dani: this is bloomberg daybreak: europe, i'm dani burger in london alongside manus in dubai. these are the stories that set your agenda. manus: advantage macron, the first round of elections in france give the incumbent a narrow lead over marine le pen. the nation's bond yield premium over the u.s. vanishes as

treasury rates height. plus, ukraine warns that russia is renewing its offensive in the east. johnson visits kyiv while austria's chancellor meets putin today in moscow. dani, good morning what's the difference between a slow-motion bond direct and a taper tantrum? not much. markets suggest you could get ready for a re-rating of 10 year treasuries to 3% by the end of this week. what is the differential between a tantrum and a dislocation? dani: it's a bit of a head scratcher this morning. there is no shocking events from over the weekend that would cause this selloff. you are seeing 10 year yields moving nearly eight basis points this morning. is this just a market that is having to rethink what does this balance sheet on actually mean? manus: you've got to send tens

at the bottom of your screen, what you have is a continued momentum in the steepening of the yield curve and you can debate all you want. saturday night, there was only one conversation and that was about the turning of the screw of qt. why have we stephen? the answer is they are getting ready for much more aggressive qt which will steepen the curve, which is what the treasury wants. dani: for what it's worth -- manus: boring dinner on a saturday night. dani: but just how many basis points's 95 billion dollars in withdrawal is equivalent to? one analyst said it is 100 basis points, we have heard arguments for 170 basis points. i have a big sign of the times

with china starting to ease policy, the premium of chinese bonds over the u.s. has completely disappeared. just below zero, manus. that is the chart. manus: and who sold all the russian bonds? let's look at the bond maneuver. there are political repercussions, the euro had a blancmange moment. the euro up for eight days in a row. cpi we are expecting, and rates on 10 years. and we will get to the polls with francine in a moment. they euro-dollar giving back a lot of its powder puff. and concerns in china around a

million barrels of the men taken off in shanghai. and bitcoin, the puff has come out. dani: i am starting with asian markets, that mobility and data concern, a recession concerns are everywhere. looking at the msci asia pacific down more than 1%. europe also underperforming. we are not seeing the lift from mike braun's lead. it's not about politics today. we also look at nasdaq futures also underperforming. it is these longer duration assets that are likely to come under pressure as we see bond yields spike. manus: we will talk about duration hunches with our guest. francine is on the ground with the latest on the french election. and our chief asia economics correspondent and joins us.

and maria tadeo with the latest on the war in ukraine. dani: let's start with the politics story. president macron is set to base his nationalist rival marine le pen in the final round of french election in a rerun of their 2017 contest. francine lacqua is in paris monitoring the latest developments and joins us from there now. you of course were on top of the results yesterday, what now changes between the two given that macron outperformed, but there is this question to where the votes from the losers if you will, will go to now. francine: that is the million dollar question. the cards are different from 2017, this is a marine le pen that is more assured. we have a far right candidate that normalized more of her extreme policies.

the second is she is much stronger on the economy. five years ago there was a debate on the economy and europe that really cut down her chances. the third thing is that emmanuel macron has been in power for five years . a lot of people aside in the last five years let's give this guy a chance. he may not get as much support because of that. the candidates that are far left or far right we have to monitor. melenchon saying do not vote for marine le pen. these could be interpreted as antiestablishment anger votes, so it is unclear where this falls. on the 24th of april the second round vote will happen. the polls are extremely tight. i would suggest the biggest day is april 20 where there is the debate between the two candidates. manus: let's see how her

economics comes out of the debate. great work over the weekend, the hardest working anchor in bloomberg, francine lacqua. we will be back to paris which she has a cast luc viennet, that head of markets at bred banque populaire. pressure on manufacturers already strained by covid lockdowns. shanghai has recorded over 26,000 new infections as china's largest outbreak continues to spread. let's get to our chief asia economics correspondent. enda, there's two key issues here one is inflation, and two is that lockdown and mobility and economic impact. which takes its way for the global economy this morning? >> i think covid is the big

