european trading day. from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is the european close on "bloomberg markets." guy: let's take a look at the journey the german ten-year has taken today. this is when draghi starts to unveil what the ecb has been up to over the last couple of days. then the market kind of starts to take yields lower. we get down to record lows. then somebody at the press conference asks him, you keep saying it is really bad, but why didn't you do anything? did you discuss doing anything this time? didn't,no, actually we and you see the market turn. we moved sharply away from that low that we hit earlier on in terms of the yield. in terms of other asset classes, draghi wouldn't have liked this reaction either. we saw the euro going up. as it wasas off

earlier on, up by 4/10 of 1%. not the reaction draghi would have been looking for. the banks initially traded higher here in europe. draghi is talking about tiering. the banks have wanted to talk about this for quite some time. the banks completely turned around, as did european equities, now down by 4/10 of 1%. vonnie: it is mainly about earnings in the united states, so to give early fx and bond traders watching closely -- so particularly fx and bond traders watching closely. earnings.with the co-founder is leaving, but also it is losing $1.12 per car sold. that really didn't endear itself to investors. the stock is down 13% now. ford having a pretty negative quarter, its turnaround strategy hitting the pause button.

it is down 7%. bank takingcentral down the interest rate by 425 basis points today, indicating there would be more cuts to come. the interest rate is still almost 20%, but traders seeing an opportunity for carry here, and that has the lira stronger. guy: let's talk about the ecb. mario draghi setting the stage to deliver another round of monetary stimulus, likely to come in september. he spoke at the news conference following the governing council meeting in frankfort. mr. draghi: in this environment, inflationary pressures remain muted, and indicators of inflation expectations have declined. , a significant degree

of monetary stimulus continues to be necessary to ensure that financial conditions remain very favorable and support the euro area expansion. guy: mario draghi speaking a little bit earlier on. we are joined now by adam posen, president of the peterson institute for international economics. should the ecb have acted today? adam: i don't think so. i don't think it matters that much whether they act now, next month, or two months from now. at the margins, it seems they -- they tried to use forward guidance, and forward guidance never really works. also, i think for exchange-rate reasons, they are much more comfortable going after the fed moves rather than right before. the fact that they paused for a month or two doesn't really matter that much.

guy: adam, they are going to discuss tiering. it is likely we are going to see tiering, as a result of which you would have to assume that the headline rate can go significantly lower from where it is. the snb is at -75. can you be the -- can you see the ecb there as well? adam: i don't think quite that far. i think it will probably bottom -50.omewhere around -40, tiering is an interesting thing. it.an and french banks like i think it is smart for the ecb to do it, but i don't think it matters very much. what matters is the overall rate level. 2%,ie: below but close to and still symmetric. how does that work, adam? adam: fair question. i think they would like to be truly symmetric, but they are

not able to yet make that statement as opposed to the below but close. the issue is, just as the fed is talking about if you want to average something like your real , you want to convince people you're going to overshoot for a few years. the other point is they are trying to take away the risk, the tail risk in people's minds that maybe the ecb would reverse course or raise rates prematurely. not sure how effective that is going to be, but it is worth a try. vonnie: deutsche bank with a note saying the fed is a more important driver for the euro and volatility then the ecb acting around the periphery of negative rates. true?t if the fed goes more than 25 basis points, or signals it has more optimism, does that aid the dollar and the euro? adam: i'm not sure.

i don't really have a good model corporate acting volatility. i think ash good model for protecting volatility -- good model for protecting volatility. if they drop the rates lower, they have to start buying stuff, and they do the tiering. at that point the ecb might be more powerful than the fed because the fed is going to have limitations on what it can buy based on current legislation, and despite the best efforts of , they and clarida probably are not going to get to go right into qe. the ecb is going to be moving. package.talk about the what using the ecb could ultimately end up buying here? bank bonds? could that be on the list? etf's? what do you think ultimately they would be? adam: if i had the choice, i

would be looking more seriously at etf's then bank bonds. i think bank owned bonds is more tricky from a hazard point of view, and probably not that high on the transmission issue. lack of liquidity from the banks. it is keeping them from raising inflation expectations. you want to affect the real economy. this is a debate i had 10 years ago at the bank of england. the question is balancing the things that the central bank thinks are not guaranteed, but if you get more into the things that are poor substitutes for long government bonds, the more effect you have. president draghi has outlined they are going to be looking at etf's and bundles of current bonds, things like that. vonnie: adam pozen is staying of the, adam posen

peterson institute for international economics. today, a weaker yen 1.0804. the dow and the s&p down about 2/10. down about 0.5%. this is bloomberg. ♪

