manus: good morning. it is daybreak europe. the feds sees heights next year, a grain that they might be sooner than you think.

-- talking tightening, the feds raphael bostic sees heights next year. they think it might taper sooner than you. saying goodbye to its most hawkish member, a former policy member says the bank does not have an inflation problem, yet. results of the feds stress test, the biggest wall street banks are all set to pass, paving the way for them to double their shares of the payouts, over 100 and $40 billion. good morning. it is now clear who is made 2022 club. you have a growing dissidents as you coined it yesterday. dissidents but no mutiny on the

fed. bostick, all in the 2020 camp. i put it to you, dani burger and that the fed has a communication problem. williams and powell, hammering home the taper, these guys, trotting along with hikes. good morning. dani: good morning. i agree that this is an issue if you are investor trying to figure out the environment. if i can play devils advocate, what if this allows the fed to move in different directions depending on the data comes in. perhaps these disagreements are a good thing for them. manus: yes, i do not disagree with you on that. it is good to have optionality. i've seen a few accidents in the bond market and my time. it is not pretty. with that in mind, i think one should bear in mind, if you talk

about hikes next year, let's step back for one moment, let's call 2020 to hikes. dani: yes. manus: you put away $1.4 trillion from a bond market where you are a hefty buyer from a similar program and it is a minefield to do that. there is a depth suing. -- debt ceiling. dani: yes. what happens with the buyer is not there for those? the skew in the market of tell wrist, hit a record in the past two days. on two markets -- manus: yes, gone. dani: not to interrupt you, i just want to contrast this chart with what is happening in the markets this morning.

this is volatility, the same time, cash yesterday was muted. we are looking at a futures market that is moving higher. you have again, holding edits level, just about 1/10, significant that we are able to jump over that as the dollar continues. from a going to have any more bulls join the last day. finally, at the u.s. 10 year, it is the dreaded auction of the seven-year today. will it be more pandemonium or will it go bite with no one batting an eyelash -- go by with no went by -- go by with no one batting an eyelash? manus: it is all around, guess what, inflation. >> the u.s. economy is really on

fire. >> developed markets are further had. >> we will see a second half of the year with the economy running really hot first and foremost. >> i think that prices are going up. >> that will hedge over and spill back into the global economy. >> i do not think it is ending to be alarmed about. >> the chances are higher that this is ongoing inflation and that the fed will need to adjust. >> this is a trajectory phenomenon. >> i think we are overshooting by more and longer. >> if you see breaking inflation rates go about 3%, and you see that spurt, then you have that tightening of the monetary policy. manus: let's bring in hannah peters, sanlam investments global equity investment analyst.

dissidents -- which is a dani burger word -- i am always jealous when 70 gets a clever word. can you see a situation where they taper completely in 2022? hannah: good morning. i think what we have to focus on is that powell said there is not going to be any preemptive interest rate hikes. they are wanting to do is wanting to see a real tangible recovery in the economy before they think about doing anything like dissidents. they have to bear in mind that there are billions of people still unemployed, all that we are seeing a fantastic recovery. we will need to wait and see for that recovery to be more entrenched before they make any moves and such. dani: we have been talking this week about some of the moves have been started.

you had that yield curve nar dority started to fly into some degree. what will it say to you if they start to signal the dynamics before the fed starts to taper? hannah: will be have seen is a move in that u.s. 10-year treasury yield balance go from 170 basis points to 149, today. we are seeing as a result is that rotation come in and growth has started outperforming again. it has put a pressure on financials. if puts pressure on interest margins, generally. we start to see that change in the market dynamic which is becoming more evident in this month where you see it start to outperform, in goldilocks economics. the 10 year yield is not the height that is putting pressure, but is not so low that things are starting to run out of control, essentially. manus: set it before and i will

say it again, i am so glad when people tell me that goldilocks has not been kidnapped. if she is still alive and well, schwarzman talked about the u.s. economy and an avalanche of opportunities, that is because of tax, i'm curious about your take on that. everything has grown faster than anyone anticipated, do i still continue to over allocate to u.s. excellence and outperformance? hannah: the u.s. has done exceptionally well. we saw it lacking in parts of this year, but it caught up now, we have seen valuations come up. i think, because of the pandemic, we are starting to see pockets of opportunity. it is all changing so quickly. just this month we have seen such a strong move. i think there are some of the

