The world. We will talk about that. What did draghi deliver yesterday . Investors continue to ponder the meaning of the word taper, we will bring you plenty of analysis, arent we, matt . Matt we can talk about it all morning long as far as i am concerned. Let us take a look at how futures are trading right now. A bit of a mixed trade here. Not much action but we did see a lot of action yesterday after that east the meeting. Big gains, especially here in germany. Not so much in england. We were still up, the ftse closed 0. 5 , but here we were almost 2 on the dax. His morning, a bit of a quite start. Watch. ll wait and maybe a busier session as we work our way through the day. Big position trades. That, european equities, solid session yesterday. The spanish market up by over 2 . Backs dax up by nearly 2 . The critical line for the dax more thane 11,000. A European Markets, solid performance. We got the yen a little softer versus the dollar. We go continue to monitor that. On the round the world continue to be on offer and you can see that the yields, the red is indicating the actual bond is being sold and the prices are going down. What we are seeing really clearly at the moment is this duration trade. We are selling duration. The curves are steepening up. That is the trade being driven by draghi yesterday. It will be fascinating to see what the fed does and whether that trade continues. It has been a theme since the election at the beginning of november. That is catch up with everything we need to know. Bloomberg first word news with juliette saly. Juliette thank you. South korean President Park geunhye has been impeached by the countrys parliament over an influence peddling scandal. The motion was approved by 200 34 lawmakers surpassing the 200 tow trucks all. 234 lawmakers surpassing the 200 votes threshold. Chinas official factory gain inflation gauge rose to the highest levels since late 2011 last month. The Producer Price index jumped three point 3 from a year earlier, beating economist expectations. Consumer prices rose. It suggests the worlds secondlargest economy may be poised for inflation again. Gold is heading for its worst slump in more than one year. A weeklyrices set for loss. Eroding an annual gain. This of course is fed rate hike expectations boosting the dollar. U. S. Equities at record levels, luring money out of the haven. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You veryette, thank much indeed. Let us talk about some of the news we have been breaking while juliette has been speaking. Chinas leader, xi jinping will not be seeking a second term. Along citing family reasons for not running, obviously, the politics between china and hong kong are quite tense at the moment as we continue to watch what happened in terms of the developments in there. The currency on the move in hong kong. the move, whereas today, the eurodollar not really budging much at all. Ecbs mario draghi sent investors scrambling. The euro jumped and then plunged after the Central Bank Cut monthly bond purchases from 80 billion euros a month. That is a ninemonth extension. Draghi thank you we was openended, noting the banks 1. 7 inflation forecast is not close enough to the banks 2 target. Purchases of securities and the Asset Purchase Program with a yield to maturity is below the Interest Rate on the ecbs deposit facility would be permitted to the extent necessary. The outlook for gdp growth is probably unchanged. Broadly unchanged. The risks remain tilted to the downside. In the december 2016 euros system staff macroeconomic predictions in the euro area phich for see annual hic inflation at 0. 2 in 2016. 1. 3 in 2017. 1. 5 in 2018. 1. 7 in 2019. Us bring our guest, bill street. He helps manage 2. 4 trillion as head of their investments for emea. Thank you for joining us this morning. I appreciate your time. First of all, let me ask you your take on yesterdays taper. Was it a taper or not . Bill not really. It was not a tapering process. There was some sort of technical elements on it. By threeding out quarters or four quarters the degree to which they will continue to intervene, so technical adjustments, paving the way for maybe more, but at the same time, leaving the door opened to be able to come back in if they have heard the concerns about what goes on in the periphery. Guy does it seem, matt does it seem strange to you bill, that the inflation target, he admitted, was below what they want to see and at the same time, he is reducing the amount of monthly stimulus . Why would you take your stimulus back if you are not yet hitting your target . Michael yeah, it is an interesting point. If you look at some of the Inflation Expectations, which anothernd previously used to look at very closely, something called the breakeven market, especially the forward hasin breakeven market, which index bonds and nominal bonds, if you look at the breakevens in europe and the u. S. , and that is something which a touch on the u. S. Side, they are beginning to move quite aggressively. They are below their targets. It is a barometer of Inflation Expectations from investors. So heeakevens are moving, is concerned or the ecb is concerned, that he momentum behind Inflation Expectations the momentum behind Inflation Expectations are picking up. He is getting a steeper yield curve and the currency is holding in an risky assets are performing. It is not about results all in all. Guy if it was not a taper, was it a rate cut . Clearly, there is going to be a former focused on the front end. This is the german curve. The curve is steepening up. We are north of the average. Ways, you could argue it was a rate cut and he is controlling much more of the front end and will be pushing the yields down in terms of the option he will be taking. It was not a taper. Was it a rate cut . Bill it was a bit of a manipulation of the curve. We have seen this before. If