dani: this is "bloomberg daybreak: europe." i am dani burger and these are the stories that set your agenda. the u.s. pledges armed drones for ukraine as a president biden claims russian president vladimir putin could a war criminal. jay powell ramps up the fight against inflation. plus it is the boe next.

traders prepare for a third straight hike at midst -- amidst stagflation. it was jay powell and the fomc yesterday that envisioned a sharp tightening cycle. the bond market perhaps a bit skeptical, inverting at one point yesterday and early this morning for the first time since march 2020. seven rate hikes are on the way, a suggestion of qt to come. it will not affect unemployment, but this -- is this an alarm for the economy or is this a bond market that believes the long-term effect will be able to bring inflation down? there is some concern on bonds but stockmarkets markets roaring higher yesterday. we had a u.s. session that closed above 2% yesterday, starting to gain as powell was talking. this morning, some of those gains continuing.

mirror opposite is in the s&p 500 futures off the back of big gains. we are looking at gains that might have a lift from what has been happening in china. another day of rallies for hong kong and tech there. looking at the view across assets, we had yields pushing higher again yesterday on the back of a more hawkish fed than some people had thought. coming in slightly this morning, 1332 is where you are coming in on your two year yields. staying steady this morning at 2.8%. the yen yet again falling, on track for its longest losing streak since 2014. it is that divergence of yields

between the u.s. and japan. let's get our reporters around the world for the latest top stories. juliette saly is covering the chinese stocks rallies and aggi cantrill on the ground with development on the ukraine war. and maria tadeo is in brussels covering the response from nato. chinese stocks extending their surge this morning with tech and property among the biggest winners. chinese officials stepping in that verbal attempt to help out to help the economy and the market. let's get to juliette saly. another day of gains. does that look like these could continue? juliette: that is the big question, how sustainable is this rally? we are adding to those gains we saw yesterday on these markets yesterday and we are seeing foreign investors buy into these markets for the first time since march and we are seeing $5,000

of mainland stocks trading through those links. two day gains since 1998. you have been seeing those come through in the hang seng tech index which had that record gain yesterday. the index was down for almost 70% from its february 2021 peak. we narrowed that gap to a drop of about 70% to that peak. we are seeing money coming into these markets to the point of whether or not it is sustainable, you have got investors out there suggesting that this rally will relink for a while, but you are going to see more measures backing up these words that we have heard from beijing. rolling out the possibility of broad-based easing for the property sector. when these stocks are falling, and official said that we do need to see stronger measures. when bergen gelid -- berg

intelligence saying that it might be too little too late for the moment. dani: we will speak with marija veitmane state street from state street in a bit. over to the war in ukraine where president biden has offered $800 million worth of military assistance to kiva and called vladimir putin a war criminal for his invasion. zelensky making his plea to congress yesterday and it looks like that is bearing some fruit. aggi: it is bearing some fruit but it also should be notice that this is short of what zelensky has been asking for. looking at the civilian casualties, a lot of this which comes from shelling and bombing of these areas like what we saw last night. also a theater that was bombed in mariupol that was being used

as a shelter ukrainian government has been pushing not only for more offensive weapons but also for nato to close the skies over ukraine. that does not seem like they are going to gain that response from nato. however this is a significant move on the part of the americans who up until this point have been sending more antitank defenses and stingers. this is a new move because this is a more offensive tactic that the americans are offering the ukrainians. dani: putin also had a televised conference painting a dark tone for traders in russia. what can you tell us about that? aggi: there is concern on the part of russia that this economic sanctions are really going to bite the country. now that they are seeing that

there is a lot of western companies that have left the country is in the last several weeks, there is concern within the country for what that means for the ruble and for the country's economy going forward. a lot of what russia can do right now is to focus on their own civilians and any support for the russian support -- russian economy that they can. dani: thank you. that is aggi cantrill at the ukraine-poland border. -- to retain its own armed forces could be a possible compromise to end the war. that's bring in maria tadeo. neutrality is the key word here on the diplomatic path. what does neutrality mean and what does it entail? maria: that really is the question and the answer to that could lead to the resolution of this war. we believe there is still a diplomatic way forward. the issue, and this is why it gets very complement --

