tv Bloomberg Daybreak Europe Bloomberg June 29, 2022 1:00am-2:00am EDT
dani: this is "bloomberg daybreak: europe." these are the stories that say your agenda. manus: growth is resurfacing. it helps push stocks into the red again. france cuts their forecast amid surging inflation. finland and sweden take a major step towards membership as turkey drops its opposition. an interview from mount olympus. most powerful central bankers talk shop.
we are joined in an exclusive conversation. good morning. a divine coincidence. get inflation right and the world will be perfect. it is not going that way, is it? dani: it really is not. this is a market i think is more likely to expect failure than success. that is what we saw yesterday after consumer confidence numbers were coming in at eight decade low. it was easy for the market to turn, almost too easy. rebalancing will be worse for equities. let me show you with the markets are doing this morning. some of that is easing in the future section. nasdaq is falling. that is the 11th time that has happened in history.
tech was hit the hardest. not unusual to see that type of bounce back. perhaps this is not just recession fears that hit equities. the idea that this growth picture is slowing. at the central -- the central banks will keep slowing. that is almost -- that is like cpi impacting the future section. u.s. futures are playing catch-up. asia-pacific, despite the fact that china and hong kong may reduce their quarantine period, it is the move of the u.s. that has trickled. we are seeing a decline. manus: one thing you can say is when you look at the j.p. morgan survey on the bond market, there is a sense they are throwing in the towel. you can see, yields turn just a
little bit lower this morning. easy to soup in and pick up the bonds. -- easy to swoop in and pick up the bonds. we are seeing equity traders -- hedgers short the futures rather than use the options. you can see them for the first time since 2016. evercore saying you need a fix to blow through the floor. prude is down by half of 1%. we still notice a tightness in the supply side. opec-plus under delivering by nearly half $1 billion. they have reduced quarantine rules by 15%. dani: let's get to some other top stories from today.
enda curran will join us from hong kong to help us digest resurfacing fears. francine is ahead of the blockbuster panel today. manus: juliette saly is in singapore. maria tadeo joins us. they are going to talk us through the nato expansion. dani: starting with consumer confidence. the u.s. has fallen to the lowest in more than a year. inflation continues to dampen outlook for americans. the same time, reserve officials are playing down the risk of the most aggressive rate hikes will push the u.s. into recession. >> i see us tapping on the brakes to a more sustainable pace rather than slamming on the brakes, going over the handlebars and having a proverbial recession. i would not be surprised, it is
in my forecast, if growth will slow below 2%. we will not go into negative territory. dani: joining us now is the chief asia correspondent enda curran. starting with that consumer data, what was the take away from it? the most week in nearly a decade. enda: 2021, the weakest since then. consumer confidence is almost at a decade low. purchases of goods are holding up but the fear is that purchases of cars and appliances will soon start to pull off. the fall in consumer confidence is all over the price of food and gas. of course, households are worried about income levels.
takeaway consumer confidence, the major surprise. manus: what do you make about those comments? tapping the brakes and not crushing them. there is a confidence there that we are not going over the handlebars. all the metaphors are there. is there confidence that we will not hit a recession? i love the arrogance. the least number of people on the holiday for years. there is a slowdown, recession. enda: there certainly is. the first job is consumer confidence. with not want to hear them talking about the recession. she is pointing out a slowdown in the u.s.. the question comes about what kind of recession?
