manus: good morning bloomberg's middle east headquarters in dubai.

dani burger is alongside me. these are the stories. jay powell reiterates he sees inflation as transitory. another thing that is transitory. markets pivot away from the reflation trade. sooner rather than later. that is the fed's robert kaplan wants to start tapering. and oil tops $75 a barrel for the first time over -- in over two years. we are joined by the traffic europe -- trafigurea economist. there is a host of voices from the fed. that is the alpha voice in terms of the temporary nature of

inflation. yes, kaplan wants tapering now. let's get down to business. i don't know who wrote it, we are googling it as we speak. do we need more of that? dani: that song is stuck in my head for the rest of the day so thank you. of course, it matters here because he is a voting member but this dissonance we are seeing among fed members, the difference of opinions, how do you price that in? does that mean more mullet till it he --does that mean more volatility to come? manus: i love the word dissonance. could it be that the five-year foreword rolled over to a level that we have not seen since 2018 and therein lies john's opinion. rather than jolting the market

out of an extreme position, what powell and his cohorts have done is give it an extra shout. the view from main street is that there is more flattening to come. a temporary reprieve and a spike in the treasuries. dani: it is interesting the idea -- we were tightening starting in march with the money supply and the growth of the money supply. maybe what we have seen over the past few weeks is not necessarily a big change. manus: no but there is web saw in the treasuries. 14 basis points. we have seen that three times. dani: if you look at what the treasury is doing, there are definitely sellers out there in this environment who may not believe the fed is as hawkish as the initial move was that stands to reason why we are seeing more

unloved parts of the market. $75 a barrel on brent. that is what we have our ion when we speak to trafigura. manus: because i am irish and not american, i did not know the benjamin franklin note was they $100 notes. we are going to talk to the chief economist from trafigura shortly. we have shown you some of the influential voices from the bed but they need to be more in tune with the inflation risks. >> as we are making progress in weathering the pandemic, to start adjusting these purchases. treasuries and mortgage backed securities. >> there is an upside risk to inflation. it could go higher than what i

have outlined here and we have to be ready on both sides to be able to react to that. >> much of the consensus of professional forecasters in february was that we would have inflation just above 2% this year. we have already had more inflation than that in the first five months of the year. >> it is easy to say that the fed should tighten and i think they should but i think you will see a very sensitive market and a very sensitive economy. the duration of assets has gone very long. manus: it is easy to call for that. rafael bertoni -- raffaele bertoni from gulf investment corporation joins us. larry summers says we have had inflation for five months. you should think about what

their errors of thinking where that led them to be so far off their forecast? this is group think. larry summers is accusing us all of a group think. are we suffering from group and hoping that inflation is transitory? raffaele: good morning. yes. there is obviously a big split in the market at the moment including central banks regarding the temporary aspect of the spike in inflation we have seen so far. we have always been in the camp that this is temporary. it has to do with the particular nature of this recovery. in terms of the reopening of the economy after the lockdown. it is difficult to make a comparison with the past. and it is difficult to see how

inflation would develop going forward. we wouldst -- we would have higher inflation expectations but we believe this is temporary when the economy will reopen fully and then we should see some sort of normalization. already in the past few weeks, we have seen a normalization of the price and commodities and this should continue going forward. dani: some of the market moves towards normalization and commodities but you have the front end of the curve having a big reaction to a more hawkish fed. look at other risk assets like credit which have held up reasonably well. what accounts for the split in opinion and also in the market itself? raffaele: that is right. [indiscernible]

the part of the curve that has been very stable and not volatile with all of the adjustments on the long side of the curve. there are reasons why credits are so stable at the moment. the main reason in my view is that these spikes in inflation are related to strong economic activity which is supportive for credit. generally speaking credits are at the moment -- they offer a good balance sheet but they are not particularly leveled compared to other cycles. and the rate is very low. credit is a place where you can have some protection from rising

inflation. manus: certainly, ray dalio does not want you to own government bonds. it is a 3% tax. he also doesn't like cash. can we extrapolate? we made a great deal about the flat nerve. 40% was ripped apart. have we gone too far too fast in the flattening of the curve? would you be a buyer on the drop? john arthur says the flattening started a few weeks ago. given what you just said, am i inclined to believe that you feel there is a point at which you would reenter this for a reason -- reese deepening -- resteepening on the reopening? raffaele: i believe that the majority of the flattening has already happened. further flattening will be