opportunities in the u.s., you have to look at pockets of value and speaking of companies like pfizer and health care insurance, even companies that are trading site -- sideways by and large, and all that time the earnings are coming through these companies are becoming more competitive from a valuation basis. dani: if amazon looks interesting to you, do you think there will be growth in this market? hannah: we are always buying growing businesses, it is what we do. amazon has some fantastic long-term potential. we are always looking at companies that we think are growing. we think there are pockets of opportunity with all this noise going on, it is giving investors good entry points at more reasonable valuations with companies that have been

expensive in the past, particularly last year which was a high-growth growth driven market. in this rotation, the value has been taken a leave a little more. is giving us an opportunity for things to come out a little more and a better opportunity to get into these high-growth names any more reasonable price. dani: we will get more from you shortly, you will stick with us. that is hannah gooch-peters, sanlam investments. now let's get to first word news. >> boris johnson will convene a london summit to help tackle the low vaccine rate. regional data shows 60% of london has had at least one dose of vaccine, compared to 73%-79%. u.k. is can tendering -- continue to push up vaccines and

daily deaths and the blow. the u.s. is said to ban some china goods over expected abuse. [indiscernible]changing produces half the world polysilicon. your car has rejected a bid from volkswagen boeing the car-rental firm at 2.2 billion euros. a consortium led by the german carmaker offered over 44 million euros. that is as the bids of future of mobility services. there was a restructuring that handed control to creditors. vw is not currently planning on raising the offer.

global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you. , a tricky day for the bank of england, the central bank balancing act goes on is the economy recovers while limiting inflation. all of this and the outgoing chief economist. what's to discuss. this is bloomberg. ♪

manus: it is daybreak europe. i'm in dubai and dani burger isn't london. the bank of england announce

policy decisions against at backdrop of inflation. slowly reopening u.k. economy. let's get to our bloomberg u.k. economy reporter. his opening, it is fast, furious, restaurants cannot get enough staff. what are we expecting today, no rate move, but maybe a hawkish tilt? >> exactly. we are accepting a unanimous vote to keep interest rates at a record low and and a 21 split on buying. they're expected to vote to pair back stemless again. there likely to cite the jump in consumer price with both the balance to the set target. we have had a growing minority in the economist moving forward predictions of what we will have the first post-pandemic rate rise.

bank of america, credit suisse, so many markets with 15 base point increase by june of last year. dani: alone bull at this point, leaves after today, what is his parch are going to have in terms of impact on policy agendas and maybe even markets? >> we do not know who is going to replace and. a is the straw -- him. he is the swansong. whoever replaces holding as chief economist is going to be hard to be more hawkish. dani: such a pleasure to have you on set next to me. so wonderful. [laughter] thank you. that is our bloomberg economic reporter. hannah gooch-peters is still with us. will hold dane have any friends with him on the bullish side? hannah: ultimately.

we are not expecting any changes approaching around 2%. what we have to keep remembering is there are thousands of people on furlough and thousands of people are employed here and that u.k. we are looking for that to change and people will be on furlough until september or october this year. i do not know if we will see any meaningful changes until we get further into gear. we will see a recovery in employment and an economy more trenched. manus: the warning from the airline industries, give us a rollback and plant because otherwise we will lose these people once they come offer lower. -- off i asked my last guest -- off furlough. is u.k. inflation secure than u.s.? u.s. breakevens are at 2.3%, it

is more rampant in the u.k. that it is in the u.s.. but is it as sticky? hannah: i do not know. what we have to do, instead of looking at inflation numbers, we just focus on investing in companies that are not as effective by it. companies with strong brand in pricing power or companies with low input. they are not as affected by these inflation numbers. dani: if you are looking past that, what you do with what manus mentioned about all these travel companies need clear guidelines, is that where you want to be right now? hannah: we saw a big movement in a lot of trouble companies last year. we had investments in continental hotels. we had an over 100 50% move. he see companies like amadeus up over 30% in the space of just a