households are still in good order, so our banks. -- so are banks. manus: enda curran there, chief agent economics correspondent. off to the ecb with francine lacqua -- good to see you. i wonder about the push back against the hawkish narrative, some of the sentiment from our colleagues. how is the confidence going? -- how is the conference going? less windy. francine: yes. a lot of worry about the monetary policy for the next -- for the last decade. they have done too much. rock stars that have kept it safe. if you see stagflation taking hold, the economy slowing, how
difficult is it to hike into a cycle where there is a downward trend and what does that mean for recession? the question everyone wants to know is how the central bankers are prepared to hike to make sure the inflation is under control. hildebrand is right and during that great interview, it will take a lot of pain to get to 2%. christine lagarde will be asked again about fragmentation. if it is not due to inflation, maybe some structural reforms that we are not doing. dani: first off, think you so much for promo-ing my interview yesterday. we have to promo for you. you have a great panel with some of the world's most powerful
central bankers. jerome powell, christine lagarde, bailey and kirstein. -- carstene. let's get more with juliette saly in singapore about yesterday's rally. juliette: morgan stanley called it a small step for covid exit and a giant leap for confidence. it is not being reflected in the price section. today, the topic is about these growth worries. we are seeing asian stocks snapped at 40 rally. a lot of the weakness is coming through. china csi 300 is 100 away from a bull market. we are seeing some pullback. hsbc saying, this will not be a game changer for the yuan.
that is straightly -- slightly stronger than the dollar. it will be an easing of the quarantine rules. there is still a lot of processes in place. the fact is that a lot of people do not want to deal with quarantine at all. there is still a demand for the dollar. let's take a look at how the market has been for june. noble stocks have not been doing as well. the regional index is down about 5%. china is on track for a gain this month. they are outperforming some socks. we heard earlier that this remains the topic as we start to see an easing of covid zero policy. manus: you keep pushing that narrative. we can smell a bull market. we will see tomorrow morning and hopefully you can confirm it. juliette saly with the asian
market roundup from singapore. to the european story from nato, finland and sweden have taken a major step award in their way to nato membership. meanwhile, g7 leaders have agreed to stick by ukraine. joining us now is maria tadeo. she is at the summit and madrid. how big of a breakthrough is this for finland, sweden, in regards to progress in membership. ? maria: i am about to go through security. one of the major questions going into the summit for finland and sweden. it is about their security. it is about the important geopolitical changes. they are itching to actively join with finland, they share huge border. they made it clear that they did not want to get into it
politically. yesterday they had a huge meeting. by the end of it, the turkish president drafted his objection. he did get some of the reassurance he wanted. no veto to turkey. commentary around the turkish [indiscernible] they agreed. interestingly enough, they said yesterday they had nothing to do with that. no concessions on the united states and this was a discussion between the three of them. that is in terms of today and how that all came about. dani: thank you. we will let you go and get through security.
maria tadeo there. here are some of the key things that marks the -- market participants will watch out. 10:00 a.m. u.k. time, confidence surveys will be released. will they be as weak as the u.s.? 1:00 p.m., the latest germany cpi reading. additional data showing a drop in month over month. will the rest of germany show that? 1:30 p.m., u.s. gdp figures. manus: 2:00 p.m., jay powell, lagarde at a conference. also, second day of the nato summit in madrid. rhea going through security as we speak. dani: coming up, sign said inflation may be cooling. we will speak with antoine bouvet from ing.
>> central bankers face a difficult set of choices. they can bring inflation down at a heavy cost to the real economy and raise interest rates very much to get the inflation community or they can except that the cost is too high and tolerate for higher inflation. dani: hildebrand they're speaking to us yesterday. speaking about what the phrase
of the day might be. manus: those days may be gone. get inflation in check and everything else may follow. we are talking to antoine bouvet , senior rates strategist from ing. to the positioning in treasury, we are seeing jp morgan's positioning. there has been a collapse by 11%. when you look at rates, when you look at the slow down and people not taking holidays, are you beginning to see the narrative which means that you can buy bonds as recession trade protection? antoine: good morning.
a good day always to talk about interest rates in my opinion. the recession narrative taking over the market. this is when we saw that rally. in a sense, this is the right market reacting late. we are heading into very turbulent waters. the million-dollar question, do these do points finally behave and provide a balance to the portfolio when the economy slows down. we need to look at various metrics is. in the grand scheme of things, current yield level elevated.
