we'll give you a super easy refund. we'll even cover the return shipping. this is a limited time offer, so go to aerotrainer.com to get the body you want with aerotrainer. >> good morning. from bloomberg's european headquarters, i'm annmarie hordern. stocks mixed at the start of a busy week. testimony from jay powell and janet yellen will give investors plenty to consider. the turkish lira plunges as another central bank chief is ousted. he is the fourth in two years.

the eu is ready to withhold covid-19 shots from the united kingdom. a very good morning to you and happy monday. a busy week. we are seeing weakness broadly across the asia-pacific region. down 0.2%. u.s. futures in the green but europe is broadly in the red. the dax -- germany is gripped with a third wave. 10 year yield this morning down so far dropping five basis points. we have a number of options this week -- auctions this week and we have to talk about the lira. down more than 9% against the u.s. dollar as erdogan fired the bank governor in a late-night

decree. the new governor is turkey's fourth central bank governor in two years. everyone is worried about the rock-bottom rates. more on that in 10 minutes. a busy week. a number of events. jay powell and janet yellen will testify. tuesday. there is a series of treasury auctions. the later takes place on thursday. and a host of data points. durable goods. and home sales all coming out. plenty of potential catalysts but the bond market on the docket this week. we will also discuss the inflation rate. we spoke with the richmond fed's thomas. >> i want to emphasize that inflation is not a one-year phenomenon. >> a multiyear phenomena.

joining us now is fabiani fedeli from robeco institutional on potential risk ahead. she says the fed will have to taper ahead of a taper increase. the market could anticipate this in the next couple of months. the market getting ahead of the fed. i want to get your first thoughts on inflation. larry summers says this is irresponsible market macroeconomic policy. detained that inflation is going to be a blip this year? fabiani: good morning. long-term and short-term. larry summers looks at this as a short-term issue -- as a

long-term issue but in the short term come it will be a shot in the arm for equities. you look at the inflation coming up from the levels to the current levels, 2% or 3% over the year depending on which point of the year we will be, this is a strong environment for equities. we expect inflation to get up to 3% in the near-term because of the comps around energy. back down to about 2% at the end of the year. markets are comfortable at these levels. at least equity markets. for now, there is no reason to panic. >> why is larry summer so worried about the u.s. economy overheating? fabiani: we have seen that, for example with china in 2009 when you are a huge amount of stimulus in the market there is the possibility of a distortion

to the economy. it has to be managed well. that is what larry is looking at. the debate is still there i think. we will have to see how this plays out. i think for this year come this is still a good environment for equities but it clearly needs to be managed. and also, you pointed this out earlier, that you have to look at what the fed is going to do on a yield side. >> at one point, i know you have loved the shift into cyclical and you were a lush on equity, at what point does that start to hinder your outlook on equities? fabiani: it is all about real rates. at the moment, they are still in comfortable territory. it is when you see real rate

rising significantly, that you have an issue. and don't forget that it all depends on the outlook for growth. think about 2004, 2006, 426 basis points in the fed fund right but it was still one of the best years for the s&p 500 and the emerging market equities. the outlook is going to be key. if growth continues to improve, than the yield increase is going to be far less worrisome than if we have a stall in growth. >> you have been talking about the shift to cyclical since october, what sectors do you still like? fabiani: we have last month -- we have already started rotating late last year out of some of the hotter sectors, particularly

on the communication services in the u.s. we have started moving more into cyclical's and we have added even more to financials, balance sheet financials, insurance, materials, and consumer discretionary. >> are you still also as well bullish on commodities? we saw a lot of them take a leg lower last week. how does that plan into the cyclical tilt you like as well? fabiani: when we talk about materials, we talk about commodities. oil is a different point. with oil, clearly you have huge capacity at about 9 million barrels per day. we really do not see that kind of super bullish outlook on oil

that many out there see. for the year, we still have oil price just above that for the year. you might have spikes. but from the supply side, you still have enormous capacity that can be deployed. >> in the u.s. come as we see the number of vaccinations increase, one thing thomas barkin mention is that there is supply chain issues. we could potentially see that happening already as demand increases. are you worried? fabiani: i am. you see the supply side issues. that is also a reason why the big stimulus we are seeing in the united states will not only benefit the u.s. economy but also economies elsewhere through demand for imports.

