Essentially may pay them to lend and that the dax would drop, you would have locked me out of the room, but that is what happened yesterday. David we have someone to explain it all to us. Our very special guest is Mohamed Elerian. We think of him as a bloomberg columnist. Welcome back. It is good to have you here. Mohammed co. Wonderful mohamed wonderful to be here. Jon the republican caroline the republican president ial candidates stayed away from namecalling. Trump said his campaign has been a positive force. Frankly,ump i think the republican establishment or whatever you want to call it should embrace what is happening. We are having millions of extra people join. We are going to beat the democrats. We are going to beat hillary or whoever it may be, and we are going to beat them soundly. Caroline trump his favorite to win primaries next tuesday in florida and ohio. With getting a boost former candidate ben carson agreeing to endorse him. The Islamic State is expanding its presence in libya. Inh the death of market off 2011, libya has been a failed of moralwith the death mark and off he in 2011, libya has been a failed state. And a deadly earthquake in sunol me more than 18,000 people were killed on japans is coast. It also caused the fukushima power plant reactors to melt down. The japanese government estimates it will take 40 years to complete. Global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am Caroline Hyde. Lets take a look at the markets. How are they doing, that . Matt we are seeing gains across the board. S p futures are back up 1 . Dow jones futures up 140 three points. S p futures now are rising to the highest level they have seen since january 6. We are getting closer to unchanged on the year. If you watched yesterday, we were down after the ecb meetings , and we rallied up hard in the last hour to finish unchanged across the board. Take a look at europe. You see big gains over there as well, with the ftse up, the least of the major indexes. 2e cac up 2. 2 , the dax up 2 3 . Down after the ecb, but today the market has gone up after that. We will talk with Mohamed Elerian about it. They seem to like it in equities. Stephanie i think you need a picture of mario draghi in a superhero cape climbing that axis there. If you think about what he did yesterday for European Banks, especially the peripheral ones, it was a massive safety net of protected effort, and the market particularly likes it. Matt if you do a gip chart, you can see it. It was pretty intense. All of a sudden we were up 3 , and then we just dropped like a lead zeppelin. Recovered all of that drop in some of the gain from yesterday. Take a look. Mohamed, we have a new function here called gmm. It is so cool. If you type gmm go on your bloomberg terminal, what you see in these columns equities, forex, sovereign bonds, and commodities i have them sorted by the biggest move away from the 90day mean. It is pretty cool. Euro stocks is the biggest gainer. Italy has a bigger percentage gain, but since it is a more volatile market, it is not as much of a move as the euro stocks. Are arranged you by different regions because you can see things that you normally would not be screening for. Palm oil check typically, but we see it today. Oil has been pretty intense to watch. Goldman sachs you see a gain 38. 75, getting closer to 40. Put out some numbers on oil. The 12year low for oil, the 17year low for natural gas. Remember not want to 549, you can type g btv. When you think about how this affects people everyday. Price for a average gallon of regular gasoline yesterday jumped four cents. That is the biggest oneday jump since january of 2009. So when we say when are these moves going to affect people . Yesterday, four cents. I filled up my harley at a shell station, and it was a ripoff. David stay in yonkers. It is cheaper. Jon a startling move i the ecb yesterday, 18 billion euros. Choosing to cut every single Interest Rate in the ecb, pledging to buy nonbank corporate debt as well. Euro. Y expect a weaker that is not what happened yesterday after the news conference. Lets welcome back in Mohamed Elerian. My take on this is judging the potency of this program by looking at eurodollars like going to the beach in the going to the beach in florida and complaining about the skiing. Mohamed i do not like disagreeing with you, but ultimately if you want to assess this assess assess the success of the ecb and what they are doing, Exchange Rates will help or hinder the european economy and inflation trends. Today you have words today you have used the words massive, dramatic congo and, like you, if you told me yesterday morning that they did what they did, i would have told you need to i would have told you nero to 1. 07 or 1. 06. Are we getting closer to the point where these policies become ineffective . Jon ineffective in the sense of the effects market. That is in the sense of the fx market. Can he make that pivot from the ,x channel to the pivot channel and will it take more time . Mohamed it can certainly take more time, but it could be like pushing on a string. As he is pressing the accelerator, the regulators are pressing the brakes. That is why you do not get the impact on credit that you expect, and we see this playing out in the u. S. The u. S. Is lucky because it has other areas of growth. Clear that with Monetary Policy and the fx, can impact the man . You have written in your book that can it impact demand . They say we will pay you banks at some point to loan to people. Is it possible that they can affect demand for that mechanism . Mohamed it is possible but not probable because demand is being held act by a lot of things. First, we have decoupled the ability to spend from the will to spend. Secondly, more important, we are lacking structure will reforms that give people confidence. Thirdly, the companies are