you look at how the yield curves performed, this is a catch up to the rest of the g 10. What i would say is that by having that bit of manipulation, it is no coincidence what is going on in the banking and Financial Sector in europe. This is going to be good. Steepening up the yield curve, reducing the duration that elements and the threshold limits as well. I think it will be good for the Financial Sector. It is an interesting technical twist. What is the duration here . There is the option to go longer and increase the Balance Sheets further than penciled in. Where you expect the ecb Balance Sheets to end up . Is this it, is this the end of the road . They will discount at the end of this process. We bill had this conversation last bill year and the year before, but ultimately what he has done is an interesting technique to twist and manipulate the curve. It helps the Financial Sector but also, he takes the pace to say that it manages Market Expectations about tapering. It is not a taper. He took pains to point out they are there so draghi is still in there from a policy perspective. They would have been very frustrated with brexit but very worried about the italian election. Discussion about monte dei paschi and european banking market, so the door is open. To answer your question, too early to tell. Let us see how 2017 worked out, but i think the ecb will be quick to intervene if they need to. Stay with, you will us. Bill street with us. Coming up on the show, south korean president is impeached by parliament over and influence peddling scandal. Seoul withlive to the latest. Will the ecb extend monte dei paschis deadline for the recapitalization plan . A bold call on gold as the precious metal sa suffers its worst year. Our guest is bullish on bullion. That discussion later on bloomberg. Guy lets talk about what is happening in france. Twistga takes another this morning. The former Prime Minister is now leading the charge in terms of the socialist push towards next year election years election. Clearly, it valls is worried we will see the votes split on the left and as a result of which, that will change the dynamics in terms of how the right votes. Macron tosking join the socialist party. Well come back and talk about what is happening in europe and the political story in just a moment. That is catch up with Everything Else we need to know. Here is the Bloomberg Business flash with juliette saly. Juliette thank you. Has agreed to buy shares in stillwater. The montanabased company is the only miner. Hit the highest level in more than four months in tokyo after starting to market its super mario smartphone game. That included giving fans the chance to try out the game in apple stores. The peaks are still 8 in july. Stocks dropped in hong kong, australia, and the u. S. Following a report that china is approving a cut on union pay atm withdrawal units in macau. About half of chinese gamblers to withdraw money. It takes effect from tomorrow. The move is seen as a widening in the crackdown as to how cash is used in the gambling enclave. Indeed. Nk you very much a moment ago, we were talking about french politics. Let us talk about french data. Industrial production out of france is not pretty. The French Economy producing mixed data. Let us start out with the ip year, minusyear per eight. That data getting worse. The manufacturing production 1. 5rs year on year, versus a survey of plus 0. 1. That is really mixed on a month by month basis. It was expected to the 0. 7, the manufacturing number. Pretty grisly numbers on the economic front out of france at a time when some of the politicians are looking for that date had to be improving. It is not. France seems to be, as i say, producing mixed numbers. Let us talk about what is happening on the other side of the world. The south korean story, this populist push. Maybe that is not the case. It seems to be gathering momentum. Matt goto seoul and find out findly go to seoul and out exactly what is going on. They have voted to impeach President Park. Rosalind chin is live with the news. What does this mean for the presidency . D it means president be suspended will immediately from her duties as president and the Prime Minister will take over for the interim. President park has said she will be accepting to prepare to step down and let parliament decide her fate. That is what she said several days ago. She has in fact called for a meeting with evident ministers at 5 00 p. M. Seoul time. Thats cabinet ministers cabinet ministers at 5 00 p. M. Seoul time. Will be run by the Prime Minister while the Constitutional Court decides whether to let this measure pass or not. It needs six of its to vote in favor of it for and then the elections will be held within 60 days of it. This whole process could take up to eight months. The Constitutional Court has Something Like 180 days in which to decide it. It is unlikely to take that long. It will be a lot shorter process than that. Essentially, the country could be in a sort of limbo with the Prime Minister in charge. The people of the country did not vote for him to be in power for up to eight months. That is a time for a lot of uncertainty over south korea. Guy thank you. Your line seems to be a bit temperamental. Does this go further than simply politics . Does this go into corporate peoplein terms of how will now be giving the relationship between politics and business . Will this affect business in south korea . Well, the very close tie between big business and government has been under scrutiny for a while. There has been increasing aboutess and frustration the situation because this really has been a situation that has been in south korea for quite a while, several decades in fact. While korea, the people of korea, have moved forward leaps and bounds, the economy develop, the Companies Really push forward, but the relationship