dani: dani:"bloomberg daybreak: europe." this is i'm dani burger in dubai. these are the stories setting your agenda. manus: the fed lays out plans to reduce the balance sheet by over $1 trillion a year. stocks slumped, treasury yields dropped. more pain required. the fed policy will need to

force more losses on stock and bond investors to be effective. more sanctions. the u.s. slaps new penalties on two of russia's biggest banks. biden says moscow has committed major war crimes in ukraine. good morning, it is a moot point as to whether you think qt this time is max hawkish and us. that is the view from bloomberg intelligence. the runoff at $95 billion. that is the runoff, a ramp-up. how quickly will they get to it? that is moot for me. dani: the pace of change, not necessarily the change itself. what destruction will it bring to markets? looking at bill dudley's opinion piece this morning. manus: let's get to what the former new york fed leader had to say.

more pain to come, more losses on stock and bond markets than we have seen so far if the fed is to be effective. this brings me to the view of how much wealth destruction and equity market pain the fed will tolerate to get the inflation under control. dani: maybe it is not even about tolerating, maybe it is wealth toleration as a feature, not a bug. as the former president points out, in order to tighten financial conditions, they will have to cause stocks to sell off, make interest rates higher, there will have to be pain in the bond market. financial conditions, a big sector is indeed equity market return. manus: absolutely. there is the chart you have been referring to. loose and lush when it comes to f con. that perhaps underpins the shaken but not stirred equity markets. let's have a look. the curve on inverts, there is

an interesting fact. you saw the moment whether it would endure or not. slight steepening in the curve. 257, the dollar is flat. and dollar-yen. our guest was saying it was one of the most undervalued currencies. the pain of the weaker yen in the economy is coming through. -- back after a 10% white out on the iea releasing millions of barrels, 100 80 million from the u.s.. a bounceback in crude. dani: positive yield curve, recession is called off -- we have seen deutsche bank, a huge shocker of a call that we would get a recession. let's run quickly through what equity markets are doing. asia-pacific index down more than 1%. the pain mostly being felt in japan. china down 1%, better considering more policy support

hinted because of covid and issues in the property market. the selloff continues in the west. european stocks down .3%. worse when it comes to the s&p 500. big losses amid the fomc minutes. i wanted to point out small caps. interesting they are underperforming, given it seems the selloff in equities are tied to the growth sensitive cyclical assets. manus: let's get to the reporters around the world. we have the details on the fomc. maria tadeo on the ground with u.s. sanctions. stephen on the latest with the oil markets. and the u.s. warning to india over its alignment with russia. dani: investors are digesting the fed's minutes from its march meeting. it indicated they will begin the runoff of the balance sheet.

for more, we are joined by enda curren. over $1 trillion a year in terms of the maximum cap, what were the big takeaways from the fomc? >> another pivot. last month, they were buying bonds. now they are talking about running down the balance sheet by $100 billion a month, just over $1 trillion a year. that caught a lot of attention. the second big takeaway was the members of the fomc were talking about a 50 basis point hike. that was considered an outline view. had it not been for the russian invasion of ukraine, they may have gone ahead with it. that is going to like. enough expectations 50 in may, and go 50 again after that. talking with the balance sheets and the rate hikes, it is an aggressive pivot. the fed is racing to get ahead of the curve. they had been conscious they were behind the curve, but setting a record as they go into the second half of the year.

manus: thank you very much. enda curren with the latest on defining the hawkishness of the fomc minutes. -- targeting to of russia's biggest banks and two of putin's daughters. president biden accusing moscow of committing major crimes in ukraine. let's get to our reporter in brussels. how would you contextualize this escalation going after putin's daughters and the language of biden? after what boris johnson had to say, there is a coalescing of global leaders, in terms of accusations on war crimes. >> it is, but at this point when you look at the pictures, and we have all seen the pictures, the reality, it will probably not be the last of it. russian troops continue invading ukraine. there have been reports of what are war crimes, executions, mass

