>> this is "bloomberg daybreak: europe." i'm dani burger with manus cranny in dubai. these are the stories infecting your agenda. manus: inflation shocks u.s. cpi. winding on stimulus being substantial upside risk the prices. president biden demands the end of russia's preferred trade

status. jp morgan joins goldman sachs as wall street pulls back from russia. china tech shares tank on delisting fears. risk off takes hold. good morning. in the words of the treasury secretary, inflation is uncomfortably high. no recession according to janet yellen. a 40 year high in the u.s.. more to come. 9%, 10% the market is saying. >> hawks have won out with inflation. ecb catching markets offside. i don't envy anyone who has been trading bonds. manus: absolutely not. to the bond market, repricing came through on the print. cpi out of the way. to the u.s. treasury market. up to two and a quarter percent

quite soon. changing the narrative on the bond market. the question is whether you explode higher on the risk. 6.4 rate hikes. jp morgan are brave, they are shorting inflation on the five-year. they might be calling the peak. dani: sometimes you have to be brave. markets who may have been brave pricing in the ecb, the fed pulling back because of the start of the war, they were caught off sides. we are seven basis points near the peak of when the ecb had the hawkish pivot. say they are on the same path as december and february, despite the material change. this is yet again another repricing. manus: absolutely. quick snapshot of risks. lack of development in diplomacy.

the heat out of the relief on whether the rally in european equity markets in two years. brent down 8%. gold has come back from the $2000 mark level. gold at 1983. oil down. abating a moment because of no progression at the moment of europe's closing its doors to russian oil. the full of gases -- the flow of gas is there. the renewed visibility probability of rate hikes in the u.s. dani: i don't know what you did, but something you said clearly calmed markets. futures flipping into the green. very slight, but turning positive. .03%. futures unchanged. the markets are mostly unchanged in general. not even .10% for euro stoxx.

more weakness from nasdaq futures. those are down. .2%. following the hot inflation numbers. do you want to be long-duration if the trade is back on? we are still monitoring the latest in terms of ukraine and market reaction. let's get to our reporters around the world for the latest. dan moss is covering u.s. inflation in the ecb policy meeting. tom mackenzie is on the ground in poland for the latest on the war in ukraine. juliette saly is covering the tech selloff in china. manus: let's pick up on the 40 year print. rising gas prices, food, and housing costs. war of ukraine set to push inflation higher. europe is focused on the ecb's to exit stimulus. slowing the bond buying program of this year. how big of a shift was it? let's talk about inflation.

a bumper number in the u.s.. the ecb laserlike concerned at 5.8%. the inflation and is fairly rapid. >> not quite an unadulterated rampage by the hawks. the ecb statement had something in it for everyone, even if they wanted balance kerry. they will bring forward the wind down. some concern the ecb would be a perennial lagger. however, they insisted rate hikes would be gradual. they also said it would be some time before rate hikes wind down. that is language that wasn't in there, either. the ecb, not quite game over. they can regroup and come back. it is still a long way away. a lot in the last two weeks. dani: we really have.

they have felt like a year. let's stick with the u.s. story. biden may call time on russia's preferred trade status, which lets him have some higher tariffs for russian goods. how much of it is pure optics, given the sanctions against russia have been applied to a great extent? >> this is a lot in the realm of domestic u.s. politics. there were voices from both sides of the aisle in congress talking about capitol hill actually taking the initiative to itself. that is risky. when a bill originates on a hill and is drawn up, you never know what will be in it. if biden is styling himself as a wartime leader, he wants a congress with him, as a partner, but a junior partner, best to stay a step ahead of them. you don't know what else they will add. dani: thank you very much, dan

moss. the corporate exodus from russia is continuing. jp morgan and goldman sachs pulling back from the country. citigroup assessing operations. the finance industry move further isolates moscow from the international economy. manus: that comes as talks continue failing to make progress. moscow said it is open to talks, but keep said russia is continuing with invasion until his goals are met. tom mackenzie is on the ground. the very latest on the situation? tom: one of the first things people say when you speak to refugees who continue crossing the border is when do we think they can head back home. they left jobs, houses, many loved ones. reasons why within 50 kilometers