conglomerates, samsung, lg group, some of the biggest names that the world does from south korea, they have very close ties with the government. We saw the heads of some of these Companies Like sam sung, they talked about the fact that they made donations to foundations controlled by a close friend of park geunhye, which is what all this political scandal has been about. They denied seeking any political favors in return. People have been very frustrated. We have seen come to an head here now in south korea with these protests we have seen growing every week and the call for President Park geunhye to be toppled. The question remains, what will happen next . They could still throw out this motion, which is what happened this last time there was an impeachment of park against the president. The first time, 2004, the old president was accused of crimes with the elections and the election process but they were thrown out of the Constitutional Court, a part of it, because the offenses were two minor for him to be too minor to be impeached. There is a question of whether big businesseen and the relationship between the government and companies can be severed. Opposition leaders are making that case that they can be the ones to do this and reform big is this Going Forward for south korea. Guy great stuff. Fascinating twist then turns in this story. Fascinating implications for what this means in business in that part of asia. Rosalind chin in seoul. Thank you very much indeed. You atd are understanding politics at the moment . [laughter] not very. What i can say is that it does feel like populism begets populism. Bill whether we are talking about south korea, italy last week, brexit, the trump event, it does feel that we are getting this momentum of populism. Guy markets like momentum trades. Is populism a momentum trade for investors . Bill if you are ever in doubt that 2017 was not going to be punctuated with politics, well, i think this just in boldens the view that next it embold ens the view that it will be untreated points of politics and political analysis as populism becomes momentous and has a momentum behind it, as tople become more emboldened make difficult choices or statements through the ballot box. You will find this coming through into the markets and you will find a lot more volatility or points of all agility throughout next year. Matt i thought it was interesting points of volatility throughout next year. Matt about it was interesting that while mario draghi said deflation was no longer on the radar, uncertainty is rampant, everywhere. He repeated himself rather forcefully. D. C. That playing out in the markets, bill . Do you see that playing out in the market, bill . Bill absolutely. We were looking at bcps versus germany. So that risk adjustment, that from investors is all you need to discuss or look at if you look at the peripheral spreads beginning to move. Donts the concern, and forget, the italian bond market is probably the fourthlargest bond market globally. If you get momentum behind a bigger political change in italy, investors getting concerned about the italian bond market, it will move even further. Guy at the same time time, we seesame equity indexes at or near alltime highs across the developed world. Why would that be if this uncertainty is being played out in the bond market . Bill i think the different parts of the bond market we talked about in the peripheral bond market was just inventing an increased risk premium, if you you l, but a lot if you like. This really started from the Inflection Point of trump. Agendaesetting the macro after 10 years of some low growth and some sort of exhaustion of traditional and extraordinary Monetary Policy with quantitative easing. He set out an agenda that is going to change that direction and people are investors are feeling positive about that, so they believe that you can take on higher yields. In return, for a positive growth story, and momentum behind risky assets. It is logical. My concerns would be, in some of riskyt of receipt markets, it could get more unstable. Guy we are watching the spread across the atlantic as well. 4 basises trading 203 points. We are very elevated in terms of the levels we are seeing here. We will talk about this story with bill and the impact that will have on the dollar Going Forward and the dollar index is something we need to be concerned about. It will be a more cautious start , i would argue, to the get go of trading this morning. Four minutes away from the start of trading in europe. Markets on this side of the atlantic up by 0. 1. That is the fair value on my bloomberg. The market opened next. This is bloomberg. Guy good morning. I and the city of london. Matt miller is back in berlin. We are moments away from the start of european trading. Matt park impeach. Will koreas Parliament Take the president of power over the influencepeddling scandal. And inflation nation. Chinas factory prices jumped. It is this filtering through to consumers and the rest of the world . Plus, what did draghi deliver yesterday . Investors deliver the meaning of the word paper. We will bring you analysis. Guy thanks you thanks very much indeed. European equities are mildly positive. The dax may be a little softer. A flat opening prospect. We continue to watch the european Banking Sector as we continue to see the curve steepening up here in europe. Lets take it the market open and show you what is happening, in terms of where the lines are going. 100, a mildlyse positive start. It will flash on the bottom of your screen. There you go. Up 0. 1 . The cac is expected to do similar things. The italian market remains firmly in focus. When will we get news on monte . Ei paschi we continue to ask and get no answer. Im sure it is coming soon. It is coming now with manus cranny. Manus are we being overly effusive . Are the markets overly excited . If you believe copper and iron ore will remain up, one might believe the ppi numbers coming from china. If shifting gears. That reflation trade is affecting market. Comeve seen financials back by 0. 