his job. Manus lets talk about some of the benchmarks. We were looking at this this morning am a that is the inflation in blue. If you look at the trend, the data is outperforming by the most in a year. The report card that he has in his pocket going in here is really quite strong. Guest it is very good. You look at is the surveys, they are the highest in several years. Business and Consumer Confidence is coming up. European commissions Economic Sentiment showed confidence continues to rise him we have on employment in total still pretty high but below 10 . That is as good as mario draghi could have expected. Anna we will get new forecasts around grace growth and inflation. Not deliver would be a big shock. Why do we need an extension of the program, why not just carry on until the date that is penciled in and then stop . Guest i think draghi feels they have to do a bit more to make sure the nice economy that is coming on now just has some lasting ability. A gets into a sustainable expansion. That is kind of the problem. You get a nice recovery but you have to, in order to have the expansion continue, it needs to be sustainable. Anna he wants the governments to do more. Monetary policy has to setback at some point. Guest that is true. That is what is going on in the u. S. Have done thethat best, ireland and spain, have done some fairly dramatic economic restructuring. That would be helpful throughout the eurozone. Manus when we talk, i [inaudible] all you have to do is go outside wonderful these paradigm shifts are not as real for people on the street. Lets talk about italy. They have been moved from stable to negative. We will see the bond market open today but one of the things about moodys focus is on is the debt load. This is the critical point. Gdp is 130 for italy. The last thing they need is a prolonged political impact. Guest that is true. I am not sure theyre going to have that long impasse. I am guessing there will be a technocrat government. In which they will change the election the way they elect so that the winner of the plurality does not get that big bonus amount of seats in the parliament. That will keep the fivestar movement under control a little bit. I think things are moving in somewhat as good a direction as maybe as can be expected. Anna thank you very much. Some highlights of the day ahead. Electiond the buy takes place today. We get the u. S. Initial jobless claims at 1 30 p. M. A speech ine preferred on how to make the euro a lasting success. Coming up on daybreak. Under water down under. Reporting the worst Economic Contraction since 2008. We speak to the countrys finance minister. Ona with investors focused the central bank as it meets for the final time this year, we discussed the prospects for druggies qe program with the chief economist. Manus chinas trade revised as the imports and exports rise. We are live in beijing with the latest on the worlds secondbiggest economy. This is bloomberg. Anna welcome back. This is bloomberg daybreak. 51 . Seng is up ive the global stock rally continuing. Lets get the Bloomberg Business flash. Documents disclosed by Deutsche Bank provide smoking gun proof that lenders including ubs, hsbc, and bank of nova scotia [inaudible] the market. After the german bank settled a lawsuit over claims it manipulated gold and silver prices. Representatives of ubs, hsbc, and Nova Scotia Bank did not immediately respond to emails. Russia has sold an 11 billion dollars stake in its largest oil uce it to glencore [inaudible] they will share a 19. 5 percent stake. The sale is a triumph for president by mayor potent who announced the deal on state television personally. Deutsche Bank Employees may have manipulated internal indexes as part of an allegedly fraudulent losses. O help conceal to comment declined beyond an october statement that said the lender intended to [indiscernible] [indiscernible] accepting wechat pay. Customers will be able to complete purchases with a scan of their phone. It is embracing the cashless mobile payments. Manus thank you. Australias thirdquarter gdp did not make a great reading for investors. With the economy shrinking pie. 5 of percent. The biggest contraction since 2008. This comes after the rba left the cash rate [inaudible] for more, we are joined by the finance minister joining us from berlin where he is visiting. Isnk you for joining us, great to have you on the program. To what extent do you think the us trillion economy will be safe from route saved from recession by the Mining Industry . Guest we have had a bad quarter but if you look at the growth over the last year, 1. 