manus: good from bloomberg's middle east headquarters in dubai, i am manus cranny alongside dani burger. these are the stories that set your agenda. investors sour on the reflation trade. 30 year falls below 2%. equities slip with u.s. futures. iran elects a new hard-line president.

iran wants a guarantee the u.s. will not quit the accord again. in france, president macron and far-right leader marine le pen disappoint in regional points ahead of next year's presidential election. 6:00 a.m. in london, 9:00 in the difc. welcome to the show, dani. a bumpy ride in the bond markets. the steamroller is out, when they grab a hold of plattner, they keep going, the paper below 2%. we were chatting about this yesterday. a few months of vastly overshooting actual inflation, powell and the fomc avoid the regime, and it is faster than the dared anticipate. good morning. dani: good morning. what a day for me to start with you, you are talking me into the deep end with this market

action. i think that vehicle encapsulates the debate going on, is this a change in the reaction function? every time some inflation starts to get a with, the fed gets a whiff of inflation, it swats it down. if i'm an investor, why not by the long end of the curve here? manus: it depends on how much further the flatten or has to run. they talked about buys twos and fives. maybe we are getting a little carried away. don't forget, equities dipped on the taper in 2013 and went on for a fairly resplendent rush higher. dani: positioning i think is so important here, because a day before the fomc meeting, j.p. morgan came out with the client survey that shorts and treasuries are the highest since 2005. you have to imagine a complete rethink of what you are holding in your portfolio if the fed

turning more hawkish. manus: absolutely. the bond markets are almost pricing in a little recession. what have we got? dani: we have, as you say, recessionary pricing. looking at the 30 year yield, the thing 2%. the movie very apparent in the 10 year as well, seven basis points. it makes sense they will go ahead and sell out of japan, a very value heady -- heavy index. nasdaq 100 futures are out relatively, still down but not as bad as the s&p 500. manus: let's see what the experts make of it. king dollar was re-anointed. let's deal with the framing of why the dollar spiked higher. give us your version. a lot of people have tried to quell the angst about to rate hikes -- two rate hikes in 2023,

but it is the speed of the taper that seems to have arc market. what do you make of -- seems to have irked the market. what do you make of it? >> what matters more for the fx market is after tapering -- how fast will the fed lived interest rates and how fast will they hike interest rates? if you look against the bond market, there's indication that the fed will react appropriately to inflation risks and if they don't, they run into the danger of having to later hike rates much more aggressively. i think this is resolved in the appreciation we are seeing right now. dani: ok to go along the dollar, is that the movie will see from here on out? >> yes, at least in the short term. medium to long-term, it matters

what will inflation do? we see a large chance that this might happen due to these reasons that drop into the inflation outlook. if inflation disappoints, markets will quickly price out further tightening by the fed and we will see a weaker dollar. the overall medium-term picture is unclear, and my opinion. manus: i got one this morning, saying lumber has fallen off a cliff. likewise copper. maybe there is justification we've got ourselves in lava over inflation. everybody got riled up by bullard's comments. if you go back and look at what bullard actually said, it sounds

he is more bullish on the economy than hawkish on fed rights -- rates. in an extension of growth in the u.s., what does that do to the dollar? esther: exactly. bullard is a great example, he does not fit into the typical dove/hawk scheme. for a long time he was in favor of low rates, but always concerned the fed might miss the point where it is appropriate to tighten monetary policy. clearly for him now to advocate for interest rate heights -- hikes in 2022, it signals he is much more optimistic on the economy and inflation benefits. that being able to escape this low interest rate, low inflation environment. for this to be true, he would still be waiting and seeing what

it data comes out. dani: bullard a nonvoting member, but this week, we have or 10 different instances where we get fed policies figures. it feels like -- fed policy speakers. the regime in the fx space, is that over? esther: i would at least assume that volatility will pick up. i was surprised it remained so low, even for the longer term. one urology versus two-year -- one year volatility versus two-year volatility. emerging markets, how they will react to potential hiking of the u.s. and the fed. in my opinion, this market will no longer be -- manus: let's dig into the em