of this border, every hotel is taken up. refugees are hoping they can be able to return to ukraine in relatively short order. that looks very unlikely, given the meeting we had between the foreign ministers of ukraine and russia in turkey yesterday. the minister saying he wants to continue the demilitarization of ukraine and wants ukraine to recall sovereignty claims over crimea. the ukrainian minister saying it was 10 among calling them to surrender, which the ukrainians are in no mood to do. they will continue talks, but the goal is enormous between the two sides. the implications for people on the ground as they continue crossing from ukraine into poland looking for safety is enormous. looking at humanitarian corridors, president zelensky saying civilians have been able to leave from the cities on the back of those agreements. that takes a total number to

about 100,000. the crisis on the ground is particularly around cities in circles that continue to be bombarded. dani: thank you very much. that is tom mackenzie from the border near ukraine. away from that. another big market story is the selloff in tech in china. the hang seng tech index for the worst drop ever following the slump in the u.s.. sparked by the sec, identifying five firms that could be delisted. let's get the details with juliette saly. >> the delisting says nothing really new. but look at how much it has affected market sentiment. we've got such nervous is following the beijing regulatory crackdown. and of course, the unease given the global markets in general. the hang seng tech index with the biggest one-day drop on

record. the lowest since july 2020. down 61% from the peak in february. adding to the nervousness, they plan on holding onto the ipo in hong kong. let's look at the specific movers. they missed on a couple of key aspects. that has been down by as much as 17% during the session that was a record drop. by about 12.8%. the big heavyweight, tencent weighing. following the hang seng having its worst week since march 2020. we've got the fed next week. policy divergence between the boj and fed. the yen at a five-year low. the greenback and all of it weighing through into a pretty terrible week for regional equities. mse asia-pacific on track for the worst week since january, extending the bear market territory. manus: thank you very much,

yulia saly. -- juliette saly. the highest cpi print in 40 years. europe records record inflation. the central bank's plan is to call time on stimulus. we discuss the implications with our guest. dani: we speak with the cio and founder of human edge investment. he's reducing science exposure to equities in some portfolio to 100%. we hear on that call. this is bloomberg. ♪

>> the numbers were in line with expectations. >> inflation not likely to rollover. >> it is continuing to accelerate. >> higher price, higher costs.

difficult for central banks. >> we have to fall out from the implication of ukraine. >> how long the conflict plays out and how disrupted the sanctions regime is. >> it makes a very difficult situation. >> we will hear a normalizing, not tightening message. >> sitting on the sidelines is not an option. they have to move. >> more hawkish rhetoric. >> expect probably fewer interest-rate hikes than people were projecting just for a couple of weeks ago. >> this is a tricky place for the fed. manus: guests weighing in on the u.s. inflation. and the implications for fed policy. the ecb pricing the market with a decision to exit stimulus faster than expected. threatening push prices even higher. christine lagarde said it

presents substantial upside risk. >> the war in ukraine is a substantial upside risk. especially to energy prices. if price pressures feed through into higher than anticipated wage prices, or if there are adverse assistant supply-side implications, inflation can turn out to be higher over the medium term. >> joining us now is holger schmieding. the market seemingly surprised by the ecb still on course to tighten policy. were you surprised by their decision? >> i was surprised in the sense they announced the end of the asset purchases for the third quarter and late terms. we had expected before hand the ecb would end these purchases in

the third quarter. we expected them to announce an acceleration of tapering process. the ecb was clearer than expected on its timeline for these purchases. having said that, the major message has been it is highly data dependent. that is the first rate hike that may potentially come at the end of this year. everything is open on rates. manus: a cracking line this morning, the hawks on the ecb. and the doves fly again. what would it take? bank of america said september is live for a hike. what can shift the timeline demonstrably into 2023? >> it simply is the news on the economy we will get over the

