manus: good morning from our middle east headquarters in dubai, i am manus cranny with dani burger in london. it is "daybreak: europe." asian stocks sink after the s&p 500 stages its biggest turnaround since 2008. hiking insight -- aussie yields surge. plus, eastern europe on edge -- the europe puts thousands of

troops on alert because of the russia/ukraine crisis. welcome to the sign, a warning shot, it is credit suisse, a material slowdown in the business of wealth management and a provision of 500 million swiss francs. in terms of litigation, they will offset part of that through some of their estate sales. a warning shot on a material slowdown in wealth management. good morning. dani: good morning. this comes off the back of significant changes credit suisse has had to make. we are seeing the impact of that filter through earnings, they say combined with the reduction in their overall risk appetite, to exit that part of the business, they are seeing a loss for the investment bank division. this has been a powerhouse for

wall street earnings but not so at credit suisse. manus: the investment inc. expected to post a fourth-quarter loss. a significant slowdown in transaction activity in international wealth management, specifically in the asia-pacific divisions. the latter reflects client re-leveraging, and as a consequence, net assets for wealth management will be modestly negative. those are the breaking headlines on credit suisse. we've got a little more to get through on erickson. dani: we certainly do. credit suisse results come out. erickson out with results as well. one of the key headlines, they are seeing their target one year early. we are talking about companies able to sustain some of the price pressures and maintain margins.

also erickson, fourth-quarter, a large beat, adjusted operating profit at 12.3 swedish krona, the estimate had been 10 billion. manus: that beats almost almost 2.3 billion krona. the sales materially better, 71.3. that is a blistering beat for erickson on the gear making side. but it is all about the verlander -- virulance of markets on the equity side last night. the fastest turnaround we have seen since 2008 in the market. the question is this -- we debated this morning whether we would talk about credit or

equities. this is the essence of what the fed wants to do but are they prepared to accept the level of tightening, a minute as it is at the moment. has there been enough justification in the equity markets in and of itself to dissuade the fed? the answer is no, it hasn't. this is a tiny jolt on the ethicon. dani: the fed, what they've been saying, is it jawboning? are they able to tighten financial conditions? when you look at a day like yesterday and you have this whipsaw market, the question that arose from many people is where is the fed put into do we even have a fed put at this moment? manus: it may not be the equity dislocation, it could be the credit dislocation that trips the consciousness of the fed to

slow the rhetoric. when you look at what's happening in the rates market, this is from evercore. i know this is something you wanted to look at. dani: this is just the idea of at what point does the fed act? julian emanuel at evercore did a study of the past big market events will re--- where we saw the fed step in. the s&p 500 would have to reach 3670 before they step in, so we would have to see more significant losses before they would step and. -- in. manus: i think only of credits scares get seriously dislocated. we have asian markets under pressure. are they hedging or getting ahead of another belting by the u.s. markets? dani: in today's session, let's whip these markets, seeing some

weakness, especially playing through on the nasdaq. we saw that momentous turnaround yesterday. yesterday we also saw the strongest two-year auction since fed 2020, demand is strong. but we are seeing selling come through today. some haven buying. bitcoin continues to get hammered, it rose about 4% yesterday and took about half of that out. you mentioned asian markets and we have that specter of inflation taking hold in australia, hotter than expected cpi prints fulling -- fueling fed speculation. julia, it is a momentous day and markets. juliette: we've been looking at that hot inflation rate from australia, the core rate at 2.6%. within the rba's target for the

first time since june 2014. specifically on the three year, which rose as much as nine basis points to the highest level since april 2019, as we see rate hikes pricing in, all seeing a lift off from august money markets, lift off as early as may. the next meeting in february, we are expecting qe will be wound back. let's look at equity pain, because it has been a day of selling with asia stocks at a 14 month low. we have the asx 200 at the lowest since may. we have seen japan's topix in correction, down 10% from its highs. also looking at the kospi getting toward their market territory, up 17% from july highs could but it surprised me in times -- terms of singapore, authorities tightening policy. it is really using the currency.