call. everyone is saying to me, this time is different, pick a market and everybody says it is different, but if i look at em, some of them hike some of them expected to hike. where is the biggest play in em fx? people say be more judicious and idiosyncratic. how do you play a tighter view on em? esther: we have seen most of these central banks, they have been quite cautious to react quite early in the cycle to avoid falling behind the curve. if they have the fear the pressure on their currency increases as the fed seems to hike, they hike interest rates. i would keep an eye on the pandemic situation and economic situation, because these central banks will be reluctant if the economy seems to suffer much

longer, potentially due to further risk of infection. for me, most attractive are the central banks that have traditionally been hawkish. like the check central bank. dani: does that mean the carry trade can come back? it was hit pretty hard the past week with the hawkish in us from the fed. esther: in the medium-term, i would be cautious, i would expect volatility to pick up and typically that's not a good environment for a carry trade. dani: you will stick with us and we will get more from you. let's get to the first word news with dudley humphrey. >> a day after a hard-line cleric won iran's election, global diplomats turned their six round over reviving a nuclear deal. it's the first time since

deadlines have been mis-defined agreement. iran says it needs to guarantee the u.s. won't walk out again. the major contenders for the french presidential race fared worse than expected. marine le pen got 19%, almost 10 points behind her scored last month, and turnout was at an all-time low. one recent survey showed many citizens did not know what the elections were for. u.k. prime minister boris johnson wants the u.k. to become a sciences superpower. they are spending to find solutions for the public good. the new office for science and technology strategy will be headed up by the government's chief scientific advisor. a u.k. supermarket has rejected an unsolicited proposal valuing

it at 5.5 billion pounds. the retailer says -- it undervalues the group, and under takeover rules, they have 28 days to make a firm offer or walk away. 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? manus: thank you very much. the qatar economic forum kicks into gear today. the underwater's -- underwriters are the qatar ministry of commerce, and media city qatar. ray dalio, larry summers, stephen schwarzman and many more. coming up on the show, good progress, the ecb verdict on policy overhaul. we discussed the outlook for europe. that is next.

this is bloomberg. ♪

dani: this is "daybreak: europe ." the european central bank president says its governing council is making progress on the biggest overhaul of the institution's monetary policy in almost two decades. her comments come as the entire council met in person this weekend, the first time they are meeting in person since the outbreak of the pandemic. their aim is nothing less than to retool the ecb for the 21st century, with a new inflation goal, that are ways of measuring the economy, and the agreement on how to treat issues such as

climate change and inequality. our guest is still with us. we also have a boe rate decision this week along with the ecb meeting over the weekend. has the fed hawkish in us called a soul search of types among these central banks who now possibly also have to weigh tighter policy? esther: at least for the ecb, this will not be the case. i think the ecb will be happy the more their monetary policy diverges from the fed's. also, a weaker euro, which is something they keep an eye on . for the bank of england, they are in a different situation, their inflation outlook is much stronger than the euro area. they have also started to gives a slight indication they are

keeping an eye on the pace of their bond purchases. i think with infections increasing again in the u.k., they will not point to any reason for any changes in monetary policy. manus: it is interesting, where we are at the moment. the rise of the delta variant in the united kingdom, and if you look at the article i put on linkedin and twitter, i think it is a risk. take your mind back, elsa variant and topping out a vaccination rate in the united states of america, these are underpriced risks, aren't they? esther: yes, in my opinion, this is the case. however, it is unlikely to be an isolated risk for some countries or currency areas. i think it will be a problem, a global problem. it is not and idiosyncratic

currency, more a risk sentiment consideration. dani: what will be driving the euro-dollar from here on out? central-bank policy? is it not the variant, for example? esther: i think what will matter more is actually the central bank monetary policy, in this case, the fed will be dominating. for the ecb, it is quite clear. even if they use their -- strongly related to the pandemic, we don't even start thinking about their other purchase programs. the several years before even the most hawkish hawks in the ecb think a rate hike will be warranted. the more music is playing on the fed aside -- side. manus: let's talk about the bank of england. there is a meeting this