dani: to the question that manus mentioned, you pointed out that we have seen inflation expectations come down dramatically. you have also pointed out that volatility is very high in these inflation expectations. what does that tell you about the ability to have conviction in this market? antoine: that is a discrepancy. if you look at the ultimate driver, how much are they going to return in real terms, it is already quite a lot of headwind. more importantly, it looks like central banks have warned about those expectations. the problem is, if that is
elevated, confidence will be low. i'm not sure a lot of them are ready to do so. i think it will take time to draw the most risk adverse investors. between now and the third, we will see a peak in inflation and central banks will remain hawkish. there will still be that volatility. the ones with the most risk appetite will be the ones willing to jump at these levels. manus: since we are dealing with peaks, francine has the pleasure of having a panel later today. fragmentation and what comes out of that narrative will be critically important. i think you are brave.
you are calling the top and spread. that is a big call. why are you so confident in what will be in the anti-fragmentation? antoine: that is the theme. the ecb is behind that call. ultimately, the first want to warn about many of the problems, the devil is in the details. there are limitations to what they can do. they will turn around the announcement and this is not the sort of debate they want. that being said, ecb has a lot of experience fighting those. that is not to say they will tie into in a hurry. i do not think that is a situation you want to chase
spreads tighter. with ecb will do is have a cap in place. not at a specific level but preventing large jumps. in that environment, that spread will be a reasonable line in the sand. i don't expect them to be crossed. not for very long. dani: this is a long-standing problem. keeping inflation in check and doing that without causing a debt crisis. it is such a highly political issue. what does that mean, the influence of politics in the economics of trying to get back to normalization? antoine: there is a discrepancy between objectives than any time
the ecb will increase interest rates are talking about balance sheets, you can expect the spreads to widen. some spread widening is healthy and a sense. what market forces will dictate. since the ecb will no longer be the marginal buyer, investors will need to replace them. the question is if they want to do that. yes, perhaps the spread level is not very wide but we need to put it in the context of risk. therefore, it would be lower. i think it will be successful in that respect, provided it does
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manus: this is "bloomberg daybreak: europe." these are the stories setting your agenda. >> growth fears resurface, consumer confidence of pushed stocks into the red again. france cuts their gdp forecast amid surging inflation. sweden and finland take a major step toward nato membership after turkey drops opposition. the view from mount olympus, exclusive conversation at sintra. the peak might be in for the bond market, that was the view of our last guest. for the equity markets of the bottom does not feel like it is and yet. it seems it could easily flip, considering yesterday's lousy consumer confidence data. manus: picking up on ing, the
bond crowd are late to understand this. a real slow down on the way. this is to go above 40. that bond market rally continues, there's been a collapse in the short position over the past week, reduced by 11%. a much bigger drop in the short positioning then adding to the lungs, up over 6%. they are equitable at the moment. iron ore, china is the opening, dropping its quarantine to 10 days. -- reopening, dropping its quarantine to 10 days. beginning of normalization, crude down by .6%. dani: i find the idea really
fascinating. some interesting data from j.p. morgan talks about the housing market, the folks are taking their options. they are doing it on u.s. futures. the most short on s&p futures since 2016. the options based measure isn't showing that bearishness through. neither futures this morning, after we had that big decline in equities. from up 1% to down 2%, up .3% today. the asia-pacific index down more than 1.2%. stocks did fire across etf. they banished their account balances, they were ravaged in 2022. our data shows nearly $10 million was -- $10 billion was pulled out of equity funds. on fears of recession.
morgan stanley chief economist told us a potentially recession will be shallow. >> i think shallow. i think the duration is still in question. i say shallow because you don't have a deleveraging cycle on top of recession. that is different from how he entered the financial crisis. manus: will be shallow? will be short? morgane delledonne is -- is whether you believe this is a defensive rally or bear market. good morning. >> it is very complicated to know. what we are starting to see is that most of the fed's tightening has been pricing the market. the drivers for the equity
market are likely to trade to the earnings. at the moment, the risk is more towards dovishness toward the end of the year, especially as core inflation slows down. at the results of high interest rate, especially on segments like housing, cars, also the retail space. the future earnings will be critical moment to see if there will be another selloff. what we can see now is a critical lifecycle phase, with the reversal from the sharp drop from the pandemic towards more cycled trends. dani: earnings is the thing that comes -- becomes important for equity markets. of goldman sachs strategist -- you have goldman sachs strategist -- do you agree?
