manus: good morning bloomberg's middle east headquarters in dubai. it's daybreak europe. jay powell holds the line on inflation as williams says any talk of tightening is a way off.

we bring you an interview this hour. hong kong starts the first trial under its new national security law, raising questions of whether the city's independence and the future. the cohorts at the fed. it is about the cooing of the doves. that is why equity stabilized. good morning. dani: all this back and forth, but if you look at markets, did we need to live through the past week? we have done a complete roundabout on the 10 year. i could have slept all the past week and been fine.

tom porcelli always the sober us to voice on macroeconomics called yesterday a snooze fest from powell saying that is an hour of my life i can never get back. the one thing he points out is the fed speak over distortion saying nonconventional monetary policy has the potential to increase the risks to financial stability by spurring search for yields behavior, eroding lending standards, and increasing leverage. that is the fed's admission that bubbles can be created, or at least distortions from financial policy. manus: i mentioned it before we came on. this is about seeing bubbles everywhere. he is talking about meme stock investing and the end of an 11 year bull run. we will talk more in just a moment.

i do not know whether it was a snooze fest. i think some bond traders grip to the seats and said wow. 10% growth in the u.s., does that mean -- >> i know you have been speaking to people who would say we are not priced at the right level here. it is amazing how people have had to revert again over the past week. manus: a bit of a reprieve, is it? >> if you are concerned about bubbles, today is not the most comforting trading day. we have nasdaq 100 futures up 0.2%. that is a new record when it comes to the futures. asia stocks getting the tonic from powell speaking yesterday. we have a dollar that is stronger despite falling yesterday. not necessarily charting a clear

path. bitcoin falling 10% yesterday only to gain another 10% sitting around 33,000. let's return to the fed. jay powell reiterated his message to the markets yesterday. >> we will not raise interest rates preemptively because we think employment is too high, because we fear the possible onset of inflation. we will wait for evidence of actual inflation. a substantial part or perhaps all of the overshoot in inflation comes from categories that are directly affected by the reopening of the economy. these effects have been larger than we expected and they may turn out to be more persistent, but the incoming data are very much consistent with the view that these are factors that will wane over time.

>> let's bring in the julius baer head of research. would you agree with tom porcelli that the testimony from powell was very political, it is an hour of his life he will never get back, or did you have concrete takeaways? >> i think this is about splitting central-bank policy. looking at market reaction to earlier statements and fine tuning the message. the fed is certainly is not one to rock the boat. maybe is even a bit scared about the market reaction, which is massive positioning. they are trying to work this out. in terms of delta, last week versus early week was not so much of a difference. it is about fine-tuning a message.

manus: fine comes down to wellness -- to williams. he said focus on the taper. we are in an inflation frenzy, that is what is driving the markets. let's deal with the taper. when do you see the taper happening, and what pace? what pace can this market deal with in regards to the taper? what does a soft taper look like 2021 2022? >> first we will have discussions about it, about implementation, then implementation itself. discussions will probably start around august. at some stage in 2022 this will start very gradually. this is exactly what markets are struggling with.

they have a postrecession recovery. this one, a very extreme one. this takes a lot of patience. we are not really good at that in financial markets. dani: it sounds like you are agreeing with manus in the language of the soft taper. do you want to go into cyclicals at this point? >> we are in the midst of a major rotation. back, back-and-forth. you can look at the 10-year treasury yield and say whether cyclicals are taking the upper hand when yields go up and vice versa. we are in limbo here. we have cut back our exposure in springtime. it is just too early to go broadly back in.

it is more of a balance thing. unfortunately, you are more in the wait and see mode at the station. manus: we got a heck of a call from jeremy grantham yesterday. he sees bubbles everywhere. he talks about bonds, stocks, real estate, and commodities. the trifecta and a half for him that he has not seen before since japan 1989. do you share his angst? he says stay away from the s&p and bitcoin. he says he sees the opportunity in value and -- do you see this level of risk that grantham sees? >> that is of course a concern. the central banks are managing their monetary policy.

it is basically part of a wealth effect they want to get. it is extreme at this stage. over to europe, i don't know where the bubble is. there will be a major rotation into the growth franchises. jay powell is holding to his words. maybe the bubble will be more extreme by 2022. dani: if you are looking at what the fed is saying in relation to this bubble, and they are clearly aware of it, how much do you rejigger your portfolio or just write it off as dumb trying to talk off some of the froth in the market?

