manus: good morning from our middle east headquarters in dubai. this is "bloomberg daybreak: europe." the stories that set your agenda. surging commodity prices, stocks , has all eyes are down for the

u.s. cpi tomorrow. the senate passes a sweeping bell -- sweeping bill into how the u.s. can compete with china. bitcoin approaches a continued downward spiral for the world's biggest digital currency. good morning, the question is, the gap between ppi and cpi. a serious infusion of inflation, but the gap is widening. the cycle is rejuvenated and the chinese authorities are coming in and showing their might and strength in terms of price controls. a thing of beauty, ppi and cpi breaking the previous cyclical highs. good morning. annmarie: the question now is when, not if, potentially those prices will feed into the consumer and demand will pick up. i know you're very excited about

what was written today, a little bit of game theory on this wednesday morning. she read it first as china caution -- no, inflation caution, but she actually thinks now is more a game of chicken. manus: i monster game of chicken. well done. i have this image of you and i in an old volkswagen driving over the edge. fearlessly driving toward an incline truck of rapid real-world price increases. i think that encapsulates the narrative between the transitory and perhaps something more progressive. annmarie: certainly, and the fed is just really not relenting in terms of saying it's going to be transitory. investors at some point push them, and the other part of the story is, for weeks we've been

talking about aging and the china communist party that worries about the spike in commodity prices. but now the scoop we have out of beijing is the fact that they are doing something, they're putting plans potentially in place to actually cap these prices. you have to think if they are going that far, they're worried about any rise we are seeing in raw materials. manus: absolutely. just get in there with the control of: dairy products. a quick snapshot of what's going on in the markets on day two of quarantine. let's run through, the s&p 500, the vice of blackstone says get ready for 4500. we will break out of our slumber of the past two months. stocks are muted this morning, the dollar is down. jeffrey gundlach webinar on the dollar, he said he still retains his bearish view but in the

medium-term term he is neutral. the 50 day moving average, the 200 day moving average, that could take you down to the lower $20,000. that's from a brokerage house. could it be it breaks the slumber of the u.s. 10 year government bond market? tom mackenzie is the china open market anchor. good to see you as always. everyone is telling us the chinese have got it under control. what do you make of it? tom: we both set it up so well. the key takeaway, the headline number, 9% is the highest in terms of producer price inflation, the highest number for 13 years. but what you also point out is

the downstream part of the economy. the manufacturers of electric components are digesting these toss and it -- cost and it will have an impact for margins but they're not passing it on to consumers. there isn't that demand, they can't hike prices. that's why you see the cpi missing estimates, coming in at 1.3%. the question annmarie poses, when does the dam break, essentially? the fourth quarter of the year is when you see the gap start to close. that's when the pressure start to build. stepping up to the brink, the officials say they will try to ensure that those stable prices around the most key food products will continue, they will manage that and the scoop we got in beijing around -- coking coal and they are looking at price controls. manus: you have covered for

china for years now. do these kind of macro landgrab price controls, do they were? -- do they work? tom: they did work. earlier this month you start to see some jawboning from officials, and as a result, you saw those commodity prices start to fall on the back of that. goldman sachs says longer-term is not going to work because economies around the world, trading partners of china start to reopen and the demand picture starts to pick up. for the moment this is what officials are resorting to. manus: tom, thank you very much from beijing. let's turn to our guest host this morning, the chief of global strategist at credit suisse. our men and china says the price controls don't work. ppi to cpi is busting out of it

cyclical boom. does that change your mind in any way or do you say it's transitory? >> we have the impression that much of the pressure is transitory. there are various elements that are pushing inflation and we think many of them are more due to the currency situation, the demand increase, bottlenecks in supply chains. but some will be fixed and some will be temporary. although there is a risk in inflation, our base case continues to be that we will see an easing of the peaks from the year. annmarie: we don't see it feeding into cpi just yet. do you have a timeline of when we could see that happen in china? >> that's hard for us to guess, quite frankly.

the macro information that comes out right now is quite unpredictable. so many things are going on, so it is hard to say. but we have the impression as long as food prices continue to behave, there will be little impact on the cpi side. manus: you retain a strong global equities narrative overall. how much of china and asia is in that bullish allocation? >> not as much as we had last year. china was one of the first to come out of the pandemic situation. clearly it's much more in the face of normalization right now. other markets are opening up and particularly, europe is just opening up. right now certainly the narrative is based on economic recovery.