8 , it that is still the strongest, one of the strongest growth rates in the world. It is stronger than any of the g7 economies except for the u. K. It shows we have to continue to work hard so we cannot take growth for granted. The us trillion economy is a economy and transition beyond relying on record levels of mining investment. Into a more stronger, more diverse base. That is where we have to continue to work to make our tax system more growth friendly. Also ensure that our exporting businesses across the board have the best possible access toarkets key markets in our region around the world. Word you used the magical for the whole world, infrastructure. The u. S. Is promising to do it, the u. K. Has [inaudible] your administration going to do question mark we hear the story about the rebalancing of your economy. What are you supposed to do in terms of infrastructure spending, should it continue to rebalance. Would you give up the balanced budget in the near term . Guest we have got a very significant Infrastructure Investment program in place. To the tune of 50 billion. We are focused on significant investing and enhancing economic structure. These are always under review and we can were looking at investorn bid our investment by partnering with the private sector. Remains on getting the budget back into balance as soon a sensible time cable and certainly that has not changed. Anna your budget could look you fiscally constrained if factor in Commodity Prices whether it is coal or iron or. Are you about to factor those into your budget to give your government a little bit more room to maneuver . Have a budget update in the week before christmas. All of these decisions are being made by the government in that context. We were waiting for the National Data to feed that into our economic [inaudible] underpinning our budget forecast. Very important to add that even though there has been some forvery in Commodity Prices commodities like iron ore and the like, those prices are below their peaks. Of lowlook at the impact Wage Inflation and low profit growth, that is more significant than the beneficial impact to date. Although somewhat of a recovery in Commodity Prices. All of this will be reflected in our budget update on the summer 19. December 19. Manus lets talk about the coveted mental you still have, it is the triplea credit rating. S p has warned it is under threat. John houston said it is a matter of time. Do you accept that it is just a matter of time given the constraint that you have the rebalancing act you have to do, is it just a matter of time before you give up the aaa and is it worth that much in this world to have a aaa . These are forly, the credit agencies. We work hard to put ourselves in the strongest possible position for our economy and the foundation for our budget on the strongest possible Fiscal Foundation for the future. All told he is nothing new. All thesed on things we control, the decisions on spending and the revenue side of the budget, the policy decisions that all of the policy decisions taking together continue to improve our budget pigot position. There are always and for any government, always external factors beyond your control. That will have an impact on your overall fiscal outcomes. Anna austria has benefited from its links to china. A lot of investors are asking questions about how much opportunity there might be in the United States, the infrastructure story around donald trump, for example. And extend to try the definition of the lucky country and try and reorient that away from china toward the u. S. . Guest we have a strong and longstanding friendship and alliance with the u. S. And we look forward to working with the Incoming Trump administration. To the Mutual Benefit of both our countries and our prime to ther has spoken president elect trump. There are as you would expect contacts between yesterday and government and the incoming administration. We are very optimistic about our relationship. It is a relationship that has withstrong and very good the governments of both political persuasions on the american and australian side. Our trade relationship with china is also very important. We continue to be an important relationship, it is our most important twoway trade relationship that we have. China is going through a transition and all of these , will will have to be have to continue to be worked through. Manus thank you for joining us this morning. The us trillion finance minister ning us live from germany australian finance minister joining us live from germany. Anna decision day for druggie. We are back in front for to talk about the ecb. Mario draghi. We are back to talk about the ecb. This is bloomberg. Guy just after 6 30 in london and 3 30 in tokyo. The dollaryen is down 0. 25 . It is daybreak. It is available on your terminal and mobile. Lets take a look at the top stories. In our editorial meeting on a daily basis, this is like me. It is a cover story. It is of course, ecb day. The consensus of the meeting is for the sixmonth extension for the qe Program Beyond the current expression date in current expiration dtaate in march. Volatility suggests hedging could be the name of the game. Anna the nextdoor is italys credit outlook. The next story is italys credit outlook. Movieodys slow and halting progress. The countrys rate stands at two sets above junk. Manus exports supported a surprise gain, snapping a sevenmonth losing streak in dollar terms. This is imported. This could be turnaround from exporting deflation to exporting inflation. Imports rising 6. 