>> it is really about trying to figure out what is going to happen and what will the post economy -- post recovery economy look like? for us it is really stay the course. the big opportunities in terms of relative player may be out. come september, october. >> the taper tantrum only took stocks down by 6%, 7%, they went to power ahead. julius baer head of research this morning on daybreak europe. let's get the first word news.

quick sydney is set to impose new restrictions as an out break of the delta variant spread in the region. the u.s. looks set to under shoot president biden's vaccination target. the white house narrowly failed to get all adults at least one shop -- 70% of all adult at least one shot before july 4. ceo james gorman says 90% of return staff have had shots. the goal is to create a normal office environment without the need for face masks and physical distancing. former citigroup chief economist catherine man is to join the bank of england as a policymaker. with previous roles at the world bank and oecd, she brings international experience to the boe as it weighs when it can recalibrate its monetary stimulus.

the u.k. government is to consult on new rules for on-demand video providers. stream content from the bbc is subject to code overseen by a media watchdog. foreign competitors like netflix and disney are currently not subject to regulation. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: coming up, we hear from ivan glasenberg who's going to give us his view on china's efforts to cool the markets. ♪

dani: this is "bloomberg

daybreak: europe." let's turn to commodities. the head of glencore says beijing's effort to cool the market will not last. ivan glasenberg told bloomberg prices will stay high and supply will not meet demand from the u.s. and china. he spoke at the qatar economic forum. >> you have the big infrastructure spender in china at the moment, the chinese got out of the problems. they started spending on infrastructure and pushing the infrastructure, fiscal spending. then the rise of commodity prices. you had disruptions in certain commodities because of covid and that tightened up supply, that allowed commodities to push up to where they are today. infrastructure -- we see it coming in the united states.

the speculation of commodity prices picking up on the back of that will start driving them up. recently the chinese have tried to push it down to bring it back to lower levels. i think that is a short-term game. fundamentals will keep it at this level. >> how much can they talk it down? >> they are not trying to take it down. they are taking material from the strategic stockpile and putting that in the market. how big the stockpiles are we don't know. eventually they have to restock the strategic stockpile. they will come back into the market. it is a short-term phase. >> like a couple of months? are we actually at the start of some kind of super cycle that is very different? >> in 2002 we had the chinese

coming into the market. we had a big push on commodities. the world was not ready for the demand. u.s. commodity prices rose significantly. the world caught up but you had the 2008 financial crisis push down commodity prices. chinese infrastructure spending in 2009 kept a strong. the mining industry started producing too much and started producing more. then you had the 2015 commodity price drop. we started looking better until covid. we got the rise of infrastructure spending around the world. i do believe commodity prices will stay strong for a long while longer, and i think when

the american infrastructure plan comes to fruition, let's assume it will take 18 months to get going. you will push commodity prices higher for a long time. you will have the chinese continuing with the infrastructure plan. they still have to urbanized a few hundred billion people. you have the united states upgrading infrastructure. commodities will stay for a long time. how quick the mining industry can bring new projects on -- new projects are going to take longer this time. we have developed most of the easy projects. we are now going to go into the more difficult regions of the world. i think the mining industry is not ready to add to the market. manus: naturally glass half-full

, ivan glasenberg speaking at the qatar economic forum. let's see whether the commodity is as bountiful over at julius baer. when you listen to that interview, a couple hundred million people to be city-ized in china. do you share his bullishness on commodities? >> this is cooling off as we speak. in industrial metals and agriculture, the question is how much of a setback to we get. from a pure recovery point of view, on virtual demand, this

looks to be sound. the question is always how much supply reaction do you get. we struggle to see the next super cycle. >> oil has been resilient as commodities cool off. there does seem to be this disconnect between the commodity world of oil and energy stocks which have not performed as well. how do you bridge the gap between the two? >> this has been quite puzzling for quite a while. anything we have seen in previous cycles just tells us about how uncertain the future is. this is just the risk building for some of these companies and therefore i think it is just a measure of uncertainty.

energy stocks can't follow as they usually do and the disconnect will stay until we have more insight with the new world in terms of energy transition. manus: apologies, i had a little sneeze. we've got consumer confidence rising in europe. have a bank of england policy meeting tomorrow. do you want more european exposure, or how brave are you in regards to u.k. exposure? the recovery is coming fast. a better vaccination rule out that many -- than many had presumed in the united kingdom. >> there is an opportunity with a much more contrarian call.