8 . Consumer staples up. You are seeing Raw Materials just ratcheting out a living. Energy up. Gmm, your global markets, here we go. Upt texas intermediate 0. 75 . The momentum is down. Gold is dying. Taxation and compliance will get you in the markets, according to opec. Oil is now 51 a barrel. The 300,000deliver barrels of cuts . Crude is on the far left hand side of the screen. The renminbi is stronger. The dollar is down. The dollaryen keeps moving. I want to talk about bull markets. This is back in france and italy. A trillion dollars have been ined to the msci world index the past six days. We are in the longest winning streak on the msci world since july. But the bulls are back in italy and in france. Can that momentum continue . Are we being overly effusive . I am off to do a bit of global radio. I will leave you with the stocks to watch. Nejra i am looking at two gainers at the open. Electrolux up 2 . It has said it is starting to see signs of a slowdown and parts of europe, including the u. K. , following brexit, and that sales in the region will be stunted. It is seeing 1 growth in europe next year. 4 ins down from 2 to 2016, it said today. Nevertheless, we are seeing the stock move higher. Looking to reduce costs. Its an Operational Efficiency will have a positive effect of 1. 6 billion Swedish Krona next year. Her hats that is giving a lift to the stock. Gemalto heading higher, up 4. 6 . What we have seen here is 3m could sell its biometric Business Unit to gemalto. It looks like we are seeing movement on this stock on news of that deal. Fund the purchase with cash and existing credit lines. It sees the deal adding to the eps from the first year on a pro forma basis. Wasng on, i know that manus talking about this, but i thought we might see movement as trade got underway. Thanks down 0. 3 . Thought they might see that s game, as theynk did in asia. Oil and gas heading higher on the stronger oil price ahead of the opec nonopec meeting in vienna. Mike thanks very much for that update. Italys president is holding talks with Political Parties to try to form a new government, following Matteo Renzis resignation. Bblica isrepu announcing somebody could be chosen monday. Our milan bureau chief is following the developments. Who are we talking about . Remainsusly, mr. Renzi a candidate to succeed himself, essentially, as Prime Minister. Other names that have been mentioned in the Italian Press include his foreign his current finance minister, mr. Paduan. Even if mr. Renzi were to get the nod from the italian president , it would be basically a shortterm government whose main mission would be to redesign the way italy elects its leaders in parliament. The Electoral Reform legislation. Ad that will require quite bit of consensus and agreement with other Political Parties. , such as some of those the fivestar populist movement, would like to have elections right away. Why would the president appoints someone who has essentially just been voted out of office by a democratic process . I mean, italy voted no on the referendum to get renzi out, right . Dan well, yes and no. The referendum was a constitutional reform. Renzi kind of turned it, by mistake turned it into a measure on his popularity and on his government. You know, while some parties want immediate elections, such as the fivestar, the italian president has made it very clear he wants to change that law. So renzi would be, perhaps, a quick solution, because he essentially has the majority in parliament right now. And running,et up essentially, maybe with a few tweaks in the current cabinet, and try to get this done in the next few months, with a view of Holding Elections by spring or summer of next year. Guy which piece of news do i get first, news on the Capital Raising or bailout of monte dei paschi, or the new Prime Minister . Which comes first . Dan i think monte dei paschi. , theow the ecb committee supervisory committee, is holding its second day of meetings to discuss monte dei paschis request to extend the time to complete a capitalraising operation. We should get some news on that, i would think, later today. Want toy, the markets open monday, hopefully, with some news on that. We will see. Certainly, the ecb has not tipped its hand on what it is going to decide. If it says they are going to stick by the original plan that is, this has to be done by this year then that is going to be very, very difficult. And i think we are likely to see the government stepping in at some point. Guy great stuff, as ever. You are going to have an interesting day. Days, i should probably say. Dan joining us from milan. Our guest from goes live eyes still with us. What is the risk to the markets in sequencing . Is it italian politics or italian banks . I probably think it is the politics. I think we have traveled through this italian banking, monte dei paschi to one side for a moment. As atalian banking center, sector, will travel through this. Dont forget we went through the european banking stress tests. They came through, broadly speaking, with a fairly clean bill of health. Always beenf not the greatest gauges, though stress tests. Bill but they do put out scenarios. There was a bank that struggled through it. No surprise as to who that was. I think we will travel through that. Having said that, i think the Banking Sector will continue to be under pressure, because the actual underlying fundamentals in italy dont look great. And the macro context for banks dont look great. Stressm a balance sheet, test, they will travel through this. The bigger issue to your question is the politics. As the politics will create more volatility. They will create uncertainty into the real economy. That will put