forthcoming week, and we expect an alarm bell. how soon do you see inflation being a problem for us, or not, in the u.k.? credit suisse says a in q3 2022, and d.o.a. says q2. do you see in inflation problem on a timeline that aggressive on rate hikes in the u.k.? esther: i think the bank of england will also focus less on inflation and point toward several transitory sectors that are having an effect on the inflation rate. i think the central banks will still be able to justify less focus on the inflation at least for around one year. the bank of england has several other problems to take into consideration. the delta variant, the past few

months the pandemic is having a much stronger effect on the pound than other currencies. also of course, the continuing brexit risk. it is still unclear how brexit is affecting the economy and that is still something the bank of england will take into consideration and will later result in them being more cautious than the focus on inflation will justify. dani: give us where some concrete numbers are going to go for these currencies. for example, we've seen some pretty bullish positioning and different leveraged funds when it comes to the pound. are we max positioning here? can it run any further or is the next move lower when it comes to sterling? esther: i think against u.s. dollar, it is indicating in the short-term the next move will be lower. the u.s. dollar will also be dominating here. the focus right now is the fed

will be more aggressive or more positive to react than the bank of england will be. i think it's in the interest of the bank of england to not run too far ahead of the fed or ahead of the fed at all. because of the brexit risks. they should also be interested in a slightly weaker sterling, and don't want to push any further appreciation risks. manus: give us a drawdown on sterling, before i ask you about the delta variant. where can you come back to? esther: we think the appreciation potential in sterling is exhausted. maybe one cent lower or something like that. after that, all of these concerns about the pandemic and exit -- brexit, and the bank of england is likely to disappoint,

expectations will likely result in the stalling or returning to levels we saw a few months ago, at 87. dani: let me take off on the second part of the russian, or do you move to -- part of the question, where do you move to? should we see more concern about the delta variant and should you be buying in that environment? esther: as i said, it is a risk consideration, at least from a global perspective. of course, some protection, the traditional safe havens. they might sense if you really want to protect for the renewed flareup of pandemic concerns. manus: ok, the good old it might be the haven after all. bitcoin could be too volatile for some. we've got the calls in at the

end. we are going to talk about france, exit polls show president macron and far-right leader real opinion -- marine le pen fared worse than expected in the first round of regional elections. the details. this is bloomberg. ♪

manus: it is "daybreak: europe." we've got the early results indicating president macron and his opponent, marine le pen, have fared's than expected in the first round of france's regional election.

the election is watched closely because the next presidential vote is less than a year away. let's get to paris. we are tracking the exit polls. you were in geneva last week, back at home in paris today. what are the polls saying? >> it was a disappointing result for both president macron and marine le pen. if you look at macron's party, it did not come first in any of the 13 regions of mainland france. even if you look at marine le pen's party, it only came first in provence, in the southeast region, even though it was expected to be first in several other regions. even in provence, [indiscernible]

clearly this is a comeback of the old, traditional parties. the traditional right ring, that existed before -- right wing, that existed before macron is making a comeback. in the northern region, you have a candidate. he has declared himself the a candidate to face them in the next presidential election. clearly this shows macron and le pen are not necessarily what the french want to see next year. dani: how do you take the results and translate them into

national politics? >> this is not necessarily a bellwether for the presidential election 10 months away. macron has one target, create local routes with local elected officials that could relay his ideas at the local level. marine le pen's targets were to secure some big regions and have a lot of delegates, also in order to relay her ideas and programs for next year. they both failed. the french do not want to see a rerun of the 2017 presidential election. another lesson was attention. two thirds of the french did not vote in the regional elections because they did not want to see this match between them. this is something politicians will have to listen, the comeback of the traditional

right wing. manus: thank you so much. up next, the iranian nuclear deal, round six abandoned for now. ♪ look...if your wireless carrier was a guy, you'd leave him tomorrow. not very flexible. not great at saving. you deserve better - xfinity mobile. now, they have unlimited for just $30 a month. $30 dollars. and they're number 1 in customer satisfaction. his number? delete it. deleting it. so break free from the big three. xfinity internet customers, take the savings challenge at xfinitymobile.com/mysavings or visit an xfinity store to learn how our switch squad makes it easy to switch and save hundreds.