as we speak with this post recovery alignment, europe will have an intermediate stance. not much of an opportunity, but that is something you want to revisit. we reckon the outlook for 2022 will be better than what it is currently priced in. it is more being rather neutral on the whole thing. dani: thank you for joining us. coming up, hong kong holds its first trial under the national security law. we are live on the ground with stephen engle who is going to give us the latest. ♪

manus: it is daybreak europe. to hong kong now. the first trial underway under national security legislation that was imposed by beijing. a 24-year-old man pleaded not guilty to charges of incitement to secession and engaging in terrorist activities. we have stephen engle outside hong kong's high court. this is a tense, pivotal moment in terms of testing law. >> absolutely. there are more than 50 people who have been arrested under the national security law. more than 100 have been arrested facing possible charges. this is the first one to go to trial since the law was imposed nearly a year ago.

the activities under the microscope today in this trial, the 24-year-old former restaurant employee allegedly rode his motorcycle carrying a banner calling for the liberation of hong kong into a police cordon. that is why he has been charged under the national security law for incitement of secession as well as terrorism, as well as a third charge, dangerous driving causing grievous bodily harm. a lesser charge, but one in case the terrorism charge does not hold muster in court. there is no precedent yet for national security law trials. there is potential conflict between this document, the basic constitution and the national security law.

as you rightfully said, about three hours ago, he pleaded not guilty to the three charges. dani: what correlation if any can we draw from this case and the more high-profile jimmy life situation? >> he is a billionaire, media tycoon. this comes at a time when that newspaper is on its potential deathbed. there were more arrests including of a 55-year-old in parliament after last week five editors and senior management were arrested. he is serving a 20 month sentence not under the national security law, but he will be the most high-profile. what happens today could be used as a roadmap for future cases. dani: thanks to stephen engle.

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dani: good morning from bloomberg's european headquarters. it's just on 6:30 a.m. in london. i'm dani burger, with manus cranny live in dubai. this is "bloomberg daybreak: europe." jay powell holds the line on inflation. saying any talk of tightening is still a way off. and the take of ivan glasenberg.

plus, hong kong starts a new trial under his new national security law, raising questions about the city's independence and its future. anise, good morning to you. i have to say, whenever i come in -- manus, good morning. one of the ways i gauge is what is gaunt -- gauge what is going on is the plethora of notes i get. we are talking about it coin. what a wild ride went on yesterday, falling 10%, gaining 10%. it's the fifth time it has happened this year. it is not unusual to see that kind of volatility. manus: it is gut wrenching, and it's whether you've got the wherewithal to stomach it, scott minerd says it could trade down $20,000 but there is a longer-term story. he said i still prefer bitcoin to gold. of course these people are

talking their book, and it's fair enough, everybody's got a book to talk. i've been obsessed with jeremy grantham at the moment. he says it coin is an asset with the nasdaq bubble. get ready for this. meme investors, it's called nihilistic investing. i know the two words are different, that this is huge. dani: it's that kind of idea, that kind of proclivity to bid up bitcoin and meme stocks. i know it's not always the same investor base, but it does have a lot of crossover. so it is interesting to see meme stock continuing to get that flow while we get volatility in bitcoin. this was interesting, from the spoke investment, who point out we are currently down 48% from the high of bitcoin. that is typical, the average drawdown from the high is 48%.

so if you're into meme stock or bitcoin, this is the picture you get. manus: we know it's going to be low rates for longer than we all choked up on last week. let's talk about the market, the nasdaq with a little better tone on some of the equity markets this morning. nasdaq and asian stocks up .3%. the dollar firming a little bit. the message from the fed, i think you said one or two analysts have said -- the message was clear, when you talk about taper and not about hiking rates. that has perhaps assured the equity market and the bond market. let's talk about the banks. deutsche bank shareholder has signaled -- the prime minister

spoke to bloomberg's simone fox and she asked about consolidation of the european bank and how inevitable was it. >> i think it should happen, because if we compare the european banks with the american banks are the chinese banks, we will find they are too small to stand by themselves. i think managing between them is important. everybody is waiting to have a better valuation, but i believe to manage now is better, because the market is being taken by the big banks, the giant banks in europe. if they don't do something quickly, then the european financial, i think they will have difficulties to compete with the americans and chinese. they will have more difficulties to compete with them. >> do you think deutsche bank,

something where you're a shareholder -- >> i am not on the board, so they have to decide. but i'm saying what i think. i believe a merger is inevitable. manus: the investment promotion agency, the underwriters, powered by bloomberg. plenty to discuss with magdalena stoklosa, morgan stanley's european head of research. let's get straight into listening to the qatar's, they owned a lump of deutsche bank. i know you can't talk about individual names, but are you expecting a major consolidation moment in the european banking landscape? has he got a point? magdalena: yes, i think he has a