pressure on banks as well. Obviously, italian banks are hurting for their own reasons. The Banking Sector in europe in general is having a tough time of it. Mario draghi maybe not helping too much. What do you think of ecb policys effect on european banks and their resilience . Bill it goes to our earlier conversation about yesterdays announcement. Look, i think some of the earnings were beginning to pick up in the italian or the european Banking Sector, previous to some of the political events we have had in the last few weeks. I think some of this twisting of the yield curve would help the italian Banking Sector. But at the same time, european banks at the same time, gains will stay low. Yield curves are going to increase. But he is actually not tapering. He is making that point clear. And he is going to stand behind any potential systemic risk. Guy is italy a sustainable member of the eurozone . Bill it has to be. Guy right. Bill i think it has to be. To the point where we were discussing about u. K. Being a concern, italy is going to be a real worry. A bond market that cannot be bailed out. Exit the eurozone and redenominate the fourthlargest bond market in the world i think when we come to discussing , hesitant toope say the phrase too big to fail. That i think there could be a positive element to this. It may be the actual shock to the system that brussels needs to actually reengineer and fix some embedded problems in europe. Because italy not being part of europe now feels like it is too big a breakup of the project. Guy bill will stay with us, bill straight. Coming up on the show, south koreas parliament votes to take the president out of power over the influencepedaling scandal. We bring you the latest. Lets talk about the airline sector. Oil a big story. The soft landing for airlines, going to be tough. Industry earnings are forecast to fall 16 next year. This is as oil prices rise. We look at crude and the carriers, and the nontaper tantrum. Aaghi sent the markets on ride with qe light. Investors are not sure what they are dealing with here. Are they beginning to understand it . Mike welcome back to the European Market open. I am matt miller in berlin, alongside guy johnson in london. Markets have been trading about 13 minutes. Look at how they are doing. Slight gains, nothing compared to yesterday. The dax last night closed up 1. 25 . Right now, little changed. The stoxx 600 gaining almost 0. 25 . Markets are up across the board. It has been a great run if you are long equities. Guy it has, and it continues, as you say. Lets talk about how the breakdown is working in terms of stocks and actors. What we saw yesterday was interesting surrounding banks in italy, peripheral banks, the stephen of the curve. Today, unicredit down by 1. 9 . Bank oflot of couple already banca popolari down as well, and i think that is not surprising giving what has been going on with the frankfurt story and the ecb. But politics continues to be the dominant theme. Mario draghi was referencing this very clearly yesterday. It is a story that is present in asia. South koreas parliament this morning voting to impeach President Park. Rosalind chin is live at the National Assembly in seoul with the breaking news. What happens next . What does this mean for the presidency . What does this mean for seth curry a . For south korea . Rosalind it means that will bet park geunhye suspended from her president ial duties, and the Prime Minister will take over. A for mr. Will address the nation at a clock p. M. , at a couple of hours from now. Lawmakers in300 south koreas National Assembly, which we are standing outside, voted to impeach her. That means this issue will now go to the Constitutional Courts to look at it. Nine judges on the Constitutional Court can agree to put forward this motion and to approve it. Then, the president election will be held within 180 days. That is a long time. This process, if you string it out, could take eight months, in which time the Prime Minister, which has not been elected by the people, will be in charge of the country. After that, they may get a new president. The thing is that the Constitutional Court could still throw out this motion to impeach President Park. This happened before. This is the second time ever in south korea that lawmakers have voted to impeach a president. The first time was 2004. At that time, the Constitutional Court throughout the motion of the constitutional stage, saying that the offenses were deemed to forr 4 deemed too minor him to be impeached. This possible eight months with the part minister in charge, and possibly the Constitutional Court throwing out the motion. Well today is a huge step forward for President Park impeachment, the future is not exactly clear cut still. People, although they have been cheering, the thousands of protesters standing outside the National Assembly they cheered when they heard this had been passed by the lawmakers. Still, we could see a revival of the anger that we have seen in the last few weeks, regarding this issue. Back to you. A difficults at time for the country, with what is happening in north korea, what is happening with the economy. China is going to be paying a great deal of attention to that. You, rosalind chin, outside the National Assembly in seoul. China is going to be watching this carefully, but china has a lot to think about at the moment. Mike a lot going on. The epicenter of the global reflation action. Inflation rose to the highest since late 2011. That helps sustain prices around the world. The ppi figure beat economist estimates by a full percentage point. Consumer prices also picked up on rising food costs. Take a look at the chart in my terminal. You can see the cpis in china, here in blue, in the eurozone ere, in white, and in the u. S. U. S. Cpi is the purple line in the middle. China is the highest, up over 1 . You can access