dani: this is "bloomberg daybreak: europe." these are the stories that set your agenda. powell crushes bonds. the fed chair says he is ready for 50 basis point hikes if necessary. higher and higher. oil jumps again is that you debate a ban on russian crude -- as they eu debates about on

russian crude. and investigating the cause on the worst aviation accident in a decade. it was powell that took markets over surprise. if there was any confusion about his hawkishness, he cleared it up yesterday. the executive summary, nothing, says powell. it sets the bond market on fire. you're looking at a two year yield which went above 2%, the belly of the curve which inverted in many places. you have a lot of these yields reaching the highest level since 2019. it is a fed chair hell-bent on making clear his job right now is to bring down inflation. edit not -- it is not just

bonds, but it is assets. you have the yield differential between the u.s. and japan. oil continues to move higher, up 3% for brent crude. bitcoin also getting a bid this morning. bitcoin has this barometer of risk appetite. stocks are still holding up well despite the hawkish powell and the warnings from the bond market of a recession. you're looking at a euro stoxx 50 down by 0.4%. both s&p futures and nasdaq futures down just around 0.2%. let's get to our reporters around the world. our chief asia economics correspondent in hong kong, juliette saly with all of the market moves and reaction, our

reporters maria tadeo and aggi cantrill covering the war in ukraine. let's start with fed chair jay powell who was ready to hike 50 basis points at the next meeting if needed to bring down inflation. powell took a more aggressive tone in his speech yesterday. let's bring in enda on this. even more hawkish if possible after his press conference at the fed meeting last week, and the market was surprised by that. enda: that is the key takeaway, the fact that the tone has already changed on the hike, but they have such a fairly moderate trajectory from here, but now he has made a point in his speech and that the fed will go by 50 basis points in a meeting alone if they need to. the fed reacting to credits that they are behind the curve -- critics that they are behind the curve. they are now looking for 50

basis point hikes at the may and june meetings. by all accounts, it is yet another hawkish term by mr. powell. you see the dollar-yen getting serious now about trying to contain inflation and despite critics saying they are behind the curve. dani: and hiking is significant given that they are expected to begin the runoff as well. thank you. let's get to the market hawkishness because it is rippling across assets, especially bond markets. jules, we saw the reaction in u.s. treasuries. what does the ramification look like globally? juliette: absolutely. we have got the aussie 10 year yield heading the highest since 2018. we continue to see this bond selloff reverberate across. the globe. . we are also watching the

reaction come through on the asian equity market and that is due to the fact that you are seeing the weakness in the yen. you see the nikkei which came back after yesterday's a long weekend up by 1.5%. that is the longest winning streak since september. let's look at the yen. 120 may now be the battle for this carrier trade. the yield differentials between the u.s. and japan, and the yen being a safe haven as well as we continue to see uncertainty over the war in ukraine. perhaps that is going to be the next barrier as we continue to see these high yields plan to the market as well. dani: elsewhere in asia we are also looking at alibaba this morning looking to buy the dip in its own stock and buybacks. what are the details? juliette: they have increased

the share buyback from 15 to 25 billion, given the alibaba shares today. it has been heavily acquitted over the past year and when it announced the share buyback last year, it did not do much to the stock, but a lot of allies say this could give investors enthusiasm and assurance in this market that has been beaten down by the crackdown on beijing. bloomberg intelligence saying this might factor through to other players like tencent. this might give a good move to the hang seng and the hang seng tech index this morning. dani: thank you, juliette saly. let's get the latest on the war in ukraine and oil surging for a fourth day. some say the european union may be closer to a ban on russian oil and crude imports. maria, the issue around banning

russian oil, how likely is it that this comes to pass? maria: you saw that priced again into the markets, the debates. if you ask me, are we going to see a full import banned by the end of the week, the answer is probably going to be no. yesterday we heard from the top european diplomat that there is no consensus for the time being, but the key here is that the debate is very much back on the table. it has been reinvigorated over the past 48 hours. we spoke to officials yesterday at the european council meeting where defense and foreign ministers were meeting and there was a real divide between those that believe we are not able to unplug, but also countries, particularly in eastern europe, who say there is a way around this and we can do this and see something that might be a

partial ban into the european union. this is a moneymaking industry for russia. everything else has been shut off. the other thing is that there is almost a real trend that some of the sanctions -- remember, this was billed as the mother of all sanctions where there are plenty of loopholes. russia is able to serve their debt in dollars. they are operating almost as normal. we clearly need to look at sanctions to close those loopholes. dani: thank you very much. maria tadeo on the continuing looks at eu sanctions. russia is refocusing its military activity in ukraine on the port city of mariupol. joining us now is aggi cantrill who is at a humanitarian aid center in poland.