complicated around the issue of neutrality, is that it could mean anything and everything. the meaning of it changes depending on who you ask. for russia, it is that they never join nato and they points to sweden as a model for the country, but they would have to clamp down on their terms of military activity. if you speak to ukrainians, this is a different story. this is not just about not joining nato, but they would want international guarantees for safety for the country. he repeated there needs to be oversight here. we do not trust the russians and potentially the european union, even that is very tricky. ukrainians continue to say we are not going to do a repeat of the budapest montreal the --

budapest memorandum. the other thing we should note here is that for any talks to go forward, the ukrainians continue to say we need to see a cease-fire and on the ground we see the opposite. yesterday another brutal day on the city of mariupol. crimea and done best -- donbas had dramatic reports and yes another hospital was shelled yesterday night. dani: we have the german chancellor meeting with other officials in berlin to beef up military spending paid what are we expecting from this coming meeting? maria: it is now very evident that this is already changing the nature of european defense. we heard from the secretary-general saying there will be more troops on the ground, particularly in eastern

europe and the operations we conduct will be extended. we are looking at an operation that is bigger in numbers but also sustained in time. the author issue for this visit to berlin today, germany is now saying we are going to increase our military spending to 2% from 2022. that is a huge number. 100 billion euros in a fund to revamp the german military. the criticism was that german capabilities were not up-to-date. the german government now saying they will you turn on that and invest more on spending. dani: thank you very much. that is maria tadeo. let's get back to one of our top stories. the fed the -- the fed raising by 25 basis points but also committing to more rate hikes. >> in support of these goals,

the fomc raised its policy interest rate by a quarter percentage point. the economy is strong against the backdrop of a tight labor market and high anticipation -- high inflation. we believe that the increase of the federal funds rate will be important -- be appropriate. dani: we heard from powell there, a projection of really sharp cycling. what do we think is speech with what the fed is projecting means going forward? >> i think the most significant thing to come from this was not the hike, which was anticipated, and not the multiple dots, which was anticipated, but that the fed is prepared to go beyond neutral to put the economy into restrictive mode. to overtly prioritize containing

inflation overgrowth. this is the first time they have been emphatic about that. they do not have a great history, nor does any central banks, of managing this well. they also talk about it. how many do you recall have actually treated? dani: fair enough. there is enough of a divergence on the function as well. it is not just the fed, but we have the bank of england decision today. it is going to be more of the same? not really adjusting their past considering we have more now. >> are they prepared to overtly move into restrictive territories as well? in a matter of a short time relative to monetary history, the major central banks would have swung from overt accommodation to openly of

bowing preparedness to be restrictive. not just neutral but restrictive. that is a pretty big deal. the biggest surprise in terms of today's decision that the boe would be the 50 basis points they are able to carry to date. how aggressive is the boe prepared to be? they have already got a reputation of being somewhat aggressive. they moved first among the developed world's central banks. do they really need to go any further at this point? point proved, keep taking it up to all of the points. do they feel they need to go beyond that? when you are a business approving credibility for credibility's sake, it can get pretty dicey. dani: thank you very much. that is daniel maas, or bloomberg opinion columnist.

coming up on the program, we take a look at the diverging signals from the stock and bond markets on the central bank decisions. we will speak with marija veitmane from state street next. we will also discuss russia's default later this hour. this is bloomberg. ♪

>> every piece of news that comes out, we have this brief thinking of the erratic nature of the dot plot, the discussions of shrinking the balance sheet, and we don't even know what the impact of the rate is yet. they are in and inflation panic.