♪ vonnie: live from new york, i'm vonnie quinn. guy: from london, i'm guy johnson. this is the european close on "bloomberg markets." let's check in on the bloomberg first word news. here's courtney donohoe. courtney: new u.k. prime minister boris johnson has made it clear he's willing to go for a no deal brexit.

earlier, he met with his new cabinet. 18 of the 29 numbers under theresa may are no longer in their jobs. north korea stepping up pressure on the u.s. over stalled nuclear disarmament talks. kim jong-un's regime has resumed missile testing. the north fired at least two missiles into the sea north of the korean peninsula, hours after u.s. national security advisor john bolton left south korea. in puerto rico, governor ricardo rosello has given into hundreds of thousands who demanded his resignation. he says he will step down next week, and that means more uncertainty for the u.s. commonwealth, still recovering from a deadly hurricane and record bankruptcy. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney donohoe. this is bloomberg. vonnie: thank you. let's get to the markets now with have a go to little. abigail: still declining for

global equity markets, but off of the lows, at least in the u.s. the s&p 500 down to tenths of 1%. the stocks down 9/10 of 1% -- down 2/10 of 1%. down 9/10 of 1%. 1%key ishares down more than as their central bank cut rates the most ever by 400 when he five basis points, so i bit of a reaction there. we also have reaction in the 10 year yield to do with the ecb. 10 year yield bonds earlier rallying, and around the time of the decision, backing up in a big way. bonds selling off a little bit. a little but of disappointment there is less action out of the ecb, despite the outlook is "worse and worse." let's take a look at some of the big earnings movers. 3m higher, up 6/10 of 1%.

they beat both top and bottom line estimates. they reaffirmed the outlook, seen as a less bad quarter. southwest airlines reversing a loss earlier in the quarter. they say the 737 max 8 will be grounded for the year. by china.6.7%, hurt -- a lin -- align technology down 25%. when we going to be bloomberg on a global basis, this is a really interesting chart, back into thousand we see that growth had outperformed value in a big way -- or i should say, value underperformed growth. now in this market, value continues to underperform, but that inflection point was back around the time of the tech bubble, so it is going to be interesting to see whether value starts to shine again.

vonnie: abigail, thank you. we have adam posen with us of the peterson international institute. we want to talk about the new u.k. prime minister come about first, one more question on the european central bank. mario draghi says christine lagarde would be an outstanding president of the european central bank. she comes in on november 1. does she need to take on the whatever it takes mental?does she need to -- whatever it takes mantle? does she need to reshore markets? adam: i think she needs to work more behind-the-scenes in terms of pushing europeans towards fiscal readiness, not lecturing them in public, but working through the euro group. that's what has to be picked up on. i think a statement at this time of trying to make some sort of rhetorical point like draghi

would be premature and might lead to disappointment. vonnie: we have a new prime minister, boris johnson. obviously you served on the bank of england for some time. you've been watching the process unfold. does sterling weaken? is the bank of england of lies to do something pre-of dudley -- is the bank of england obliged to do something preemptively? adam: any move they make will be seen as political, especially now with the high likelihood of a general election being called by prime minister johnson. it would be a mistake for the bank to stick its neck out. i would expect that whenever there is a brexit matter coming to some head, they will cut rates significantly as soon as that happens. for the time being, i think they have to be on hold. saw in the cabinet last night was a exit takeover -- was a brexit takeover. why will the same thing not

happen now at the bank of england? toed lyons, who was advisor boris johnson when he was mayor of london, his name has been floated. can you see a situation where he gets the job? we have a reasonably loose fiscal approach, and jared takes the same approach when it comes to monetary policy. could we see a wholesale shift here? adam: we could. i think it is going to take a little longer at the bank of england. the monetary policy committee is truly a committee that makes the decisions, and it is even more of a committee in some ways than the fomc or ecb because, as i demonstrated when i was there, you can have really independent votes. king demonstrated when he was governor, you can be on the losing end of both. ther goal may be to get

bank of ellingham -- of england to that kind of policy mix, but it would require more turnover in the maybe then some plea the governor. if they go that route, they are back to the 1970's of a politicized bank of england going for growth prematurely, and they will end up having to reverse themselves to keep sterling from crashing. guy: i guess that is an argument against him being put into that position. you're a popular chap, so let me just ask you another question coming from our viewers. how can buying etf's stimulate the euro economy? government spending produces negative rates in return and is funded by taxes. adam: there's two pieces to this. what are you doing for the trend growth of the european economy, it's a pass -- its capacity to grow, and what you doing in the now? right