story for china and whether or not eight, china can control it without destroying the broader economy, and whether they stick to this covid zero despite the cost. the inflation rumors we had on the producers side that were reflected in oil prices is not good news for manufacturers who are suffering disruption. on the consumer side, 1.5 percent is much higher than expected and represents an increase. that reflected supply problems linked to the covid lockdowns and all the light. but inflation is a bit of a side story, those numbers aren't enough to stop the authorities from putting more support economy. the bigger question is can they get covid under control, the numbers in shanghai continue to go up. is the government going to doggedly stick with this covid zero approach, or will they focus on supporting the economy?

so far, they are sticking with the aggressive approach on covid and that's why there is a lot of pressure now on the chinese economy. dani: our chief asia economics correspondent and the current keeping us up-to-date on the latest data from china. do ukraine, where the ukrainian president expects russian forces to widen their offense if in the east as they have banded parts of the north. prime minister boris johnson made a surprise visit to keep in a show of international support for ukraine. joining us now is maria tadeo. a change in tactics in the fighting in ukraine, how does that contrast with the latest diplomatic push? maria: we saw a huge diplomatic push with horace johnson meeting zelenskyy. that video of the two walking around kyiv has gone viral on the internet. and the head of the european commission as well to show

support from the eu to ukraine. but when you look at the situation, ukrainian authorities believe there will now be a major offensive on the east trade they say this will be the battle far gone boss. -- for donbas. we are going to see heavy fighting, heavy artillery and someone. there are two reasons for this. there is the very contested area between ukraine and russia. two, the clock is ticking for vladimir putin ahead of victory day on may 9, he needs to show his public something. for the ukrainians, repelling that attack on the east they believe will give the government and zelenskyy a much stronger hand going into the peace talks that they believe will only, after this is sealed on the battlefront. manus: maria tadeo in luxembourg

this morning. let's take a look at some of the events that are going to drive the agenda for the week. the eu foreign ministers meet where maria is standing. what additional measures will they take against moscow, that is on the agenda today. tuesday we see what we can see on inflation data from the united states of america, the cpi. dani: on wednesday it is u.k. cpi, and then christmas comes early for me. j.p. morgan kicks off wall street earnings, followed by wells fargo, morgan stanley and gordon -- goldman sachs on thursday. we will get the ecb's rate decision as well. and on friday it is u.s. industrial production data. first up, with me as micronet le pen face-off in the final run of the french election, we face-off

on the growing cost-of-living concerns. manus: the u.s. 10 heads back to zero for the first time since 2019, what does it mean for markets? this is bloomberg. ♪

>> i think it will take some time to get inflation down. there's other things going on in the economy that are adding to price pressures including the commodity and energy price increases. so i think inflation will remain above 2% this year and even next year, but the trajectory will be moving down. manus: the cleveland fed president there. the real yield has been negative

since 2019, but is inching ever closer to zero ahead of cpi data tomorrow. let's see what he makes of this with oliver kettlewell over at mashreq capital, there is a being for blond -- baying for blood in the bond markets, how important is that, i think it is important for the underbelly of risk. what does real yield say to you? oliver: it's been a pretty poor monday morning. that's more ominous for stocks rather than bonds, to get positive real yield. stocks have not soured off much in the past few weeks as bonds have. i would be more worried as a stock investor, as a bond investor it excites be. dani: what does that look like

in equities, what is a fully priced in concerns about the fed and qt, how ugly should it be getting in equity market? oliver: i think bond investors have taken the medicine, stock markets haven't. there was a bit of a selloff after the war in ukraine, but since then they have come back. the thing about qt coming up, qe's biggest beneficiary was stocks. therefore the flip side of that the biggest casualties of q2 should be stocks as well. we think stocks have a difficult possible few weeks ahead and parked simply -- and possibly a bear market. manus: i want you to extrapolate your qt thesis.