dani: that is the guggenheim cio there commenting on the fed actions, calling it an inflation panic. bond traders are not buying powell's upbeat perspective of growth. we were converted from one day prior to that and have not inverted since 2007. joining us now is marija veitmane, senior multi-asset strategist from state street. you have equities powering higher into the close yesterday. who raises this point of optimistic view or this flattening to invert? marija: i would have to say the equity markets reaction, i

generate with that, but that is ahead scratcher. we would not expect the readings of the headlines that the fed is introducing extra hikes. that is low in growth forecast with inflation, i would not get that action of the stock markets going higher. one thing you can point out is that one thing right now, the fed is incredibly transparent. they are incredibly clear about how the hiking cycle is going to plan out. that removes some uncertainty, removes some equity risk premium and potentially is supported to the pledging terms. dani: i think we all are at this point. the point that we have more clarity from the fed, how much of that is complicated by some of the data we have seen? some of the divergence in

forecast. what does that mean for the fed reaction function as we navigate this difficult time coming out of the pandemic and the overlay of war? marija: you're absolutely right. maybe that is an explanation for what may be a stronger reaction in the equity markets, the range of forecast is incredibly wide. the war in europe makes it incredibly difficult to be certain about any outcomes. we are encouraging that the fed has been firm on the inflation path, and that is what we have heard from other central banks as well. there were focused on fighting inflation and that is important. right now they seem to be prioritizing it overgrowth, but we will see how positive the development in europe will continue, how will the war will continue, what is going to happen with commodity prices. we have seen stocks and the oil

price that is encouraging the overall inflation picture. dani: to the point of inflation, petting -- inflation combating that overall growth, one of the headlines yesterday was that projections for unemployment, those stayed really steady. the thought is that in order to fight inflation, you have to slow demand. how can employment stay at the same levels? what do you make of that? marija: you are right, and all of the forecasts were not particularly encouraging. we are seeing the lower growth, we have higher inflation in the forecast, and the flat labor market. that is the story of recovery from the pandemic, is that the labor market is really unbalanced. there are parts of the labor

market that are extremely hot and parts of the labor market that people struggle to find jobs, so there are still more people without jobs than before the pandemic. it is this instability. i guess the fed is thinking about structural issues on the labor market and how that is changing. i think that is acknowledging that as well. dani: i have a question for you that i have a feeling i already know the answer to come up i have to give you some version of it every time you go on. it is about banks. the k w bank index up more than 3.5%. does the more hawkish fed tempt you at all into buying more to banks? marija: for me, you know that. for me, banks are about the yield curve, and this is a response from the bond market that was not encouraging.

we are worried about european banks as well. what we saw in europe was that banks re-rated in the second half of last year on the expectation of higher margins, expectation of more investment banking. that raises the question now. we note volatility makes it difficult for fund rating exercises. we know that central economies are not going to grow as fast as they expected. as rate increases here, they are encouraging, but they are not moving the yield curve, so it is hard to grow margins. it might not bring as much, and investment banking activity will be challenged by higher volatility. though i am still skeptical. to me it was the benefit of the doubt that was put into the bank premiums. dani: you are a woman who sticks

around with her convictions. i love it. marija veitmane will stick with us. coming up, we will ask her about chinese stocks in the resurgence as beijing announces it will support the financial market. more on that next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." a huge rebound in china specifically tech stocks with policymakers verbally pledging support, saying that they support not just equities but overseas listed equities. the property market as well. two days on the hang seng tech index up almost 10%.

they are posting their biggest gains since 2008. still what is -- still with us is marija veitmane. you're still on the rally in china. why? marija: i think we need to see more from policymakers. we want to hear those words, we just need to see a bit more action on their part. what we heard for a long time and what has been shown by them in words and actions was the common prosperity and how shareholders are handling it. actions speak louder than words so we do need to see action. on top of that, you have all of the sentiment that we have been worried about for some time. the zero covid policy is really challenging and especially for

the tech heavy production provinces, that is a concern. the spillover is a potential, but the shying away of investors from chinese stocks, we want to make a connection between taking the russian side and ukrainian concerns as well. those concerns are still there but we need to have actions to support. dani: we are just about time, but i do want to get this. might not be a fan of china tech, but u.s. tech. marija: definitely u.s. tech. it is stable, fast growing earnings, and we still love it. dani: really great to have you on the program. it is fantastic catching marija veitmane up. that is marija veitmane -- it is fantastic catching up. that is marija veitmane, senior multi-asset strategist at state street.