few years on the back of the vaccine news. what happens is that they really seem to be the vast majority of those moves. i do not think we will see any more about meaningful move until people start getting on planes again, start staying in hotels and we get further down the line in terms of reopening. manus: maybe they run up. i'm interested in getting your view, goldman sachs have the view on that u.k. saying there is offer in gold value, and you're saying it is strongest five years on from brexit. when you look at the chart relative of stoxx 50, it is still way undervalued in a relative sense, still 5% below in dollar terms. when you look at that u.k., do you want to be in the value portion as opposed to the global

exposure story which is the ftse 100? how do you differentiate the story or is value a better play for you in europe? hannah: u.k. market is heavily dominated by financials and your energy companies and so those have all done very well relative to the u.k. market. they have performed in-line line with the u.s. and europe and is a broad-based -- rate. because it has been weighed down by these energy companies in these financials with have -- which have underperformed. it is far more driven in the u.s. by information technology. i think what happened is when we hit this latter portion of last year from a valuation basis, the u.k. market hit a bottom, it almost had nowhere else to go. we had this vaccine news, this

catalyst, we have seen a huge bounce in rotation which has been favorable to the u.k. market because of the sectors exposed to. dani: even set it there, we had all this news, be it covert or otherwise, it is a noisy market when it comes to that u.k. right now. is this something that you want to reallocate based on or do you just sit on your hands at this point? hannah: we do not ever sit on our hands. we are trying to look through the noise and see if there are pockets of value. we look at domestic or global investors and are looking for customers that have international revenue streams. noise for us provides opportunity to buy into quality companies at more reasonable valuations. we have a saying on our team that we are looking at stealth rallies and the concept is quite funny because we are looking at companies which have very stable

income streams, structural growth streams. if you look at european pharmaceuticals, on a total return basis, you have the likes of new return highs, it has been an exceptional performer that it did like last year. i'm not sure the noise you have going on where you have everyone talking about the energy companies that are doing so while -- well. you have companies that are perhaps boring that are new all-time highs in the markets. that is a great place to be invested right now because valuation is much more compatible. manus: boring can be a little more trustworthy. love that, stealth rallies. thank you very much. hannah, thank you very much. hannah gooch-peters, sanlam investments, equity investment analyst there. coming up, the eu summit in the

concern that is the spread of the delta covid variant. this is bloomberg. ♪

>> the vaccination rate, as high as it is now, the measures that people have taken while clearly covid-19, it looks like there is going to be another way of, but hopefully that does not translate into hospitalizations or more serious illness. dani: the ceo of berkeley there given his thoughts saying that there is another way possible. pandemic will also feature heavily in brussels today. we have the eu leaders meeting

for the last summit before the summer recess. let's get to bloomberg's maria tadeo who is outside. obviously this is a risk weighing on everyone's minds. how big are a risk of these variants for that european reopening? maria: that is really the question in europe and the question that european leaders will have to tackle today when they meet in brussels. if you look at a report that came out from the disease prevention center yesterday, they said that this is a much more transitional -- transmissible variant. it could account for more than 90% of all new cases of coronavirus in europe. that is a big concern for european governments who really need to strike a balance between reopening and taking off some of those restrictions, which the economy needs. there has been a big push across europe to save the summer season and bring in tourists into the european union, at the same

time, prevent this new wave and the spread of variants. it is a tricky balance and is unclear how this will work. we have seen the vaccination campaign speed up, but in other countries, we have seen the number of cases also playing with this new variant. manus: then you see headlines about that u.k. opening up 60,000 people inside the stadium , it is mixed messaging in those terms. i just want to show you, my mom has sausages in the freezer, but it is a serious issue. other sausage words going on in ireland? [laughter] this is serious. what is the latest? sausage gate. maria: there is a deal and making, european governments are moving now, we understand very close renting an extension to that grace. there was ending at the end of the month. this is about the infamous

sausage war, what does show is that we are going to avoid that potential trade escalation by the end of the month. there is one issue that has not been resolved and ♪ ♪ 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. and they're number one in customer satisfaction. his number... delete it. i'm deleting it. so, break free from the big three. xfinity internet customers, switch to xfinity mobile and get unlimited with 5g included for $30 on the nations fastest, most reliable network. (announcer) the core is key to losing weight, getting back in shape, and feeling good. introducing the aero trainer, designed to strengthen your core, flatten your stomach, and relieve stress and back pain. it conforms to your body and increases muscle activity. abs, back, obliques, hips, and glutes.