the restatement of the yield curve, the debate that we are having is whether qt, the prospect of more aggressive qt is causing a reese deepening -- resteepening of the bond curve? oliver: to some extent. if you look at, there is a great function on bloomberg, most of the bonds are on the short end. most of the run-up should affect the short more than the long end. it's a big unknown which is why there has been a bit of a steepening. manus: that just blows a hole in my conversation. dani: this is the confusion, we are seeing a curve that starts to keep in -- starts to stephen

as we have this qt debate. what do you think of the fact that we have broken up to such an ugly market, is it positioning, what is driving this extreme pain we are starting to see this week? oliver: perhaps inflation numbers due out tomorrow. the u.s. cpi will hit 8.5%, everyone is getting scared about these numbers. for us, the market moving event will be the relative change. once you have gone from 8.5 to 8.4 or 8.3, once the inflation story changes, bond investors will jump back in. we don't have to wait till 8.2% for everybody to get happy with fixed income. even if we get horrible numbers tomorrow and next month, at some point the inflation trajectory will change. manus: we are in this awful

consensus heard-like myopic mentality that this inflation spiral will never end. you say that bonds could deliver equity like returns. bonds could deliver equity like returns over the next 12 months, but all bonds are not created equal, so is it high-yield, ig or em? you say duration hunters would arrive at this stage. oliver: it would be investment grade, because i think high-yield will get hit by the same way equity investors will be. for some of the single be corporate's, so we would rather not be in that space. dani: bold call considering with those ig bonds have done so far this year. oliver kettlewell will be staying with us.

juliette saly with the first word news standing by in singapore. >> the u.k. chancellor rishi sunak has asked for a formal review into whether he properly declared financial interests. it comes to see faces intense pressure to lay out the details of his family's financial instrument -- arrangements after it emerged that his wife was legally avoiding taxes on her overseas income. china's covert outbreak continues to spread despite the lockdown of shanghai's 25 million people, there were more than 26,000 new daily infections reported, another all-time high. a southern metropolis is implementing restrictions after local authorities warned that 20 cases they found could be the tip of the iceberg. pakistan's lawmakers are set to choose charif as the leader

after imran con was ousted in a no-confidence vote. the former pm fell out with pakistan's army over a range of issues the military has ruled the country for almost half of its 75 year history. no prime minister has completed a full turn in that time. global news, 24 hours a day, on air, and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg, manus. manus: thank you very much, juliette saly in singapore. president mike braun and marine le pen face-off offer the final round of the french presidential election. we can focus on the economy and the growing cost of living next on bloomberg. this is bloomberg. ♪

>> i wish to extend a hand to

all those who want to work for france. >> not all those who vote for emmanuel macron should join our move. >> never lose your faith in democracy. must not give a voice to madame le pen. >> i: my supporters to vote for marine le pen. >> the debate we will have in the coming 15 days is decisive for our country and europe. dani: reaction after the results of the first round of the french presidential race. early polling has given the second round with a narrow lead to emmanuel macron. still with us as oliver kettlewell, head of fixed income and global portfolios at mashreq capital. i was checking the latest chatter, there was this big

rally, mike braun will continue to be the president of france. should you be hedging a marine le pen as president of france, and what does that look like? oliver: i don't think it would look good for equities or french bond yields if le pen came through. we are slightly underway european equity, but mainly because of the war and europe has slower growth fraud -- growt h prospects. i think macron will probably pull group, but you will probably get noisy headlines over the debate. i did not think president trump would win in the u.s., but we are slight underweight european equity right now. manus: that is more on the recession risk. when you look at the ecb, their biggest concern is a blowout in yields because of political

dislocation, for an escalation coming up energy supplies to are from russia. there is still a great deal of bond risk in europe, or do you pick up any yield there, but there is no riches in yield in europe is there? oliver: for a ust based investor, european bonds are not that attractive i agree. the ecb recognize the fact that peripheral yields can blowout. and i think they are looking at ways to mitigate that. in general, that ecb policy is closer in line to the boj. they are not going to raise rates anytime soon. dani: on the other side, i know that you are looking at overweight em. i wonder what you make of the latest data that shows hedge funds are the most sure em on