summer. indeed, december is the first rate hike. but this is very traditional on the eurozone economy. recovering from the current setback over the summer. if tensions died down somewhat, say a couple of months from now, we have more clarity about the situation regarding russia's invasion of ukraine. if energy prices have peaked and start falling over the summer, allowing consumers to spend more on non-energy items, the eurozone economy can pick up momentum again over the summer. in that case, only in that case, with the ecb go ahead with the first rate hike in december. the ecb is no longer ruling out such a rate hike. but the ecb has expectations not preannounced any such item. dani: to that point, of growth

expectation, being data dependent, the ecb revised down the growth forecast. still expected gdp to expand. still sees inflation settling around 2% in 2024. i'm going to put up a tweet from rupert harrison at blackrock who said the ecb policy era continues. growth forecasts are unrealistic and engineered to justify a decision to accelerate the end of qe. what do you make of that? >> i think it is vastly overdone. the ecp forecast is on the policy side. we should not forget underlying momentum to the euro zone economy is strong. like the u.s. economy, in recent months and quarters, has almost consistently surprised to the upside. a lot of pent-up demand. they want to spend money.

if and when, and that is a big if, if and when the situation regarding russia's invasion of ukraine, the eurozone economy would pick up significantly. 3.3% for the euro zone with uncertainty. the ecb is on that side, but i would not call it totally unrealistic. we have to see how the war develops. manus: one market movement caught all of our eyes. wasn't the implosion of italian equities, it was the explosion in italian bond yields. is this an example of what will happen in southern european per refuel spreads -- paris friel spread in the pandemic that we

have seen? will the spreads rise further? >> it is likely with a general up move in yields across the world in the u.s., europe, spreads will widen somewhat. it is just normal. italian yields are extremely low by historic standards. relative to economic growth that it is likely to happen after the current related interruption. they are still somewhat favorable. further increased in yields. we should not pose a risk to italy or other paris friel european countries. if there were to be a crisis, which we do not have peru you yields, they would stand ready to go against it.

we are not at levels i would call wise at the moment. dani: what level was worrisome to you? >> 100 basis points in yields for italy would be significant worry. that is what markets take on the dynamic of their own. we have seen a lot of volatility. in the underlying widening, you would call it orderly. the overall extent happening in a rather volatile fashion. manus: the voice of stoic reason. the chief economist. always great to have you. and we are going to carry this conversation. look at his ideas. why did he reduce the exposure?

if he was, we will hear from him in a moment. 100% to 25% equity exposure. on bloomberg. ♪

dani: welcome back. i'm dani burger in london alongside manus cranny. we're getting more positive mood music from equity futures. started off in the future session negative. we are drifting higher in europe after the ecb decision yesterday in which the prize markets. still far away from the rally in the middle of the week. the best rally for equities since 2020. similar in the dax, as well. little changed underperformance on nasdaq futures. concern about chinese adr. and what higher inflation means. manus: absolutely.

the growth to value trade will be challenged. one asset that is not trading is nickel. a surge in price due to a short squeeze. the tycoon whose enormous short bet triggered the price hike. he said he doesn't plan to reduce his positions. our mining reporter in hong kong. the immediate question is what development does this tycoon have the money to meet the margin requirements to maintain a short? good morning. >> it has been the center of the chaos. it's already worth billions of dollars. the updates it is telling the bank and brokers to reduce position is definitely good to show the confidence from the

owner. recently became the onus that we still believe it was full and they would like to keep its sharp position. it is clear how it would be. but so far, the position in the region of 150,000 tons. metal exchange has hoarded nickel trading since tuesday morning. right now, the idea to keep shorting indicates there could be more volatility ahead. dani: i can't help but think once markets do open, we will have a huge dislocation. we will have the issues causing the short squeeze in the first place and a lot on this market. what happened next for the nickel market? >> further nickel contrast, they are down for a second day.