this chart on your terminals. Bill street is still with us. Bill, how do you see this reflation and china playing out . Does it spread around the world . S, we finally get trumponomic continued stimulus from draghi, a return to inflation . Yesterday, draghi said deflation is nowhere to be seen. Bill it is a good point. We have been talking about the equity story. We have been talking about the ecb yesterday. We alsohe things looked at the breakeven and the forward expectations with inflation embedded in the u. S. Market, but also in the european bond market. This is just another part of the story. We are beginning to see pickup in core inflation, ppi and cpi. This is the one of things that would concern me Going Forward. If you look at how the bond markets are beginning to move, we see the backup of yields. Days before the trump election, global treasuries 40 of the Global Treasury market was yielding negative Interest Rates. We had 1 negative return on the postl index every week, the trump election. This is concerning. It is also concerning because of the absolute shifting yields. To 2 , be moving from 1 but from an absolute shift, Capital Allocation point of view, that is enormous. If this momentum continues without a pickup of the real underlying fundamentals, and how csick things like trumponomi can impact the real economy, that would be a real concern for investors as they see this inflation trade happening without true growth. Is the Bloomberg Markets global aggregate total returns index, hedged to take out the dollar swing. It is a Straight Line that goes back an awfully long way. That is back to the beginning of the 90s. Do i want to own any of these right now . Should i just sell them off . Bill just citing off of the treasury markets, the dominant country bidders to the index, the treasury market got some very, very low yields. One could not make an argument to see 10 year treasuries. Heading for 4 . Within this nominal g 10 treasury market, there is always an extraordinary need for duration by different types of investors Pension Funds and liabilities, liabilitydriven investors. Our central thesis is there is going to be a pernicious backup in yields. A gradual, sort of slow exactly. This is reflective of Global Growth and the decline of inflation. We have seen the trend a disinflationary trend over the last 10 years, exacerbated by the gsc. It is too early to say with that graph, that little turn of the graft the graph. It is something to keep an eye on. We arehe absolute level coming from that makes the shifting yields that much more pernicious. Smallt such low levels, a move in yields generates a big capital story. Bill is hard to stay with us. The next subject is related. It is inflationary. The market has gone cold on gold. The precious metal heading for its worst performance in a year as investors go risk on. Five weeks down, if we close out at the current levels, for gold. Is it a trade you actually want to put back in your portfolio . The market is awfully risk on right now. Mike welcome back to the European Market open. Gold is heading for its worst slump in more than a year. Prices press bullion are set for the longest run of weekly losses since november of 2015, eroding the annual game. Bill street is still with us. Bill, as we were talking about the reflation trade, the question to ask is, do you really want to buy gold if we are going to keep seeing inflation on the rise . Is now the time to get in . It is anits a interesting one. What does gold do, or what part does it play . The gold story has been a diversify or, a diversify or a diversifier of risk. The backup of yields, where does gold play when you have treasuries at 2. 5 , 3 . Can you have the same diversification risk by going into nominal assets across the atlantic . I would say gold is going to continue to be under pressure, if you look at the vix and other forms of volatility indicators. You see that coming down at a very low level. So i still think it has a part to play, but i do think the momentum trade out of gold is gone for the short term. Guy good to see you this morning, bill. Thank you for sharing so much of your time with us. Bill street, with state street global advisors. Up next, soft landing. Industry earnings are forecast. Rising. Crude prices a big component to the cost story. Get the analysts of crude, and the carrier. It is a 30 a. M. In london, 9 30 a. M. In berlin. Today waitingies, for the weekend. The trade is not going anywhere. Gone anywhereally since this morning. Looking at three of the biggest gainers, starting with electrolux, which is starting to see signs of a slowdown in parts of europe, including the u. K. The region will be stunted. Shares gaining, and the company said it is looking to reduce costs will have a positive effect next year. This is europes largest appliance maker. Altice, the target and ipo of its u. S. Business in the second quarter, curing up for acquisition opportunities raised by Donald Trumps election in the pending merger of at t and time warner. Ce said no decisions are taken at this point and no assurance can be given that an ipo will be pursued, but is to explore that ipo. We are seeing the shares up. Lalto gaining 3. 