record. what would you say to investors that are shunning this space right now? manus: john law. -- go long. [laughter] oliver: i have not got the greatest record, if you take the average hedge fund it has under performed the s&p. so i think i would rather take a long only view that a hedge fund. manus: it's ok, we can paraphrase aggressively for you. what are your best performing assets, we have got 30 seconds. just don't want to belong china bonds. oliver: these market-friendly incremental policies coming through on the chinese government, the latest being the financial stability draft law that is coming through, so i think is coy to be positive china. so don't give up on china yet,

despite with these hedge funds are saying. manus: well done, thanks for being with any night. oliver kettlewell, head of fixed income at mashreq. we w

manus: it's bloomberg daybreak: europe, i'm manus cranny with dani burger in london. dani: advantage micronic, the first round of that french presidential election gives the incumbent and narrow lead over nationalist rival marine le pen. china's factory inflation top forecasts. the nation's bond yield premium over the u.s. vanishes.

ukraine warns that russia is renewing its offensive in the east. johnson and bonder lien visit kyiv, while austria's pm will visit putin in moscow. oliver kettlewell was just telling us it is an ugly start, and to some degree it is confusing. odds are selling off across the curve. tens are getting hit especially hard. if this is all about qt, you would expect it to be the front and. but the market is acutely aware of the busy week we are going to get from u.s. data, cpi and ppi are all on deck. manus: the bond market is perhaps twitching a little ahead of the 4% print we are expecting. on friday with bloomberg, and there is this baying for blood in the bond markets, they want to test the 3% level.

2.77, it looks like a tantrum but all it is is a reappraisal of inflation risk. dani: baying for blood in the bond market, that is some twisted poetry that bond managers probably aren't appreciating right now. manus: my talents are lost. dani: i 90 you have got real yields on the mind. manus: let's have a look at the real yield. real yield is what does concerts oliver kettlewell, he says it is more malevolent for the equity market and he is calling for a bear market between now and the end of the third order. -- quarter. we will bring him back at the end of the happen put it to him.

-- half and put it to him. manus: dani: dani: the bond markets are heating up. most of the selloff is in asia after concerns over mobility restrictions. also seeing pain in this european index. and if the s&p 500, given what is happening in the bond market, and nasdaq futures down .7%, this is not a bloodbath, just like losses. manus: jp morgan, citigroup and -- across the assets there was a pop and then it was given back. the dollar is up for eight days in a row. you're looking probably more

malevolent in dollar-yen, 3%, what will that do to the dollar. mobility being shut down in china is what is driving the commodity markets lower as you see oil decline for two straight weeks. dani: it's interesting looking at the euro, i saw one call saying it should hit 1.1 zero in the aftermath of the election. let's take more into that story in the final days of the french presidential race, cost-of-living was on the top of voters minds. it looks like it will feature prominently ahead of the april 20 or runoff -- 24 runoff. let's get over to bloomberg anchor francine lacqua covering the election in paris for us. and she has a guess.

francine: we are joined by luc viennet, the head of markets at bank popular. the markets are discounting a marine le pen presidency, are they complacent? luc: i don't think they are complacent. i believe the outcome yesterday was pretty much positive for the markets. the risk was to have macron and le pen less than 25% in the first round. we did not have that. for the second round are about 53-47%. francine: that is tight. luc: it is ok.