so it can be an extreme short squeeze stepping to ease. right now, all eyes are when the exchange rate. we see it, including funds suspending trading on tuesday morning and canceling transactions from earlier that day. by avoiding the transactions to actively go to the bearish position holders at the expense of the bullish counterparts on the other cited of the trade. the market is waiting to see what will happen when the metals exchange reopens. but it is not going to reopen today. dani: thank you very much. bloomberg metals reporter. commodities behaving much more calmly. manus: absolutely. a repricing going on. oil down about 8% on the week. we see some of the heat coming out of that. gold below $2000.

everybody seems to be watching treasuries. dani: a lot of rethinking about positioning. coming up, we talk about one of our coming guests who has changed their equity positioning. all about defense now.

manus: it is your friday edition of "daybreak: europe." i'm am manus cranny with dani burger. dani: inflation shock. u.s. cpi hit a 40 year high. plans to wind down stimulus sees epicentral upside risk -- substantial upside risk. stocks slide and treasuries rebound as risk off takes hold.

president biden will demand the end of russia's preferred trade status. jp morgan joins goldman sachs as wall street pulled back from the region. it was an ecb decision catching markets off guard. u.s. cpi coming red hot. really well encapsulated at the moment. they are just seven basis points away from hitting the high they hit after the ecb had their okta's -- hawkish. . manus: the conversation with -- dani: it is friday. manus: what he said, stop over reading the explosion higher in this spread. a normal move in the sense global bond markets repriced this week and yields exploded higher across the curve. dani: they did. i like what he said. tempering the harshest language

out there. it is important in this environment. the ecb saying -- he said the ecb got their growth forecast wrong. he said it is optimistic, not totally wrong. manus: 5% inflation this year. jp morgan on the five-year forwards in the u.s.. you have oil has come down about 8%. gold trending, kissing the 2000 level. you are just off of the 2000 level. etf's are piling in on physical gold. the most since 2020. the dollar did a lot of the strain lifting. the big currency move is dollar-yen at a five-year low. the probability of hikes in america. 6.4. big shout out to the producer of the show. he got the function up and inspired me. dani: i love a little go on the

terminal. in this environment, perhaps we can start talking about this shift into value away from growth. very complicated by the economic outlook. you get a tiny flavor of that in the u.s.. nasdaq outperforming slightly. i want to emphasize the ever so slightly part. .07%. outperformance from europe. gains of about .3%. the biggest outflows from europe on record. perhaps positioning oversold gets the opportunity to step in. let's get back to the story on russia. president biden set to call for the end of normal trade relations with moscow. hearing the way for increased tariffs on russian imports. the imf joined a growing chorus of a russian debt default. let's bring in dan moss for

analysis. we have this move off of the back of a lot of sanctions coming from the u.s. how impactful was the removal of the preferred trade status? >> it is possible for russia to be more commercially and financially isolated from the u.s. this pushes the isolation further. it would allow a high degree of tariffs on what russia can get into the u.s. at this point to be levied. i think the main impact is domestic and political. congress made noises about legislating this for itself. in wartime, you want the legislature as your partner. you prefer the issues of message management. that would be a junior partner. to best stay ahead of the hill. you don't know what else congress will put in language. manus: the imf has joined a

growing chorus that talks about an impending default, from credit agencies to analysts, etc.. is the statement late, and is it obvious? >> it is both of those things. the real value is to distinguish where we are today from where we were during the last russian default. it had imf ownership all over it. there was an imf program that had to be put on pause. there is no imf program with russia. the imf doesn't have an office. it doesn't have people. so this is a very different place. it is mainly a heads up, but not much in the game yet. manus: our bloomberg opinion columnist, dan moss on the very latest flows.

whipsaw is an understatement. around the russia-ukraine war and volatility in the bond market. mads pederson has been watching this. i remember a number of weeks ago, you said "i have the capability to go from 100 to zero on equity." you pulled the ripcord. when did you do it, and what triggered you to do it, in other words, changing equity allocation on one of the funds? >> it is a long process. part of the time, we want to be defensive 20% of the time. the rest, we want to be overweight. the sequence is simple. a selloff last year. the fed and ecb lost control of inflation, communication.

earnings have started to come down. credit markets are tightening. equity markets are nervous. we are facing a situation where we risk it could lead to self enforcing negative spiral. we don't say it will be a global recession. we don't say it will necessarily be the world going under, but if you were part of -- probably now is the time. nobody knows where the ecb will end, where the fed will end. they are tightening into a slow economy. i don't even think she knows where it will end. so it is a risky situation. the main problem -- dani: a lot to unpack. i will be lazy and let manus unpack some of that. before we walk through it -- you have reduced your equity holdings. exposure.