7 , the most in two years. And that was against a projection of the decline of nearly 2 . Anna absolutely. Lets get a look at the markets with nejra. Nejra yes, fresh records on the s p 500 and dow jones have lit a fire under the asian session. The msci asianpacific, up almost 4 . This chart shows u. S. Stocks were lagging asian stocks before the u. S. Election and now they are int e the driving seat. U. S. Future sare is are in the. Were still trading up 1. 3 . Looking at the sector breakdown, you can see telecoms are very much in the lead, followed by materials, which includes those metals and mining stocks. The Industrial Metals are higher today, particularly within the london metal exchange. Energy is also up 0. 7 . Oil rebounded after falling in the previous two sessions. The only Industry Group down are healthcare stocks, mimicking the u. S. Session where we saw those stocks after president elect donald trump declared himself an opponent of high drug prices in an interview with time magazine. You can see little bit of dollar weakness today. The korean yuan, up for a third day. The new Zealand Dollar touching almost four week high on comm ents from the Central Bank Governor that they are likely done with rate cuts. A little bit of sterling strength as theresa mays 2017 brexit schedule has been backed. A bit of euro strength as well as a second day of gains. It is close to a four week high ahead of the ecb meeting. Most economists are expecting an extension of qe, but when does that tapering come in . It could be a dangerous game that draghi is playing. He does not want a repeat of december 2015. Take a look at the turbulence. Llar volatility at its highest since june. Peter says this is one of the most of goal to interpret that we have had for a long time. It is one says this is one oe most difficult to interpret for a long time. Manus lawmakers supported in opposition, giving parliament the chance to scrutinize her plan. Anna that means may well have to set out a more detailed outline ahead of triggering article 50. Binding. Ons voted non still with us on set, bob bauer, chief global economist at the book liberte principal global. The consumer has been pretty resilient within the u. K. A lot of concerns about whether investments will hold up as uncertainty continues. Do you see evidence of weakness yet . I think it will come in the future. Ata we have seen, whether they are business surveys, mortgage o approvals, the last number was really strong. There is not a sign of weakness yet. Tourism is very strong. Of course, that had to do with the pound. Exports have been strong. We just do not see any bad data yet. Anna i am going to turn my house into a hotel. [laughter] [laughter] manus air bnb. We were looking at the current account deficit and we saw the treasury review the current account deficit. It was just not as bad as had been expected. Toat are the risks policy next year for the bank of england . Did mark carney misstep by going to 0. 25 . Where is the crunch point for carney, in terms of inflation . You mean, where does inflation have to go . Clearly, we are in a reflationary environment around the world. No, i dont think he made a misstep when he lowered rates a quarter of a point. Back then, nobody knew what would happen after brexit and that was logical. Now we see relflation in the u. S. , eurozone, and china. Commodity prices are up. I think that will keep the u. K. K. Ok. Anna we might get more inflation because of the weakness in the pound. This is mapping global trade flows. This takes the u. K. And takes the total trade within various parts of the world. The u. S. , already key to the u. K. Trade story. Two countries that britain has to appeal now and get further up the queue, in terms of trade negotiations. How muchxperience, difference can that kind of trade deal make for the u. K. Trade story . I think it could be pretty good. The Obama Administration said the u. K. My have to go to the back of the queue. Have to go to the back of the queue. The Trump Administration said that would not happen. I think the Trump Administration will put that pretty high on the agenda. I think it would be a great relationship and a great bilateral trade deal. Manus there is a great symbiotic relationship, that special relationship. I am waiting for donald to tell us how special we are. I know i am special. Can donald trump really achieve if he gets 1 trillion in stimulus in the u. S. . I am not sure that part of the package is as important as the tax and Regulatory Reform part of the package. I think that could be really positive. The u. S. Is already picking up. We had 3. 