dani: this is bloomberg daybreak: europe, i'm dani burger with manus cranny in london. manus: flying to king dollar, taiwan has for a record monthly decline against the greenback. the growth forecast is slashed. amazon posts a surprise loss as apple warns supply constraints will hit the revenue line.

elon musk unloads $4 billion of tesla stock to fund his twitter deal. dennie, it's been a wreck of a week, 20 year highs yesterday but are we in one of the most aggressive final stages of the dollar rally. that is the mood from kit dukes who says all the ingredients are therefore a short-lived overshoot, but. as. -- but a fair yes. dani: it is no longer bought volatility that has captured the attention of markets, it is now fx that has cut up. this chart is showing the jp morgan fx volatility that has shot higher, while bond volatility has stayed constant. is this the next thing we need to look at as the risk for contagion to make something break? manus: we took this back to

other periods of time, the fx volatility is most demonstrable in the yuan. but i think it is the magnitude of the outflows from the yuan that are the most unsettling for our nerves. the biggest evaluation since 2015. bloomberg as a house slashes the china growth to 3.6% now for the rest of the year, a heck of a cut from where we were. dani: the offshore following the biggest since it was created in 2010. manus: oil with a downgrade from bloomberg in regards to what is happening in the china outlook, three point 6% from 8.1% last year. nymex crude still in the green, dollar is lower against the yen

off that 20 year low. and i have with the natural gas futures in, let's come back to the glows from yesterday evening. the aussie gives back on the slowdown in china, still in the green, but overall this month down 5%. dani: let me give you your look on equity futures. i was prepared to tell you this is all about apple and amazon. there forecast missing, amazon had fallen within 9% post market. but nasdaq was down more than 1%, at the moment futures down just half a percent. they are rising in sync with the hang seng tech index which is gaining off the back of politburo pledges. i wonder if these apple and amazon earnings are going to come back to bite u.s. tech later in the session. manus: let's get to our reporters. laura wright is in london hq

with the latest on tech. enda curran will talk through the china downgrade. and juliette saly is in sydney with all about market action. and maria tadeo as ever has the latest new frame. dani: kicking off with apple and amazon which tumbled in weight training -- trading yesterday, let's go to laura wright for a roundup. laura: apple is down 2% in after-hours training. it was most macro headwinds in focus, ruling lockdowns in china exacerbating supply chain congestion. they had a record not holiday second quarter. demand for macbooks were robust. the ipad was hit by supply chain congestion, wearables below estimates. services was a bright spot in the launch of apple tv plus act in 2019, but supply chain's will hit apple $4 billion to $8

billion. amazon trading down almost 10%. expensive overexpansion, they doubled their delivery capacity, they doubled warehouses. this knowledge with surprise loss for this quarter, and a forecast surprise loss for next quarter. manus: thank you for the tech roundup. build it and they will come did not happen. the china story is deteriorating amid lockdowns in shanghai, let's get to our economics correspondent enda curran on the slashing of the growth rate to 3.6%. is this your best case scenario, worst case, run us through. enda: it seems to be the scenario right now. zero covid is hurting the economy in a much deeper way than anyone anticipated. bloomberg economics talking

about growth of 3.6% this year. that's all down to covered zero ruling lockdowns, her to consumers and industrial production. we did have some news with a readout from the politburo meeting. they are talking about more support for the economy and have highlighted the need to boost consumption. they are talking about taking pressure off the property market. there is reference to platform companies as well. that's being taken as a signal that they are getting serious about the growth story in china. we don't have specifics on measures, but it indicates horse --more support is coming. dani: that's and the hong kong. -- enda current in hong kong. we have progress on talks between u.s. and china on company audits. let's bring in juliette saly with the details. juliette: we saw a huge

turnaround before those politburo lines were released i have an hour or so ago in the morning session in hong kong. this was on the back of this bloomberg's group and speculation that you could be seeing and easing in this crackdown on china tech, a sign of progress in talks to keep u.s. stock markets open to asia's largest economy. and we had china bowing to support the healthy growth of platform companies. you can see these huge grains on and the likes of alibaba, lifting the hang seng tech by the most in six weeks. when it comes to overall asian market sentiment, japan is out of action today. this line out of hong kong is lifting the regional index, also gains in south korea with samsung. in the csi 300 up by 1.6%. those lines about supporting the economy starting to give a leg up to investors. we are about to go into holidays as well, so a liquidity low

ahead of the mayday long weekend. we are continuing to watch this downward pressure on the offshore yuan. the dollar is weaker at the moment, but it is poised for a record monthly drop. every investor looking at the acceleration of that and are we going to see similar to what we saw in 2015. manus: and what more rrr cuts might come. juliette saly, that you very much. biden has asked congress to provide a further 30 $3 billion in additional military and humanitarian aid to ukraine. let's get you maria tadeo in brussels. biden's plans to deliver that aid package, put it in context? maria: the short answer is huge. this is the biggest package we have seen so far. more than $30 billion, the largest single package sent to ukraine.