now europe is joining in, but much less at this point. annmarie: is there risk to chinese equities and the growth we could potentially see over the remainder of the year because of how high these inflation figures are? >> is not in our base case. we think china, when you look at monetary conditions, they have tightened some to move others. this was a bit of a headwind to equities, the same as we've seen on u.s. rates which were a bit of a headwind. and from growth into value, we don't think the cpi story at this point will be that. manus: in terms of this game of

chicken, and we talked about this at the start of the show, there's a global game of chicken going on with the central banks. if you think about it, it is a delicate game. how much is your strategy based on the status quo holding on rates, but with a moderate taper across the world? >> we were quite surprised how investors behaved when we saw the first -- when there was potential thinking about thinking of tapering coming out of the u.s.. yet investors were fairly calm. the needs to be an organization of monetary policy which is now set for crisis mode.

i think the united states will taper eventually. we will see when talks start about this. it doesn't change the overall story and we don't think this will lead to substantially higher rates, for example at the lower end. we do think that will continue to rise higher. as a consequence, we don't think this will be a substantial headwind to equity markets. it may lead to volatility but we would argue that it is still a buying opportunity. annmarie: jeffrey gundlach said -- i was just going to say, jeffrey gundlach said, how does anyone know? what is the risk to the fed getting this wrong and your base case being wrong? what is your biggest concern?

>> clearly, a risk that we identify would be if inflation were to be higher than we anticipate, and secure. we do have some inflation hedges in our portfolio that we think would benefit from such a situation but i don't think initially it would be the end of the positive equity trend. manus: thank you so much. some breaking news here in our region, one of the major housing builders here, the chairman has resigned. he's very much the public side of the business. he has been there for 7.6 years. that just says his sway across the is and is.

this is an interesting breaking news line here in our region. the chairman's company is to make an offer for the remaining shares. we will break the story down a little bit more. annmarie: when we get that new chairman, i'm sure it will be an exclusive interview. ahead on the program, later this morning, will be speaking to an economist who wrote the book that said inflation was dead. now he thinks it is alive lie. that conversation coming up at 8:30 london time. that's given a recap of what is going on around the world with simone fox. >> good morning. president biden has ended infrastructure development talks with republican senator without

a deal. the white house at a brief phone call failed to reach agreement on the scope of spending or how pay for it. biden said he would develop a bill with a bipartisan group of 20 lawmakers. the u.k. is pricing for the city of london to be exempt from a plan to make multinationals pay more tax to the countries they operate in. the chancellor is expected to make the case that financial services should not be included in the deal when talks moved to the g20 next month. he says he wants to make sure the right companies pay the right tax in the right places. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: coming up, stocks hit a record, advancing for the fifth straight month.

the flow goes on to europe. we discuss with our guest host. this is bloomberg. ♪

annmarie: good morning to you. this is "bloomberg daybreak: europe." manus cranny is in the studio in dubai. european stocks hit a record high yesterday, set for their longest monthly winning streak since 2013. are your appealing etf just saw its biggest ever inflow, a single trade worth nearly $1 billion.

obviously we are seeing a lot more exposure coming into europe as the vaccination program and recovery is underway. where do you want to be exposed as you see equities get more of a boost across the region? >> we think this is early days of the reopening, it offers the best upside potential. within europe, were still exposed to financial companies. we think the yield curve will get a bit steeper. cyclical acceleration will be helpful at the same time. those are just two sectors from geography. generally speaking we have the impression that the euro zone

this point has a lot to offer and we think particularly the u.s. may have the upper hand right now. manus: when we delve a little deeper into your thinking, spain is one of those countries you want to allocate more two. why? >> there are multiple angles to that story. on one side it's highly exposed to financials. on ansell's is one of the sectors we do light. on the other hand, it will make quite a difference. and there is exposure in latin america which we think can be good at this time. annmarie: what about spain and other southern european countries in terms of the tourist season? there is potential that the second summer, like last summer,

will be wiped out in terms of business. is that a concern for you? >> is a risk, without a doubt. our analysis shows that vaccinations are accelerating quite nicely. having potentially a document that shows you are vaccinated will allow you to travel. we think that summer vacation season will be substantially better than last year. it may not be prot -- what it was prior to the crisis, of course, but we believe it will be substantially better than what we had to go through last year. manus: on the u.k. side, i'm just curious to get your view. we've talked to a number of different people about starling. we are in this moment where the lockdown, or the full relief might be delayed. a number of people have said the