the 40% of the european economy that is private sector can be affected by credit conditions and investment demand. 40% gives chunk of you a significant chunk of growth. it is a legitimate question to ask if part of the problem for all of the major economies, since you are so close to zero all the time, do you need to change the formulation of the european economy? i think it is less about state-private. this isn't china, whatever john bolton says about europe. but there is room for productive investment, both private and public. vonnie: are we close to some kind of maybe not a recession, but a major slowdown? how does it come about? the small-market doesn't seem to be going anywhere. is unusual, and it particularly for the u.s., to have a slowdown if you don't ore a real estate crash the fed tightening. i don't think we are getting

recession in the u.s.. in europe, i think we may be getting there. there are some signs things have bottomed out. but the fundamental downdrafts in europe are quite strong. in china we are getting increasing signs of slower growth. you put together eu plus china, that's a very big chunk of the world. vonnie: could the trade war to bus into it -- trade war tip us into it? adam: i think of the trade war as an ongoing downward pressure on investment. i would rather think of it as stealing and wasting some growth energy. it is an ongoing drag, and that uncertainty just remains. vonnie: our thanks to adam posen, president of the peterson synutra international economics -- peterson institute for international economics. this is bloomberg. ♪

♪ guy: let's get back to europe's largest economy. germany is facing a series of challenges, from falling

manufacturing and trade. matt miller spoke exclusively to german finance minister omar schultz, asking first about reaction to the ecb. their ecb is doing job, and we do not comment on their decisions. i think anyone of us has to deal with the world by developed of the economy. we know due to all of the tensions we have between china and the united states, for instance, the not clear development and the question of brexit has an impact on the economy. mostly on the way that many corporates that are willing to invest, waiting for the next month and the next month. i think anyone of us is waiting for a solution, and this will have a good impact on growth. matt: are you concerned we might be stuck in almost a japanese vicious cycle, where low rates

begets low inflation and low growth? >> i don't think so. i think we will see better growth next year, and we see it at the end of this year already. man-made problems that we have with all the tensions lved, we will have better growth worldwide, and this will have an impact on the european economy and especially the economy of germany, which is a really global society exporting and importing from all over the world and to all of the world, and this is what we should understand. matt: we do have global issues. the trade war, brexit, et cetera. yet, u.s. banks are doing quite well. european banks have never fully recovered from the financial crisis. rates have been punishing to a lot of banks, especially here in

germany. regulations have been difficult for a lot. the u.s. is starting to loosen up. do you think it is time for europe to loosen up on the banks and allow them room to grow? olaf: i think a lot of the banks did a very good job in the last years. as you know, they need to reduce risks, and this is what we worked on also at the political agenda. very big success for the banking package of the last year, which is now in limited. we will continue to work on that. i think for europe as a whole, it is necessary that we do now the next steps, and one of them is forming a banking union, which is making it feasible that the whole euro zone, the whole european union with its 450 million inhabitants, is acting as a marketplace for banks, and this will make it better business for them also. matt: you mentioned the

reduction in risks, where it is all most like there's a pendulum between financial stability and growth that, since the financial crisis, has swung too far towards financial stability. do you think inflation and rates need to come back a little bit to make room for growth? olaf: i think there is enough room for growth for banks and the economy. if you look at germany, you will see we have the highest number of people employed. if there would be 500,000 people entering the border of germany and knocking at the right doors, they will have a job from the next day on. this is not a difficult economic situation, and it is nothing where you cannot have the perspective that a better growth rate will come the next time. guy: the german finance minister left schultz speaking -- and esther olaf scholz -- minister

olaf scholz speaking exclusively to bloomberg's matt miller. initially, european equities went higher on the ecb, but subsequently fell back sharply. stocks are also under pressure despite some solid numbers from vw. the dax down by 1.2 percent. the ftse 100 absolutely flat. the cac somewhere in the middle. bright spotrs one in that market. the european close coming up next. full coverage in just a moment. this is bloomberg. ♪ i don't know why i didn't get screened a long time ago.