9 . Matt thank you very much. Following the Historic Deal to cut oil production, another meeting in vienna this weekend between opec and nonopec members. Oil trades higher ahead of the summit. We are outside the groups headquarters in vienna. What can we expect and who is attending this meeting . Good morning. This meeting is about getting the rest of the nonopec members invited on board to cut production to reach it 600,000. Arrel a day target opec has invited 14 members, but only five are coming. As you know, the ringleader of the nonopec group and the one to focus on is russia, willing to cut 300,000 barrels a day. Besides them, the other nonopec member is oman. It will be interesting to see if theyre able to get to the 600,000 barrel a day target. Beare hearing that opec may willing to accept a natural declines as part of its target. A real that its not cut. Those are natural declines, so the rebalancing of the market may take longer than they expect. Lets talk about this battle, nonopec and opec and what the threat is that nonopec members posed to the cartel. To show you this bloomberg terminal chart which paints a perfect picture of the nonopec threats, specifically russia. Imports to china, russia completely surpasses saudi arabia. Isy are saying moscow saying they will go slowly with these production cuts, so we might not see the rebalancing until later in the year, analysts are saying spring 2017, and until you see production cuts coming in, charts like this will not change. You will see russias imports surpassing those of saudi arabia and other opec leaders, so this paints a picture of how dealtant it is to get this to rebalance the marketing and get these nonopec members on board. Guy great stuff. It feels like you are living in the end a right now. Covering opec and the oil story. We are watching the impact crude the sector story, country story. Crude reducing nations rejoicing, but one industry is morning of the commodities recovery, airline set to decline next year after a record in 2016. This is according to the industrys main trade group, net income to fall 15 and 2017. Bloomberg caught up with the ceo of iata. We have been helped by the oil price in 2016, but we must be aware of the ability of the airlines to have the ability to manage their business. We have significantly increased the resilience of the industry. Uy giving us a view of iata lets get with John Strickland now. This is a cyclical industry. We know that. We have seen that. It has been a good five years. At some point, it will rollover. This oil price is a mixed blessing. Last year has been a story just as much of overcapacity and yields. Last Quarter Results of the european legacy groups have been doubledigit declines. Whether the oil price going up will be a positive or negative, it is difficult to tell. Europeans are cursed at the moment with difficulty surrounding labor, so they they dont have the option of saying that part of my cost space is going up, but that other part, staff, will be going down. You only have to look at lufthansa. The recent pilot strikes had cost them 100 million euros. The dispute has been going on for two years. Air france, klm also has labor issues. Pilot unions has indicated unofficially they are not keen to go along with a recent proposal. Matt have the personnel costs now overtaken fuel costs . Or is feel costs still the biggest . Fuel costs are the biggest. They have gone down dramatically. But rundown maybe to 20 , personnel costs are still a an important component of the next. Matt what is the likelihood atthansa resolves this issue a time when fuel costs are starting to rise. Isnt it going to be difficult for unions to get an increase in pay . Difficult, ands that will worsen it. The timing has been a challenge. If we draw the comparison with iag, they put their house in order. They were able to get that message over far more successfully to get the buyin of labor groups. Lufthansa has reported profits over the last couple of years. It looks that they are doing quite well on the face of it. We have the most powerful labor group in the form of the pilots and they can bring the airline to a standstill. There does not seem to be a meeting of minds as yet. Michael oleary has long predicted a bloodbath in europe. He has been frustrated because of the more inefficient carriers have been able to take the oil price and sustain their businesses. If we start to see oil prices jacked up, then presumably michael will get his way. Hastenink michael can that situation because hes talking about his average yields being down, predicting a 30 to 50 cut in units. They can ride it out and drive traffic volume, but put more pressure on competitors. They have actually increased their expected fleet size in the coming years has of their most recent guidance. They have plenty of aircraft. A base inannounced frankfurt next spring. Guy capacity in europe has been going up. When does that chart rollover . If you look at the order books, even the next two years, ryanair and easyjet and norwegian, more than 200 aircraft coming into the fleets of those airlines alone. There is no evidence of other carry groups. The carriers who are the weakest are relatively small. Capacity could come out. Guy that means are flying older, less inefficient less efficient aircraft as well. Thank you for your review. Your view. Up next, mario draghi sends markets on a wild ride, but the hawks and doves agree on one point. Mario draghi did something yesterday. The question is, what was it . That is next. This is bloomberg. Guy 43 minutes past the hour. This is the open. Buy, theeement to buy the company. Limitedatm card holders to 5000 hong kong dollars per transaction while in macau. The government has set daily and annual limits that will remain unchanged. Casino stocks slumped after china imposed the cut. That is your Bloomberg Business flash. Guy thank you very much. Mario draghi announced an extension of the Central Bank Quantitative easing plan until the end of 2017. Matt longer than expected, but at a slower pace. To 60 billionce yeaeuros. Convinced the market that even though they would cut purchases, this was not a taper. They defined the taper as a step function going down. At the short end, when a Market Participant knows they were not raise rates while they are buying bonds, so they said they will buy nine more months, three months more than we thought. They can bid the yields down. At the short income date look at this as being pretty dovish. Less than 80. I see this as tapering to the extent that it is openended. There