modest. that is a train that has gone by now. in my opinion, it is early to open a steepening position as of now but i would look for a better point of entry to the reopening but not just now. i think a little further flattening especially in the u.s. it was different in this euro curve. dani: thank you so much. you will stick around with us. let's get to the first word news with laura wright in london. >> the u.s. says 150 million americans are over 45% of the population have been fully

vaccinated against covid-19 however, a study shows the highly contagious delta variant is spreading in southern states which have lower inoculation rates than the rest of the country. 8.5 million people in india, a new record per the u.k. has formally started negotiations to join a trading block. international trade secretary liz trust says membership in the group whose 11 members include canada, japan, mexico, and australia would be a glittering post-brexit prize. hong kong's apple daily newspaper may be forced to shut down this week with its parent company next digital blocked from accessing its bank account. one of the more prominent voices of the city, -- a final print version could be distributed on saturday. the company behind a members

club for creative industry executives has filed for an ipo and new york. it owns clubs around the world including a vast hotel complex and london. the company which has yet to make a profit says it plans to use the ipo proceeds to pay down some of its more than $800 million in debt. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. maybe we should head over there after the show. dani: that sounds like a good plan to me. manus? will you join us in london? manus: whether the members at stock or not is the question. it is a hot to trot issue all around london. what have you got? next time i am in london.

emerging market currencies hit a hawkish reserve. we will talk about the greenback. ♪e greenback. ♪

dani: this is bloomberg daybreak, europe. i dani burger. emerging market currencies hit by a hawkish fed may soon regain the record run against the dollar on expectations that developing central banks may outpace u.s. counterpart in policy tightening. the currencies of brazil, the czech republic and poland come all countries that delivered multiple rate hikes or are expected to do so soon, are retaining orderly gains. zillow economists have raised inflation rate forecast for 2021

after the central bank delivered its third consecutive 75 basis point hike. our guest says the forecast has moved upwards reflecting supply-side factors by the combination of dm guidance and persistent slack will allow most em central banks to maintain modest policy adjustments. raffaele bertoni is still with us. modest policy adjustments but after that more hawkish tone coming out of the fed, does this essentially give emerging market central banks the green light to tighten more aggressively? raffaele: it is possible but it is not our expectation for the simple reason that the emerging markets are still lagging for now. there are economy -- their economy is still not working

completely so they have much less room than the federal reserve right now in terms of hiking rates. they need to be more commodity of for longer. -- commodative for longer. manus: you said the forecast has moved up largely for the supply side but you have concerns about the em-dm split. what does that mean for policy rates in em? raffaele: yes, manus, the main divergence at the moment is due to the reopening of the economy. emerging markets are late compared to the developed countries in terms of the investment rollout. they would probably take more time before coming back to

normal business activity. and generally speaking, emerging markets started this pandemic with a much lower level of flexibility on their balance sheet. and the monetary and fiscal support that we have seen in developed countries is almost impossible in emerging markets. the maneuver room for emerging market central banks is much tighter. dani: given all of that, where are you finding the most value in the em space? raffaele: the first name is asia for a number of reasons. if we believe that the reopening trade is still running, asia is the first to become the next

interesting part of the market. both for equities and bonds. asia is also very closely linked with the economic activity in china which is quite strong. manus: raffaele bertoni with his calls on em. thank you for joining us. how to manage risk? radeon low does not think -- rate d aloe -- he spoke on monday. >> there is something like 10% of gdp stored in financial assets that will be coming out. it is likely there is going to

be a big pickup in demand and that will probably raise prices significantly and it also depends on how you you counter inflation, like housing prices. they are going up but rental prices are going down. the big things i think are -- and if you went to a 3% inflation rate, that is not one of those things that gets me nervous or excited. the real issue is that we have a supply-demand issue of bonds because we are going to have to sell a lot of bonds to those in the world who own bond inventories. and they have very low interest rates. negative real interest rates. and they are overweighted in u.s. bonds and they have to buy a lot more. and that is also coming at a time when chinese capital markets are becoming more