you also see still issues from the supply chain side in i.t. components, that is continuing and it will create distortions i had but in the end -- ahead but in the end -- companies are focusing on capital expenditure. >> fabiani fedeli from robeco institutional stays with us. your first word news with laura wright. >> the european union is estimating a disagreement with the united kingdom. all withholding the astrazeneca vaccine until it fulfills its obligation to the eu. german chancellor angela merkel wants to keep the current lockdown in place for another

four weeks. she is discussing the proposal with the regional governments. religion may also suggest a curfew and closing schools. case numbers are rising again. australia's vaccine rollout is hampered by petén -- by torrential rain and flooding. the downpour is expected to intensify in the middle of the week and caused this rapid -- and cause disruptions to freight and logistics. global news, 24 hours a day, on air and bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg >>. just ahead, erdogan has done it again and the turkish president has ousted the third bank governor in less than two years. that story is next. this is bloomberg ♪.

>> inflation. >> we have said we would like to see inflation run moderately above 2% for some time. >> we are telling people that the markets will be late. inflation expectations could react to that in a way that the fed does not anticipate. >> inflation is currently below 2%. >> there is a consensus building. >> it is not going to be below 2% in the next few months. i see a 3% or 4% number and ahead of this. >> do we think the fed will be afraid to do what is necessary? annmarie: central bankers and market names speaking about the

fed's inflation dilemma. it is a hot debate in turkey. the turkish lira plunging as much as 15% against the dollar as president erdogan replaced another central bank chief. turkey is on its fourth governor in two years. thank you for joining us. what message should markets read into this weekend's comments? this is the fourth central bank governor in less than four years. what roadmap is turkey set on? >> this is a message of retreat to unorthodox measures. a retreat to the idea expounded by president erdogan that higher interest rates fuel rather than control inflation. that is why we are seeing traders take this very negatively today. a heavy selloff of the lira.

that is indicative of a removal of trust in the direction of turkish central bank policy at the moment. annmarie: it has been one of the standouts prior to this. what are we likely to see in the coming weeks and months? this is on the heel of a 200 basis point cut. is that going to be reversed now? >> the hike that we saw last week was off the back of a period, a brief period of lira weakness. it surprised the market in general which took it very positively as a sign that turkey is serious about getting a hold of inflation but it also seems to have surprised the president. the outlook is that we will see an exit us of foreign capital --

an exodus of foreign capital. interventions from state banks to try to shore up the lira. there is not a lot of maneuverability for the central bank in this environment. reserves have been buoyed but they are not at the level that gives the central bank a lot of leeway. we are talking about $50 billion of gross reserves. once that is removed from the equation, i think the market will believe that turkeywill resort to less orthodox measures. annmarie: will we see capital controls? >> it is difficult to say. we are just seeing the statement from the finance minister that

turkey will stick to a free foreign exchange regime and will focus on price stability. turkey does not have a record of imposing capital controls. there will be some tweaking at the lower levels in terms of buying and selling the lira. i don't think we will be looking at capital controls at this stage. but who is to say what is ahead. annmarie: thank you so much for joining us. bloomberg's justin carrigan on the overnight to create over the weekend from turkey. fabiani fedeli from robeco institutional is still with us. what we saw out of turkey was quite a surprise. you can see the reaction in the lira. this is now turkey's fourth central bank manager in less

than two years. fabiani: we looked at last week's rise in rates thinking something has changed. and now, nothing has changed. we saw this ousting of the governor. i think this is really undermining investor confidence in turkey. certainly foreign investors' confidence in turkey. justin was talking about fx reserves dwindling. capital controls are on everyone's minds. the good thing here is that i think we are seeing something we have seen before. turkey is a little different player compared to other central banks in emerging markets which

gives us confidence that it will not be fooled elsewhere. annmarie: we are waiting on mexico and some are saying that we will see mexico cut which would be a break from what we have seen in brazil, russia, and turkey. what does this mean for e.m. more broadly? fabiani: as you pointed out, brazil had an increase last week . it was also unexpected and it really felt that as soon as we started seeing inflation go up and the brazilian rial being volatile, they wanted to stand that. the pboc over the weekend was reiterating that there were not high rates at the moment and they would not cut rates and it would stay stable. from an e.m. standpoint, central

banks are behaving in an orthodox way. there could be some specific situations but right now, we don't see anything close to turkey. annmarie: fabiani fedeli, stay with us. coming up next, we will look at what is happening in the vaccine battle. this is bloomberg. ♪