tilt for starling's to the upside. do you agree with that, or how do you take additional u.k. exposure? >> in terms of starling, we think there's a bit more uptime but they're probably in a burial -- a fairly final stage of recovery. there may be more upside potential. u.k. equities continue like to companies that are less exposed to [indiscernible] when you look at u.k. equities more broadly, they continue to trade at a substantial discount on a broad basis, which success there's a bit of brexit overhang still priced in. they have done quite a fine job in terms of vaccinating and there are some hiccups and delays. we see the re-acceleration is fairly substantial and we continue to believe there is

upside potential. annmarie: so briefly, sticking with currencies, it seems you're on a tear against the pound and the dollar. will it be cautious tomorrow from? ? christine lagarde regarding strength >> it will be interesting to see what the ecb comes up with. early in the year, sadly we saw european rates rise. the ecb was leaning heavily against it. right now i think it is a different story. european rates are moving higher because of fed reacceleration in the euro zone domestically and as such, i think the ecb is much more reluctant to lean against those trends. this could continue to be in europe's favor.

we don't think the euro should materially strengthen at this point in time. the dollar still has an advantage. our impression and view is that the euro-dollar should be more sideways at this point in time. manus: thank you so much for being with us this morning. the credit suisse chief global strategist. coming up, the u.s. senate a sweeping bill worth $250 billion to set out an agenda to compete with china. the details right here on "bloomberg daybreak: europe." this is bloomberg. ♪

annmarie: good morning, this is

"bloomberg daybreak: europe." i want to get to the latest developments coming out of d.c. the senate has passed a sweeping bill trying to compete with china's economic and military prowess. we're joined by bruce einhorn. a lot of bipartisanship is going into this. one of the chances of this getting to the house and actually becoming legislation? bruce: you are right, in the senate this did enjoy bipartisan support, which is a rare thing these days in washington. a lot of house republicans have expressed opposition to this so it is unclear where we'll go. democrats could pass this if they stick together, but democrats have a very small majority in the house. so it really does remain to be seen what the future of this bill will be. manus: it's going to be a tight

rope, isn't it? we are short on time, it's a bit like one of those votes on the floor. coming up, the ecb set to follow the course set by the fed when it comes to stimulus. our next guest says it's too early to start talking about a taper. i me just recap one of our biggest breaking news stories. christine lagarde has set the tone and tenor of caution around expectations payment it's probably going to be hawkish, but this is one of the huge builders in our region, the chairman will resign as chairman and use his investment to pick up the under 28% the company he doesn't have. it looks like the chairman is stepping down and making a play

through maple invest to scoop up control of the rest of the company. he's got 72%. annmarie:

annmarie: good morning from london. it's 6:30 a.m. here in the city of london. i'm alongside manus cranny into by. this is "bloomberg daybreak: europe." china's factory inflation jumped to the highest since 2008 amid surging commodity prices. all eyes turn to the u.s. cpi

trend for tomorrow. the senate has passed a sweeping bill to help the u.s. compete with china. but talks and without a bipartisan deal. bitcoin pointing toward it continue downward spiral for the world's largest digital currency. today it's really all about what we got out of china in terms of that inflation figure on producing prices. 9%, still beating estimates and as you pointed out this morning, what we have to focus on is the widening gap between ppi and cpi. that begs the question, when will we see these prices be passed on to the consumer? manus: we will talk about ppi to cpi. this has consequences in a number of directions. while market volatility, what

does the pboc do? they came in and said we will control prices on dairy private it's hawkish without any kind of tightening hike. one blog encapsulated it for me. bankers are playing a monster game of chicken. herein lies the point. policymakers are driving fear toward rapid, real world price gains. michelle summed it up beautifully. one could say there is an avalanche of criticism. it's a bit like thelma and louise on an inflation journey. annmarie: we could discuss that one a little bit off-line. an interesting point michelle

makes is, the fed is really relentless in terms of what they see in terms of transitory. jeffrey gundlach said how does anyone ever know? which brings up a point, how does anyone know? and if they are wrong, what kind of risk is that setting? manus: we will move the agenda along, but i think this comes to the core of the point, which is that we won't know until next year if it was transitory or fixed. there's an avalanche of criticism saying the fed needs to get a little more real. should we have a look at markets? the vice chair blackstone saying he is bullish on stocks. going back to your friend mr. garlock, he is still long-term negative on the dollar.