the number of refugees is growing. what is the latest on the ground? aggi: as you said in your introduction, the situation in mariupol has been described as extremely dire. there are around 300,000 people who still live in the city, although many people who have already fled, and the real concern is that because of this -- because there doesn't seem to be a lot of ground gained from the russian army, we heard from the and cranium -- from the ukrainian side that kyiv was strategically important in that they are trying to do for weeks now paid while that is not possible, it seems that a lot of russia's attention is focused on cities like mariupol. it is strategically important and only 60 kilometers from the

russian border. it is an area which has been under significant compartment -- bombardment. the refusal of the ukrainians to surrender the city means that it will probably sustain more destructions in the coming days. dani: thank you very much. that is aggi cantrill in poland. let's look at some of the events we are following today. at 12:00 p.m. u.k. time, it is the bloomberg equality summit. at 1:00 p.m. u.k. time, ecb president christine lagarde is scheduled to speech at -- to speak at the bis summit. jay powell is ready to back a 50 basis point hike if necessary to tame down inflation prices. we will discuss the bond market and the u.s. economy with our guest, frederique carrier, next.

was investigators seek to establish the cause of the worst aviation accident in a decade. we speak to john strickland. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i am dani burger. fed chair jerome powell is ready to hike 50 basis points at the next meeting if needed to bring down inflation. his more aggressive tone poured the fuel and driving treasury yields to the biggest jump in past decades. gunning us now is -- joining us

now is frederique carrier, managing director and head of investment strategy at rbc europe. what do you make of the surprise on the market to fed chair jay powell's comments yesterday? frederique: good morning. earlier this year, we thought inflation in the u.s. would peak at about 7.5%. we saw the conflict in russia and ukraine creating much higher commodity prices so this has now been summed up to 9%. it is bringing the process -- prospect of inflation to be negative psychologically, so therefore it seems to be behind the curve needs to make these comments forcefully on the back of what has happened last week. that sounded slightly more dovish.

we want markets to understand the principles that interest rates are going higher. dani: the markets in reaction to powell and yesterday as well, but starting to price that powell might break something. you have the belly of the curve inverted. powell himself did touch on this point. i want you to listen to fed chair jay powell's comments on this. >> there is good research by staff in the federal reserve system that really says to look at the first 18 months of the yield curve. that really has 100 percent of the explanatory power of the yield curve. no one expects that a soft landing will be straightforward than the correct context -- in the correct context. dani: we do have a chart of this 18 month key builds yield curve

and that has been steepening. how much runway does this give the fed to continue to act more aggressively despite other parts of the curve getting closer to inverting? frederique: organizing a soft landing is very tricky. if you think of all this up -- all of the tightening cycles since 1950, not enough to produce a recession, so if you are behind the curve, it moves more sharper than expected, the risk of a recession can increase. we think at the moment, perhaps 20% or 25%, but the more aggressive fed action could bump that up slightly. dani: it feels like soft landing has become the new transitory in something that the fed has said over and over again. it feels like we are on that

path. if the possibility of recession is somewhere around 25%, do you think the markets have been overdoing it? at least the bond market starting to invert some of these curves? frederique: i think the market starts to see that we will have a very aggressive interest-rate rate over the next year, but it seems to be short-lived where expectations are already for interest rates to fall in 2024. that would explain why some of the segments of the yield curve are inverting. dani: does it make sense that we have a market that is looking past some of these yield curves and moving stocks? should an inverted yield curve dampen from the risk appetite? frederique: different market observers will look at different things. we look at the one year to 10 year over the last half century.