attractive. that creates a supply-demand issue. there will not be enough demand to buy those bonds and that means it is likely that the federal reserve will not be able to taper or cut back and might have to increase to prevent interest rates from going up and that is a classic monetary inflation. that is my bigger concern than just the spurt. for most of the world i think the real question is what are interest rates relative to inflation and what is happening with all of this liquidity? there is a huge amount of liquidity and negative real interest rates. that means ed pays not to own any debt instruments. it pays not to own cash. especially cash where you get no interest rate in an environment like larry says of some amount

of significant inflation. in the vicinity of over 3% so you get taxed at that rate in terms of buying power. and so, when i look at that, i think you are going to see the continued inflation in other assets and it pays to borrow a lot. houses right now, to buy, i am saying interest only loans being made when there is basically no interest rates. you don't have to pay back your principal anytime soon and the interest rates are so low that there is a lot of money being thrown around that way. those are the things that concern me more because you build up a bubble. you saw the reaction of the markets when the fed even hinted at tightening. i don't think they can tighten a lot without having a negative effect. dani: that was the bridgewater associates officer ray dalio.

coming up, hsbc revamps its u.s. operation or four of its most senior investment bankers leave. we have more on this bloomberg exclusive up next. this is bloomberg bloomberg

manus: this is bloomberg daybreak europe. dani burger is alongside me and london. four of hsbc's most senior bankers in the u.s. are leaving the investment banker. it is all part of an overhaul. bloomberg understands that the head of debt capital markets is among those departing. changes come as hsbc plans to revamp its global banking business in america to better serve asian clients. joining us now is our editor,

dave. great to have you with us. great work on this coup. how does it fit into the pivot to asia? >> it really reflects where the bank is going. these are four very senior bankers with about six decades of combined experience. anchors want to be where the action is. where the bank is growing. hsbc has made it clear that it will not be in the u.s. or europe but in asia. it is their roots and their future. hong kong and china is where they are putting their resources. that is where they are hiring. and that is where they are staking their future for future growth. dani: we also had some reporting on this wealth connection plan linking investments between hong kong and china. standard charter seemed interested. why? this is part of the pivot. and it is a big deal. for the first time you will have

investors on both sides of the hong kong-china border being able to invest in their own market. this is a big deal and china where investors generally have restrictions, currency controls and others so this allows them to buy in hong kong. it is not surprising that hsbc and standard chartered or are hiring a lot of people to get a piece of the pie. dani: david, thank you so much. coming up, brent continues to rally amid signs of a rapidly tightening market. we speak to the chief economist from trafigura about oil hitting $100. it is all about the benjamin's. this is bloomberg. ♪

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>> good morning from bloomberg's european headquarters. it is 6:30 a.m. in the city of london. this is bloomberg daybreak: europe. jay powell sees inflation as transitory. the markets pivot away from the reflation trade. treasury yields bounce as stocks clawback losses. sooner rather than later is what robert kaplan wants, to start

tapering. james bullard says be ready for inflation to go higher. we are joined by --which says oil could hit $100 a barrel. manus, good morning to you. we have had a lot of fed speakers already. we are getting more. you have to wonder, what do they need to not pay in order to not move the market, kind of the do no harm mantra? that would be for powell as he heads into testimony today. manus: the dissidents, you lean into the new york fed. kaplan does not vote, nor does bullard. kenny unseat the bomb -- can he unseat the bond market? or money is going to wash in. wti is rising. tenure government bonds still saw 150 but we made a whip

around yesterday. third biggest one-day move in 2021. i will show you what is going on in europe. european stocks are higher. the dollar is manning ching -- the dollar is managing. yesterday's move was one of the biggest weekly moves that we have seen in five years since brexit so there you go. bitcoin regains its footing. to the oil market, it hit $70 -- $75 a barrel amid signs of a rapidly tightening market. benchmark has rallied by more than 40% this year. a strong rebound from the pandemic in u.s., china, and europe. the market continues to firm. the time spread is the widest backwardation in seven years. let's take it to our guest. we have only seen this backwardation -- this is tight as she can be. we have only seen it twice. on each of those occasions, it