25%. what are you buying instead? >> we have reduced it by 75%. dani: exactly, thank you for the correction. >> slight difference. but defensive portfolio, which consists of core equities, 25%. medium to short duration in government bonds. it is a typical defensive portfolio, which can do good in most situations. we are holding until things can recover. some clients are more concerned. we have reduced equity. we only want to hold equities 75% of the time. where we are most positive and we hold a little bit of credit, and also short duration bonds. manus: i'm one of the

risk-averse clients. i'll be in that. i will probably be frightened and running for cash. on a slightly broader complex, we have a number the same. we don't want treasuries as a backstop. we want inflation protected products. you said proceeds will go to mid duration bonds. the belly of the curve. are you not buying any tips, are you saying for the moment you are happy, you don't need tips? >> i'm saying i don't need tips in here, because we talked about 25% equities. the tips are kind of nice, but not really capturing the side when we have inflation at 8%. dani: a lot of your calls you are talking about it being pained to the central bank.

let me be careful with my words. it does sound like a loss of confidence in the fed in central banks. is it fair? do you no longer have trust in these institutions? >> i have trust in the institution's intentions, but if it is supposed to get inflation around 2%, and is 8%, is trust larger or smaller than it was before? the institutions are in a little bit of a limbo. the ecb going out, and they are basically tightening monetary policy. because they are not fully updated. i remember many years ago, they did a 50 basis points hike. completely out of sync with the world. i don't have as much confidence as i would like. i don't have as much confidence -- manus: i think that is the challenge.

one of my guests earlier on his words, that is why they are in red, psychopathic people backed themselves into a corner to make mad policy decisions and continue on the road to recession and severe price corrections. what is the breaking point? what is it being crazy, what is 6.4%? where does policy mistake arrived? 25 basis points gives them credibility. what is the mistake? >> 250 and saying we will continue this space. if they tie into get inflation down to where inflation is currently being produced by a supply shock. the current inflation created by demand shock. the over accelerated economy. the latest push in commodity

prices. tackling by hiking rates too much. it is a policy mistake. the ecb tightens so much that it can go into inflation. china and europe are big open economies. this problem with russia is not a nice situation. it is a terrible situation for open economies. if they tie in against inflation, they cannot control. that is a policy mistake. 50 and 50 would be over tightening. manus: the volcker stan move would be a mistake. we were posturing this morning as to whether the size and scale of a 1998 default, you lived through it. many are decrying and said it would not matter to the world, would not have a huge impact, because institutions don't own the debt. in your view, would the default

have a material risk impact? >> no. i don't think the default would have an impact. the real risk of russia in this situation is the words before the central bank to lay it on russia. putin's war is not under control. the problem the chinese have, one of the leading civilizations in the world. so that situation can escalate out of control. dani: what about the wider ramifications? the second order effects? much has been said about dwindling liquidity in the bond market funding stress. do these things concern you? >> yes. i'm more concerned about the situation with the chinese. i'm more concerned about the situation with potential spread

widening of italy and spain. but let's say they are 50 or under. 20 basis points yesterday. they have a much bigger problem. we are facing losses. that is much bigger. for all of the problems with putin and his war, the russian government is the main. dani: when you get back to 100% equity, join us again, hopefully the world will be in a better place. that is mads peterson. juliette saly joins us in singapore. >> the european commission president speaking to phase out the eu's dependence by 2027. outlines land in the formal summit.