graves, rape against women, all of this against every international convention would be a war crime. it reflects the reality we have seen on the ground with those terrible pictures. look at the sanctions, we have russian banks being sanctioned, vladimir putin's daughters are personally sanctioned. we know the west is going around or against putin's inner circle. the reality is this will deter the operation we are seeing in ukraine, and for the time being, we have not seen that. the russian operation continues. yesterday, we heard from the nato secretary-general who said they pulled away from the capital and the west of ukraine to rearm, regroup, and resupply. we will see a shift in the focus of the east of ukraine, where we see big fighting. going into may 9, this is the big victory parade for russia. the big chauffeur vladimir

putin, the power of russia in the world. he will have to show something to the public. the idea that on the ground, this war has weeks, if not months to go before we see a cease fire. dani: that is maria tadeo, our european correspondent. oil rebounded after a steep slump triggered by prospects for further crude releases from strategic reserves. now look for tighter u.s. monetary policy and weaker demand in china. joining us is our energy reporter in singapore. we have the announcement from the iea of more releases between the u.s. and allies. what will the effect be on the balance of the oil market? >> yesterday, we saw oil prices fall sharply because of the release. the u.s. will release 180 million barrels, along with other allies releasing 60 million. 240 million in total.

it is probably not enough to balance the market. that is why you see prices rising today. the big issue is flows. because of the war in ukraine, folks aren't buying russian crude. because of that, russia will be reducing production, reducing exports. that will leave a 3 million barrel a day gap in the market. the release will be like a band-aid on top of that. it will provide balance to the market in the short term. once it runs out and of russia doesn't add much to the market, those flows aren't there, the market is short, it is a bullish nature. that is what we are looking at now. manus: showing the time spreads rollover, different in the action from the market this morning. thank you very much. let's talk about the white house. they have sent a warning to india against aligning itself with russia.

the national economic council director is disappointed in new delhi's reaction to the invasion of ukraine. it could be significant and long-term consequences if it supports moscow by increasing trade. for more, let's get to our government reporter joining us now. this is one of the first direct criticisms, one could say, towards india. other nations have not come onside with the west. but how serious a moment is this? >> it could be a serious moment if the u.s. were to go through with what they are threatening india with. india is heavily dependent on russian weapons. it has also decided to buy discounted oil -- russian discounted oil from the market. if there is any kind of sanction or reaction to what india is

doing, it would be serious. that said, on the ground from what we understand, the impression we get is it is not what india is expecting. it believes it has explained its position very clearly to its allies. includes the u.s., japan, and australia. why it cannot immediately shun russia. the reasons are primarily disputed with china, which has been going on for the last two years. the situation is quite critical. as well as the western borders with pakistan. and on top of that, what india has been saying publicly is how the west kind of goes ahead with the sanctions, it is still buying stuff like oils and other things. those have been kept outside of sanctions.

as a country, india also needs to do what it thinks is in its interests. dani: thank you very much, that is our asia government reporter. and manus, bless you. let's take a look at the events we will be following. 12:00 p.m. u.k. time, ukrainian president zelenskyy referring to parliament. and the fomc after christine manus: the boe chief economist will speak at the bank's international conference on

sovereign bond markets. that is followed by the u.s. initial jobless claims data. and raphael bostic and charlie evans speak at an event on economic mobility and employment. coming up, we dive into the markets with monica defend. she joins us. dani: we are also going to talk about the french presidential election. voting starts this weekend. the latest from paris. this is bloomberg. ♪ this is bloomberg. ♪

>> 3.6%, and we are running well above rates, 2% inflation. the fed will have to tighten up, tighten financial conditions to push the employment rate. when the fed has done that in the past, it has resulted in recession. not during tension, but chances of pulling off a very low. manus: bloomberg opinion columnist bill dudley on what he thinks the fed needs to do and the risk of a heartland. -- hard landing. monica defend his here in time to read the minutes. good to have you with us.