point. i'm a huge fan of consolidation myself, and i believe we have started. when you look at production last year, let's not forget, we had created a 20% market share back in spain with the merger one bank. we created a 20% bank in italy. so the ball started rolling at quite a scale, i have to say, already. of course you can argue these are all domestic transactions, but i think it is a start. dani: and of course, this is coming out of a crisis where regulators are keenly attuned to what is happening in banks. to what degree are the regulatory hurdles, or is that environment supported? magdalena: that environment has changed a lot, particularly over the last 18 months. and they came out with clear

rules of what they expect from the merger. so i have to say, it's almost like 18 months ago, historically we were all kind of worried about the large institutions, and now we are encouraging larger institutions. so i think it became very, very clear that it's a business model discussion, and very often a merger is the only way to truly improve the profitability of the banks. which of course the cost line seems to be proving those kind of returns going forward. manus: it seems to me that banking, you can almost steamroll through structural changes and get synergies, unlike culturally, you have some other megamerger platforms.

i looked at your notes, and you're talking about payouts. maybe i'm just the only one in shock. euros on yield over 5%, the u.k. are going to pay out over 20%. do you think the dividend delay and buybacks are already reflected in the equity pricing? magdalena: no, i don't think so. i think that's why i'm quite constructive on the banks. i still have 10% upside to the sector as a whole. there are still limitations on the payouts, which are supposed to come off at the end of june in the u.k. and at the end of september in the euro zone. that kind of pace is extraordinary in the payouts. the kind of makeup payments in the fourth quarter this year and much more normalized in 2022.

it's actually been quite clear from one perspective. the market that waits for those actual limitations to be lifted. dani: we have an analyst downgrading european banks yesterday. they don't talk about dividends as much as you do, but they talk about the reflationary trade being on pause, the yield curve, the end of the steepening has happen for now. that's why they are downgrading it. does that factor into your view at all here, or are you still bullish despite that? magdalena: of course it's a huge factor in our view as well. but i think there is something bigger than inflation trade, which i'm actually quite skeptical about as well. it's what i call the credit cycle trade. because ultimately, it's going to drive the banks earning, and ultimately the treatment us --

tremendous dividend payment to be the fact that the provisions are coming down, in the credit market and also reopening of the economy. despite the fact were not going to get rate increases, particularly in europe, where it was never part of the pieces, the credit cycle and the huge impact of earnings of the banks is very, very high in session one. 50% up -- in session one. let -- i'm playing this reopening credit cycle as a dividend. i think the rates, agree, our little bit of a disappointment, but ultimately it's about real macro strength into next year. manus: magdalena, let's talk about the other aspect of banking, the digital euro, the advent and when it will come.

how does that play out on the landscape of european banks? is it that there will be some major players that will be a delivery mechanism of -- of a digital euro? how will it impact the market? magdalena: we haven't yet heard truly how they are going to structure the digital euro. but i think we know enough to be able to talk about the impact on the banks. the impact on the banks is going to be quite small, because ultimately we seem to be talking about the limit of 3000 euros per person that we will all be allowed to hold within the euro. you can argue that even if the public has converted the euros

out of the bank deposits, the bank deposits have come down by about 8%, which in the environment we've got at the moment, this is a huge exit, particularly after last year. it's counterintuitive to be positive for the banks. the mechanism, i think the vast majority of the banks will be running effectively the version of the digital wallet to hold, but the ecb will decide the euro limit per person. dani: i also want to get to your other piece of new research about growth in competition in the asset management industry. one of the things that struck me was, you talked about the need to grow in the crypto space, that this drives the landscape of the industry. and of course it happens as crypto looks very volatile. so what form do these type of

products take, given that volatility? magdalena: this is the interesting part. we thought when we looked at key things that were likely to grow and really impact wealth asset management -- managers over the next cycle, the cyber market, reptile currency, crypto assets in general. -- cryptocurrency. we talked to 20 ceos of the largest wealth managers in europe. what was very, very clear is that the off during -- offering of crypto assets is in its absolute infancy. there was no large wealth manager that offered crypto assets trading or crypto assets