all the breakevens are rolling over. let's reset in the ecb. policymakers have all the evidence they need to keep monetary stimulus in place. despite the faster u.s. rebound from the pandemic and a far higher inflation than the euro zone, fed officials are saying they won't slow the bond down. our next guest says growth and inflation dynamics are improving, but it's just too early to even start to talk about taper. it's likely to be revised up for both growth and inflation. it's too early to start talking about talking about and can about doing anything. so the fed gives christine

lagarde all the latitude or the rope that she needs. which is it, latitude or rope? >> we obviously look to policy guidance, but it's a bit different this time. like you said, we don't have the same growth and inflation rates in europe as we do in the u.s.. there clearly saying they will remain very dovish at the high pace of purchases at least for the next quarter. annmarie: you say the ecb will sound dovish, but christine lagarde tomorrow, what kind of tone does she set on the heels a bank of canada, new zealand, bank of england, striking a

little more of a hawkish tone about the recovery? imogen: i think she will be almost overly cautious about the recovery. i think they will acknowledge the fact that near-term risks are preceded -- back in march they had much more uncertainty of the vaccine rollout which started off much slower in europe. so that very near-term, i think they will recognize it as a more balanced risk. there still a lot of uncertainty about the strength of recovery and that's what they will emphasize and learn to -- used to re-justify the high base. manus: what is the risk of as some people say, a hawkish hold? in other words, we are committed

, but we have the capacity to use app as a ballast. could that be part of the narrative tomorrow? imogen: i think the risks are skewed to be more dovish than hawkish. on the side of caution wherever possible at this point. i don't think there's a huge amount of pressure for them to be hawkish right now. when the shift comes in i think is important. it might be something they talk about tomorrow. it isn't due until march 2022, so they still have some time. but they have to introduce the topic of passing it back on. it will continue until march 2022 as planned, and then it

will pick back up again. so if there's any reference to the shift, i think they will be dovish. a clear message from governing council members recently that even after the crisis period, there will be a need for monetary policy because unlike the u.s. and the u.k., the ecb, putting aside the fact that we just have higher inflation rates , we think it will require [indiscernible] annmarie: where does the euro play in this? what do you think the direction will be from christine lagarde? imogen: the euro again plays a part. she's told us a broad-based

financing condition index is what they're using to guide them back to stability. the euro is obviously part of that. i don't think we getting more cautionary language around that than we've already had but clearly appreciation in the euro and rise in yields we've had is all going to play a part for the financial conditions they will be watching and use that to justify the very easy monetary policy. manus: i'm not trying to get you to make a market call, but when you look at the trajectory of the bund market and yield careering toward zero, giving everything you said, it's astounding the speed of the repricing in the european bond market, isn't it? imogen: luckily, making market

because is my job, so i'm happy to do it this morning. we generally over the longer term won't see much higher bund yields. we believe strongly in the strength of recovery and we don't believe the european market has priced that in yet. the differences the ecb will be more dovish than necessary this week. i think they will be in a control mode over that number and coupled with high buying in the near term can keep a lid on the deal. annmarie: thank you so much for joining us as we await that meeting tomorrow. the european rates strategist payment we did has some breaking news on the parent company, net sales coming in beating

estimates. online sales rose 67%. i'm not really an online clothing shopper. i like to physically go and see items. but maybe to my benefit, 98% of stores are currently open so they are almost at that 100% level where their retail shops are open for customers. manus: i think there will be a blended model where you going to try on and order. you go in there and look at the product and then you go home and order summer shorts, because it's getting a bit hot down here. first quarter sales rose. it is too hot for me on the beach. annmarie: the weather in london is becoming a bit peachy as

well, it's very sunny here. unfortunately i am in quarantine. let's get a recap of the first word news with simone. >> the u.s. and e.u. are set to back a renewed investigation into the origins of covid-19 payment in a draft statement seen by bloomberg, there's a call for a transparent evidence-based who study free from interference. several countries have called on china to be more transparent with ongoing questions over whether the outbreak was caused by a lab accident, transmitted from wildlife, or something else. china is considering imposing a cap on the price of terminal coal from mines at the country's ports. bloomberg understands power plants could be told they cannot buy coal above a certain price level, as china struggles to contain stubbornly high energy cost ahead of peak summer power demands. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in

more than 120 countries. this is bloomberg. manus: simone, thank you very much. the cost of raw ingredients has soared higher since a call -- start of the pandemic. this has prompted a broad commodity boom and that could push up prices for consumers. the you engage of world food because has risen to the highest level in almost a decade and may will continue its upward trajectory. economies and supply chains are still struggling to overcome the covid crisis. megan, thanks for joining us. this surge in food prices for 12 straight months, just give us a sense of the breadth of this. >> like you said, we are at the highest in almost a decade, the