>> at this moment they earnings are lacking. the q2 earnings will be to look at how consumers have been hit and how the margins will be compressed. but on leverage, and enter the cycle and potentially recession, look at the leverage issue. it is low compared to historical levels. especially intact. even lower in terms of leverage ratio. at the unemployment rate is still low. earnings so far has been up from last year. it is still a very good area for growth. the growth rate is declining more as we enter a soft landing
in the u.s.. manus: we are showing our due and imagery of these numbered valleys. the inflows across the subsequent rally has been -- hedge funds are battening down the houses -- hatches. there are pockets of value in long-term investment. because i don't have to advise anybody, i can say whatever i want. i look at things like microsoft, apple, s&p and go why wouldn't i by these monsters. they just pop it every month, there you go. where are the pockets of value in big tech? am i deluded? >> i think the tech market now is in a phase we need to look beyond the big market cap out there.
if you look at biotechnology, cloud computing, but also health. we seen a lack -- talking about double-digit rebound last week in these things. these are probably -- it is interesting how investors are coming back to growth talks. because they have so much value there. if you look at growth ratio, there price at the moment. >> especially when you look at things like cloud computing and environment, looking at business models.
they're quite resilient and inflationary environment. we do see people now that have more confidence that the tightening cycle has peaked. dani: what about the kind of tech that you are just looking for future cash flow? it that the cash flow is not there now, it is all about growth. can that business model to sustain itself going forward? >> i think the question is whether the investors and economy will transition to clean and digital space. they are structural type of development. the narrative around this transition is impact. now it is a question of entry point, are the investments
attractive enough for investors to get back in? is definitely intact. dani: thank you for finishing a thought. apologies for the interruption. manus: go ahead. dani: i was just going to think you, we are both happy you could join us this morning. now to the first word news. >> jp morgan no longer has any exposure to the nickel that rocked metal markets earlier this year. after drop in prices allowed the tycoon at the center of the massive short squeeze to exit his positions with the bank. j.p. morgan emerged as the largest counterparty to a chinese company. walgreens has abandoned the sale of its goods pharmacy chain.
the deal was expected to bring in more than $6 billion. bloomberg has learned the goldman sachs is going to celebrate to more than $1.2 billion. it forces the firm to take more lending loss provisions. goldman originally said the market would break even this year. 2310 -- 23 time grand slam winner serena williams the first round at wimbledon. she was beaten by 116th ranked player from france. when asked if this is her last match, she said who knows. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you very much.
and sweden have taken a step closer to nato membership after turkey dropped their opposition. g7 leaders have agreed to stick by ukraine to the bitter end. maria tadeo is at the summit in madrid. maria, good to have you with us. maria: we are very safe. the big question going into the summit, the idea of sweden and finland bridging the policy of neutrality to join nato, as the war ukraine has been accelerated by the russian aggression. the deal yesterday, i think it took many by surprise. we were expecting along, drawn out negotiation, and it was done in four hours. we were told erdogan want to just be except that he would be accompanied by the presence of
finland and sweden. perhaps a propaganda moment, was worth paying that price to get the assurance they want to join nato. we are expecting this to be a fast official confirmation by the end of the summit. the nato leaders are expected to officially give the go-ahead to finland and sweden. this could be quick for the two countries. dani: we are also seeing possibly the biggest strategic overhaul of nato since the cold war. his that bring us back to the dynamics of that era? maria: we could see the most sweeping changes to nato. when you look at the language for the secretary general uses. they say russia is a direct and significant threat to nato security. just a few years ago, russia was
not a member of nato, but was seen as a partner to nato. now it is essentially being declared an enemy potentially to the security of the 30 countries. when you look at china, it was not mentioned in some of the conclusions. now it will be named a systemic challenge to nato. i'm not sure if we are back to the cold war, but we are definitely back to block politics. it is clear the messages either you are with us work without. the war in ukraine shows when you are not part of nato, it is lonely out there. dani: thank you very much. the french government have/it's economic growth forecasts of underscoring the constraints on a mac as he tries to prepare -- macron as he tries to repair. joining us now is caroline. i'm looking at morgan stanley,