>> from the second quarter, we want to manage to progress the vaccination in germany as quickly as possible and is flexibly as possible. annmarie: angela merkel speaking

last friday on the importance of stepping up the vaccination campaign. the eu is upping its and take in -- its ante in its battle with u.k.. the drugmaker fulfills its delivery obligations to the european union. let's get to our bloomberg reporter in brussels, maria tadeo. how serious is the eu about halting the shipments? maria: it goes back to the underlying and -- it goes back to what was said last week. she singled out astrazeneca and referred to it as a company that had underperformed and under -- and under delivered. she was very clear about the principle of reciprocity.

that is what has happened with astrazeneca. the european union has made about 40 million units and about 10 million of those have gone to the united kingdom. and you have to factor the brexit narrative into all of this. and a very six -- and a very successful vaccination campaign in the u.k. what they say is it is about reciprocity and piling on the pressure on astrazeneca to deliver on those contracts. if they do, all will go well and nothing will happen. we should stress that when you look at the overall balance come astrazeneca has cut production to the -- you can understand where the frustration is coming from.

annmarie: thank you so much for the update on what is going on on the vaccine front out of the european union the. fabiani fedeli is still with us. when you look at this and you see how far behind europe is, do you still think that the end of the second quarter, the supply constraints will remain? argue have to change your timeline? -- or do you have to change your timeline? fabiani: the vaccinations have been incredibly disappointing in europe and below our expectations. we do believe we won't get enough doses by the end of the second quarter to vaccinate 70% of the rest of the population. that is not because of astrazeneca but because the other vaccine providers will

start also adding to their doses for europe. that means that in the third quarter, europe will have to deliver in terms of the vaccination set up and that will be something we will need to follow. there will most likely be enough doses why the end of the second quarter. but then come of the devil is in the details. annmarie: we also have germany on the brink of extending their lockdown. we have an idea of vaccine nationalism. how damaging or risky could this impact the way investors? think towards europe -- how damaging or risky could this impact the way investors think towards europe? fabiani: it is damaging because

you see the difference in gross -- in growth between the u.s. and europe. and also with u.s. stimulus and the vaccinng better. i think in the short-term it will hurt european equity markets and we have shifted some way more towards the united states. we are not always on the cyclical side. and i think europe really needs to get back on track with the vaccination program. annmarie: i imagine with this export halts, that is what they are trying to do. fabiani fedeli, thank you so much for joining us this monday morning. just ahead on daybreak, the credit suisse ceo says he considered selling off the asset management arm in the wake of the greensill issue.

that is next. this is bloomberg. ♪

annmarie: good morning. from bloomberg's european headquarters, 6:30 a.m. in the city of london, i am annmarie hordern. this is "daybreak: europe." stocks mixed at the start of a busy week. inflation data and testimony from jay powell and janet yellen will give investors plenty to consider. the turkish lira plunges as yet another central bank chief is ousted. the new governor is the fourth in two years.

and the european union is ready to start withholding covid-19 shots from the u.k. as it looks to shore up its own supplies. very good morning to you. a busy 24 hours already. look at what is going on in turkey, and a busy week ahead. look out where we are this morning. asia-pacific down 0.2%. we are seeing a risk off tone as we look at the equity markets in the red, except for the nasdaq futures. the dax futures are down 0.4%. this comes as angela merkel looks set to extend the locked by another four weeks. treasury yields were down, 1.6%. we have a deluge of options coming down the pipeline. the lira this morning, we are down 8%. at one point, we were down 15%. this comes as an overnight decree into saturday morning, erdogan fired the central bank governor. the concern is whether or not turkey will head on a path of rock-bottom rates. of course, the lira is one of