you have more than $20 billion in weapons and defensive systems. about $8 billion in financial humanitarian aid. what it shows is that the united states is becoming convinced that ukraine can win the war and make good on the promise at the start of the week that the united states would do everything to help ukraine until final success is completed. weapons is something ukraine has asked for four weeks now, it is clear that as long as weapons keep coming in, ukraine is not going to surrender any major cities. this is happening ahead of may 9, this is seen as a key date for both ukraine and russia, the victory day parade that is expected to take place in moscow. the expectation is that mike will continue, both sides buddy -- fight will continue, but for

ukraine, this is huge aid. dani: preparing for the war to extend. that's our europe correspondent reporting live from brussels. let's take a look at key things markets are going to be watching out for. at 10 a.m. ukraine time we get euro area gdp and cd -- cpi figures. also, russia's rate decision has been continuing to ease to stabilize markets, and likely to add to that in the wake of sanctions. 1:30 p.m. u.k. time we expect the latest on u.k. -- u.s. income and spending. manus: coming up on the show, we are going to have our recession watch, what is the latest gdp from the united states of america, what is the surprise retraction really mean? we discussed on daybreak europe.

manus: it's daybreak europe, i'm manus cranny alongside dani burger. dani: we have to take a look at hong kong tax. this has got a 12 punch of some noise around u.s. auditing, but also what is happening in china. manus: the currency on its knees, the biggest evaluation since 2015. we are also seeing talk of rrr cuts to come. the verbal intervention is this, to strengthen the macro adjustments we strive to achieve full year economic development goals and to keep the economy running within the reasonable range, those are the words of the politburo. let's get to our guest dan zwirn

, chief investment officer at arena investments. the yuan is being crushed, how concerned should global markets be with the worst rout since 2015 when the yuan was devalued? dan: over the midterm we shouldn't be too concerned. we are not big macro investors per se. as we have seen in other markets, omicron driven changes are ultimately temporary. i think we would expect there would not be a material change in our outlook. dani: your outlook is that default rates are being underestimated. walk us through work. should -- three where we should see some of that risk being priced in. dan: it has been paired with

monetary policy since 2012. when you have those two things together, you create inflation. when you create inflation, you create either more inflation or you pop the bubble with appropriate changes in policy, neither of which is happening. as a result, you get increasing speed up inflation which has to be curbed by a recession caused by the overall economy changing. as a result of that desperate search for yield, a number of the bubble markets within fixed income have been developing, and all of those ultimately start from where those financial obligations have been financed. and that all is determined by investment-grade buyers who are financing the financiers, they have seen as i'm sure you saw, investment grades down by 5% which is cataclysmic in that department.

manus: d think it is the worst past four investment-grade? that kind of deflating of a cause i bubble -- quasi-bubble so to speak. dan: i think there is more to come. i think the majority of that was a search for yield by a duration. a lot of that was caused in the first quarter by expectation for changes in rates. we haven't seen the changes in rates we are going to have to have, much less correlated spreads in river -- rates in credit spreads which will cause further damage. dani: when you look at what the politburo is saying talking about supporting the growth of platform companies, this idea of verbal intervention, is anything they are saying enough for you to take on more risk, or are you

still approaching them with hesitation? dan: even if growth returns which i think ultimately it will, there is going to be a massive dislocation in terms of overextension of credit in china. we are focused on nonperforming obligations. expectation for growth over the long-term should be high. what we've seen is only the beginning of the credit issues with the extreme issuance of unsecured debt. in a place that is relatively undeveloped in its on the solvency -- insolvency practices, the property market is only the beginning. manus: the credit market corollary you have laid out sounds pretty tortuous for bank credit and pretty tortuous for other financials. is that where you are going to see more pain? dan: in the west actually, i am

relatively sanguine about bank health. they have not been able to lend much since the gmc. a lot of that is going to, in non-bank financials which you referred to as shadow banks, which has real consequences since a lot of that money is in pension companies and insurance companies that need that yield. dani: this reminds me of our conversation with standard chartered which said i am more confident about chinese housing cycles, and then hsbc -- manus: they are more sanguine in their outlook. dani: when you look at these two banks with different views, does that change your confidence in their outlook, or is it just about the shadow banking and the private credit world? dan: anyone who looks to banks for how they are looking at their own capital, does so at

their own peril. we see it on the ground, we have private obligations in over 20 companies, i think the real issues are driven by this inflation in western markets and frankly, it would be wonderful if the united states and european governments were as responsive as the chinese government was to what they see in their own markets. dani: perhaps we will dive into what that responsiveness could look like. that's dan zwirn chief investment officer of arena investors. a surprise contraction in the u.s. economy, we will discuss that with dan. this is bloomberg. ♪