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the rest of the continent showing signs of weakness. the ftse 100 on the 7500 level. only down one point. drug stocks doing good trade. london market outperforming. take a look at the dax and the cac 40. focus on the dax -- the auto sector trading lower. the german banks also rolling over earlier in the session as well. deutsche's was up strongly early on. the dax trading down. down 1.1%. the cac 40 somewhere in the middle, down .4%. sectors andyou some give you an idea of how the rotation story has worked. most of the european sectors are negative territory. there's the health-care health care sector, helping out the london market. some of the bond proxies doing all right. i think nestle reports numbers tomorrow. pay attention to that.

at the bottom end of the market, the auto sector. vw came out with solid numbers but we are seeing weaknesses from the supply chain companies. auto parts trading down 1.64. chemicals are trading lower. insurance is trading lower. let's look at individual names. a bit of m&a worth paying attention to. deutsche bank, 1.81%. it was up 5% earlier on. as it rolls over, you see that affect the dax. in terms of the session, quite a big move. aboutg with emma chandra this being taken over by u.s. buyout company. ham up 34%. nt, the saudi deal issue now looking in more jeopardy.

clariant trading down nearly 10%. vonnie: a lot of monetary policy action today what with the ecb and the central bank in turkey as well. earnings are telling the story for the u.s. major indices. we are off our lows and the s&p , andwn .33%, as is the dow the nasdaq down .66%. let's get to some of the individual movers. we are seeing warnings, including from ford, which warns on asia and suv sales and is taking a beating off of that. tesla the other carmaker that disappointed investors. i wanted to point out occidental petroleum. ichan's ideaarl there should be a record date set. this is not saying the shareholder proxy is backing

ichan's nominee to the board, but is saying occidental shareholders should be looking at a record date. boeing down another 3.5%. more bad news on boeing planes and more uncertainty for the company. , even afters squibb everything it has been through has good drugs in the pipeline and that has that stock up 5.2%. guy: let's get back to our top story. the ecb leaves rates unchanged at the central bank president saying a significant degree of monetary stimulus is needed and the outlook is getting worse and worse. is the also talked about staff are going to be examining the possibility of grace. will that help out europe's banks? is jennaa asked sanders -- one man to asked is janice henderson bank

specialist. let's start with the macro and then get into the more granular story. we are in monroe -- we are in mid-reporting season. how big of a shift would it be for the european bank outlook if we were to see tiered rates. discussion is interesting. draghi heard from mario is the european area requires a comprehensive package. he also a knowledge that is part of that we now need tiering. banks are nearing the point of the reversal rate. all of these policy measures are finally beginning to impact their ability to finance the economy. what this does, we need to see the real details. if we use the swiss model, this gives the sector a two to 3% earnings uptick. that is moderately helpful. it is merely an antidote and not

any links or. ixer.d not an elxie you lower the yields on the loan portfolios and you diminish the returns on investment portfolio. as that portfolio rolls over, we will see incremental pressure and accelerating incremental pressure given where yields on rates and credit are. i do not believe it is going to offset what is an ongoing revenue headwind for the european banks. guy: you bring up the s&p. mb.e -- the s we now have a meeting just before the september meeting of the ecb. there is some suggestion the smb will want to maintain the court or it has with the ecb. the smb currently does have a it isg structure, but suggested it may deliver a

surprise rate cut. if you are ubs or credit suisse, halt -- how problematic will that be? ubs has already reported. those are the banks we will be watching. barrington: it is a headache for all of these banks across the european area. we know from ubs reporting the other day, their enology met further fed rate cuts will be a headwind for net interest income's. earnings are coming down 5% as compared to where the street was. that is almost on a forward-looking basis. the euro area and you just keep accelerating the revenue decline. the challenge for these big they are high-cost income businesses. they believe their growth businesses, which frankly they are. when you have revenue headwinds, you have high customer cash balances, low customer engagement, it is very hard to manage that in the earnings

progression unless you are willing to address costs. at this stage, the banks are not willing to take the next big step on cost. vonnie: speaking of which, does deutsche bank survive in its current form? do you like the restructuring plan in place? barrington: the restructuring plan of deutsche bank embeds 10% revenue growth assumption to the end of the plan. the problem is that over the last three years -- ubs also embeds revenue progression. the problem is european banks have seen earnings go up by 60 billion. not one part of that came from revenue progression. investment has driven all the earnings growth from cost reduction and from lower cost to achieve. restructuring cost drove that cost reduction. from here i can only see revenues going down. the cost reduction is a challenge and it may require