this was an out of cycle tightening. manus: the question is, do you get out the wheelbarrow into look for quality names in this drawdown? thank you, juliette saly in singapore. our guest is from bank of america merrill lynch. good to have you with us. we talked about the equity market under severe volatility and verlander repricing. when i look at rates, rates traders sticking to the guns. the rates market has yet to consider any response to the shakedown. how do you read the response? good morning. >> good morning. if anything varies, it's that the fed might more than what the rates market is pricing today. although equities don't like it.

inflation is that 40 year high. the truth is the fed is still easy, still doing qe and as long as they are tapering. it will take a while for the fed to be able to create monetary policy. we are in a situation where the most likely scenario is the fed thinks more inflation will be persistent, and i think the markets are looking at a reality where the fed is not there to support equities. dani: we are going to dig into a lot of these and much more detail, but before the break, i want to get your thoughts. if it is going to take more for the fed to get markets to be more tight, what is the number

one risk at this stage that can upset fx markets? thanos: there are so many, i don't know where to start. the most likely risk i see is a scenario where the fed would be unable to bring inflation down. there is very loose monetary policy but also fiscal policy, and supply shorts, high energy prices. there are many forces beyond the fed's control. so the truth is the fed would have to do a lot to affect inflation. after base effects fade, inflation begins stabilizing in the medium to long-term at about 3%. this is a figure that will be very volatile for the markets and the fed needs inflation

credibility. dani: there are a lot of risks. thankfully you are sticking around so we can get into it. let's get over to the first word news and juliette saly joins us in singapore. juliette: u.k. prime minister boris johnson facing further allegations of holding parties during the pandemic. i tv reports up to 30 guest attended a downing street celebration during the first lockdown when most gatherings were banned. he says the staff gathered while the prime minister was present for less than 10 minutes. a move comes after an activist investor bought a stake in the giant. rio tinto has struck a deal with mongolia to start work on a

long-delayed copper mine in the south of the country. it sees the cancellation of almost $2.5 billion of debt owed by the mongolian government for its share of construction costs. construction of the mine is expected to start next year. 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: thank you very much. juliette saly in singapore. coming up, the u.s. puts troops on standby for deployment as u.s. tensions grow in ukraine. dani: plus, later, more pain at the pump. this is bloomberg. ♪

>> from a russian perspective, invading ukraine will be a painful, violent and letty business. >> this isn't the time to increase military activity and tension. >> not to protect but to get ready. >> we must deter him from aggression. >> we are in a situation where we are using every measure to de-escalate. >> should diplomacy fail, we are very well advanced in the preparation for responses to potential russian aggression. >> we are convinced the real war is a likely possibility. >> ukraine is growing as an independent nation. manus: european leaders on the growing tensions over russia building up troops on ukraine's

border. the u.s. putting as many as 8500 troops on heightened alert for deployment to bolster nato in the east part of europe if needed. let's get to our senior reporter. biden has spoken to european leaders and says the u.s. and europe are completely united on russia. how united are they? is that as far as sanctions and troops? what does that include? mark: in essence, they had a conversation, biden said it was a great conversation but the essence is they did not discuss the details of the sanctions. it was ahead of a period where they looked disunited. a lot of different voices. essentially what they decided to do was shut the noise down, tell the world, tell the russians in broad terms we will do strong

stuff, but not to detail what it is and to leave that until a later moment. dani: mark, there does seem to be this contradiction. on the one hand, russia continues to build up in forces, and on the other hand, you have ukrainians calling for calm, criticizing the u.s. for evacuating families out of the embassy. how should we think about these two? marc: it's interesting. when you are here, i am in kiev at the moment, next to the front, and it is interesting, as you drive back across, the further you go from the front, the less calm things are. that takes you to the u.k. and u.s.. essentially what you have is the u.s. and u.k. taking believed -- taking the lead together with the baltic states, saying we have to prepare for the worst.