2 growth in the third quarter. We looked for that in the fourth quarter. We think we could have 3 growth next year. That is very positive. Anna thank you, bob. It is great to the your insight on what is happening stateside. Bob baur stays with us. Manus it is the last ecb meeting of the year and the spotlight is on mario draghi. Matt miller has a very special guest down in frankfurt. Matt manus, thanks. We have the chief economist from commerzbank. You made a great point about, and i think in your note you talked about a solution to draghis problem, which is even if he extends qe at the pace they are doing now, he will have a problem without enough bonds to buy. What is your solution . There is a 33 issuance limit within the next year. That means within the extended period, one solution would be to redefine the bonds. Currently, the ecb purchases bond between two years and 30 years maturity. If you drop the two year limit, it would raise the denominator and bring down the ratio of bonds in the ecb. This would give the ecb an additional six months. Matt this is a fascinating solution and i know you put this out already to clients. The broader question is whether he is going to extend, for how long, at the same pace . What do you expect for that broader answer . Extendpect the ecb to the Bond Buying Program for six months and to maintain the market on purchase. But you are right. There is also speculation the ecb might lower the bond buying me. U and to lengthen not only by six months, but by nine months. This could be interceded at the start of tapering, something i think they would like to avoid. If they do signal the tapering center and at a stronger pace than the market expects, when we see the euro initially rise against the dollar and other counterparts . It was obviously very bullish for the japanese yen. I think it would also be because for the euro, it would mean less monetary stimulus. However, it would not be overly bullish for the euro. A s for the euro. The tapering could also be a problem for Italian Government bonds. Why marios is my draghi has to be so careful. His communication skills have left a little bit to be desired. Are you concerned about that today . No, i am not much concerned because i think overall draghi is a very clever communicator. With only two sentences he stops the summer debt crisis. Matt what about the support of governments, the support of the people in europe . We saw the italian referendum fail miserably. We did see at least austria win with a pro europe candidate. But we have still got this populist feeling that takes it with a little bit of the support draghi said he needs. We can see these movements in the u. K. And u. K. The antiestablishment movement creates an atmosphere where it is very difficult for finance ministers and politicians to implement the necessary reforms. 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 lets get to the Bloomberg Business flash. Reporter thank you. Documents disclosed by Deutsche Bank provides smoking gun proof that lenders, including ubs, hsbc, and the bank of nova scotia, rigged the silver market. Eight months after the german bank settled a lawsuit over claims it manipulated gold and silver prices. Every sedatives of representatives did not immediately respond to emails. Russia has sold an 11 billion stake in its largest oil bil producer. Surprise deal that comes despite eu sanctions against russia. Lp,chairman of bloomberg the parent of bloomberg news, is a senior independent director i at glencore. Deutsche Bank Employees might have been part of an allegedly fraudulent scheme to help banca monte dei paschi conceal losses. That is according to an audit issued by german regulators. A spokesperson declined to comment beyond an october statement that said the lender intended to put forward evidence in court. Unicredit has agreed to sell 32. 8 of its bank unit to ensure a polished development fund. The 2. 6 million deal is part of the plan to boost capital. The purchase will make the polish government the biggest pekao shareholder, holding 1 3 of the stop, allowing you to control the Supervisory Board and make changes. That is your Bloomberg Business flash. Manus thank you very much. Lets turn our attention to chinas exports. They snapped a sevenmonth losing streak, in dollar terms. Lets get to Tom Mackenzie, standing by to break the numbers down. This is china triumph and good news, tom . Tom overall, yes. There was a bounce, a 0. 1 increase to export volumes in november. That does not sound great, but compare that to the forecast. They expected a fold of 5 . Compare that to october. The actual number was down 7. 3 . In september it was down 10 . That 0. 1 looks pretty healthy. This is a year on year figure. 2015 export numbers were obviously pretty low. The yuan now is starting to benefit the exporters here. They have struggled with high in put prices and higher wages. Of course, demand has been key as well. We have seen a pickup in global demand, particularly from the u. S. Also, the imports. You pointed to those and those to china,. 7 in tw versus a drop of 1. 