further restructuring costs to do that. i do not see the cost of risk going down. plan embeds the revenue growth. the latest numbers were very poor and even local transactional services earnings were down. i think they have significant challenges. we know that from the credit suisse plan, when they restructured they saw very significant revenue attrition from the restructuring. vonnie: what are bank executives in board rooms saying? there's a new prime minister, boris johnson, and you had a funny line, you said boris johnson needs to offer europe and all of branch and not a salmon.hearing, or barrington: boris johnson maybe a new face but the discussion with europe remains broadly unchanged. the european position this

morning seems to be reiterated. they're not willing to renegotiate the agreement. the difference with boris johnson is the threat of the no deal hard brexit has increased. with that have increased two unpleasant outcomes for the u.k. -- one is a hard brexit, or the other is the possibility of a rebel leader brings down boris johnson's government and we go to general elections, which may then lead, looking at the current electoral calculus, that would suggest a labor or liberal democrat or maybe a coalition would be the government, led by potentially labor who would be the largest party. that would raise significant questions about political and economic policy. ck to theting this ba deutsche's question, one of the reasons deutsche struggles to make money -- that is something

u.k. would face. how would u.k. banks react to that? barrington: it is the royal bank of scotland question. the bank has been in the crosshairs of jeremy corbyn's rhetoric a number of times over recent years, suggesting a breakup of the royal bank of scotland. that is the reality. if we were to see the potential for elections, the market would start to worry the royal bank of scotland would soon become the savings bank and that is a real risk. that is a concern one would have about this type of government. we are talking about a u.k. returning to pre-thatcher economic policy. guy: i'm hearing more of that over the last 24 hours. fascinating. we will leave it there. barrington did miller joining us from janice henderson. we are wrapping up in europe. we are through the auction process. we have seen a downdraft when it comes to european markets. a little one.

a little dip during that. the german market taking it on the chin. we did see a big turnaround in the banking sector, but it was the auto sector that was a drag. you probably want to get more analysis under your belt -- you can do so even if you're getting in the car and driving home. the cable show with jonathan ferro in new york. i will be joining him in london. we'll be taking to the air at the top of the hour. you can find us on dab digital radio in the london area and all of your bloomberg devices. ♪

vonnie: live from new york, i am vonnie quinn. guy: from london, i'm guy johnson. this is "the european close" on

bloomberg markets. let's get a news update. here's courtney donohoe. courtney: the ecb is sending it strongest signal it is ready to step up monetary support for the economy. investors say they expect -- current costs or lower for the first half of 2020 and that leaves room for a rate cut in the first half of september. the ecb says it would resume its bond buying program would continue -- orders placed with american factories posted the biggest gain in more than a year. plus shipments unexpectedly increased and that indicate second-quarter gdp due tomorrow may be better than expected. nearly three years after hurricane matthew cause massive damage across the southeastern u.s., some victims are still waiting on the promise of government assistance. some suffered more damage to their homes during hurricane florence. the federal government awarded

north carolina $237 million for matthew recovery. officials say that after this month, the state suddenly spent 6% of this. , paris has been its all-time high temperature -- 105 degrees is a july record. 90 degrees at london's heathrow airport. day centers are being opened for the homeless to get out of the sun. summers in much of europe are usually mild and few homes have air-conditioning. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am courtney donohoe. this is bloomberg. guy: thank you very much, indeed. earningsr has reported -- the push through debt is getting a lot of focus. joining us today from paris is the company's cfo. thank you very much.

was it an easy decision to spend the dividends. your owner has been placed into protection, as a result of which you do not need the cash flow in the direction. was it an easy decision for you? >> the decision was consistent with our strategy, which is a strategy of deleveraging. we think it makes sense in detail to have less debt and movement we started five years ago. in 2014 we had 7.5 billion euro net debt. we reduced it by two thirds and by the end of next year will be at 1.5 billion euros net debt. that is an 80% reduction. this cut allows us to complete this movement on top of our disposal plan, which is going on a total objective of $2.5 billion we already reached $2.1 billion. if i look at -- guy: if i look

at net debt at the end of 2018 and where net debt sits down -- since now, it looks like net debt is going up. am i mistaken? david: that is quite natural. in halfl debt goes up one and goes down and have to. one and down half in half two. our plans mean to improve the cash flow while reducing costs and we are more than covering the additional lease from our operations by reducing capex after all of the transformations we did and reducing inventories. we are perfectly in line with our plan and all of these kpi's. current cash flow generation is totally consistent with our goal for the year, as well as the target in profit and on top