highest since 2011. 2008 and 2011 or when we had the previous records and index, so all eyes are on that. there's a lot going on, there has been whether -- whether shocks in south america. we also have a rising demand for cooking oil, that's the part of the index that has doubled over the past year. so we are seeing a widespread rise in prices that go into all of our groceries. annmarie: what is the outlook, then? how much further can we see some of these gains? megan: a lot will be determined potentially over the next few months. south american producers are harvesting their crops. now all eyes will be on the u.s., europe, and russia. we are getting into the heart of the growing season for crops

like corn and soybeans. wheat will be harvested very soon as well. the world is looking for how big the harvest will be, if they will be able to replenish stockpiles. annmarie: thanks so much for that. just ahead, with western super majors and retreat from the oil market, national oil champions are set to fill the void. what does it mean for the world's emissions? that story is coming up next. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe."

the big take today, the oil industry shrinking faster than fossil fuel demand. under growing pressure to pay down the debt, cut greenhouse gases, and for some transitioning to renewable energy. the national oil companies aren't facing the same kind of pressure. laura, all was very relevant for some of the national companies in my part of the world, when they see what happening in the northern hemisphere. what is the trend, what are we seeing? laura: it's still early days, but what we're seeing, all companies are having to discard a lot of their assets. at the end of every sale, there is a buyer. a lot of research out there is showing that share of growth and production will increase while

it shrinks on the ioc side. that means -- is not necessarily a good thing for the world. annmarie: what about the shrinking up production? why are they doing that? laura: these major oil companies are having to cut back emissions. they are under a lot of pressure from shareholders to basically transition into clean fuels. as a result of that, they're having to fund the transition through sales of assets and their core business, oil and gas. annmarie: energy reporter laura hurst, thank you so much. you can catch more of that honor website. finance ministers agree on a substantial global tax reform deal. what should we expect from the

summit in cornwall? that's coming up next. this is bloomberg. ♪

annmarie: good morning, this is "bloomberg daybreak: europe." manus cranny is alongside me in dubai. u.k.'s preparing to host the g7 meeting in southwest england this week with an injection of american meant them. what else can we expect from this meeting? john, thanks for joining us. what will you be looking out -- looking out for at the g7? we have the tax proposal momentum, but what out should we we -- should we be keeping our

eyes peeled for? john: of course we will be looking at the optics. the europeans are hoping this will bury four years of tumpian america first. on covid, the goal would be for biden and johnson to move the supply western vaccines to low income countries. that would be one big take away from the summit. manus: john, good to see you this morning. what about the ongoing post-brexit spat? john: quite a war of words going into this new round of negotiations this morning. on the british side, peeling for common sense and flexibility and on the e.u. side, patience is wearing three and -- wearing

thin and there is a threat of further action. in the e.u. eyes, if britain continues to fail protocol and fails to live up to its commitment. manus: john, thank you so much for the latest on what we can expect on the political front. there's a number of things on our agenda today. 10:30 u.k. time, will get the crude oil inventory reports. and talks with mr. biden and the administration over a number of regulations that directly affect the industry. how does the rest of the afternoon look? annmarie: 3:00 p.m., bank of canada will announce its latest rate decision. canada has had some signaling of a hawkish rate as of late.

u.s. wholesale figures will be released, so a lot to look forward to. the big story in the markets this morning is what we heard out of china in terms of the ppi numbers and the gap with the ppi and cpi. it's been called a game of chicken, not caution. manus: be careful what you read in the morning times. caps on coal, they will get involved in the food market as well. so is it doing everything to avoid a hawkish deal from the pboc? annmarie: they are not just now signaling that commodity prices are too high and they are comfortable with it, you see

prices from everything on raw materials, but it's like, the scoop we have from beijing, they are starting to look at plans to cap those prices. as tom mackenzie said, it didn't work in the past. manus: there is one chart that matters, it is the bitcoin death call. people are now talking about $20,000 if you break a big psychological thaw which is $30,000. the death cross is where your careering toward the 200 day moving average. deep down, it's an homage. annmarie: the story on the terminal says don't call it a

bubble, call it an epidemic in terms of what is going on with bitcoin. ♪

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>> good morning. welcome to bloomberg markets "the european open." cash trade is less than an hour away. here are your top headlines. surging commodity costs drive inflation to its highest since 2008. the crypto collapse continues. bitcoin slides as