for two weeks we could have worries by financial markets if the polls go back to 51%. francine: this feels very different to 2017. macron has been in the job for five years, and people are going to not bother voting. one candidate said don't vote for le pen, so is there a danger that voter turnout is so low that it gives more momentum to marine le pen? luc: i think melenchon gave an opinion this time. five years ago was positive for my throne -- macron. i tend to believe is is a better situation than five years ago, still it is very tight. francine: in 2017, monsieur

macron got 67% of the vote, he could only get 53% this time. luc: 53% is fine. francine: what does it mean for the markets? luc: if marine le pen is the president, the main indicator to look at is the 10 year spread which is currently at 55. it could go to 100 or above. i think the main point is if le pen's president, and even if she does not still support frexit, because of the fact that she wants only friends to decide. the european union is not deciding anymore anything. and it is an exit de facto

basically. francine: i know you are not a politician, is the big day april 20 when you have a debate? that is what five years ago took ari le pen down. luc: it was an important point, but it was not the only important point. this time it will be very important. we will see what is the outcome. she will be much more prepared for this five years ago. francine: what are her main weaknesses right now? she has had high momentum because of the high cost of living and she has been very vocal about the high cost of patient. if you look at my throne --is it her relationship with vladimir putin that could change the game here? luc: no, i don't think so. the french people are versatile and they want to change things once in a while.

basically, it could be more that they vote against macron that for le pen, again, i tend to believe that we have a 75% chance to see mike braun with-- to see macron win. francine: marine le pen has said she wants to nationalize utilities. luc: the main indicator is the bund spread. when you look at the cac 40 year-to-date, it's outperforming euro stoxx. it is down 8% whereas the euro stoxx is down 10%. i don't think the cac 40 will be much affected.

if we have some calls at 50-50 we could have uncertainty again. francine: talk to me about the parliamentary elections. even if marine le pen becomes president, if she can't govern because she does not have parliament either, how will the markets take it? luc: it could be a mess. but anyway it is good news. if she comes to power, again, it will be as i said they panic button. the probability is 25%, but the parliamentary election will not be the main focus if she comes to power. francine: that is luc viennet, head of markets at bred banque

populaire. we will have plenty of coverage from paris throughout the day. manus: francine lacqua with luc viennet, the head of markets at bred. juliette: president zelenskyy says he expects russian forces to widen their offensive in the east of ukraine this week. let's as the country is ready to respond. prime minister boris johnson became the first g-7 leader to meet his counterpart face to face -- face to face in kyiv. china's biggest covid outbreak continues to spread despite extended lockdown of shanghai's 25 million will. there were more than 26,000 new cases reported, an all-time high.

guangzhou implements restrictions after local authorities one that the cases they found could be the tip of the iceberg. elon musk has decided not to join the board afterward her. -- board of twitter. he disclosed recently that he had taken a 9.2 billion dollar stake in like company. ev-maker nio says supplies remain off-line affected by lockdowns as china battles the highly infectious omicron variant. global news, 24 hours a day, on air, and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. dani: juliette saly in singapore. coming up, with factory

inflation higher than forecast and the largest covid outbreak, we will look at what is moving the markets in china. 5% decline on hong kong tech. this is bloomberg. ♪

manus: it's daybreak europe. straight to your global market matt. bond of dislocation is testing the mettle. 2.77 is where we are trading on u.s. 10 year bonds. the aussie is about 3% for the first time since 2015. michigan inflation expectations are the number that will be double punched in the bond market, as well as cpi tomorrow

at 8.4%. bond markets are in a malevolent mood, dani, good morning . dani: we are now just four basis points away from 3%. a lot of red when it comes to asian markets, let's dive into what is moving markets in china. factory prices rising more than expected and a covid outbreak. we are joined now by cheap asia economics correspondent enda curran and juliette saly. the numbers we got today, the mobility restrictions, what's the overarching picture of the economy in china? >> it's one of ongoing disruption and uncertainty. the very aggressive approach to containing covid is continuing as we see with the lockdown in shanghai. in guangzhou they will be going down a similar road with testing underway. that is pushing pressure on the

consumer side, and as a threat to the manufacturing industrial story in china. there has not been widespread reports of china, but is it is expected to start showing up soon we saw some of that in the indian inflation data you mentioned. consumer prices reflecting 878% increase in -- a 78% increase in vegetable prices. and factories are now facing rising prices and covid disruptions. it is certainly downward pressure on the economy. manus: let's cross over to jules, there are consequences of this covid policy and of tech policy on the equity markets. jules, what did you do with the yield advantage? [laughter] juliette: it's going to turn negative for the first time

since 2010. not too much of surprise as market watchers are expecting. we have been seeing foreign investors sell out about $14 billion worth of chinese sovereign debt the past couple of months. the question is if this will weaken the yuan. and what we can expect from the pboc with potential move so the mlf rate. dani: the numbers that she is pointing out, what does that mean for all this plan policy stimulus? enda: on a headlight basis, inflation in china is accelerating rate that is something of a sideshow compared to the broader economic background in china.