will the bank of england hike first for the first third time in a row? equity markets are off the back of a higher session yesterday. we are seeing european futures up 3%. as a small business owner, your bottom line is always top of mind. so start saving with comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to $500 a year. so boost your bottom line by switching today. get the new samsung galaxy s22 series on comcast business mobile and for a limited time save up to $750 on a new samsung device with eligible trade-in.

dani: this is "bloomberg daybreak: europe." i am dani burger and these are the stories that site your agenda. the u.s. pledges armed support for ukraine as president biden declares vladimir putin our work criminal. the fed launches what is set to be its most aggressive tightening cycle in decades. plus it is the boe next.

traders expect three rate hikes. the hawks are out up the fed. it is the boe's term next. marija veitmane was just discussing with us, is the boe going to prioritize inflation overgrowth? last time this happened was for one day in 2020 and before that it was 2007. the stock market powering higher as powell at his conference yesterday talking about the threat of inflation. marija veitmane saying it is ahead scratcher how stocks did what they did. europe has some catch up to do today. you're looking at two european stocks which are slightly higher this morning. they did close lower as the s&p

moved higher. s&p little changed today. tech doing stronger now. maybe catching a bit off of the tech rally that continues in china and hong kong. hang seng up 5.5%, following yesterday rally thanks to policymaker's verbal intention to support the economy. yields moving higher and seeing the most of the action. a little bit of that is being undone this morning, down by 4.5 basis points for the 10 year yield. breakevens now slightly higher, but we did see that coming off of higher inflation expectations as the fed tries to fight higher prices. the yen at the slower rate differential and brent crude just topping $100 a barrel. it is also bank of england decision day. the announcement is expected at 12:00 p.m. today and a clear majority of economists are

expecting a third rate rise in a row. we are joined by lizzy burden who is outside the bank of england. just yesterday, raising rates for the first time for the fed since the pandemic. has expectation for the boe also gotten more hawkish? lizzy: just when you thought a march rate hike was in the bag, russia invaded ukraine pay while u.k. inflation is already at a 20 year high, now war is threatening to push up prices even higher. the bank of england response -- if the bank of england responds too aggressively, the war will break the rate of recovery. economists are expecting a third straight rise from the bank of england, but the question is how big it will be. there are plenty behind me who are arguing that they need to

frontload and tamp down on inflation expectations now, but there may be others in their who say that inflation is going to tame itself by weighing on-demand. there is not much a rate rise can do about the immediate crisis. bloomberg economics falls somewhere is in the middle. dani: are we likely to get any more details on quantitative tightening today? lizzy: we are getting closer to the market, and that is the minimum level that the bank has said it will start to deal with -- ed has also said it is not an automatic trigger, so i will hold for more details because it has also said it will not get back to sales in a time of economic stress. clearly the war in ukraine has created those.

the guessing from the boe is that it is going to be extremely careful on this. this is something it has never had to deal with before. dani: thank you very much. that is lizzy burden. joining us for more talks on central banks is christian kopf, head of fixed income at union investment group. thank you for joining us this morning. a lot of criticism coming from the fed decision yesterday, saying that they are prioritizing fighting inflation over growth. do you agree with that sentiment? christian: i don't agree. the year on year as a hawkish message from the fed. see the dot plot has shown the neutral rates into policy territory in 2023 already, but we are starting from a level of interest rates that are extremely accommodative. i think we will see a lot of rate hikes.

this raises our rate expectation for 2022 from five to six rate hikes. it is an appropriate message to contain inflationary pressure building up in the system. dani: you also write in your notes that central banks -- the ecb did not do it, we have the boe and expectations are for that as well. why hasn't war and already tightening financial conditions, why hasn't that given central banks more breathing room to top -- to pause from their tightening path? christian: that is a worldwide movement underway now. it started with the hawkish message we heard from the ecb on the 10th of march where it signaled that it continues to wind down the program's in spite of the war. and europe is in close proximity