that there is a high possibility there will be war, the largest since world war ii. on the other hand, the ukrainians are trying to keep their population basically calm, they have limited things they can do. they've got their troops in place where they can put them, they are trying to get whatever weaponry they can in addition. there are limits to what they can do. meantime, there is a risk that the economy starts to flee and -- shut down and investors flee. there's always the possibility that putin's intention is not to invade, to weaken the economic and political situation in ukraine so he can get what he wants. dani: thank you so much for the update. mark champion there. as tensions have risen, it has been the ruble, rates in russia and ukraine that have taken the brunt of the beating. a great chart here from our charts editor shows one month of

reversals, now surpassing the peak we saw during the pandemic. investors are concerned, the ruble is worst-performing em currency. let's bring in our guest. at what point does this go from a problem for russia markets, or local ukrainian markets, to something broader to see a spillover effect? thanos: with geopolitical risks, nothing happens until it happens. markets cannot price it in a way because investors are not willing to position for such risk. something can go wrong today or a few years from now. only when things escalate is when markets react. we are seeing that with the suggestion of russia and ukraine. things are getting worse but we

have not seen a broader market reaction. if something bad happened it would be very negative for markets. it would be particularly negative for europe, very negative for euro-dollar. it is something you have to wait until it happens to react to it rather than position in advance. manus: when you talk about nothing happens until it happens, you talk about it could be bad for the euro-dollar. we look at gas prices rocketing by 10%, goldman saying this could go on until 2025. i think euro-dollar is driven more by rate and we will talk about that in a moment, but looking at euro swiss, is that a better gauge, being long swiss on a six-year high, into equity market angst, political angst -- is that behavior of choice on this risk? thanos: part of why the swiss

franc is strong is because of the geopolitical risks. if something happens, it can appreciate. if somehow there is a solution, the swiss franc will weekend. -- will weaken. it might not necessarily be the best way. i think euro-dollar is the way to position. we believe it will weaken even if we get the posted scenario with russia. manus: we will pick up on some of the risks and what to do with the euro-dollar call, the inflation divergence and the basis for the bank of america call. our guest stays with us. coming up, rushing into havens

as tensions rise. it has ramifications across the fx market. the dollar has finally woken up as protection currency. this is bloomberg. ♪

manus: it is "daybreak: europe." our guest is with us from bank of america merrill lynch. i said to you, we will get to the dollar call. i think you've explained it beautifully, what does it take to wake of the dollar -- we finally had a jolt. equity markets convulse and the dollar -- oh! you have a slightly different narrative, it is the divergence in inflation.

transitory european inflation versus more enduring stuck flation in the u.s. will jolt the fed. thanos: we see u.s. inflation being persistent. we see it stabilizing at 3% by the end of the year. we forecast it will be below the target. according to what is guiding us, they will only hike one inflation from the target. if our inflation forecasts are right, -- normalization. the market is pricing in hiking starting this year.

the inflation dynamics has to do with overheating, the european economy hit with negative supply shocks. dani: i'm going to get my transitory curve star, you two are going to have two pay me for the flagrant use of the t-word, which has been banned. what levels are you looking out for? thanos: the forecast is not very aggressive, we have euro-dollar at 110 by the end of the year. the consensus is 150. moreover, the risks for forecasts are to the downside if the fed hikes more, which i think is likely, or if the fed forces the stock market correction, which even with what is happening today with equities, is also a likely scenario. we will be wrong and euro will

be stronger if -- is persistent or the ecb starts to engage. manus: very briefly before we let you go. sterling -- the bank of england in many ways is quite contrary in -- contrarian before christmas. how much more will we get from the bank of england? thanos: the market was pricing too much by the bank of england. the market is pricing slightly more than four. in the u.k., we have had inflation. it is not an overheating economy, it is also hit by negative supply shorts and balances.

also brexit, a lot of uncertainty. dani: unfortunately, that's all we have time for. thank you so much for joining us, we appreciate it. every day in business brings something new. so get the flexibility of the new mobile service designed for your small business. introducing comcast business mobile. you get the most reliable network with nationwide 5g included. and you can get unlimited data for just $30 per line per month when you get four lines or mix and match data options. available now for comcast business internet customers with no line-activation fees or term contract required. see if you can save by switching today. comcast business. powering possibilities. every day in business brings something new. so get the flexibility of the new mobile service designed for your small business. introducing comcast business mobile. you get the most reliable network with nationwide 5g included. and you can get unlimited data for just $30 per line per month