made $100 oil. when will we hit $100 oil and is the market tight enough to achieve that? >> thank you for having me on. as you say, the current structure of the market is telling you that the market is hungry for oil. we have moved from a situation where the recovery was china led , manufacturing lead, and goods led, and we are moving into something more u.s. lead, europe led, more services lead, and more experiences led, so everyone is taking to the skies again. you are seeing a very strong demand recovery and some of these issues in the market that we were talking about, india, iran, inflation. india has started to recover, starting to see demand as mobility indicators pick up. iran seems to be absorbed by the market, and of course, we have had talk about inflation but even that seems to have been observed by the market. where do we think we could hit $100 oil?

for us, this has been about structural underinvestment that you have been seeing since 2014 so this is going on for the better part of a decade and to me, this is something where the market is slowly realizing that even with all this their capacity that opec currently has off the market that eventually, you will be in a situation where demand has not only recovered but it stronger than where it was and you do not have that capacity anymore that you really need other than as a little bit of a buffer, and in some sense, it will be like hemingway said about bankruptcy, that it will happen gradually and then suddenly. the market will wake up and realize we have lost a significant production from a lot of the smaller producers that people don't talk about. sicko cook -- mexico, colombia, vietnam. it needs to be a much higher price not just in the front but in the back incentivize new production to start to come on. dani: if i can push you a little bit on that, can we get a little bit more specific? when do you think that environment is going to be put in place?

it's going to happen gradually, but will be next year, five years from now? when do we get that $100 barrel for oil? saad: the demand recovery, the amount of stimulus that has gone in the system, the liquidity that is there, you could see it intentionally next year, assuming we don't see any real movement on rates or anything else to slow the economy down. it is something where we will run out of spare capacity as the demand comes back to pre-pandemic levels. given the conditions we are seeing and how ugly we have come from 30 dive -- $35 to $75, this is something you could see in the next 12 to 18 months. but again, the conditions have to be right for that. manus: let's talk about what opec-plus would do. we are going into a meeting next week. we know his royal highness likes to keep traders jumping. just over one year ago. so do you expect, with this

narrative, would the eyes being absorbed -- manufacturing into services. do you think opec will return barrels more quickly than we have currently penciled in after the structure that they have announced for july? saad: i think they are happy with the pace of the recovery right now and they are happy with where prices are, and again, we are not about $100 in the next couple of months. there is the their capacity out there. we are seeing more barrels come into the market but this structure is telling you that the market wants more barrels from opec so i think this gradual pace we are bringing on to some very well. what they may do is look at their official selling prices to really raise the prices for their customers and test the demand waters and see is there demand at these higher price levels? you can increase production a bit more quickly. some of this will also depend on what is happening with iran, if

there is more progress towards a deal, and barrels may be coming on sooner than opec is thinking today, then there may be has to be some adjustment to account for that but given the strength of the market, you could suggest perhaps that at least a gradual turn of iran might be able to be observed by the markets to some degree. opec is in the sweet spot with regards to bringing production back more slowly. and you are not seeing a recovery out of the u.s. in particular, which may be the other concern. dani: to what extent should the market be pricing in return of iranian crude in for the market? saad: most participants are penciling in some sort of return , likely more in the late q3/q4 timeframe, when there seems to have been quite a bit of progress on the talks, but there may be plenty of room still between the parties that we are not aware of. most would say we are expecting

these barrels to come back into the market and frankly, even early in the year, we have seen some barrels moving east out of floating storage and the market has been able to absorb that. so this is something where you can dial it up, dial it down, depending on where you think the market conditions, and given where we think travel is getting too, not just gasoline demand but jet recovery. you are saying that this is not something that is worrying the market as much as it was a few months ago. manus: could you imagine what happens if they get rapid testing as you go to get on a plane? that is when you radically shift, for me, that is when you radically shift and you talk about much bigger products demand. to the global commodities super cycle, i know that you are slightly longer cycle than we are. where are we on copper? we see the chinese trying to take the heat out of this ratchet higher in hard

commodities and soft commodities. you would say that we need a better incentive price for copper. what do you make of the chinese stepping in and what is the incentive price that brings on more production? saad: if you are looking at this from the chinese perspective, it has been successful. $10,700 and we looked like we would threaten $8,700. that price has come up a lot. we saw it in china. you can see the physical market weakening as buyers were holding off purchases, as working capital requirements went up, you had to get on the rise agent for higher spending, etc., from places like the state grid, the army. you were having to see them go back and get more budget basically. you could see it really closing so the metal was not moving. the structure was in contango as opposed to the backwardation we are seeing in the oil markets. a bit of physical weakness.