4 last month. They were focused on coal, crude, and copper. Anna and manus . Anna we are thinking about the risks then to the recovery and the bounce in the chinese economy. If you are drawing up a list of them, does it start with debt . It is very near the top of the list. Debt in the corporate and banks. But also, donald trump, when it comes to exports, the uncertainty over his policy. Will he label china a currency manipulator . Is he going to continue with stimulus, because that can boost chinese exports. Bloomberg intelligence expects chinese exports to grow 5 next year, compared to a contraction of 7 this year. The pmi manufacturing data, also solid, gives policymakers room to tackle some of those corporate levers question marks, and the shadow banking as well, and the house price. It gives them a platform to act. They know have to do that they half to do that now very swiftly. That now veryo do swiftly. Manus and the data gets better. The terminal says china is swinging to an exporter of global inflation, which is good news for everybody. This is the ppi and export price index coming up. This is what the world needs, but there is a big risk, or am i overstating the risk, being accused as a currency manipulator . I think you are right. Nominal growth in china is picking up, but at the low it was that 6 . Now it is at 8 . Is verylation positive, but i do not think it will turn into a negative. There is so much excess capacity around the world. So, i do not see us running into productive capacity constraints, which would then bring about significant inflation. Anna which of the trumps will come forward when it comes to trade . The one at the podium during the campaign, delivering this antichinese rhetoric, antiglobal trade, anticurrency manipulation . Will it be that focus . Or will he step away from that kind of rhetoric . I think the supporters of donald trump, they heard what he said and they took him seriously, but they did not taken literally. I think his point about the antitrade rhetoric was, we need to do a better job and look at more for the u. S. In these deal s. We have opened up our borders in the United States and other countries have not been quite as reciprocal. That is what people heard. Anna so, as long as he makes small steps in that direction, that could be enough . That could be enough to satisfy the people who really like him. There is a large swath of the un ited states that lost jobs and have had real problems because of free trade, and not much was done to help them. That is the group that really voted him in. Eastern ohio in western pennsylvania, those are states republicans had not gotten in the past. Manus we had a map of their. Thee had a map up re. One thing struck me as i looked at this map. It is the 10 biggest benefactors of the reflation story. The United States is the biggest benefactors globally, but what surprised me is, look at europe and germany. There is not that much of a reflationary emphasis from the core of europe. That is true, but if you look around the world, the eurozone is picking up growth, the United States is picking up growth, the emerging markets are doing better, Commodity Prices are firm. That is good for the entire world. I think that will leak into the United States. I mean, into europe. Anna we were talking during the break about what has been driving stocks higher. You do not think we should lay all the credit for the recent stock rally what is it, 2 trillion we should not let it at the door of trump. That is right. Before the election stocks were increasing, the yield curve was steepening, banks were outperforming, value stocks were outperforming. The same things were happening after the election. I think markets were sniffing out the fact that the underlying economic environment was pretty good before the election and improving, but the election of donald trump and the sudden realization that we might have significant fiscal stimulus through tax reform on top of that forced investors to understand, this is Getting Better. Manus so, things are Getting Better and we took off. My journey has only just become if i am rallying for christmas in the stoxx 600. Would you be as bullish as i am trying to get myself to be . I think for a while, but stocks are not cheap anymore, at least in the United States. They are not horribly expensive, but they are not cheap. The only thing that will make them go up is profits. The National Income and profits accounts are up 3 year over year. So, that is coming back. Anna bob, thank you for spending time with us this morning. Bob baur, chief global economist. Manus what will the ecb president say, or not say, about the future of the asset purchase programs . Anna it is a tricky balance. Only the one hand, there is the expectation they will be more qe, but on the other hand, when will it come to an end . Thematt will be previewing ecb decision. This is bloomberg. Manus draghi steps up, delivering his final policy announcement of the year. Asian stocks extend the global rally amid expectations of more qe. Back in business. Chinas exports snap a sevenmonth losing streak. Imports jumped the most in two years. Italys president said he would delay accepting renzis resignation. And u. K. Lawmakers back theresa mays plan to trigger article 50 by the end of march, but only if she shows her brexit hand. Welcome to bloomberg daybreak europe. It is our flagship morning show. Im manus cranny. Anna and im anna edwards. Lets recap one of the big stories we have been covering overnight, which concerns glencore and its talks with ro snet. Glencore is confirming it is in final stage talks on rosnet. In talks for a 19. 