not responding. This is yet another attempt good for him, good for the ecb because they should have done it but i hope behind closed politicians are coming to the end of the road and it is time for the handoff. Stephanie is it not risky . Look at credit products. Yet again, investors are piling into an asset class, even if it is an Investment Grade that is corporate. Let me buy a highyield print guess what, if the market falls out again and you have nontraditional investors invested in an illiquid product, which is highyield, they will be hedged, wedged, and screwed in there. And they cannot get out. Do we realize those ramifications . Mohamed we do and the Central Banks do, but they will argue that the risk for them is due to unintended consequences. But if we get the benefits, that is ok. Stephanie and if we dont . Mohamed then we will find out that we get economic weakness, and critically, the Central Banks will go from being part of the solutions stephanie to being part of the problem. Instigator. Ckst this is the itra europe, illiquid, sub Investment Grade nonbank holdings in europe. Stephanie glencore ripping and off the ecb announcement. , rep sore, all of these companies have their cbs adding cheaper and cheaper. Making it easier for them to raise money, essentially, but is that a good idea at . If it was hard for them to raise money in the first place, maybe it is not a good idea to make it easier for them now. It is like allowing subprime borrowers to buy houses. Mohamed we have seen this movie over and over again. This is the movie we have seen since 2010 in the u. S. And since 2015 in europe. We have seen it over and over again, which is you get this impact based on policies, and then fundamentals assert themselves. Ie process, you start made you cough. Banks do not want to be doing this, but they have no choice. It is they got one of that yesterday. They did not get the second half. The other point to make is that you look at that particular chart there, and at the bottom it is debt. Deutsche bank, commerzbank, the spanish, german banks need it to come down because the rate is at 20 basis points. Isnt that good news . Mohamed it is good news that there is some support for the banks, but ultimately the support for the banks have to come from the Balance Sheet side and their assets being worth more because the credit risk has come down. You only get that through other policies. Go back to the g20. It is about fiscal monitoring and structural. Sayd i am delighted to that you are staying with us. Up next, we go to mark orton in london. To mark barton in london. On bloomberg. Caroline this is the Bloomberg Business flash. Overall we have bp escaping from billionslity in damages from the oil spill. Paid out 55y billion in damages on the spill. The worst may be over for oil. The International Energy agency says the price of crude may have all about. The iaea says that disruptions oil prices have risen 50 from the 12year lows they hit in january. Bank of america is cutting back in asia. It has fired 15 senior bankers in its Investment Banking unit this week. The deal they also cut jr. Positions. Banks around the b of a also r positions. That is your Bloomberg Business flash. Jon we keep it in europe, london, with mark barton standing by to keep us through the european markets. Where do you start . All that stimulus moves, the number really expected in that way, shape, or form yesterday. Talk me through it. Mark investors come with a slightly different position today. That is the polite way of putting it. You know what happened yesterday. It rose as much as 2. 5 after the draghi measures. That had investors scratching their heads. No more Interest Rate cuts. The index finished the day 1. 7 lower. We bounced back today, and over the two days, we are up by one half of 1 . Banks are the fascinating stocks today, the bestperforming Industry Group or a they fell by half a percent yesterday. They are the best performers today on the stoxx 600. Deutsche bank, which is 6 higher today, cut its bonus by 4 . Revenue in the Investment Banking industry to drop this year as climbs pullback from trading, from fixed income securities, and refrain from doing deals. Every bank is rising today. This is fascinating. I know you love the euro. This is euro, this is dollar, this is the last couple of days. We start we fell as much as 1. 6 . We finished up 1. 6 . The focus has moved from the fx channel to the credit channel. It is a subtle change but it is a big change, isnt it, jon . Jon it is we have Mohamed Elerian with us. It is going to take a long time for people to look at credit specifically, and a long time to see it through to Inflation Expectations. Talk about whether this can have a material expectation going forward, mark. Draghise a look at measures, the fiveyear, five have your forward inflation. Know, on february 11, this measure fell to an alltime. Ecord low of 1. 36 in the last bill stays in the last two days, we have seen a pickup in expectations, one point 48 . We are still below the highs of last year, 1. 