a doubling of caps from the. round of quantitive tightening. how hawkish is it, and what is the biggest risk to liquidity in markets from the scale of the caps they have announced? $95 billion of treasuries and mps? >> exactly. you mentioned the liquidity drain. on one side, hiking rates to control inflation. and hopefully they can do so, hiking 60 basis points over the next two meetings. then we start with a shrinkage of the balance sheet. in the past, it was quite painful for the equity markets. what we think is inflation between april and may, they will hike rates, then they will start with shrinkage, political pressure on the fed will ease during the summer. and this will allow them to better temper and caliber the

tightening of financial conditions. dani: this is one thing i'm trying to wrap my head around. the degree to which the fed is willing to see stock markets fall to see bond yields moving higher, or not even put up with it, but force it, as bill dudley talked about. kathy jones went even further to say the fed is willing to trigger a recession to break down inflation. do you find those types of calls to be accurate? >> i don't think that the fed is targeting a recession. they need to be bold to control inflation. the political pressure is high. but they really need to take care of the economy and financial markets. because our session cannot be in their target.

the economy proves to be -- the u.s. consumer is doing fine. what i really see as a risk is ppi into cpi. so we might see some margin squeeze that can put profits at risk. >> there are a couple of views that we have hit peak duration sales. in other words, the market is front run at these aggressive moves, selling and the flattening of the curve. when it comes to credit markets, they have been well behaved. justin said i don't want to talk about bonds, equities, i want to talk about credit. he thinks this is where the more dramatic repricing will come if it is a heartland. nobody has a clue whether it will be hard, soft, nobody

knows. i throw $1 million at anybody that does. this is where the next moment of distemper could come. do you agree? >> let's start from our positioning that it has been reducing over time. it is true credit proves to be good fundamentals. as soon as liquidity starts to tighten it concert the next one. this is who are a preference for the european one would be reducing. dani: i was struck on the same line. you wrote traditional bond equity does not work as correlation dynamics changing. what then takes its place as the true diversifier in a portfolio? >> it is becoming quite

challenging. so you are in it to look at commodities and goals. it looks to be quite a nice space. rising geopolitical risk. certain park it -- certain pockets of the emerging market. and on the spectrum beyond traditional -- it has had quite a night trying to diversify the portfolio and maximize return nowadays. manus: we have referenced oil a couple of times on the bounce back from a 5% drop. spreads are rolling over. it was four dollars more expensive a couple months ago to get the oil. that has come down. jeremy grantham says when you see oil prices at this level, it

always triggers a recession. we are obsessed about the fed, abscessed about curves, obsessed about all of those from a global perspective. from a global perspective, $100, how much of a triggering impact to recession will it have? >> if that is how you go to the u.s. economy, the link between oil prices and u.s. economic recession has been diluting over time, because the u.s. has been able to diversify resources, which is not the case, which is not only oil. so we think the area is currently running, it is definitely painful for countries such as germany and italy.

and this is because of energy dependence and germany with the last quarter before the fourth quarter, 2021 was already negative. this is where the risk of recession might be. dani: we are going to get more in just a bit to expand on those thoughts. monica defend, the head of amu ndi institute. diving further into europe's energy conundrum and the economy. that and more next. this is bloomberg.

dani: welcome back to "bloomberg daybreak: europe." i am dani burger london with manus cranny in dubai. we are speaking with monica defend about the energy crisis

and its effects on europe. a great chart from blackrock talks about the spend of energy in europe. that is this orange line. it is just under .10 of gdp europe is spending on the crisis. let's bring back monica defend. you are laying out the scenario of high energy prices and the impact to the european economy. what has it meant for your exposure to europe? are you in the camp much this year that you should be pulling back on european equities as the risk of stagflation takes hold? >> yes. and to be a statement -- is running into it because of energy dependence and geographical turning up late. if you look at the ecb, the 10%

reduction in the supply almost 1% gdp. and this is what has started including in the forecast. and we reverted our preference in the past. positioning for european equities, that we would be more than one month ago. versus european equities, it is meant to be for the time being. there might be some nicer stuff. it might be the regional preference. manus: about france, we are going into the sack around this weekend. but this time a couple of years ago, on 61% on 39%, much closer.