this is a short-term story. allowing a little bit of a breather. you have done a lot since the start of the year, let alone since the bottom last year said this is time for the market to adjust, take a breath before you come back in the second part of this year. part of it again, you can see what is happening in the u.s. as housing inventory has -- that led to some loss of demand there as well. chip shortages impacting auto production globally, so all these things have been factors in weighing markets down in the front right now and of course, we have had with the dollar move in the fed the last week or so, it has exacerbated that, but if you look beyond the next couple months, you still need that metal. the state grid will have to come back and find more metal -- buy more metal towards the end of the year. nothing has changed in terms of the demand coming from the

energy transition. you absolutely need that metal and for that, you need a much higher price in order to incentivize that supply to come on in time. >> does that mean your head of copper trading in the metal, does that still stand given the short term pressure on copper prices? >> absolutely. this is really where you need to get to in order to bring on these supplies. otherwise, you are looking at a sizable deficit and as i said be a, copper is not something that you substitute away from. it is what you substitute a way to when you are bringing in electric calls, electrification of the grid, so it is not something that you can really replace and you have to bring on new supplies. the problem is the time it takes, which is something like seven years to 10 years. have seen it with prices above 10,000, 10,500, you have not seen the new project you would have expected to get approved

and to move forward, so you know, this is telling you that we need to be much higher from here in order to give corporate boards and shareholders and everyone else the confidence that this demand will be there and these prices will be there. it will not be online for quite some time. >> when we get to the $15,000 level and the $100 level in oil, we will have to have you back on, saad rahim, chief economist. thank you for joining. let's get to the first word news with lower here in london. laura: -- with laura wright here in london. laura: -- of the population has been fully vaccinated against covid-19. the delta variant is spreading in southern states, which have lower inoculation rates than the rest of the country. india vaccinated 8.5 million people yesterday, a new record. several large chinese banks are said to be restricting credit to china's evergrande group.

sources say three banks with billions of dollars in combined credit exposure tech evergrande -- to evergrande have decided not to renew the loans. in response to questions from bloomberg, evergrande denied vendors were curbing access to funding. exxon mobil is said to be preparing to cull white-collar jobs at some offices. a performance evaluation system will be used to cut 10% annually for the next three years to five years. it had 72,000 employees globally at the end of last year. 40% of them in the u.s. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus. manus: laura, thank you very much. laura wright. coming up on the show, slowly going global financial hubs are

struggling to return to the office. we will take a look at the situation in different cities around the world. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i am manus cranny in dubai. dani burger alongside me in london. a big statement by bumble, the dating and relationship app, they temporarily closed their offices, giving its employees a much needed rake to recover from covid burnout. the question is, what do you do if you have a week off and you are on the search? dani: that is a great point. definitely -- i don't know, i feel like there is a sense of

irony with an app you can use 24/7 shutting down their offices for a week. i have only been here for two days now in the anchor seat. i don't have burnout, but maybe we do a week broadcasting from fiji where the seychelles -- or the seychelles. manus: i have no problem with that. they would say what are you doing on bumble? should i get terribly tawdry and say -- do you want to know why? yes why -- guess why they have an outperformance? because of vaccinations. you are ready to go. do they swipe on bumble? i don't know. dani: i don't know. i don't have it. i assume that they do. my hot take is that eventually, these work perks -- eventually, you will have to start paying

people more to combat burnout, wage inflation, brings it back to fed power. somebody should ask him about bumble in his testimony today you're just putting it out there. manus: is it baby boomers who want us all back in the office? what do millennials whack? -- want? the whole focus is the return to the office. many of the world's key financial centers really struggling to kickstart the come back of new york, hong kong. steven arons joins us from frankfurt. how quickly are workers returning to the office? in london, they have to delay by a month and the banks are getting itchy. >> they are over here. it is true. managers want their staff back in the office because it has been shown that it's covid burnout. people after a while lose