5 rosnet stake. This is an announcement made by president putin. Glencore dealmaking seems to be back. We have seen the rosnet shares opening up in russia and jumping 4. 9 on the back of that sale. Manus it is interesting to see, glencore taking more of a substantial position in a Russian Company at a time when we still have sanctions in place. The interesting thing will be who arranged the deal. The bankswhere there involved . Manus we have asia marching higher in Global Equities are adding 2 trillion to the equity market over the last month. The bond markets have lost 2 trillion. That is the biggest loss ever in one month for Global Equity markets. One of the debates we will have with our next guest is europe, relative to the United States of america, is about 16 cheaper. Does it offer value . Anna lets bring up the risk radar. Ahead of the ecb day, we see a lot of exec patients o we see a lot of expectations of currency swings. The expectation is draghi will extend quantitative easing into the future. We have got the new Zealand Dollar in here. They said they are likely done with rate cuts. Manus oil is down 0. 8 . Non opec members and opec members divided up, i should say, it will take the pain. Breaking news coming in on the National Grid. They will sell 61 of their interest in the gas distribution business. So, the National Grid will sell 61 of their gas is to be businesses. Anna this is the investorowned utility company. They own this division of marks in england and whales. Also remember, they have a substantial u. S. Business. Company in the past on this program. Interesting to see this transaction, saying they look at the on or prior to the 31st of march. The new Holding Company will be called nggd. Manus they will propose a one off. They will proposea they will propose a one off 4 billion times capital return to shareholders. The National Grid. Weve got the first word news for you know and we will focus on italy. Matteo renzi formally resigned yesterday, but the countrys president will not let him leave. Sergio said he would delay accepting the resignation. He begins talks with italys main political talks this afternoon. Renzi is stepping down after suffering a defeat in the referendum. We obviously have to go through an internal transition that i think will be difficult. It will be very hard, as we have isbe transparent, which neither for a Great Democratic Party to stand out. But that only to come after we have tackled the crisis of government that is about to formally begin. Crediteanwhile, italys Rating Outlook has been changed from negative to stable by moodys. They cited the slow and halting progress on economic and fi scal reforms. Tains exit from britain has been approved by lawmakers after theresa may promised parliament the chance to scrutinize her plan first. Today is the fourth and final day of the u. K. S Supreme Court hearing into the handling of brexit. Anna house prices rose to a sevenmonth high in november. The index rose to 30, the strongest reading since april. That as the suppliers properties failed to teakeep up. Manus the opening of trading in singapore was delayed today. Futures on the nikkei 225, the opening was delayed by almost three hours. It is the fourth disruption to occur on the state venues in the last 18 months. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. You can find more stories on the bloomberg at top. Isus our number of the day 2 trillion, added to Global Equity markets. Was 1. 5day it trillion. Maybe i will take credit. But certainly, a very good day on asian equities today. 1. 5 gain on the nikkei 225. And the broader topix index is at a 2016 high. We saw a solid session in australia, despite the trade deficit widening. We saw a little bit of weakness coming through in china. As Tom Mackenzie mentioned earlier, we did see that trade down in china better than what the market was looking for. Equities today, closing down by about. 2 , a much better picture in hong kong. 4 . Ang seng rose, up by the regional index is at a one month high. It is the third consecutive session of gains. Ecbof this as we await the decision. Also, bonds higher today. Anna thank you, juliette saly. As we said it is decision day for draghi. Investors anticipate he will extend asset purchases at the current pace of 80 billione euros a month. The big thing to watch out for is whether draghi gives any signal as to when qe will come to an end. Manus matt miller is on the ground in frankfurt. It is cold out there and you have been there since 5 00. Read the tea leaves for me, matt. Matt i do not obviously, have the answers, but i have heard from many economists and investors, who told me what they would like to see. And that is an extension of qe for six months at the current rate of 80 billion euros a month. Some say it could be as little as three and some say could be as much as nine months. An interesting thing i heard from Joerg Kraemer about one hour ago is we could see possibly, and this is not his forecast, but possibly a thinning out of the purchases and an even longer extension. Maybe we see a drop from 80 billion euros a month to 60 billion euros in bond purchases. So, they are all kinds of guesses out there. The