the first points that investors are going to be watching. and as we see today, dumping. credit suisse ceo thomas gottstein says the collapse of green capital is a distraction. speaking exclusively to bloomberg, he signaled he has considered spinning off the asset management unit from the rest of the bank. we will bring you that interview in a minute. but first, let's take a quick look at how the scandal unfolded. green sale's primary business helps companies with their cash flow, purchasing invoices at a discount and collecting payment at a later date. the trouble dates back to last summer, when the company lost insurance coverage for its debt repackaging business. softbank wrote down its investment. green cell filed for administration. let's listen to what thomas gottstein had to say to rishaad

salamat ahead of the annual asia investment conference. thomas: it is part of our asset management problem. we are working with greensill capital. we are 100% focused to get as much money back as possible. a barrier to that, we are investigating whether the shortcomings in the first or second line of defense is too early to talk about. clearly, it is an unusual situation. but i am actually confident that we will come out stronger from this episode. it is a learning process. we have announced we will take asset management out of i w m and put it under leadership. we will directly report -- they

will directly report to me with their own division, divisional support that it needs. thomas: thomas: let's talk a little bit about the magnitude of this financial hit. what ultimately will investors be left with, and how much will you be left with to carry the burden? how much of it is insured? thomas: we cannot comment on that at this stage. you have to understand, otherwise we would have communicated it already. but you are absolutely right. we already have that view of the business. i was never a big fan of the fact that asset action was part of it. this retail situation has accelerated what i was planning anyway. he will now put his team together and take asset

management to the next level. rishaad: does the responsibility stay with them, or are you considering further actions? thomas: this will be subject to review, as i said, that the board is doing. right now, we are focused on finding the best solution for our top investors. that is our priority. our priority as a team is to get the best solutions for them and empower an investigation. i will not speculate on the outcome of that. rishaad: one more question. you split off asset management. do you foresee it being spun off into a completely separate entity, which could be independent? thomas: that is potentially part of the plan, but the most important thing right now is it is its own division. it is a legal entity.

having a holdings company around that could be something we are pursuing. annmarie: credit suisse ceo thomas gottstein speaking ahead of the bank's annual asia investment conference. bloomberg is the exclusive tv partner of the event. the focus this morning in europe is about the recovery. chancellor angela merkel has proposed keeping octel restrictions imposed for another four weeks. that is after covid-19 cases rose beyond a key level, prompting action to avoid a health care overload. for more on this, maria tadeo joins us with an interview. hey, maria. maria: good morning. we are joined by the global of global -- the founder of global sovereign advisors. you have a lot of experience working with european officials. he worked with the greek prime minister at the head of the european crisis. i know this is a different

crisis. when you look at the economic outlook, the lockdowns we are seeing, they are extending in time. how pessimistic are you about the european recovery? guest: thank you very much for the question. i am more optimistic for a couple reasons. first of all, there is going to be a very strong u.s. recovery and u.s. recovery always has an impact on europe, so we will benefit from it. second of all, you are absolutely right. with further lockdowns, the situation could look whom year. -- could look gloomy -- could . digitalization has picked up. it will certainly delay some of the recovery and recovery that was expected to be strong in 2021 may be delayed until the end of 2021 until 2022 because

typically in germany we are coming back to the number of 2019, the middle of 2022. it is a delay, but in my opinion, it will not impact the magnitude of the recovery. maria: to the other side, to the story of the fiscal side. in the u.s., there is a huge package that has been approved. in a europe, we have the recovery fund. out. it has yet to be paid out. guest: i think that is exactly what needs to be done. in europe, we are slightly more moderate and i think we should increase because it is absolutely needed and we need to start having the debate around fiscal rules. i am sure you have seen the debate has already started because the rules have been suspended until the end of this year and may be further suspended. on top of this, we have to

discuss about fiscal rules, are they still adequate, do they need to be modified, or do we move from fiscal rule to fiscal standards that some have been arguing for? maria: just for our audience, the area of expertise and what you are focused in is debt. it is very clear many of these countries will come out of the coronavirus with a huge debt pile, perhaps 160 debt to gdp. we have a very low interest rate at this point. do you worry about the debt, or should you look at it differently? guest: i think we should look at it differently. but in the order of magnitude, during the crisis, from 2008 to now, some countries did increase it. i am talking about european countries like france or italy. what is true is that in one year, countries have increased their debt by 16%, 70% of debt