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dani: good morning from bloomberg's european headquarters, it has just gone 6:30 a.m. in london, i am dani burger alongside manus cranny who is in dubai. markets whipsaw. asian stocks sink after the s&p 500 stages its biggest turnaround since 2008. credit suisse warning, they say fourth-quarter profits will be

hurt by about 500 million francs of litigation provision. eastern europe on edge. the u.s. puts thousands of troops on alert amid diplomatic efforts in the russia/ukraine crisis. credit suisse warning for the fourth quarter saying they will break even. concerns at wealth management as well as litigation costs. manus: they have reassured on the capital at the bank but what they are saying is that will exceed 14% by the end of the year. it is a provision of 500 million swiss francs they announced this morning. when you dig into the report, i think the belly of the announcement is much more important perhaps than the provision. they talk about a significant slowdown in transaction activity , international wealth management. specifically in the asia-pacific regions. dani: and of course, this is

preannouncement. their earnings will come out and a lot of questions will be asked. we have a new chairman stepping in, so far committed to continue the strategy from his predecessor, who last one week ago. -- left one week ago. what is the outlook given that they pulled back on their risk exposure and are trying to stage a turnaround for the business? manus: absolutely, think of it. the debacle over the exit of the ceo. talking about the disappointment on the departure. there's a lot to chew on in the credits we story. how vulnerable is credit suisse now to a major takeover? this is a question we need to begin to ask. would an american institution

begin to look at credit suisse? i think the stock is down 30% in the last year but we have to double check on the percentage change in the year. that's where we leave that and we will talk to patrick winters i hope in a moment on that. to the oil market, let's turn our attention -- geo politics and will never far from each other. our guest joins me now. caught up yesterday, i was cooking and walking around and ask you about whether the rebel attacks on the uae mattered this time because people say to me here, why are you so worried? it has happened many times over many years, why would it matter to the oil market now? tell me why. >> think this time the difference is it is on uae

targets rather than saudi arabia and there is a bit of a difference, but the bigger differences how tight the oil market is good like you said, this has happened many times in the past. the reason it didn't matter is back then, we had a lot of spare cassidy and buffers. right now, the buffers are really thin. demand is far stronger than expected, inventories near record levels. q1 we were supposed to build and we are fairly building into a summer period where we always draw. that is the problem right now with any geopolitical headlines, whether it affects oil production or not. uae and eu are the only ones with spare capacity. if that could come under pressure, of course targets will react. dani: i want to get your sense of what the sweat level is. if the people you talk to, and your contacts run deep in the

energy and oil market -- how fearful are folks out there? amrita: i wouldn't say they are hugely fearful of an actual attack taking out oil production. even with uptake, we saw how quickly saudi arabia bounced back, so the market remains quite sanguine about the abilities to supply the market. but in general the market is concerned about whether we find inventory or who else hasn't spare capacity should there be an outage. not necessarily the gcc, but libya or nigeria. that list is endless. i think that is where the worry is quite deep across hedge funds. traders in general. they are looking back to 2011 when libya happened or even 2008. the parallels are being drawn, saying ok, we have similar, if

anything tighter backdrops. it doesn't leave much room for any margin of error. manus: typically we talk about buffers within the opec family. the buffers, where are they at the moment? the five-year average, i believe the opec report the other day talked about the five-year average. who has the buffer capacity to step in if there is an outage, if there is a material risk in the uae, as we saw saudi arabia? has saudi got the capacity to step in immediately? amrita: we do think they have that. remember opec-plus are bringing back, at least on paper, 400,000 barrels through september. the reality is closer to half of that because of under production and under performance across

several countries. outside of the middle east. there is still spare capacity in some of these countries, but over and above that, we think saudi arabia goes to 11 million barrels per day by the end of the year. we think they can get there. uae can do that as well. the problem is, in these countries, is not just below the five-year average. we are talking about below five-year minimums. we are talking about tank bottoms. look at what is going on in cushing. there is no stock level to drawn. it doesn't leave the market with any buffer and i think that is the problem we have. like i said, we've already got them going there. if libya were to go off-line, we don't have anything else, for instance. dani: i love how you phrase it in your research, the market is asking are there any shock absorbers left.