are some dovish elements to increase the run rate clearly mario draghi has turned qe towards the the run rateng down. I see it as a hawkish move. Thinks its arket taper. As the rates go up, the equity market see the open end of this and the fact they can put the program back into play if things go wrong. They seem to like it. It is a very good question. Just because it does not make uacks does not mean it is a duck. Matt thank you for joining us. Let me ask first what you think, tapering or not . Good morning. , it is a question of semantics. It is not what would have been needed, a clear signal towards the entry and towards an exit from the expansionary Monetary Policy. If you increase asset arches by 540 billion euros, then in my view it is deathly not a time for altra expansionary Monetary Policy. Matt was it due to the pressure that we diddesbank not see a remaining policy of 80 billion a month . Is it the natural germinal stereo that held the ec back. Mario draghi has tried to square a circle. Cheap money avoid goes to an end, and at the same time he had to get around the limits and the rules the ecb set for its self in terms of not buying more than one third of a countrys Government Debt in terms of the maturity of between 230 years, so he reduced monthly purchases with the option to step it up again, to extend the program, and to adjust the rules, removing the deposit rate floor for bond purchases and by changing the minimum maturity to now one year. So it was getting around the rules that the ecb set for its self. Question from london on that last element. In some way you could argue this was a rate cut in the way we will see a refocus on the front end of the curve. Is that the right or wrong view . I dont think that is the right view. Attempt of the ecb to try to extend what in my view should not be extended anymore. On the same page, i think what it was was a reaction of the ecb to Political Uncertainty, that is a very important point, they had to adjust the rules because the year 2017 is more or less crossroads foral Political Uncertainty with all the elections in france, netherlands, italy, germany. They are trying to get around that. Guy if you dont have to own duration, do you think most people will be selling it . How much does the curve steepen from here . Well, to be honest, it will of course depend on what happens in terms of Political Uncertainty. We would expect short and longterm Interest Rates to remain on a low level throughout 2017. What we saw what happened is that investors appear at least to be less convinced in the currency markets by mr. Druggies comments Mario Draghis comments. Longer dated bonds moved in the opposite direction, but in my view, the markets realize this is not an end to the ult raexpansionary policy. Bundesbank treasuries trading 205 apart. How much wider willed the trade across the atlantic get . The,viously, there will the difference between the usa obviously will increase because what we have to expect is that the fed will increase rates in december. It will increase rates next year ,n my view at least two times so the cap between europe and the usa will increase. Just to get back to the duration question, do you think the ecb will buy the shorter Duration Bonds they are now allowing themselves to buy, or does is rule change allow them to buy more. For example, german bonds, they would reach the 33 limit by the middle of 2017, and but now they can get more in. I would rather go for the second one. They have change the rules, so they can get more bonds. I dont know whether they would actually do this to the very end, but they want to freedom to act as much as they want to. Matt why shouldnt they . Youre saying they dont think they should have extended. Why shouldnt they if they feel Political Uncertainty . Mario draghi was forceful yesterday about how this Political Uncertainty is prevailing around the world. Isnt that a concern . Concern, but not one the ecb console. There is little to no economic justification of extending the Asset Purchase Program. In the eurozone, we dont have high growth, but steady growth. It has been growing for 14 quarters in a row. We have unemployment declining, rising inflation, even the ecb is expecting inflation to rise to 1. 7 by 2019. Exactly the objective of 2 , but it is close to it, so there is little economic justification. When it comes to Political Uncertainty, i think the ecb is not the right expert to handle that. In my view, the ecb sorry, i was going to ask a do think we will see the euro take a dive here . Does the euro see further weakness as the cap increases . Is onecurrency channel of the main transmission channels for the ecb policy. The ecb hopes to spur inflation in the eurozone, and that is increasing import prices. I would expect the euro to weaken further given the backdrop of diverting Monetary Policy in europe and the usa. I could expect the euro to fall to our below territory parity in 2017 come also depending on what the usa is doing. Matt thank you so much for joining us. The chief economist at munich re. Up next, the nuclear option, the Trump Transition Team may keep americas aging Nuclear Plants online. What will the Energy Department look like under a President Trump . This is bloomberg. Guy welcome back. The Ecb Press Conference the first for matt miller. Exciting day for me. I have seen mario draghi speak before a couple of weeks ago in frankfurt, but it was great to be at the ecb and see him there live. Next, we are wrapping things up. We have surveillance. This is bloomberg. Francine the south korean power. Nt has suspended that has shaken asias economy. Opec prepares to meet with nonmembers. Can they convince russia to comply . And less is more. The ecb cut bond purchases, but draghi says it is not a taper. This is bloomberg surveillance. Francine lacqua in london. We have a great show lined up. Join us is