they predict a recession in the fourth quarter. issues for france compounded with all that in europe. how significant is the growth forecast cut in the region? caroline: it is a significant cuts of the french forecast from 4% to 2.5%. this comes just one week after they already cut their forecast for france and -- 10 days after macron learned he lost the majority at the national assembly. this is reducing the mountain of maneuver for the french government. it is going to on public finances, doves expected to remain high -- that is forecasted to remain high, forecasted at 112% of gdp. it is still expected at 5%. they have the 50 billion euros
of unexpected tax riches. however, this is going to make it more difficult for emac --mac ron to have more money to invest in education. that is not going to help the anger we saw during the legislative elections. the french very angry at the way macron has been handling the pandemic and recovery. now the war in ukraine and inflation in energy prices weighing on consumer spending. they're calling for cuts in taxes. this is something that the finance mr. has ruled out because he says that is going to cost more than 20 billion euros. prince cannot afford it. public finances are already at
an alert level. manus: good to see you. thanks for joining us. it is going to be big in parliament today, you have lied out -- laid out the parliamentary -- legislative agenda. it could be a different narrative. the majority is gone, what does that mean? caroline: he is facing parliament tomorrow, this is when the parliament is supposed to speak, the chair of the finance committee at the national assembly. that job usually goes to an opposition party, meaning the far left of the far right and the republican all presenting candidates. then the job of the chair is important, it sets the agenda of that final committee. then you have the panel has control over the budget.
they are supposed to present the revised budget next week, based on this new growth forecast. in the short-term, this is going to be difficult for emac -- emmanuel macron. that -- he has to pass pension reform, to give guarantees. the prime minister needs to reassure the french that inflation -- inflation -- anti-inflationary measures in the short term. manus: let's see what he can get through. caroline with the latest on the upcoming new tenure impressed -- in parliament. coming up, cap on the price is for russian oil and gas, or the
>> our ministers will continue following the actions of the united states. by applying the broadest possible alliance. we have to do the same thing with russian gas. it goes through pipelines. russians ability to use gas is very low. we are in favor -- we will continue to move forward in the coming weeks on the subject. dani: french president emmanuel macron backing a price cap on russian oil and gas. manus: let's check in on the oil
market. there was this debate on the supply side, we've seen the market dropped belittles a bond markets on recession, oil markets on recession voter. -- recessionometer. they are put on their current pledge. we have outages in libya, ecuador, these markets are more focused on the downside risk. since -- let's take it to our commodities editor, andrew, what we are grappling with is what a price cap might mean for this oil market. andrew: in theory, this price cap would deprive the russian war machine of money and at the same time ensure oil keeps flowing where it is needed most.
helping keep a lid on prices and inflation. in practice, it looks pretty complex. all the details needs to be agreed on, you potentially have the 27 numbers -- members of the eu all sign off. then there's the question of will it actually work in practice? will the asian nations who have been buying a lot of russian oil, will they look for workarounds? in theory, it is good for them, they may choose to prioritize ties with moscow. putin could say no, i'm not going to support it at that price. a lot of details to be worked out there. it is hard to say at the moment about what it might mean prices. dani: what should we be looking out for in tomorrow's opec-plus
meeting? andrew: they are widely expected to do a mock -- modest increase. there are supply constraints there except their own numbers show their half a billion barrels short since may 2020 on their pledge. it is expected there will be some deal in the saudi's may pump more. that will likely be tied to -- dani: we are going to have to ended there. out of time. manus, from oil, all eyes turned to central portugal. manus: you're going to get powell, lagarde, she going to keep optionality alive? ♪