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dani: good morning everyone.

6:30 a.m. here in london. alongside me, manus cranny. talking of tightening the fed's, they see a rate hike next year. they think it may taper sooner than you think. the bank of england says goodbye to its most hawkish member as the former policy member says the bank does not have an inflation problem, at least not yet. results of the fed stress test, the sixth biggest wall street banks are set to pass, paving the way for them to double shareholder payout. manus, good morning and happy stress test date. don't you love to see the date where we get to find out how big those capital buffers for banks are going to be? we will talk to our michael moore about it in a little bit. of course, the dividend picture

is so crucial here. manus: absolutely, buybacks were also camp. how much will they be able to release? i think this sets that differential. we checked in with your p -- with jp morgan earlier. it will be the buybacks story the drives that differentiation. u.s. banks are so far ahead, relative to their european peers and their u.k. peers. this is driven, we were so over positioned, so well provisioned. the most well provisioned since 2008. dani: that is right. that gap between that european in the u.s. banks, the dividend picture is going to make a difference, but there is a difference.

also in loan growth, we will seek businesses and banks taking out loans. people will drop their money in the bank, pa high and let them sit there. -- pile high and let them sit there, much to the chagrin of the banks. manus: yes, prices are up 23%-20 4%. -- 24%. let's get a quick sweep of the markets. yen is poised to bite some pandemic driven gains. we have the dollar in there. i like the ongoing hawkish tilt at that bank of england. you'll take a bit of a hawkish narrative to get back to those heights where we were five years ago.

you have that bond yields, my favorite line is from the bank this morning saying there was dissonance. but not immunity. let's talk about those stress test results at that u.s. federal reserve. they are scheduled to release the data after the close today. the test for the banks themselves, how do they fare? it is usually followed by statements from the banks saying how much capital they can release from dividends and buybacks. let's get to our finance editor, michael moore. what will be likely to see from the stress tests? michael: think you are likely to see pretty strong results from the banks. they have argued they went through a rule stress last year with the pandemic and they

passed through with flying colors. they managed to stay profitable. built of those capital buffers, this time around perhaps it will be less stressful. the banks have a lot of excess capital because of the measures put in place last year to freeze payouts. it becomes a little bit more about math problem this time around rather than a judgment call. i think you will see some clearance in those major payouts. dani: clearance for major payouts, what are the expectations at this point in terms of the degree of that. we'll jp morgan get to give out over $140 billion to shareholders? michael: the expectations are

the six bricks -- six biggest banks will give out that, jp morgan is the biggest of that. huge numbers between the dividends and stock buybacks. the banks have argued, we stayed profitable during the pandemic, we got a ton of profits built up. we should be able to get that back to our shareholders. dani: we will see if all the banks passed the test. the question if whether their employees come back to the banks without a covid test. michael moore, thank you for joining us. bloomberg's managing editor. now let's get to bloomberg's first word news. >> women are more likely to develop persistence symptoms -- symptoms after a coronavirus. that is out of a study.

about one in three people reported at least one symptom lasting 12 weeks or more with the likelihood of increasing with age. sources say bullish, a cryptocurrency exchange backed by a group of billionaires is in a spac merger talk. the deal could value bullish at nearly $12 million with an agreement possible next two weeks. the final valuation could change depending on the price of bitcoin. john mcafee has been found dead in a spanish prison cell shortly after it was announced he would be extradited to the u.s. to face charges of financial crimes. the creator of antivirus software has been in jail in spain since october. the spanish newspaper reported that he appeared to have taken his own life. global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg.