9 . But the trend is upward. That leads to my question will the trend continue to be an upward one when it comes to Inflation Expectations . Jon i will put that question to him after the break. O draghi up next on bloomberg , we take it to oil. Can we trust a backup we will get Mohamed Elerians take next. Stephanie you are watching we are backgo. With Mohamed Elerian, and turning our attention to oil. It recently touched a three month high. 38 29 cents high. Welcome to the new normal. Iaea says oil prices have bottomed as these highcost producers are reducing output. How big is this for you . Is this the moment we have been waiting for . Mohamed when i was with you a month ago, i said you cannot justify oil prices being so low on the basis of supply and demand. Demand will pick up. The problem was that the market was not finding its feet after opec exited the role of producing. Now the market has found its footing, and we are getting supply disruption. I think this rebound is real. It will remain volatile. But we are seeing the bottom forming in a significant way. Pointed toreport what they projected as 750,000 barrels a day reduction in production. We had wilbur ross on recently. Lets play a little bit of that for you. Theur oil probably did hit bottom when it was around 30 a barrel, but on a given day, given the events of regulation, it could go anywhere. But in terms of where is the real level, i do not see it going much below 30. David this is my question. This oil the symptom or the disease . We have spent so much time focused on oil, does it really affect the underlying fundamentals of Global Economy on growth . Oilmed it does, but low prices have gone from being a blessing to a curse. The reason why is the volatility that has come with low oil prices. 3 to 7 moves daily in oil have become common. Oil is not a penny stock, it is a widely traded commodity. If you get 3 to 7 moves in that commodity, it is telling you the system is becoming less stable. This is important. I agree with him. Look at the volatility of oil because it gives you a good insight as to how stable is the underlying volatility in markets. Matt i wonder about the bullish comments from goldman and the iea. If you look at opec go in the bloomberg, you can see there is an Oil Production tab. It does appear to have rolled over. Obviously at a record high, but rolled over. How much do you trust this kind of reduction in production from opec . It seems like most of the members outside saudi arabia are going to produce as much as they possibly can. They need the money. But i think that is where they are. This is maximum production. Libya comeback onstream . What will happen to iran . For most opec members, they are at maximum up performance. Matt so they can freeze at that level . Mohamed of course. That statement had absolutely no value. Stephanie why . Mohamed because they cannot produce any more, so of course they will freeze at that level. Either you need it venezuela, nigeria, ecuador or you are predicting market share saudi arabia. Bailout will of a this be for Central Banks that are struggling . Mohamed this helps. What has happened in the last five weeks . Oil and commodities have come back. Talk of a u. S. Recession has declined, and currencies have supported inflation in europe. I think there is a tactical change in inflation outlook. I do not think it is a strategic change. David is that your answer to mark bartons question . ,ohamed q things have changed but they are key things have changed, but they are still tactical. The ecb will no longer worry about disinflation. Can the u. S. Economy with stand massive volatility in the oil markets . If we take a leg right back down, which we could next week, can the u. S. Economy keep on trucking . Mohamed i think there is a lot of good in the u. S. Economy, but it is a good that allows us to grow around 2. 5 . It is not where we should be, which is at escape velocity. Stephanie you sound like larry fink. Mohamed we have two big headwinds. One comes from financial volatility, and the other one comes from the weakening in the emerging economy. What we cannot afford is a problem at home. Jon Mohamed Elerian, thank you for joining us this morning. Coming up, last nights republican debate. Not as contentious as what we have grown used to. Futures are positive. David it is not just european equities up today, but futures are t two hours ahead of trading could tom keene is here from radio. We will go to london and Caroline Hyde with the first word. Aroline Angela Merkel faces a major test three german states will hold elections could Angela Merkel is not expected to quit even if they lose all three votes. More problems for the present of brazil as she fights to stay in office. Prosecutors want to place her presenc predecessor under arrest after widespread accusations of corruption and kickback finances. Its a new role for irish leader ed mckinney. He lost the bid in parliament for a new term and threw it in political limbo. His coalition lost big in the last election. That means that kenny is still favored to eventually be reelected. Global news 24 hours a day powered by 2400 journalists and more than 150 news bureaus around the world. Jonathan tom keene is back alongside us. It is morning must read time. What have you got . Tom this is Lawrence Lindsey associated with president bush wanted to and reagan. The progressive ruling class do not view of america as a cause, only a country. Therefore, they feel little compulsion to protect the cause of liberty that america stands for. Do not expect a robust defense of American Interest from them unless they themselves are threatened. This came out with a first line that the public is angry. It look better presented for the political discourse right now. David that is simply undeniable with what is going on the president ial election. It is so important what words you choose. Progressives would not agree with that, but people like Lawrence Lindsey take liberties. Progresses might take the quality and say they are not wiling to second is a quality. Book,ts a libertarian but it has elements of criticism on both sides. Jonathan you mentioned the quality, but the quality equality and opportunity are not result. A lot of people are not satisfied where they are at and that is a problem political leaders in this country at least. A to theres it from problem at the end does not see the benefits of globalization. You see this in Great Britain with the brexit. What are we getting out of it . In the United States, we have nafta. The average worker in my home state of michigan said i did not get anything out of this. Like the its