to gdp, which is massive in one year. however, rates are historically low. as a result, we need to look at things in a different way. very low rates are a competitive advantage that europe has and it should use in order to invest and do some long-term investments, be it infrastructure, be it in green, or be it in certain countries, having more health and education spending. maria: and a final question. terms of the sustainability of that debt, is that something you would say don't worry about that element anymore? this is a very different framework. guest: i think we should look at it in a completely different way. sustainability is defined with some aggregates, in particular the imf has a state and there

are stock and flows element. the stock element should be much more undermined in the current crisis. the debt to gdp should not be overlooked because it is relevant. however, looking at any ratio that has interest payment is extremely important. i think what we should be looking at.is this we should also be flexible looking into the rate. we really see that when shorts happen, the traditional ratios do not mean anything. the biggest mistake would be to stick to the prior ratios, as has been the case in the crisis of 2008. maria: thank you so much for your time. we appreciate you coming on. always good to see you. that was anne-laure kiechel, the founder of global sovereign advisory. annmarie: thank you for that. that is such an important story today and for the rest of the week as we wait to see what the eu does in terms of halting those covid-19 shots.

just ahead, saudi aramco's $75 billion dividend survives the oil route. we will get the latest next. this is bloomberg. ♪

annmarie: good morning. this is "daybreak: europe." i am annmarie hordern in london. saudi aramco's dividend has survived a big oil and earnings rout in 2020.the world's biggest oil companies on that come fall 44% -- net income fall for 4% last year. the ceo says he is optimistic. joining us from maria at is matthew -- joining us from riyadh is matthew martin. how does this affect aramco's balance sheet? matthew: as you said, this dividend, this enormous $74 million they pay, to keep up

these payments amidst this historic crash in oil prices the past year, aramco has had to borrow, it has had to cut spending, it cut some jobs over the course of the last 12 months. it has become more focused on controlling costs so it can keep shipping money over to the saudi government, which has had to deal with this fall in prices and the impact of the coronavirus slump. despite all of that, when you add up all the numbers, the saudi government still made about 30% less from aramco than it did last year because lower oil prices means lower income tax and fees. the government is still suffering slightly, although not as much as it could have if aramco had decided it could not maintain this dividend and had to cut it. annmarie: for the outlook for 2021, they were talking about demand uptick in asia. what else did he say about the

out look? do we see an uptick broadly anywhere else? matthew: i think the note the company is trying to strike now is a note of cautious optimism. i think the ceo was saying on a call with journalists yesterday that he sees good demand from china and from asia as well, more broadly. he said that is starting to get back up to pre-pandemic levels. the real worry on the horizon is europe, where he expressed some caution around the slow pace of vaccination rollouts, meaning economies are not going to start reopening there as quickly as they have done elsewhere. because of some of that caution, they are still not getting back to the big investment plan that they had previously outlined. so they are still going to be going a little cautious on spending throughout the course of 2021. annmarie: and it is so pertinent

that you say that because today we have germany on the cusp of extending their lockdown. it is still precarious. bloomberg's matthew martin, thank you for joining us. oil this morning is steady as investors assess the demand after the worst week last week we saw since october. brent futures trading near $64 a barrel. joining us is the global olio's try to just -- global oil strategist. how ceo nasser is talking about china with demand growth increasing, but it is worrisome when you look at the west. what do you see when you look at demand? martin: that is absolutely correct. it is often difficult to know about oil consumption in real time, but we do know what refineries are running. it is very consistent with the observation you just mentioned.

refineries are running pre-much as hard and as fast as they did before coronavirus. the weakness is concentrated in these countries. but there are some reasons to be optimistic. one of the countries we track in a huge amount of detail is israel. it is a bit of a petri dish of what can happen in mobility and world consumption as a result of world infections. what we see is a very short time lag between vaccinations picking up and mobility picking up. if israel is in anyway a template for the rest of them for what can happen to mobility and oil demand once vaccination reaches critical threshold levels, then i think there are good reason to be optimistic for the second half of the year, particularly toward the end of the year. annmarie: if the second half of the year is going to be potentially what we are seeing right now and israel to other parts of the world, how worrisome is it in terms of