and also geographic persimmon data that work in ukraine. -- geographic proximity to that war in ukraine. we do not expect the inflation around the war, and central bank's are doing their best combat the inflation expectations. dani: you also write that the impact of the war on the global market is waning. why do you think some of that initial headline reaction isn't that strong? christian: that has to do with the economic sizes we are talking about here. the russian federation is an economy with less than an 50 million people and an economy that had 1.5 trillion euros. it is sitting next to a major economic block among which is

the european union with the size of 15 trillion euros. it has china on the other side which has an economy of 15 trillion euros. russia is still a power to be reckoned with, but in economic terms, it is ignored. the linkages aside from energy are quite small. dani: energy could get a big impact here. when you look at oil, prices have been swinging remarkably. it is an extreme circumstance paid we have heard predictions from bank of america saying it could go to $200 a barrel. how does the input of the volatility of oil and even higher prices, how does that input factor into the rest of your view? christian: that is the key component that will change our economic scenarios. this is as we see oil prices

receding to $100 per barrel, and we will see very high levels of inflation. we expect 7.3 percent inflation in the united states. in that basin area with oil coming back to $100 a barrel. we also see relatively robust growth for the united states and europe economy and we think the fed will hike six times this year. and we think that boe will hike at least once this year. president lagarde will give a speech today at 10:00 a.m. to talk us through her reasoning. the scenario that we really see continue is rate hikes. on the other hand, if oil prices were to search -- surge higher, that would drive us to a recessionary scenario. we think that the fed would likely cause after three rate hikes.

dani: that is an interesting thing in terms of trying to digest the impact of where we will be. if we continue to have this lobo volatility, as it -- global volatility, is it fair to look at the part of the year where qt is part of the conversation? what is the threat that this could be the exact time where central banks will have to pause and take stock of the secondary effects of war and higher energy prices? christian: if central banks have to take stock of the secondary effects or industry prices, that will only reinforce the message and drive them to further rate hikes. we were just talking about the secondary effects of the war and energy prices. we will see a lot of rate hikes here. the question arises, what if the war drags on for longer and we are talking about $150 per

barrel on oil for a long period of time and very high gas prices? that is the other risk we have. it is not so easy to replace gas through those pipelines. if we had gas security in europe, that is such a negative supply shock that would likely become reluctant to hike. dani: great to work through all of these scenarios with you. that is christian kopf, head of fixed income at union investment . let's get the first word news. juliette: president biden has branded russia's vladimir putin a war criminal and offered new rep renee -- weaponry to ukraine. this as russian forces continue to strike civilian targets. in his nightly video, the

ukrainian president said that negotiations with russia are continuing. -- a strong earthquake hits japan near fukushima. a bullet train has also been derailed. this area was devastated by an earthquake and tsunami in 2011 that left 16,000 people dead. nazanin zaghari-ratcliffe is freed after six years of iranian detention. this comes after years of negotiation between london and tehran with the u.k. paying a decades old debt to iran. hsbc has promised to pay down financing of the fuel industry,

sending to the oil and gas decline. hsbc remains one of the major funders of big oil and gas, helping fossil fuel companies raise about $62 billion from selling bonds. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani. dani: thank you very much. coming up, the debt deadline has passed but no signs of payment. we discussed russia default here next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i am dani burger. the deadline for the coupon payments on russian bonds due to a close yesterday. there are no signs that holders of the debt received their cash. today marks the end of a 30 day race period before economists can determine if default occurred. no signs of payment yesterday. what are the latest signs on this? >> the u.s. and europe seeing no signs of payment. that is $17 million worth of coupons. what currency that coupon may be paid, either in rubles or dollars, because of the sanctions that russia has faced. the u.s. has said a payment in the dollar would be fine.