custody to clients. in the u.s. you've got morgan stanley, goldman sachs offering asset custody at some level of trading. in europe, the regulatory side is so insert in that the banks kind of fear they're looking out the window but they're not ready to offer crypto as a product. dani: it's always that game of catching up. sorry to cut you off, but i'm afraid that's all we have time for. thank you so much, magdalena stoklosa, morgan stanley head of european research. that's get the first word news with annabelle droulers. annabelle: the fifth anniversary of the brexit deal, no deal being reached, the so-called sausage wars. officials on both sides are sounding increasingly optimistic that they will avert a trade war. u.k. has asked the e.u. to

extend a grace period on sausages in the u.k. and the rest of ireland. former new york police captain eric adams is leading the first round of counting in the city's democratic mayoral primary. with about half of precincts reporting, adams had about what he percent of votes. andrew yang has quit the race after the early results, saying he is a numbers guy, and is not going to be the new york city mayor. 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: annabelle, thank you very much. a rush on the stock for sausage gate. coming up, the way insiders have used spac's to boost their

fortune. more coming up on "bloomberg daybreak: europe." ♪

dani: good morning, everyone, from bloomberg's european headquarters. it's just gone past 6:40 a.m. in the city of london. i'm dani burger, manus cranny beside me, live from dubai. this is "bloomberg daybreak: europe." here's what you need to know about the latest big tech from bloomberg. and what they've enjoyed since the beginning of the pandemic. going back to early 2020, or than 470 tech firms have gone public. that means they've raise more than $150 billion. we look at how insiders have raced to push businesses into the public's hands and the range of new verse they are employing to boost their budgets.

tom, exactly who is benefiting at this point from the spac craze? tom: the point of the story is the one thing you can say or the people who created these things and have to -- have an interest in the structures. from my colleague heather, three examples of how three different ones are doing extremely well. you have a guy called michael klein on wall street, a texan billionaire, and the story explores different ways they make the most out of these structures. manus: where are we in the cycle? we're talking to some of the lead investors who say the frenzy has gotten a little bit

out of control. what are you hearing? tom: if you look back to 2020 and earlier this year, there was absolutely a frenzy, a bank like credit suisse which has a big spac advisory arm has brought it up to rarefied heights of the top three or four advisors. the markets we calibrated slightly increased, in texas it's down about 20%. this is recalibrated from extreme highs, so it still very busy. the big question is, how to do you regulate, it's a big central cog in the market. it's clear the regulations might be a bit behind the times. manus: tom, thank you very much, tom metcalf.

and one stock will be in play at the opening of the markets, some of the big brands, jamison being one of the big names in that fanning -- in that family. rising by 16%, organic growth from the current operation up 16% and 10% is the estimate there. so little bit of a shift for them, raising organic growth by about 16%. coming up on the show, the energy transition, we talk a lot about it. we will hear from some of the biggest names in the industry. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i manus cranny into by.

-- i am manus cranny in dubai. discussing the transition to green and carbon. >> a possible solution for a longer-term transition. >> certainly gas is going to play a really important role. >> to make the transition real. >> carbon price is absolutely essential, but it is also absolutely insufficient. >> policymakers and policies are also important. >> the majority of governments are taking this very seriously. but it has to be an integrated solution. >> we have to have policy and regulation that mandate think that will not be moved i just carbon pricing.

manus: the economic forum there. all the underwriters of the qatar economic forum powered by bloomberg. it all coalesces on the oil markets. you and i caught up with chief economist, look at the inventory draw down, a half million barrels drawn down. you take that and then you take exxon, shell, all talking about the prospect of $100 oil. i don't think the world will tolerate $100 oil. dani: and with the energy transformation conversation, do you hear from a lot of the oil people you talk with about that causing peak oil? they talk about it like a positive, but at some point you have to imagine that it also

weighs on what happens to the energy space. manus: peak oil is something they seem to draw closer and closer to. electric vehicles, there's a big conversation around that as well. quite a chance of $100 oil, then it will fall back. but we are running into an opec-plus meeting, and i wonder if mr. novak will make a call to release a few more barrels, just for old time sake. dani: it's all about restraint at this point. we know the u.s. shale patch has been good in that regard, not releasing anymore reserve. it does seem that is what we need from opec, that restraint, manus. manus: absolutely, but prince abdullah wants to see clear evidence of a strong recovery. so we are seeing -- we will see what they have to say as they run into the opec meeting next week.

exxon saying the lack of investment will exacerbate supply. dani: definitely, it's very interesting to watch. that is it for "bloomberg daybreak: europe." the european open is up next. this is bloomberg ♪ ♪ ♪

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anna: welcome to "the european open." the cash trade is less than an hour away. here are your top headlines. jay powell holds the line on inflation. hammering home the central bank is nowhere near raising rates. china can't call the commodity