actually having the supplies on hand? we know that opec is keeping a tight lid on those supplies. martijn: yeah, this is one of the reasons why the oil price has rallied so much over the last couple months. the practical reality is this. based on the inventory that we can see, and we see a lot of inventories these days, we think the market is undersupplied by something like 2 million barrels a day. that is on the historic upper end of how much oils can be undersupplied. step backdrop, we think 4 million barrels a day in demand will come back. mathematically, very quickly, that leaves about a 6 million barrel a day hole in the oil market. the question is, who is going to fill that? the answer to the question is non-opec producers. it takes time to ramp up non-opec production. shale can react faster, but u.s. producers will struggle to generate production growth

this year. that could be a 2022 story. opec admits they do have spare capacity and could fill this gap. opec is in the drivers seat and they have control of the market this year. annmarie: goldman sachs called the recent selloff in oil transient. last week we had one of the worst weeks since october. do you still maintain this 70 plus dollar price on brent? martijn: yeah, we actually agree with that view. commodities are not like equities. equities reflect expectations of earnings and cash flow between now and forever, appropriately discounted. oil prices mostly depend on the supply-demand balance right here, right now, over the next couple of months. if you look at what will happen over the summer as we go into the third quarter in particular, very steep inventory as the demand growth picks up, as we

just discussed. we are forecasting $70 as an average for brent in the third quarter, but we could very much overshoot that level. what will then happen in 2022 and 2023 is up to debate. but in this opening rally, there are tensions in the system that we think can only be resolved by prices going to those levels. annmarie: 1.i wanted to finish on his according to some of the data we are seeing is when it comes to iranian oil leaving iran, it is about one million barrels, and that is going to china. how complicated does that make opec-plus's job the next five meetings down the road if we are seeing iranian oil come back into the market when they are obviously not supposed to, given the sanctions? martijn: that is a question that we all worry a lot about.

the practical reality is there is room in the oil market for more supplies, including iranian supplies. if this comes to the end of the year, then it will be a lot easier to absorbency because by then we think demand will have recovered sufficiently and the hole in the oil markets will be large enough that there is room for many players. but it is indeed true that if this were to come a lot sooner than the end of the year to over the summer, then that could change the outlook. this is one of the key risks to our outlook and generally the market's bullish outlook. if this supply comes earlier, opec will need to find a way to accommodate this and that will be simply a challenge. there is no other way around that. annmarie: martijn rats, global oil strategist at morgan stanley. i want to get a quick price check on where we trade in terms

of turkish stocks futures this morning. they are dropping at the start of trading. you can see a 90 degree angle to the downside. this comes with what we saw over the weekend out of turkey, president erdogan firing the central bank governor overnight my creating lots of concerns whether or not turkey we'll head on a path of rock-bottom rates. we should note that sahap kavcio glu, the new governor, is the fourth governor in two years. also, the things you want to be watching out for are the domestic lenders, which are likely going to get hit hard today. i had on the program, janet yellen and jay powell make their first joint appearance before the u.s. house financial services committee. more on that in the rest of your week ahead. this is bloomberg. ♪

annmarie: 6:55 in the city of london.

good morning, i am annmarie hordern. take a look at what you need to know for the rest of the week. tomorrow, we see janet yellen and jay powell make their first joint appearance before the u.s. house financial services committee. wednesday, the german cabinet is due to sign off on a 2022 budget plan. thursday, watch out for rate decisions from mexico and south africa, e.m. in focus. the same day, the eu leaders summit. covid, industrial policy, and relations with russia will be top of the agenda. a lot coming up and to watch out for this week. also including a barrage of an option of treasuries coming from the united states as well. we want to take a look at what is going on in turkey. this is the start of istanbul trading. we are slumping on the stock markets, down more than 6%. it comes as overnight we saw the slump in the turkish lira, at one point plunging 15%. all of it was an overnight

decree from the president of turkey, erdogan, firing the central bank governor. concern is whether turkey will head on a path of rock-bottom rates. this new central bank governor is the fourth in two years. that does it for me. anna and mark are next. stay with us. this is bloomberg. ♪

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anna: good morning. welcome to "bloomberg markets: the european open." mark cudmore, our markets live managing editor, joins us to take us to the market action. the cash is less than an hour away. here are our top headlines. the turkish lira plunges as president erdogan out another central bank chief. the currency trades close to record lows. europe's vaccine battle heats up with the eu ready to hold u.k. shipments.