we are showing you pictures of young stoltenberg speaking at a meeting. we are keeping an eye on that. now we have -- we will come back to that in a moment. let's talk about france. emmanuel macron is the head, but -- >> shortening the government position. usually we are not taking any position ahead of inflation, just to speculate. and -- the head of the election. obviously, macron might be more supportive for eurocentric view.

manus: there is the spread. a nice lunch, glass of wine. monica defend, our guest this morning seeing it out in the markets. this is bloomberg.

manus: this is "bloomberg daybreak: europe." i'm manus cranny in dubai. dani burger in london. these are the stories setting your agenda. dani: time to shrink. the fed weigh set plans to reduce the balance sheet by over $1 trillion a year. stocks slumped, treasury yields dropped. more pain required. bill dudley says policy will have to have more losses to be effective. more sanctions.

the u.s. slaps penalties on two of russia's biggest banks. biden says moscow has committed major war crimes in ukraine. the losses in the bond market might have eased this morning. the selloffs in equities continued. losses of more than 2% stacking up on the nasdaq. a taste of what is to come. bill dudley writing yesterday says the fed will have to inflict more stocks and bond losses in order to tighten financial conditions. >> that is his view. monica has a quote from bill dudley. what you have is a debate. what is the tolerance slowdown? what will the fed tolerate? how much of the market will be pricing? are they prepared to take on? the curve goes from inversion to sneaking above the lines.

2013 to 2022, such a different moment in the curves. steepening into tightening, monumental flattening. >> i want to bring us live pictures. looking at them before the break. now the ukrainian foreign minister is speaking. he said it is clear german you can do more. he's speaking at nato headquarters. also saying what ukraine needs is weapons. we will stay on top of the story. continuing to make appeals to foreign leaders to get more support. we will keep an eye on that. let's go into what equity markets are doing. asian session dropping by more than 1%. not as steep in china. down more than 1%.

there's hopes of easier policy because of issues with covid and housing. european stocks, down more than .2%. wanting to point out small cap area did sensitive stocks taking most of the beating. manus: a quick snapshot of what is going on with the rest of the markets. 10 year yields falling despite the qt. is it maximum hawkishness? will they have to get to $95 billion? the dollar remains flat. whether it rolls over in a qt cycle, the dollar collapses again. a moment of or the dollar drops and where it would again, a slight turnaround. 5% implosion yesterday on the back of the iea releasing an additional 60 million barrels into the oil market. dani: the ukraine foreign

minister emphasizing ukraine still wants full oil gas embargo in russia. the war in ukraine and supply chain problems are sending food and fuel prices soaring and shaking vulnerable economies to the core. sri lanka and pakistan have the fastest inflation rates of asia and both governments to face pressure to step aside. >> authorities have ordered a curfew in the capital for the protest. the bus drivers, consumer prices rolling in march. joining us now is our chief emerging market economist. thank you for being with us. very potent imagery. it will have the cost of living in many emerging markets. the russian invasion, the u.n. food prices are soaring to

records. where is the biggest protagonist of that food explosion? >> good morning. russia and ukraine are huge for global food production, global food trade. responsible for about a quarter of global wheat trade, corn trade, 12% of calorie trade globally. it is a huge impact the war is having. we have seen emerging markets. particularly the ones with the food, places like egypt, sri lanka. seeing the effects of that in food prices on the consumers. >> we will take a moment. let's listen in. dani: let me jump -- manus: it appears we are listening in. >> to be on the ground.

and we also have responsibilities to prevent the conflict from escalating beyond ukraine. it becomes even more deadly, even more dangerous and destructive. we are providing support. working hard to prevent escalation of the conflict. thank you. >> that was yen stoltenberg speaking at the summit -- ahead of the summit, saying we need both sanctions and support from weapons for ukraine. saying ukraine is fighting a defensive war. bringing back to the picture. we were just talking about record food prices. before the war, this is going on. even if we see an easing of the conflict, what are the fundamental reasons for the -- for the rally.