it has been a good indicator over whether inflation is coming within the next order or two -- quarter or two. dani: would you buy stocks right now? does it make sense to bid up this rally in the face of a more aggressive fed? frederique: we think it does. at the moment we are underweight on fixed income. the yield could go up like the moving sharply on that one day that we had. it leaves us with equities as a relatively good place to be. we want to be in companies which produced strong cash flow which have good pricing power in high inflationary environments, which pay at low dividends. the sectors that are interesting to us our energy, health care,

and the cash flows, the revenues of investor companies. there are some opportunities in the market. the range of outcomes over the next year is wider, so we are being slightly cautious doing anything. dani: it is the range of outcomes is wider, especially when it comes to equities. where is the safest place right now if you are concerned about these tail risks? frederique: there are still some sectors which should benefit from sector growth, one which links to the green transition, renewables, energy, efficiency, because of the geopolitical situation. this is an area where you will

see more investment more focused. we think that the companies have that, and we think this is an opportunity to pick these companies. dani: you also move to underweight european stocks at the same time. walk me through your thinking there. frederique: not underweight, but neutral. we think that they will have rate cycling. in the medium-term, we think that europe will emerge with stronger institutions and there will be some fiscal stimulus on growth, but in the short term, it is more complex with higher energy costs, the supply chain disruptions which are going to continue, and also the impact on consumer and business demand. the conflict is in europe and it is likely to have bigger impact here then in other regions. while the market is discounting

some of this downgrade in economic growth, we don't think they are discounting the worst case scenario, which is that the economy in the short term goes with this oil embargo. it is important to take some risk off of europe in the market, which is very cyclical. it has a high production -- high percentage of industrials, so you want to be on more defensive areas of the market. dani: thank you for correcting there. apologies, i did not make to mean you sound more bearish. neutral on the equities. they can for joining us today. frederique carrier of rbc. up next, trying to beat navigating risks from before. we are going to dig into the details. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." let's get the first word news with juliette saly in singapore. juliette: moscow court has a band facebook. the ruling was made after prosecutors argued that policies that the parent company has a were directed against russia. meta so the court did not have the authority to rule as in the case because it is a foreign company. alibaba has boosted its share buyback gain to $25 billion.

it is the second program in last than a year -- less than a year. it saw a decrease in value after the government tech crackdown. 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: juliette saly's in singapore. thank you. under corporate news, nike reported earnings after the bell yesterday. the largest footwear and apparel company was navigating the risk of the ukraine lockdowns. walk us through the key takeaways of yesterday's results, laura. laura: nike rallying in after hours trading. in terms of geography, every

single region surpassed revenue expectation. nike continues to face a number of issues in china, rolling lockdowns, reputational damage. nike was boycotted in china last year because of the voicing concern about the alleged use of forced labor. that is why china failed to -- year-over-year. supply chain issues remain in focus for nike, even though their inventories have begun to normalize, it is how those inventories are able to meet those estimates. the war in ukraine poses a negative downside risk. direct exposure to russia and ukraine is negligible. dani: for now, they seem to be able to move past those supply chain controls -- supply chain

concerns. laura: directed consumer sales is a priority for nike and that is the next strategy for the ceo. right digital sales account for 40 per to -- 442%. they want to reach 25% by 2025. we saw this was footlocker last month. footlocker admitting that nike is charting its supplies. all this means is that nike is taking back control of price inventory and its image. i spoke with one analyst who thinks that in the medium-term, nike mightea

dani: this is "bloomberg daybreak: europe." the stories that site your agenda. powell crushes bonds. he is ready for 50 basis points to relieve the nd higher. the oil price jumps again. moscow refocuses its tasks on

the besieged city of mariupol. plus chinese investigators look to establish the cause of the nation's worst aviation accident in a decade. there is a lot of sad news be it from china or the war in ukraine. it is something we do have to deal with, and the market is one that has been screaming out over fear of a recession. yesterday we got hawkish commentary from fed chair pay -- jay powell. that said, the bond market was on fire with two year yields past

china have been canceled. what kind of impact is the impact -- is the crash having on the aviation sector in china?