dani: good morning, everyone. i am dani burger with manus cranny. this is "daybreak: europe." investors sour on the reflation trade, the 30 year yield on the treasury following below 2%. asian equities slip u.s. futures. nuclear talks hit a roadblock as iran alexa new hard-line

president. tehran wants a guaranty the u.s. won't quit again. in france, president macron and far-right leader marine le pen disappoint in regional votes ahead of next year's presidential election. certainly a wild day in markets, and a continuation of what we saw last week, in that extreme flattening of the yield curve. bloomberg opinions as may is this the markets sniffing out some hawkish policy from the fed? manus: a note was sinned an, the biggest flattening you have seen in a decade. to give you some context, and we did it yesterday, that is a 40% unwinding of the steepener you had last year. the only other time you had moves of this magnitude was 2008, operation twist, and last year, when they launched this

next round of qe. the magnitude of the flattening doesn't appear at this juncture to be done just yet. dani: that's right, that i am wondering, if you think that number maybe -- if you think maybe the fed did their job. people are still moving into u.s. assets, the dollar is still doing well. perhaps they have avoided worst type of reaction you could have seen in this hawkish shift. manus: f con is toluse, -- is still loose. bullard, who we were quoting, doesn't fit into the classic dove/hawk. 30 year paper below 2000, below the 2%, that is a big move on 30 year paper, 41.95.

the more you say you want to buy twos inventive -- twos and fives, the hike is pranced in. -- priced in. if you take away the taper, only about 3% on equities, because earnings are so resplendent. they say it will be a rerun of 2013. let's talk about inflation, because the dollar, cover and lender. copper is open on the lme. look at this cover, down 7/10 of 1%. lumbar down likewise on the futures. the dollar continues its trajectory higher. is it a little bit overbought? we have the many shocks rerun of 2014 and 2013. could be the dollar is at the start of its next cycle. there we go, the dollar trading at 11.46. let's talk about the revival.

the revival of the iran nuclear deal. those talks, they ended without an agreement. let's talk about bitcoin -- my apologies. iran\\\ -- i ran ahead of myself. i've never done this before, i made so much of it. dani: how could you forget? we have china cracking down, continuing to pull back on some of the mining going on. there is the environmental concern. i know you care about the hash rate, but it is the entirety of the crypto space, not just bitcoin, but ether, too. manus: the hash rate is the mining rate in china. the reason i am a bit obsessed about the bitcoin move this morning is all the speculation, it has drawn retail investors in, and crypto falls or meme

stocks fall, it could be the mother of all crashes. it plays to my inner grinch. now let's talk about iran. the nuclear deal ended without an agreement between the diplomats in vienna. a sixth round of talks. there are major gaps in the accord. a day earlier, a hardliner was declared the winner of iran's presidential election, and this could further complicate diplomatic efforts. jake sullivan spoke to fox news on sunday. let's take a listen. >> i think what we need to do in the united states is keep our eye on the ball. that is our paramount priority right now, to prevent iran from getting a nuclear weapon. we believe diplomacy is the best way to achieve that rather than military conflicts. we are going to negotiate in a clear eyed, firm way the

iranians to see if we can arrive at an outcome that it's nuclear program in a box. manus: simone foxman has been tracking the story from doha. i suppose the question is, the oil market thinks talks will be delayed as a result of raking up on round six, but what do you think the election might impact the talks? simone: there is a difference between the long-term impact, taking a more confrontational tone toward the western generally, and the near to medium term impact, which is on the deal. the candidate himself expressed some support for the deal, but most important he is the support the supreme leader has expressed for the deal, because he is seen as the ultimate decision-maker. even the hard-line members of parliament will essentially

though along with what supreme leader says. the oil market probably reacting to the idea essentially that we won't see all of the oil come back immediately if we have a hardliner in iran, in the administration. we do have time before he takes office, he is not expected to do that until early august. dani: we've also got a key deadline this week, what is it and what will the impact be? simone: yes, good morning. june 24, this thursday, that is the expiration of a temporary agreement to extend some of the nuclear monitoring the you in -- un's agency is doing in iran. it is a to the underlying nuclear deal.