>> a rally in food prices before the war. that was an element of the lock. that is a huge element for the culture. that is the reopening of the global economy. factors like rising fuel costs, these are important. shipping costs. so all of these contribute to the rising food prices. even before the invasion of ukraine. >> why are you most worried -- we had a graphic showing the percentage they are spending on food. you look at 21% in lebanon, jordan 20%, egypt at 33%. in morocco over 30%.

what are you most worried about? >> the middle east is prudent. in middle eastern countries, some countries can compensate for this with rising fuel prices. and they export oil. so they export oil, which can compensate rising food costs. places like egypt, jordan, lebanon, they import food and oil. so these countries are basically worrisome. also seeing these countries supported by the neighbors. so egypt received pledges of $22 billion from the gcc. that could upset like you were never getting. >> we have also seen protest sweep some developing nations. during the era's ring, -- arab

spring, many people pointed to food prices that might be a driver of the protests. is there a risk of that today? >> there's always a risk having hungry people. there were obviously countries, factors that matter. in the case of pakistan, food commodity importer. high food prices. they have exported food, but consumers don't see that. they see higher food costs. they are benefiting from high food prices. they have to pay the higher bill for food. that is contribute into the fact for protests and tourism. places like peru, you have food costs coupled with political instability. and you have the local factors

with these countries contributing to the picture. or higher food costs with stability in certain pockets around the world. >> thank you very much. the chief emerging market. walking us through some of the food and securities around the world. let's get to the first word news with juliette saly. juliette: the u.s. announced new sanctions targeting president putin's adult daughters, along with two of russia's biggest banks. the times newspaper reports the u.k. drawing up plans to send armored vehicles to ukraine, as well as antitank and antiaircraft missiles. italy said it will support an eu wide ban on russian gas if the block with united. the fed laid out a long-awaited plan to shrink our balance sheet by more than $1 trillion a year. many officials would have preferred a 50 basis point hike, but held off because of russia's

invasion of ukraine. it is almost double the peak rate. the u.k. is ramping up plans to build nuclear power stations and offshore wind farms to shore up energy supply to look at russia's invasion of ukraine. the energy security strategy -- by 2015. it also adds more. more ambitious targets on hydrogen, solar power, and gas projects. new york city has seen major crime rise by more than 36% from a year ago. citywide shooting incidents increased by 16%, 48%, and burglaries by 40%. mayor eric adams states his election campaign. the first month on fighting the city facing crime levels. 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. manus: thank you very much. juliette saly in singapore. a quick recap on the lines coming from the press conference that we have seen. basically saying ukraine still wants full oil and gas embargo on russia. and ukraine needs to "deliver weapons, weapons, weapons." this is before they were into nato. they said it is clear germany can do more for ukraine. and it goes back to the point of energy with embargoes. we saw the coal embargo. that was yesterday. but ukraine needs planes, missiles, and air defense.

so it is whether we go for an escalation on the sanctions. the foreign secretary is speaking. she has just gone. we will come back. there is a variety of arrivals in and out of the meeting. and we will go through the morning. >> should point out speaking moments ago that ukraine does need support when it comes to sanctions and weapons. first rounds of french voting underway this weekend. the latest from paris.

>> welcome back to "bloomberg daybreak: europe." i'm dani burger in london

alongside manus cranny. the first round of french elections taking place this sunday. joining me is caroline connan, keeping track of the polls heading into the election. a little bit of tightening, what have you been looking at? >> what we are seeing in the bond market, and the french stocks show these selections may not be completely priced in. if you look at the latest polls, the gap is narrowing between president emmanuel macron and the far right leader. in the first round, the lead is just about five points. what is even more worrying is the second round. two weeks later on april 24, they should micron would win by 53% of votes. 47%.