in europe, you have goldman gaming out the situation with the tensions with russia, it could spark sanctions on nord stream 2 and curtails flows into europe, meaning record gas prices. is this a scenario you see unfolding as well on that record gas price and area? amrita: for us, we have been bullish on european gas prices for some time. our latest no said the latest correction downward has been a little too much because we think fundamentals remain strong. gas inventories -- there is still a risk late winter we could get to record low levels. for us, the russia/ukraine situation, of course heightened tensions but we don't necessarily see sanctions coming because of the impact it will have on european energy markets. the underlying problem for european gas markets remain in that russian supplies are not really coming. nord stream 2 or otherwise. we see a very strong market this

year. manus: when we were at opec, we used to be in the same city at the same time. colima says the risk of russia invading ukraine is over 50%. what is your percentage? amrita: we think it is less than that. you can never say never, right? in general, there is a lot of egg and forth going on. there is still diplomatic talks going on. that hasn't lead to lowering of tensions, but we do think this is a political move on the part of putin to send some messages rather than being prepared to invade straightaway. we don't think the probability is that high. having said that, the chances of miscalculation, that is the tricky bit, always the case with

situations like this. i think that could have significant ramifications. but that is not our base case. dani: can i get to what your base case is in terms of prices? where do you expect natural gas to go to this year? amrita: we've got natural gas averaging, european gas, looking at 80 euros per megawatt hour. yes, it is off the peak, we had a spike last year of 160 for a few days. but it would be an annual average record. we are looking at record gas prices in europe and again, similarly for oil, not record prices because we have had higher prices, but about $90 oil prices this year. dani: all right, thank you very much -- go ahead. manus: you finish. dani: i just wanted to thank

you, what a timely conversation. amarita sen. coming up, we will dig into the credit suisse story more. the embattled letter says fourth-quarter profits will be hurt. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." earnings season is getting underway and european firms are looking at solid fourth-quarter results, but they face major headwinds globally. cost inflation and supply chain disruption. the earnings forecast will be crucial if these company's share prices are to stay ahead of rising bond yields, this is the conclusion of our latest

analysis. lucky with us we have the bloomberg intelligence senior equity strategist who put the report together. give us the overall sense of what numbers we should expect with the fourth quarter. tim: the overall set up, which has been interesting until a couple of days ago, up 26% in earnings, 16% in sales. that is a lot. and it is good in that the market was trading at record levels but it sets a really high bar within the market at those elevated points. the thing i guess we have torn into is you've got to look underneath the covers, so to speak, under the hood -- bonnet. dani: there you go. tim: exactly. if you take out energy, materials and financials, you

are left with only five center earnings growth. that represents some of the comments you made out front and from the standpoint of the cost concerns, the component concerns that can impact topline growth, etc. what is important at this juncture is can companies get through? erickson was an interesting point this morning. we will get atlas copco in a little bit. the issues of components and costs will be quite critical. manus: tim, good to have you with us. you talks before when you were with us about supply constraints and we just had that conversation, about less persistent inflation in europe. do you agree, and if so, is it transitory element that will hit margins and profit?

tim: there are a couple of thoughts here. number one, margins really matter. particularly so because they are at essentially record levels for most markets in many sectors. and again, that creates a really high bar to be sustained. if you look over the past three months and take the companies that were generating the highest margin improvement, that a group was up 4%. if you look at the groups that saw a margin traction in estimates going into this reporting period, they were down 6%. so it really matters. costs are up, metals, oil, natural gas, electricity, ag. you also have to be concerned about the staples. but i would agree with the supposition you just said, we think a lot of this will prove to be somewhat transitory. easing as we get into the second half componentry will be quite critical.