that is what europe and the united states wants. iran to keep allowing that. essentially iran stands to kick out nuclear monitors from the iaea agency. the only thing keeping them there in the data going is a temporary stopgap measure that expires later this week. we expect to see this agreement extended, but there is always the risk of some sort of policy failure. dani: we will have to keep an eye out for that thursday deadline, and probably have you back to tell us exactly what happened in the run-up. simone foxman, thank you so much. let's get to the first word news in dubai. good morning. >> thank you. the u.k. prime minister wants the u.k. to become a science superpower. the aim is to harness almost 15 billion pounds of annual r&d spending to find solutions for the public good. the new office will be headed up

by the government's chief scientific advisor. a blank check from backed by a billionaire is buying 10% of universal music for about $4 billion. the holdings company says they value the home of taylor swift at $42 billion, including debt. a company says it u.k. house prices grew more slowly in june, as a lack of availability drained momentum from the markets. asking prices rose euro .8% this month after a 1.8% gain in may. the increase is still the largest for this time of year since 2015, stood by people seeking to leave london and wanting more space. 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: thank you very much. the biden administration has rejected a call from the and is whalen president for relief from -- venezuelan president for relief from sanctions. the comment was made in exclusive conversation. >> i believe the sanctions are in moral -- immoral, that is the first thing, they are very cruel for a country. and i believe a roundtable of conversation, even if it is private, and the united states of america should accept it as such, see it as such, and the sanctions are transformed, as the human rights organization says. the special reporter who came to venezuela. the sanctions are transformed into a great violation of the human rights of the venezuelan men and women. not only is it a cool mechanism that causes the suffering of the

people, it is a failed mechanism. failed, because all of the sanctions were applied by the trump government against venezuela, for a change of regime. they did not achieve it. nor are they going to achieve it. so the sanctions should be recognized as illegal, irrational, extremist, cruel, and should be lifted. >> in your opinion, mr. president, but it is still u.s. policy, and it seems to me the u.s. will not change its policy without a change in positions. >> then is a closed game, because we have our principles, our constitution, we have the right to life, economic freedom, commercial freedom. venezuela and the whole world has the right to commercial freedom. there cannot be one country that

because of the control of the currency and the banking system, imposes to the rest of the countries in the world what should happen in their country at a political level, who should govern or should not govern. it would be the end of the united nations system and international law. the united states must recognize that an international law exists , that a multi-polar world exists, that another world exists, and furthermore, it must recognize sooner than later, that what it is doing with venezuela is a brutality only comparable to the vietnam war and the massacre against the people of vietnam. they are committing an economic massacre. venezuela has the right to sell oil, obtain profits and fulfill international obligations and maintain the life of the people. venezuela has the right to produce gold and sell it. why are we going to have the right to do that? why is the right to economic freedom going to be taken away

from us? why? someday that will. i have faith. i am a man who believes in god very much. i am a man of prayer and action, and i have the faith that someday, that message is going to arrive and produce the changes we need for a better world, a more human world, a world of respect. >> that is a problem, because you obviously don't want to live under the sanctions anymore. you are not willing to change anything? >> the changes in venezuela are produced every day, but there cannot be a relationship in the world where i put a gun to your head and i say act the way i want, or a. schu you could you cannot put a gun -- or i shoot

you. you cannot put a gun to the head of the people of venezuela. we would turn into a colony, a protectorate. we would kneel down, we would betray the legacy of these giants, like simone ball of our -- bolivar. no country, and less so in his whaler, is willing to kneel down and trey is legacy. dani: the venezuelan president calling u.s. sanctions economic brutality. as we head to the break, i want to flag, continuing to drop down nearly five cents. that is going on as we are trying to crack down on some of the bitcoin mining. coming up, we will discuss that coin declining. manus: we got the hash rate. this is it if you close down in

the southwest of china, if you close down in one area, that is nearly 80%, honey percent of china's bitcoin output. -- 90% of china's bitcoin output. where does it go to? >> a lot of the bitcoin bowls might argue, -- coin bulls might argue this is a way to mine in a more environmentally friendly way. manus: what about the hash rate then? dani: joanna sankar -- joanna is our queen of coin and we will ask her about that and why the hash rate adders and what is next for the cryptocurrency. this is bloomberg. ♪

manus: it is "daybreak: europe." bitcoin tumbled over the we $65,000th april.