of that, our commercial dynamic is good. all of the indicators of h1 are satisfactory. vonnie: it does seem that with the stock lower, investors are not convinced that the dividend and exposures -- and disposables you've talked about will be enough to bring get down to 1.5 billion euro. will you need to make more major asset disposals? new target is perfectly consistent with what we said before. we were at 2.7 billion euros last year. we make one billion additional disposals, that brings it below 2 billion, and 500 million additional savings from cutting the dividends. that brings us to 1.5 billion. today our disposal plan is that 2.5. we complete the disposal. we have been quite fast and exceeded the expectation in terms of speed. let me remind you that the 1.5 billion initial target set for

june 2018. we reached the target at the beginning of 2019 and we set the new target was beginning for the first quarter of 2020. 60% of that by july. we are quite on track and we are confident that the 1.5 is consistent with our trajectory. vonnie: your rival has reported it had a good quarter. the stock is up post regular trading by 2%. that chain has talked about their need for consolidation in french grocery chains. are you open to the prospect of m&a at all? not comment on market rumors or scenarios. we focus on our unique mix of forecast -- of formats, categories, and geographies. we have unique positioning in france which is being in regions tound paris, lyon

switzerland and the french riviera. guess we aretrong very strong e-commerce and have an exclusive -- we are very strong e-commerce. we are also focusing on organic foods. that is our strategy. guy: just a follow-up on vonnie's question. france is incredibly competitive when it comes to the supermarket chains. does it have too many? it looks like we will see further entrance. amazon is coming in. do you think there is a need more broadly for consolidation? to rebound on the latest point, amazon is our partner in food. we are the exclusive partner in food. our partners can order goods and

be delivered on the same day. with amazon we have same-day delivery. that is a partnership with the best technological operators. there might have been too much retail space in the country, that is why we think closing ,ome of these spaces make sense and we are closing some of the space. there is also -- we have to be precise when we analyze the french market. it is a polarized market. buts a competitive market, there is different positioning and competitive dynamics, whether you in high growing or economically dynamic and demographically dynamic regions or you are in regions other's top competitions for a market that is shrinking. what we are doing is reducing our footprint in those regions and increasing our footprint in the dynamic region at the dynamic format of e-commerce. we think there is room for growth on profitable and new

segments. isther specificity we have accompanying that with other activities such as advertising and energy. we think this strategy is the right one. as far as consolidation, we have pulled are purchasing and that gives us additional gains. synergy comes from pulling purchasing. we have captured a lot of that already. guy: thank you very much for your time. a great pressure -- a great pleasure to speak with you. cfo casino, david lubec. we'll be talking about the fed and the ecb. that is next. this is bloomberg. ♪ hey! i'm bill slowsky jr.,

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today's xfinity service. simple. easy. awesome. i'll pass. vonnie: time for our stock of the hour. southwest falling as much as 4.8% intraday. the company has new plans with the -- to cope with the 737 max grounding. kailey leinz is here with more.

kailey: obviously that delivery for those planes have been stalled, which is already weighing on southwest. they saw 100 $75 million impact on operating income and the bad news is it is not going away anytime soon. they have grounded the 737 max until january 2020 and that is leading them to cut their capacity growth. there were expecting capacity to rise by 5% and then out the falling between 1% and 2% as those planes are grounded. they're also stopping their service at newark liberty international airport, but they say is just an underperforming airport and because of that they will need to maximize their capacity they have coming online. they are closing down that. guy: american also has the max, what effect there? kailey: they say the grounding

will wipe about $400 million off of pretax earnings. they are taking the hit on that. if there is bright news, they are seeing more pricing power, both american and southwest. as capacity is shrinking, they are able to charge more for the seats available. if there's any silver lining, it is that. vonnie: kailey leinz with our stock of the hour. thank you very much. , balance of power with david westin. leon panetta joins the show with his thoughts on china, iran, and the democratic presidential race. that is next. this is bloomberg. ♪

david: from bloomberg world headquarters in new york, i'm david westin. welcome to "balance of power," where the world of politics

meets the world of business. today, maria tadeo from frankfurt on ecb president draghi threading the needle between hawks and doves. the departure of the puerto rican governor, and jessica roth on what to take away from the robert mueller hearings. let's go to maria in frankfurt. when i first heard the statement i thought this would be dovish because they will consider everything, but then the market said not so much. maria: that was exactly what the market was telling us. mario draghi said we will go lower. he did not cut today but it was clear that will be the next move from the ecb. that statement also read is not just rates. we can look at anything. we can look at qe2. we can look at the tiering system, which many will tell you is a good thing, but it was a lacl