manus: thank you very much. a little more on the economic forum and a conversation with the blackstone ceo steve schwarzman. he says the risk and that gains tax has led to explosive growth and potential targets for his alternative investment firm. as corporate owners seek cash ahead of the legislative changes. >> we have been through these periods of higher multiples and at least leads to a certain type of caution but it also prevents -- presents a lot more opportunities because prices are higher and more people will sell. what we have learned is that because we are fundamentally in the private markets, the only reason to buy something is to make it much better. we are in the business of accelerating growth of companies

and of real estate that we own. it is unlike stock investing where you buy it and you hope that it works out. we are change agents and we plead for good. if we can put more money to grow businesses, then we can deal with some of the issues of higher prices by accelerating growth which gives us more protection on the downside. with that prospect of the united states potentially increasing capital gains, taxes very significantly. it is like an avalanche now of opportunities of people wanting to sell things before their taxes are much higher for selling the same thing, potentially next year. it is giving us a lot of opportunities and what we have to do is be careful, there's

always a very exciting plan for growth. that results in s hiring more people. this is good for society and hopefully good for our clients who typically are at large institutions. >> how far along is qa -- qia in portfolio? is that done to a level you are satisfied with now? >> not yet. i think we have been deploying and focusing on technology and health care. within the last two years, we have employed technologies more than ever before. i think of the sectors are promising, especially those targeted in certain segments of technologies.

i think they have grown to stay. i do not think there is a risk, perhaps in initial term with inflation in mind, even though i am not really concerned about it. i think it would be a temporary basis. as you know, technologies brought forward without huge components of technology is not a balance portfolio. dani: that was ceo steve schwarzman along with the qatar foreman. the investment agency, all underwriters of the form powered by bill burck. coming up the boston feds say inflation will ease next year. what does the chairman think? we will find out next. this is bloomberg. ♪

dani: this is bloomberg daybreak: europe. the u.s. has set the bar for some solar products made in the china region. marking one of the biden's biggest steps. to counter alleged human rights abuses. joining us now with the details is bloomberg's chief asia correspondent. what exactly is the significance of this move? endo: the things in the region is a source and half of the poly silicon for semi conductors and solar panels alike. this is -- this attentional band is part of the biggest sweeping

moves for china as far as the allegations of human rights abuses and forced labor. it is potentially a significant move and may of course have broader global effects in terms of the supply chain because if you have this ban on the supply chain those companies that need to source these products will need to look elsewhere. there is clearly a political significance to it. then there is the industrial site in terms of how it spills over to the global supply chain. it is a significant event. china has in the past rejected the allegations. the details will be announced in washington later today. manus: good to see you. i saw biden warren putin very clearly over cyber, china was very much in that communication as well from the g7.

what do they say about the wider u.s.-china relations? enda: on the one hand, some critics are saying that the initial push against china against xinjiang is perhaps brought and some lawmakers are pushing for in the u.s.. others will say, look, it is still early days in the administration. we do not really know yet where we will go in the china growth because so far, have only had the basic calls with officials in beijing. we have not seen the bones of the u.s.-china policy yet. there are signs that it is coming and hence the it is hawkish. you mentioned the g7, the u.s. did go there earlier this month to try and push a fairly hawkish line against china. it had some success, there was some pushback from the eu side of things. they were not necessarily buying

the full war attacking line against china. all indications are we are still waiting for the bided administration are where it is going with the china story. there may be opportunities for the two presidents to speak, when you base what is happening on today's actions, it is clearly hawkish. manus: always great to have you on the show. enda curran, our chief asia correspondent on the sign of u.s.-china relations. we have updated you on some of the comments from boston's eric rosengren, he expects inflation to ease next year. bloomberg's head of economics tackled the subject with former president and current chairman of ubs. >> the risk is that the coming