bottom line is, everybody expects an extension of quantitative easing. Everybody has been looking to see what tapering is going to be like after that extension, or maybe as a part of that extension, when the announcement comes at 1 45 local time and then the press conference at 2 30 local time. Anna we are setting our watches. Matt, how are the events around the italian referendum playing into draghis strategy . Well, the italian referendum, as you know, did not have much of an effect on the markets. I think manus said it took three days to recover from brexit and three minutes to recover and the ugly markets from the italian referendum. Three minutes to recover from the the equity markets italian referendum. Still, the populist movements around europe are focused on immigration and other things than the ecb and centralbank policy. Manus matt, as you say, the day will unfold. Matt miller, stay warm. We will have full coverage of that decision, 12 45 london time. Anna lets bring in to the conversation the cio of london and capital, where he helps manage 4 billion in assets. It is great to have you on the program. What are your expectations . Are expectations high for what mario draghi will deliver . They are high and he will have to deliver. He is not in a viable situation. You have yields in the periphery creeping up. You have potential spreading of populism. You have the fact that there is a region that is very dependent on making sure the euro is at low levels. I would expect higher for longer. Manus personification of what is happening in europe. The benchmark draghi but that is the highest in a year. The backdrop is not bad for today, is it . The problem is that we are just this just captures s the expectations, which is fickle. The wrong signals were sent back in 2011, when they were forced to raise rates. I am not saying this will happen again, but if draghi was to disappoint the market and the euro staged a shortterm recovery, the main problem of europe is not whether draghi the next credit available or not, it is whether we let it be closer to what we need, that fiscal union. We have parties around the comm on project. Draghi knows the next six months by reckoning time for the eurozone, especially because france is going to decide what the future is for this continent in the next few years. I would be shocked if he was to the possibility that this is close to the end for the eurozone. N as aithis is a but populationuestion, is inflationary. That is one interpretation. Could the same be said in europe, or is it much more complicated . It is reflationary if you have low capacity. If you still have low unemployment, as you do in the u. S. If you still have a situation when higher inflation will mean higher wages. In europe, it is not really the case. Europe still has a huge capacity. There are too many young italians unemployed. There is still a lost generation that has lost the productive ability. That is why i do not think that we should accept the imminent problem. Anna those unemployment numbers have been coming down though, havent they . Yes, it is like going into a restroom. You have been told the restroom is horrible, and yet, it is not too bad. That is what it is like. We have been having many years of big support of government yields. That has meant that again, the periphery has had the ability to lower expectations. Manus i asked that social context, if you have 40 to 50 of unemployment, you have one politician standing up and saying, it is all Getting Better. For many people, the reality is different. Lets talk about valuation and try to give some drive to these markets. This is the differential between the relative value of u. S. To european markets. The stoxx 600, 15 cheaper. Would you buy europe . Do you like relative valuation on a discount . That is a tricky grabbed. You are a glass halffull kind of guy and i am a glass halfempty kind of guy. Manus lets go to the pub together. [laughter] isthat can bmean the u. S. Expensive, or that something is going on in europe. The periphery are still quite cheap and the high quality stocks are quite expensive. This time, where growth will not pick up any time soon. And you have got the problem of further pressure into the eurozone. I would still be brave and go into those structurally impaired, cheap regions. I would still go into the benefit from a low euro situation. The next six months would be months of lower euro. Manus would you buy italian banks . I would not buy the equity. I would begin to look at the bond side of things. Italian banks have issued senior paper, which has migrated down as contagion spreads. Of italianthe bond side banks is not for somebody who is not as brave as you are, manus. Anna you have got a firm stomach this morning, pau, to make those comments. Up next, betting on russia. Glencore confirms it is in final stage talks for a stake in the countrys biggest oil producer. This is bloomberg. Anna welcome back. It is 7 20 in london and 8 20 in berlin. 1. 