it means a lot of concern. like juliette said, a lot of focus on what the central bank will do. there is an expectation that interest rates will come down over the quarter. we are seeing some measures already happening. mortgage assistance is being rolled upper borrowers in shanghai. the government is talking about tax cuts for smaller to medium size businesses. on a headlight basis, you might say inflation is accelerating in china. that would complicate the stingless story. but they will look right through that. it is all about covid at the moment and hitting that by .5% target. -- that 5.5% target. manus: let's get back to the selloff in china market day. i thought the tech route have finished in terms of regulation but no, there is another

evolution. juliette: it's only about a month since we had vows of support from authorities to prop up tech and property as well. there are 26,000 cases in shanghai which we have seen flow through to the ev maker nio. and that crackdown this time on algorithms and what it means for how they try to hook users. the hang seng tech index having its biggest drop in a month down about 5% and flowing through to the rest of the markets. an analyst saying the recent rally may come to a halt now. manus: -- the uk's finance

minister faces scrutiny over his wife's financial status.

manus: this is bloomberg daybreak: europe. i'm manus cranny in dubai, dani burger in london. imran khan is out, pakistan will vote in the opposition leader. the kse-100 up with that best day since 2020. the view is that his successor could be a more u.s.-friendly regime in place. khan has called his ouster a

u.s.-backed regime change . dani: let's take a look at some of the front pages. the financial times and guardian, and the other big story is the scandal surrounding the chancellor of the exchequer. sunak has asked for a formal inquiry after it emerged that his wife took advantage of a legal tax loophole. let's get more with bloomberg's leigh-ann gerrans. for our international audience, set the scene for us. >> we've woken up to this news that rishi sunak has asked for this independent review into whether he has correctly declared his financial interest. this comes in a letter to boris johnson. in that letter he did say he was completely felt that he had done

everything correctly. he has had a difficult couple of weeks. this comes after we found out his millionaire wife had non-domicile status and the u.k. which means she doesn't have to pay u.k. taxes on her overseas earnings. according to analysts, she could have saved millions of pounds for not having to save -- to pay those taxes. this causes a conflict of interest if you hear from lots of the opposition parties. it's been revealed that the chancellor sunak himself held a u.s. green card, that was a yard have to his chancellorship before he did give that up. manus: if you look at some of the national broadcasters, the mauling that sunak was given in terms of raising taxes while at the same time - it is how it

looks, the spirit rather than the actuality here. is he in a precarious position? his wife is moving out of downing street, will he? >> i did see the interview, and she did have a lot to say. a lot of interest from opposition were trying to say that the chancellor is just out of touch with the real world. as you've mentioned, it's been a really difficult time for people living in the u.k. we've seen a massive squeeze on our household incomes. and of course, rishi sunak has put up the taxes. we had a rise in national insurance, we're also seeing a rise in gas bills which is affecting every household. the big question is will this derail his chances of becoming prime minister? it was hotly tipped that he could have been, but we will have to see how this plays out.

manus: leigh-ann gerrans in london. we leave you with a bond market which is in theory -- in fury. bloomberg markets europe up next. this is bloomberg. ♪

>> good morning. welcome to "bloomberg markets: europe." i am anna edwards in london. mark cudmore joins us from singapore to take us through all of the market action. cash trade is less than one hour away. here are your top headlines. the first round of the french presidential election gives the incumbent a narrow lead over marine le pen. the relentless rise in u.s. yields continues to send waves through global markets. the