productivity in the home office so people really -- companies want staff to return but it is tricky. in germany, vaccination rates are lagging behind the u.k. and the u.s. and therefore, it is not possible. though there will be -- the government will lift restrictions at the end of this month on a few days that will allow people to return and we will see how that affects the return to office over here. dani: assuming you are allowed to go back into the office, what are the big obstacles that remain? presumably, it still can't go back to normal even when everyone is sitting at their desks again. steven: there is the fear of the delta variant catching on in germany, too. the u.k. has delayed return to office and the same could happen in germany. the vaccination rate here is lower so presumably, the delta variant could spread even more easily once it is fully here and

that could lead to a big delay if that happens. dani: i'm sure a lot of those executives are not hoping for that. thank you so much. that is steven arons in frankfurt. you can read that full article on the terminal. coming up, talking bitcoin. the original crib has lost roughly 40% over the past few months. what do analysts say? this is bloomberg. ♪

dani: this is "bloomberg daybreak: europe." i am dani burger in london with manus cranny in dubai. bitcoin is holding above $32,000 as the crackdown is stoking

fears of a deeper selloff. cryptocurrency has lost 40% of its value over the past two months alone and analysts are turning now to a sinister sounding technical signal. joining us is bloomberg's cross-asset team reporter, eric lampe. i guess technicals are so important at this point because it's really difficult to judge bitcoin based on fundamentals, isn't it? eric: sure. the focus -- bitcoin is crossing, making a death cross. when the 50 day moving average crosses with the 200 day moving average. and it actually happened a couple of days ago. it has been fairly weak since then. in the absence of any earnings or other traditional fundamentals, you know, we are left taking a look at technical indicators like that. manus: that gets written up a

great deal and now it is actually happening. i wish you could see it here on the screen. but look, it comes down to supply. he contextualizes supply for me in china on bitcoin. i mean, look, you have the china crackdown. what is the latest on that and how should i think about a supply crackdown? eric: first off, in china, the latest developments we have is that the pboc, the central bank, held a meeting with some of the biggest banks and alipay, reemphasizing their restrictions on crypto trading and crypto services in china. these regulatory pressures have been around in china for a few years now but over the last few months, we have been getting increasing activity and rhetoric coming from china in terms of a

renewed focus on those crackdowns so the concern is that we are going to get more crackdowns from here as china has tried to stamp out some of the loopholes and crypto trading. we still have plenty of trading over the -- in china. there is lots of activity. also on the bitcoin mining and crypto mining industry in china is still very much thriving but it is unfortunate i think a little bit that the crypto industry falls afoul of those two main focuses of chinese government, one of which is volatility in the financial market and the other being increased emphasis on the environments and getting back to carbon neutrality. it falls afoul of both of those things. dani: i'm afraid we will have to leave it there. eric lam, thank you so much. let's take a look at things we are watching out for. brexit minister david frost will be giving evidence that parliament over the dispute on

border checks on the irish sea and at 1:00 p.m. u.k. time, we have hungary's central bank and they will be one of the first monetary tightening cycles. the plan is to reign in inflation, manus. manus: a little bit of cover now from the fed perhaps. this afternoon, bloomberg presents day number two of the qatar economic forum. we have the speakers from glencore. and the head of the major oil companies. we will continue that conversation. cannot wait to hear what they have to say. antony blinken meets angela merkel in berlin as part of his european tour and then it is all down to the fed. jerome powell testifies in front of the house subcommittee and that will set the agenda for the feds pandemic emergency lending and the purchase programs. could roll call on and on and on but it will set the agenda for

tomorrow morning, isn't it? dani: it certainly is. we will be listening to it. that is it for us. the european open is up next. this is bloomberg. ♪

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anna: good morning. welcome to "bloomberg markets: european open." i am anna edwards in london. mark cudmore joins me in singapore to take us through all of the market action this hour. the cash trade is less than one hour away. jay powell reiterates he sees inflation as transitory as the fed chair gets ready to sit before the house today. kaplan