back of the economy, the normalization in prices, combined with bottom affects will lead to good news for a decade or two. that will undermine some investors and consumers. need to monitor it closely so it does not come embedded in price dynamics. if wage demand continues to fall in line with that, there is a risk that this may become more sustained than just transitory and that is the risk everyone is focusing on. >> just to come back briefly on that, there are two issues here. the global economy looking to inherit which there is somewhat more inflation than there has been in the last 10 years, but also specific issue in the u.s. potentially compounding the problem with its stimulus. i am interested, given your involvement with the bank and

other places. we spoke to larry summers earlier this week for this form, he said he thinks the u.s. policy at the moment are the most irresponsible they have been in 40 years. do you agree with that? axel: they are the most expansionary. the u.s. had a massive fiscal stimulus. monetary policy has not been as expenditure a you look at the balance sheet. many are on the same warning site as i am when traditionally warning about inflation. i think most of the economists, always advocated massive stimulus and fiscal monitoring are getting a bit nervous this time around we might have overdone it. i think it first and foremost holds for the u.s.. there's also a broader issue on the mixed signals. this is a once in a decade, century event. it is hard to calibrate this

against our models from the past. i am concerned about inflation overshooting for longer than is currently being price in inflation forecasts for central banks, and tortiously unreliable when it comes to longer-term inflation. we will see in the second half of the year when the economy is running really hot first and foremost, the u.s. economy, and then we will have spill over and spill back affects into the global economy. the once at a very difficult point our emerging markets because that u.s. might tighten before they fully recover. i think the fallout this time around is more focused on emerging markets. it will have an effect on shortcomings. dani: that was bloomberg's head of economics stephanie flanders speaking with axel weber. let's stick with that risk of

themes to the financial systems. we'll talk about that, we will talk about bitcoin. though it had been touted as a possible inflation had, institutional investors are starting to turn away from it after initially starting the adoption. among them is the blackrock german who did speak with us at that forum powered by bloomberg. larry: long-term investors are very focused on the tiktok of the market, the tiktok of the of and downs of crypto. it is fastening to watch crypto because it is inspiring a lot of young investors. i think that is fantastic. i think if that leads to long-term investing, that is a great outcome. our focus on long-term investing, with two thirds of the managers are for hedging funds, the conversation about crypto is a minor percent of any

dialogue we have with any company worldwide. it is not terribly important. could crypto become a really important asset class one day? sure. but right now, the spread, the volatility, has the lead to widespread conversations worldwide. there are conversations i have had with governments and leaders about should there be a digital currency? that will change finance in a very substantial way. if there was a digital dollar, a true digital yuan, that will change -- that will be much more impactful. is something that we look at, something that are investors use as one tool for investing, but it is really about the tiktok of the market. that is with the public media

does. you focus on the moment in the market and ups and downs. blackrock is focused on the long-term, building long-term portfolios for our clients. if we deem crypto or any asset in the world as a great long-term asset, then it will be one of the tools for asset composition. but, the tiktok of the market, the ups and downs of what is going on and any one individual stock or crypto is really unimportant. manus: that was the blackrock chairman and ceo larry fink speaking at the farm. coming up, study removes minister says that past alliance has a rule in controlling inflation. -- saudi arabia is minister says that past alliances have a role in controlling inflation. this is bloomberg. ♪

manus: it is daybreak europe with manus cranny and dani burger. dani, as if on cue, saudi arrive years -- saudi arabia's energy minister really came to the market yesterday and said, it is about taming and containing inflation. we know he likes to anchor his role and his heft in the market as being that of the central bank of oil. bang, and they came. this is about the rise in oil prices. dani: it is. you note this space so much better than me. if they want to have a role in containing inflation, they want to put more supply out there to

make sure prices do not get too out of whack, today have an ability to do that? are they able to really ramp up enough supply to meet the demand? manus: they have a plan. that is why i think next week will be so pivotal when we get into the opec-plus meeting. i will cover it from a beach somewhere. dani: i'm jealous. [laughter] manus: they are more interested in preserving cash than following the groundbreaking. i will leave you now. i think you are driving and steering. enjoy it. do not break anything. dani: thanks, mattis. -- manus. ♪

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anna: good morning. welcome to "bloomberg markets: european open" i am