sid: it has had a massive impact. we are also having surging cases of covid in china which means a travel restrictions are already put in place. now these canceled flights, especially on the beijing and shanghai route, and now china has grounded their flights, have an impact on consumer sentiment. dani: what about boeing specifically in china? sid: boeing has been dealing with pressure on china and they were just on the top of returning the 737 max. boeing is in the midst of bringing back the 737 max after

three years of being grounded in china. the country has regulated and are very serious about the implications of safety, so this will have an impact on the investors of the max and consumer sentiment in the country. dani: thank you very much for the update. that is sid phillips paid joining us now is aviation analyst, john strickland, founder of jls consulting. this is a different plane from the 737 max, but do you expect this to have an impact in terms of china's appetite for boeing aircraft? john: china is a highly important market for boeing. say boeing has been more successful in long-haul aircraft than short-haul, but it has the potential to stall the 737 in

china. given that the country was in the process of 70 -- of setting back the process of the 737 max, this will have an impact on the sentiment and they will be watching carefully. it is best to communicate with the regulators to make sure that this does not put aside market developments. dani: can you expand into that into how delicate a position boeing is in at the moment? not just in china but getting customers comfortable again with the 737 max and their other 737's as well. john: in that respect, it is very to say that the company is in that position of getting back in service around the world. it has been having a good safety

record, but the challenges are more wide because boeing has not delivered any of its longer models for a year now because of the quality of production that is working through with the u.s. faa. you actually heard from the supervisor for each of these planes, so no delivery there. their future model, the 777x, it is running two or three years later, that is not anywhere close to be for operation as it is still in flight tests and people have already been complaining about its unknown duration for that. the company fights to maintain reputation for quality and get these difficult times out of the service. dani: else was in asia, part of the story is also the loosening of travel restrictions. hong kong thing its ban on a

variety of countries, but one of the things that stuck out to me is that there is still a possible 14 day ban on airlines that carry too many passengers to be found infected with covid. i imagine that would cause some hesitation to completely opening up these routes again. could you describe to our listeners the pace of restarting international travel to asia and what that is likely to look like? john: asia generally speaking is still pretty well closed, particularly china which is one of the largest markets. theoretically it is goodwe are d

with leisure and travel into the european markets as well. we will see how this plays out over the weeks and months. dani: i am in that camp of making that transatlantic travel. i'm checking prices all the time from london to visit my family in d.c. should those making those long-distance calls expect

prices to move higher given that we are seeing oil continuing to move higher above $100 a barrel? john: i think short-term we will not see an immediate impact of the high oil prices. the impact itself will vary by airlines. some airlines are substantially hedged, for example ryanair is hedged for the whole of the year, they have the cost of the fuel markets priced as an outcome and other thing to do is to ease away at prices. the challenges are the balance between a fragile recovery in the markets and that is based on the leisure travel, and that is quite sensitive. airlines are hesitant to press -- to pass these prices on. but many of them cannot afford to not pass them on, so we are not going to see them in the

and you may need to keep those headline levels down. but as we go on through the year , the prices will stay higher than they are currently, then it will have to work. we saw the other day, delta expects to see prices coming through later in the year, and the consumer will pay those prices. it will vary by market and by airline. dani: thank you very much. that is john strickland, director and founder of jls consulting. let's get the first word news with juliette saly. juliette: u.s. president joe biden says russia's use of a hypersonic missile against ukraine is a sign that putin is becoming desperate. this as moscow focuses its military efforts on the port city of mariupol.

ukrainian president zelenskyy has pledged to hold a referendum on any peace deal reached with russia. -- the bulk carrier has complained about service tank issues with the a350 airplanes. murdoch his -- murdoch is a listing a pair of new york real estate for $78 million. he paid nearly $58 million for the property in 2014. 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: thanks so much. coming up, snp pulls all its

credit ratings on russian entities after a ban. more on that in russian debt next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i am dani burger. now to rush out where the rating agency s&p is withdrawing the grading on the credit for the companies. for more on this we are joined by catherine who leads our credit coverage in asia. this is perhaps no longer allowed, but what will be the impact of these companies no longer having a credit rating?