here we are, more restrictions on coin mining. isn't that -- is that what is writing this lower today?

joanna: it is one factor, particular with the uncertainty of what is next. you could have miners going to other places, but you bring up the environmental issue, for instance. a hydro rich chinese city is one of the places that appears to be cracking down. if you get the cleaner energy places in china also cutting back on bitcoin mining, it could revive the environmental concerns as well. dani: in your story, you talk about how the hash rate is declining and that has been important for the price. for those who are not of's test with bitcoin -- obsessed with bitcoin, why is the hash rate so important? joanna: it is the computing power going into bitcoin, and the mining and processing. when the hash rate is declining, it shows the miners are shutting down and not putting as much computing power into the

network. that is leading to a lot of uncertainty of what will happen, will it be replaced or will people be pulling back from it? dani: joanna, always great to get you on, especially when it is not always about elon musk's tweets. thank you so much. coming up, we look at the impact of a hawkish fed on stocks, japanese equities on track for the worst decline in months. continuing to see the decline in the 30 year and 10 year yield. this is bloomberg. ♪

>> it looks like all of the signs are positive. we see a recovery globally. we see many countries are

bringing the pandemic under control. the u.s., for example, and many other countries. this country has done a great job in vaccinating its population. all of the signs are positive going forward. commodities are at most a 10 year high. the stock market, the market as well. we see a strong appreciation. that is the signal and strong gesture that the situation is under control and more positive, and i would say an acceptable recovery is underway. overall, it is very positive, all sides, and hopefully the worst is behind us and we are seeing more recovery and positive signs going forward. >> you have looked through many different cycles and we are in the midst of the federal reserve talking about tapering and huge

debates about what that means. are you concerned about a taper tantrum, or how do you look at the debate around the federal reserve potentially tapering? >> i think there are different ways to look at these issues. however, we will maintain a positive view on the development at the macro level, at the micro level. we remain positive, manus. i hope things will improve going forward. we are seeing very strong positives so far and a strong recovery. i hope that will maintain for the foreseeable future. manus: the ceo for uae investments there. it was interesting, he had just come back from the states and we were chatting before and after the interview and he said he was early impressed with what is going on there, and that drives

their proclivity for risk. let's continue the conversation with paul dobson. not sure if we can get in on that. we are about two. not that we ever get involved in ipo's. there is the disclaimer. paul, he says the worst is behind us, but the markets are shaken. the steamroller continues. good morning. paul: yes, good morning. exciting moves in the trading from the asian markets, pushing the 30 year yield in the u.s. below 2%. some rapid follow-through as well, we saw almost 10 basis points before things started to level out and cool a little bit. still pretty nervous. maybe a bit more of risk off with the yen the strongest of

the currencies. dani: what do you make of equity markets? is it logical that japan, those equities fall so abruptly? paul: yeah, well japan has new technology hitting at the moment. quite recently, the central bank there stopped supporting the stock market quite so heavily. so one of those has been removed. the japanese are also sensitive to what is going on in the treasuries market as well. probably joining in the rally, if anything, to not miss out if you think yields will go lower for longer. at the same time, there will be repatriation plays, and a stronger yen is that for the equity markets, so it creates a double feedback loop that hurts japan disproportionately. dani: definitely exciting moves

we will have to keep an eye on through the morning. paul dobson, thank you so much. manus, we are continuing to see this big bid for bonds on the selloff in equities. that is it for us. what an exciting day to be in the seat for the first time with you. this is "bloomberg daybreak: europe." the european open is next. this is bloomberg. ♪

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>> good morning and welcome to bloomberg markets: european open. mark cudmore joins me to take us through the market action this

hour. the cash trade is less than an hour away. the reflation re-think continues in the wake of a hawkish pivot by the fed. european and u.s. futures slipped with asian equities. treasury flattening, 40 year yields