now we are kicking off this 30 day grace period after what may be a default on the bond. s&p and fitch also implied that if the payment is made in rubles, we could see a trigger on technical default. dani: this is $117 million. in the grand scheme of things, perhaps this is a small amount. what would the broader risk be if russia does default on its payment, no matter how small it might be? >> it is in and of itself a small payment, but what is at stake is 150 billion that russia has in foreign currency debt and that would be a first default since argentinian default, which are still in the minds of some investors' minds. what it will do is accelerate this that we have seen from

investors, investing in emerging market assets and chinese asset those well. that risk when it comes to investing in countries where governments have an amount of control over the companies in the state of their liquidity's. dani: to that point, you are in hong kong and utrecht chinese emerging markets closely. are you seeing any signs of stress or concern of this spillover effect? rebecca: it seems quite limited in terms of the concrete effects on the financial market, although i will say chinese stocks which are rallying today on those measures, authorities are promising -- the broader concern is the fallout and china's entanglement in russia has pressured assets. particularly in the credit space where there is so much worry that is continuing to drag. dani: thank you very much.

that is rebecca wilkins. let's continue in the story of russia. justin carrigan joins to discuss from the economy side. we got some economic data and a jump in inflation. is this the first sign of the effect of sanctions? is there more to come in terms of pain and inflation? >> almost certainly, yes. we are seeing the first signs here. this might not be the effect of physical shortages you expected to see one sanctions started to hit. it is more about the perception among ordinary russians that there will be shortages of things like auto parts, medicine, and consumer staples as we go forward. we are seeing actual hoarding starting to take place in russia and we saw a sharp jump in consumer buying in immediate

weeks after the start of the war in ukraine. we are seeing the start of this and the debate before we had the war began was the ability of central banks to address this expected spike in inflation after we came out of a covid period. in russia, it is all about sanctions and how that is going to trigger further price rises. dani: and we have a bank of russia decision coming up. what tools are at policymakers' availability to limit the fallout? >> fairly restricted, to be frank. some were talking about this. under normal circumstances, we would say the usual set of tools available to central banks, most notably an increase in borrowing costs to prevent the weakening of the ruble and the inflationary impact thereof. under these circumstances, they

are more limited. we saw that big increase in rates that was enacted immediately in the aftermath of the invasion. the governor raising rates to 20%, doubling the key rate. in this environment, it is very different and difficult as well. we are talking about a sensation of hostilities and that seems to be in the fight at all anytime soon, but until that happens, there is not a lot the central bank can do. dani: thank you very much. that is justin carrigan on the impact of sanctions to the russian economy. coming up, the u.s. insists on complete access to the audits of chinese trading companies in new york. we have more on that story next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." the u.s. accountant watchdog is insisting that beijing provide access to key audits to trading in new york. for more we are joined by bloomberg's bruce einhorn. this comes at a time when china just yesterday was lending verbal support for chinese equities listed abroad. what is the latest from washington regarding this delisting of chinese companies? bruce: what we heard on wednesday from washington was the public company accounting be -- accountability oversight board. saying that chinese companies have to follow the same rules as everyone else.

completely saying that everybody has to follow the same rules. the issue here is that there is a law dating back to the early 2000's that said that they must have access to the audits to companies trading in the u.s. chinese companies have not been doing that, saying they are not allowed to by chinese law. this is something that came to a head in 2020 one congress passed a law saying that if companies did not comply with this, they would have to be delisted. chinese companies where the ones targeted, but we know that chinese companies are by and large the problem here. the chinese government released a statement saying they are making progress on this and we have to -- have the pcab making

confirmation of this as well. dani: what is happening is also the overlay of war. what difference does that make? bruce: i don't think anyone would explicitly tie the two issues. to some extent, this is coincidental. the fpc came out with a list of companies that may be affected by this going forward. this will grow as more companies released their numbers and don't comply with the audit department. that said, this is coming at a time when the u.s. is being very public about its concerns about the way china is dealing with russia in the war. we have jake sullivan, the national security adviser, meeting with his chinese counterpart the other day. there have been reports in the media about u.s. saying that the russians have asked china for help, including potentially

drones. clearly there seems to be indication that [indiscernible] dani: we will have to leave it there. thanks for joining us. up next is "bloomberg markets: europe." this is bloomberg. ♪

anna: good morning. welcome to "bloomberg markets: europe." the cash trade is less than an hour away. there are your top headlines. the u.s. pledges armed drones for ukraine as president biden labels vladimir putin a war criminal. with stuff. the fed -- list off. the fed prepares for