0766. Dollar, lets get to the Bloomberg Business flash. Reporter anna, thank you. Documents disclosed by Deutsche Bank provide smoking gun proof that lenders, including ubs, hsbc, and the bank of nova scotia rigged the silver market. After they months settled a lawsuit over claims that it manipulated gold and silver prices. Representatives from the banks did not immediately respond to emails. Deutsche Bank Employees might have manipulated the internal indexes as part of an allegedly fraudulent scheme to help banca monte dei paschi conceal losses. That is according to an audit commissioned by german regulators. A spokesman for Deutsche Bank declined to comment beyond an october statement that says the lender intended to put forward our defense in court. Starbucks is to start accepting pay at 2000 cafes across china. This means customers can complete purchases with a scan of their phone. The agreement means the seattlebased chain joins kfc, disney, and others in accepting the cashless global payments. Manus thank you. Glencore has confirmed this morning that it is in the final stage of talks over a 10. 2 billion euro stake in rosnet. Lets bring in bloombergs executive editor for energy and commodities. I was just reading here, the details of the deal. It looks like glencore is going to purchase a lump of rosnet. Glencore is only putting in 300 million. This chart is showing over the last year they have been selling assets. They have been unsuccessfully. On the face, you look at this deal, but it is a tiny equity stake for them. They are not so much interested in the stake, but in rosnets oil. Their forte is trading huge volumes of oil. You are going to go off to volume. Really, that is what this deal means. Anna this is a small buy by glencore dealmaking standards, but it has a bigger strategic impact. It is a huge deal for them because of the volume they are taking on. We are talking about hundreds of thousands of barrels of oil they will be able to market. If you look at the total volume, and it is extorte extraordinary, it will raise e glencore up again. Manus you have a load of international and global relationships. What does this say about the sustainability of russian oil . People were assuming that rosnet would have to buy back its own shares. This avoids that issue and means rosnet has a big injection of cash, but it also means there is International Interest in the Russian Oil Industry at a time when russia seems to be getting on the side with opec and seems to be bringing prices back up. Something still the announcement from glencore this morning was they were in final stage talks, waiting for ts to be crossed and is to be dotted. You would assume that if the russian president announces the deal on tv, they have got to be pretty close. Anna thank you, joe wallace. S the senior i independent nonexecutive director over at glencore. Lets bring pau morillaginer into this conversation. When we talk about the prospect of this deal for glencore coming in and taking a portion of this, russia it is almost as if it is coming in from the cold. For you, how do you look at russia . I think for once, i agree with you. Anna for once . [laughter] yeah. We have a situation where russia has been a pariah for Global Markets and political theater for years. Now, because other regions are not doing very well in europe, we are just about at the end of a very cold winter and trump seems to be a good mate for mr. Putin. The structure of the russian equity market is not going away. For those who have a hard is commodity related. It is something that should be certainly considered. Anna we will see what happens within the sanctions environment. You are also focusing on some of the big themes, the changes post Donald Trumps election victory. Are these themes you are investing around . Correct. The big problem we have is anybody who has drank mr. Trump s koolaid of, i will be sufficiently friendly to everybody, but i will make sure that inflation picks up, therefore, wages pick up and therefore, people are being put into work. The markets are being excessively optimistic and that creates an opportunity. In the very short term, the profits from the situation, when trump means higher growth for a shorter period of time, but the cost of yield will make an impact into a weak corporate sector, and productivity will not pick up. That will create the opportunity. Manus the whole world has managed to drinkt hat koolaid. Drink that koolaid. Anna we will see if they turn out to be worthy investments in infrastructure. We will bring you back to have that conversation, pau morillaginer. Manus and i have just been told my glass is halffull. You have just made my day. Anna that is it for bloomberg daybreak europe. The Bloomberg Markets european open is next. You can join manus on Bloomberg Radio. This is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. Welcome to Bloomberg Markets european open. Im guy johnson. Matt miller is in frankfurt, where it is a little chilly. What are we watching this morning . Matt will be talking a lot about draghi today. When will he call it quits on qe . Investors expect an extension today, but we search for clues on when it will ultimately end. Italys president asked matteo renzi to remain in the top spot