but you have to remember there is a margin of error of that point. clearly the gap is narrowing between those two. initially the war in ukraine gave a boost to emmanuel macron. he benefited from the rally. he appeared dealing with the state of affairs of the political bickering in france. more recently, the war in ukraine fueled energy inflation. that is where marine le pen has emerged better at responding to the french concerns. back at the center of the campaign. and measures including each catching it for fuel, electricity, and gas. 20% to 5%. appealing to some french voters.

over the past week, a controversy of advisory firms, consulting firms. according to the report from the senate, one billion euros in 2021. it quickly turned into mckinsey keith. manus: good to see you. the markets, we just caught up with monica defend. they are hedging the tail risk. the risk of derailing in the markets. it is in the modern market. -- it is in the bond market. that is where we should focus. >> that is in the bond market. you can see volatility. especially the rounds, also depending on the international situation. you see more inflation come out

more food crisis, more food protests. uncertainty between the two rounds for the bond market. inflation according to him. the most annoying issue for emmanuel macron. and also, also in the selection. first is what -- from the far left is going to do. because there is this idea that is so divided, voters in france will do the useful vote on sunday. it is not totally excluded from the far left passing the first round. finally, we have to pay attention to the turnout. that would be key. you could reach 30%. it would mean a record since world war ii.

such high attention for the presidential election. in 2002, marine le pen's father unexpectedly made it through the first round. manus: well done. great reporting. seeing across the weekend, it is long for you. be sure to tune in for the election coverage. it begins sunday evening. traveling to paris on the ground. and we have everything for you from 7:00 to 8:00 p.m. london time. join the team then. coming up, what have we got? dani: we've got a little bit of hedge fund coverage. the tiger cub suffering a brutal reversal amid 2022's market moves. some funds make up pretty well. we talk hedge funds. this is bloomberg. ♪

manus: i'm manus cranny in dubai. dani burger alongside me. we have been listening to the head of nato. the ukrainian foreign minister calling for more assistance from europe and the rest of their allies. it is clear germany can do more for ukraine. they need more planes, missiles, air defense. dani: from ukraine, changing focus and looking at the hedge fund industry. bridgewater posted a 16.3 percent return in the first quarter. the hedge fund rose 5.9%. other macro funds made it out better. tiger cub suffered a brutal reversal. losing money on their favorite

trades of tech giants and unicorns. joining us is tom metcalf. one thing that struck me by the wide breadth of returns. it was double-digit gains and double-digit losses. >> complete disparity. on one hand, equity focused hedge funds. tech heavy focus, they have been hit hard. in some cases, double-digit declines. so those funds, a tough few years. with volatility, the markets, some big bets paying off. >> who are the monster winners? chris had a good run, that will be a relief. >> a great example, coming off of a tough period. a really long run has turned around in the situation.

capital management, where the first quarter is up 148%. gigantic returner. >> we are in this period of more volatility. that means more value and better return for hedge funds. >> it is in the name, they should be able to play this market well. but part of the reality is this kind of diversion, some funds in the part. and the kind of conditions where they pay off. manus: we are going into this regime change at the fed. last year, some pretty big moments across some big macro funds. our people worried going into this qt? >> they are sort of signaling the rest of the year. that is the thing we will be

looking out for. digging away, finding out the macro positions. in the first quarter, the rate rises positioning that. interesting to see the rest of the year. manus: thank you very much. let's see what that qt brings across the assets. our finance team leader. a quick snapshot of what is going on. pausing for a moment in terms of the market. the bond market, jeff was with me earlier. maximum duration. yields dropping slightly. dani: we are seeing a little bit of the yields coming in. it is really for two days in ebro in reaction to more qt. what does it mean for markets, and we are going to need to see

more pain. manus: absolutely. it is what level is the fed's put option on the equity markets? somebody said we may need to inflect more pain -- inflict more pain. this is bloomberg. ♪

>> welcome to ""bloomberg markets." europe. mark cudmore joins us in singapore to take us through the market action. cash trade less than one hour away. here are the top headlines. time to shrink. the fate lays out plans to reduce the balance sheet by $1 trillion a year. stocks slumped, record yields drop as the market beds drive