manus: thank you very much. our senior equity strategist checking in on the report card so far in europe. let's turn our attention to credit suisse, about the breakeven on the text level in the fourth quarter and the charges, half a billion swiss francs in litigation provisions. let's get to our editor in singapore. patrick, a provisional litigation, but if you dig into the report it's about a major slowdown in transactions and wealth management, specifically in asia. good morning. patrick: good morning. obviously they have a litigation issue that line sanded -- blindsided the bank again. more worrying is the reduction in transactions and revenues in wealth management. clients are trading less,

perhaps affected by the market slump recently and perhaps borrowing less. this seems to be a worrying trend for credit suisse. the chairman was also recently ousted in the scandal about skipping quarantine. not good news at all. dani: to that point, the new chairman sticking -- stepping in says he is opposed to selling credit squeeze, but when we look at results like this, and i have to say i stole this from manus, does this put credit suisse in a position of potentially facing a takeover? patrick: obviously the more cautious, you get blindsided by these charges, questions will remain. people at the same time are thinking why would you buy a bank that is a making money? it is vulnerable for sure but it is difficult to say whether anyone would jump in and make a bid at this point in time. manus: ok, well we've got to

wait and see on that, whether the americans are coming. some may salivate at the prospect of taking that bank, reengineering, and having a major, dominant foothold in global wealth on the doorstep in europe. patrick, thank you. that is just my theory, that is nobody at bloomberg. patrick winters, you are very welcome. he covered the swiss banks for a long time. we've had many interviews. dani burger, what is going on? asian markets are under severe pressure. china is down over 2%. indonesia. the equity market in asia playing the catch up game into a major reversal, one of the biggest drops and reversal in the history of equity markets. asia, are they done the catch-up hedge? that is my question. dani: look, it is worrying, even

though we saw u.s. stocks reverse yesterday, bloomberg news did some fantastic reporting on statistics. that is not necessarily unusual to see a 4% of and reversal, but when it usually happens is the concerning part. we typically sell this type of behavior during the dot-com bubble burst and 2008. should we be concerned or is yesterday's reversal a good thing? is it a dead cap bounce? it feels like angst is permeating through markets bit -- through markets. manus: what our guest said earlier is you have an equity market which is suddenly realizing the fed is not there in full square at 10% drawdown at all times to save the equity market. the fed is there to get inflation under control.

but how much power does the fed have? 11% drawdown? i don't know the answer, and i challenge anybody to answer. i say it is a bond dislocation, not equities. dani: a bloomberg columnist put it well, the fed does not care about shopify falling, they care about credit suisse and the vix. we will talk about bitcoin coming up, it fell again. we will have more on the crypto universe next. this is bloomberg. ♪

manus: it is "daybreak: europe." bitcoin sliding again this morning after a -- after

stopping a five-day slump yesterday. hovering around $36,000. where is the new floor? joanna ossinger is our czar of crypto. joanna: people are talking about 30,000 and it is not there yet, but it has been relentlessly going down and people are starting to talk about the 30,000 level. a lot of that the retail investors in particular that have gotten in in the past few months are seeing they are down 40%, 50%, and starting to get tired. you can have the moves going higher as well, you have volatility either way. but there is talk about the 30 k level. dani: woo,, that is quite a

difference from a 67,000 top on bitcoin. getting into more about what this does for the psyche of crypto investors, especially ones that are facing 50% drawdown's? joanna: people are starting to go on social media, talking about the downside as opposed to saying diamond hans, there was a big thing when you were in the $60,000, you had a drawdown but it wasn't so bad. there is a more pessimistic attitude permeating a little bit. there are still the people holding on, saying $100,000 for the year and that sort of thing my talking about the long term, and there is a case for it, but there is definitely pessimism, especially for people who haven't been holding as long. manus: bitcoin is the poster child we refer to, but in terms

of the ripple effects, where does it permeate? where does the crash permeate into the exchanges and other cryptos? joanna: everywhere. you have ether and avalanche down from their highs. a lot of these tokens are down 50%, 60%. doge coin down 80% from its record but it is hanging in there in the top 11. but basically everything in the crypto complex has gone down. there is the real correlation with risk assets over all right now that isn't helping things. dani: joanna, thank you. thanks as always for joining us. manus, we are looking at a bitcoin drawdown, but will stocks follow suit or bounceback? manus: we had one of the biggest

turnarounds yesterday since 2008. in asia, down one and a quarter. ♪

anna: good morning a welcome to "bloomberg markets: europe." i'm anna edwards in london, mark cudmore joins us from singapore. the cash trade is less than one hour away. roller coaster ride, asian stocks sink after the s&p 500 stages its biggest turnaround since 2008. the fed star say two