reporter: obviously, it is all very moving. we had a moving target and unclear terrain and we had obviously various russian corporate debt being moved from a few weeks ago. it is all very fluid. obviously it does have an impact for holders. dani: there has also been some noise about a reuters report about or debt being played down for the longer term debt in russian debt. what's doing about that? -- what do we know about that? reporter: reuters reported that havens on a coupon worth $6 million on a bond maturing from the russian government, maturing in 2029, had reached jp morgan,

which then begins the process of transferring the money to holders. jp morgan was not immediately available for comment when contacted -- contacted by bloomberg this morning, which has also reported that jp morgan has worked with the u.s. treasury for the necessary permits to do this. it all remains a suspenseful situation whether the money will actually reach the investors. there is the question of whether it is going to be paid in dollars or rubles. because the bond has a fallback option. dani: thank you very much paid that is bloomberg's catherine bowes lee. coming up, oil surges on signs of the european union may be getting closer to a ban on russian crude imports.

more on that end the work in ukraine next. -- and the war in ukraine next. this is bloomberg. ♪

dani: it's "bloomberg daybreak: europe." oil markets pushing higher this morning. we are above $110 a barrel for wti and brent. we are now just around 5% from the highs set earlier in the month, but this follows a 20% plunge in oil over a six-day period. what we have been watching with this story is a possible eu ban on russian oil. let's bring in maria tadeo. it looks like banning russian

oil is back on the table for the eu. maria: we will have to make a clear distinction. i the end of the week, there will be an important european leaders summit happening in brussels. the discussion particularly will focus on energy. the question is are we going to see a full band by the end of the week? i would possibly say no. this today we heard clearly from the top european diplomat hinting that there is no majority around us. every stake in the european union has to be done unanimously. that means that the 27 countries will have to agree on the ban. we don't have that consensus yet, but what is worth noting here is that this could be very much back on the table. if you look at the past week, there was this notion that germany had to push it aside and

it had gone away. if you look at the meetings we covered yesterday with defense ministers and foreign ministers, you can see they are not letting go, particularly in the eastern european countries. they still believe there has got to be a way to target russian energy. especially gazprom. there has got to be away to include it in the sanctions package. on top of that, there is a feeling that the mother of all sanctions, this is how the europeans branded their actions. it has many loopholes that needs to be closed. dani: at the same time, eu leaders preparing for a meeting with biden. what are we expecting there? maria: this is the big diplomatic push we are seeing this week. a lot of this will hint around ukraine and it will be a real conversation about what to do with eastern european security. so far the united states has been clear that they really believe in nato, that they will send more troops to the ground and the operations we see

particularly in the baltics will be sustained in time. the other big issue that will probably come up is they see a diplomatic resolution to this? the reality is that this is day 27 of the war. the delegations from russia and ukraine continue to meet but we have not seen a diplomatic breakthrough. if you look at what russia asks of ukraine, this is something that zelenskyy cannot give them, which is total capitulation. if you look at what zelenskyy is asking from the russians, in many ways it would be a challenge for 20 years. to concede on the situation here is to move forward, but the two sides are still very far apart. dani: thank you very much. that is maria tadeo keeping track of the eu story. as we get to the end of this hour, we continue to look at a bond market where the selling is heading the hardest on the front end of the curve.

your two year yield is higher by just around seven basis points. and we continue to see middle of the curve, the belly, invert in many places. most of these yields around their 2019 highs. this continued reaction from a fed chair yesterday who was more hawkish than his fed conference on the fomc decision, saying that 50 cases point hike -- basis point hike, what is stopping them from doing that? you see them starting to price in a 50 basis point hike in may and june. goldman sachs says he could get both. we could get a runoff, which powell says is the equivalent of hiking rates, plus another is -- another 50 basis point hike. this is what the markets are trying to digest. these are some of your longer duration ones. two and 10 now under 14 basis

points. here's the market bringing out recessionary signals. jay powell is focused on the 18 month curve. up next is "bloomberg markets: europe." this is bloomberg. ♪

anna: good morning. welcome to "bloomberg markets: europe." i am anna edwards. mark cudmore joins me to take us through all of the market action this hour. the cash trade is less than an hour away. there are your top headlines. powell crushes bonds. the fed chair is ready for 50 basis points if necessary. short and rates lead to global surge