russia is the biggest supplier of natural gas oil and coal. >> we will rethink energy. we have to get rid of the dependency of russian fossil fuels. for that, we need massive investment. in renewables, this is strategic investment. it creates jobs at home and is homegrown. >> 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. manus: thank you very much. coming up, the u.k. premier league football chelsea sponsorships. beginning to unravel as sanctions against the russian owner live to chelsea's grounds. this is bloomberg.

manus: i'm manus cranny in dubai. dani burger is in london. the chelsea sponsorships beginning to unravel. sanctions hitting the owner roman abramovich. they have become the high-profile sponsor to cut ties. let's talk outside the stadium. good to have you with us. it is not the only sponsor of chelsea. how significant is it? >> good morning to you. the sun is slowly rising over

chelsea football club. we have been here since the early hours. things are brining up. not so much for the club. roman abramovich has been sanctioned by the u.k. government. the sponsorships are beginning to unravel. sponsoring the blue shirt, you often see the players running around on the bridge, they have a massive number three on their shirt. they say the sponsorship deal is no longer happening. it was worth 40 million pounds. the next sponsor to be considering links to chelsea football club are nike. sponsoring the player over 15 years. they will pay them 900 million pounds. one of the huge amounts for money. hyundai also considering links to it. so is the swiss -- swiss

watchmaker. we see the fallout financially for chelsea is unraveling. we must remember chelsea played in an away game. they did win. things seem to be happening on the pitch. but things for the fans and the team are changing. coming to chelsea, you can no longer buy a t-shirt in the merchandise shop, that has been shut. to buy a ticket to watch the game, you no longer can. you can only watch matches as a season ticket holder. the club is still going to be televised. revenue from television sponsors will still come from the club. one of the main things that has happened. roman abramovich, one of the richest oligarchs and well-known in london put chelsea up for

sale. he did not get any bids, now the sale is stalled. dani: the report coming from the sun. thank you for that over there. coming up, jp morgan joins goldman sachs in pulling back from russia in response to the ukraine invasion. wall street joining the corporate exodus. more on that next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i'm dani burger alongside manus cranny. j.p. morgan and goldman sachs pulling back from russia in response to the invasion of ukraine. citigroup assessing operations. u.s. bank may have limited exposure, but have joined a growing list of western companies exiting or halting

activity. we are joined by tom met cap. how arduous of an operation will this be for goldman and jp morgan to get out of the country? >> in terms of their operations on the ground, they are limited. goldman has around 100 staff. jp morgan, a person familiar, in the low hundreds. not a huge number in the boots to the ground move. and the other situation, 3000 staff. big retail operations in the country. manus: is it just the sheer fear of any risk of sanctions? it is easier, cleaner? >> certainly the cleaner way to go. that is what we are hearing. still very much more than a week into the situation, people not

clear on what they can and cannot do. some of it is reputational, a lot of pressure on the likes of goldman and jp morgan to do something. you need to finance. a very tricky situation. dani: there's a question of how much financial sense it makes to be out there, how much money they will make if they are frozen. on the other hand, how much of their actual trading, bond holding is continuing in russia? >> it is completely frozen. probably will not mean any business right now, at least in the international sense. long-term, can you leave russia and never go back in if the situation changes. it is pretty understandable why they have moved out. manus: thank you very much, we will keep a track on those institutions. the withdrawal physically from russia. tom metcalf.

let's pause for a moment. i think we have reflected from mads pederson, one saying it is nothing to get frightened about. mads pederson made it clear he's worried about explosion in paris for your yield as a result. dani: moving to the belly of the curve, in terms of mid duration. he is someone who has the expression to go from 100 to zero. we paid attention when he made the move. 25%. interesting to hear how a lot of the central bank activity underpins it. -- did not go that far. but it sounds like trust and credibility is lower on his side. manus: absolutely. how far the central banks go in terms of normalizing, i think

the phrase from our guest was normalizing, but not tighten. equities this morning desperately trying to get a small gain. tech still under pressure. dani: that is it from us. ♪

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♪ ♪ >> good morning everyone, and welcome to bloomberg market europe live in london. the cash trades are just less than an hour away. president biden will demand russia's oil trade. russian attacks are preventing evacuations as civilians