>> if you look at small business

starts, they are higher than ever. wages are up. we talked to ceos about their businesses, the economy is resilient and growing. obviously, we don't want to see this, it is disappointing. but we weren't surprised, and i don't think it is a trend. >> water businesses telling you, secretary, about the consumer right now? this has a lot to do with our trade imbalance, not a lack of spending by consumers who seem to want to spend even in the face of rising inflation? >> people are employed. unemployment is at a historic low and wages are up. people have money to spend. obviously, inflation is a drag, we know that. but if you look at the fundamentals of this economy, productivity, investment, wages,

hiring - it's all strong and resilient. >> last time we spoke about the competition and innovation act, this is been in the air, on ice if you will, and it includes the chip act to incentivize domestic chipmaking, a remarkable to see some progress. the minority leader in the senate saying they have a timeline they have agreed on. but so far, they have not even been able to create a conference committee to hammer out differences between the house and senate version. if this is a national emergency, they need to make chips in the u.s., why is it taking so long? >> yes, by the way, it is a national emergency. talk to the ceo of any national defense contractor, they need chips to make sophisticated weapons.

talk to the auto industry, they are still furloughing workers because they don't have the chips to make cars. you don't have to believe me. i was shiny what it would take to get congress to move more quickly, but i can tell you it is past time and they do need to do their job because the american people deserve to be safe. this is the single most important bill to bring down inflation in the long-term to fix our supply chains, and to create hundreds of thousands of high-paying american manufacturing jobs. i will say i am optimistic. they have appointed conferees, they did make this announcement yesterday. i am hearing more from senators on both sides about the urgency of this, we just have to kick it into gear and get it over the finish line. dani: the u.s. commerce secretary with her take on the weaker than expected u.s. gdp

printed. the u.s. economy posted a surprise contraction. still with us is the chief investment officer of arena investors, congress have not been so successful to put it mildly, what are we getting wrong about the state of the u.s. economy and specifically, the consumer? dan: sometimes those economists aren't reading history. we are in a position similar to the late 60's and early 70's, you just can't spend more than you have. it's been so long since we have had that combination of bad fiscal and monetary policy but it is sometimes hard to remember. larry summers has been spot on all the way through this. not everybody is missing it. with regard to the consumer, we are seeing issues. delinquencies across consumer credit are up. the consumer is gorged on housing, on auto, and other

kinds of discretionary spending. with rates up and inflation material up, there is going to be a dentist there. manus: the equity narrative has been about amazon dropping 9% overnight, facebook months ago got trashed, when you see that kind of serious repricing on tag , -- pnon tech -- on tech, where you look at credit in tech? dan: but the names you have mentioned, they have attained ubiquity, so it is good to be them. but there is a whole world of companies that are trying to grow and have been fueled by questionably appropriate venture capital for the last several years. when that chain stops, and the

next guy down the line is not going to pay for the stock of the company added increasing pre-money value, suddenly the music stops. so i think we are excited about the opportunities to provide growth credit related financing to folks who have not had to think about that. that will be interesting over the next several months. manus: thanks for coming in, that is dan zwirn, chief executive and chief investment officer at arena. i love the words ubiquity and monopoly. more analysis on the crunch in china's currency, the biggest routs since 2015, the spillover effects are splendid in e.m. currency markets. dani: by looking at a dollar you on making some gains back, the

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manus: its daybreak thereof, i'm manus cranny in london alongside -- daybreak europe, i'm manus cranny in london alongside dani burger. dani: the offshore yuan has for a record monthly decline against the greenback. amazon posts a surprise loss as apple warns of a hit to revenue.

elon musk offloads $4 billion of twitters -- tesla stock to fund his blockbuster twitter deal. king dollar still has its crown although it is declining off of those lines from the china politburo. the worst declines since the offshore yuan was created. dani: manus: it was --i love what kate dukes says, we are at an aggressive and potentially final stage in the dollar rally. you've got the aussie at the top of the tree, up .75 percent. it is down 5% on the month, giving back all of the q1 gains because of the zero covid policy in china and the downgrade to

growth. a small bounceback, but the ingredients of an overshooting are in place. dani: and we are looking at a euro that is a little stronger. i wonder how much this is going to make a difference, the french economy stagnated, we had expected .3% growth -- 5.3% growth. this is something we saw in the u.s. yesterday, economists are struggling to get a grasp on the economic picture. manus: a spending decline, investment slowed, this is all some would say as a result of the beginnings of the pushback on high energy and gas costs, concern around ukraine, and as our guest said, maybe if european and other monetary policy authorities took the lead

from china, we would be in a different position. let me show you cross assets this morning. the oil market is up at 1% despite the downgrade on our house viewed the chinese growth. dollar-yen is on the board, it is coming back from a 20 year high on the dollar. goldman sachs says intervention will save the yen. bank of america have come in with their view on the yuan. and natural gas futures in the u.k. yesterday down 21%, that speaks of the volatility in terms of looking for alternative sources of gas from russia. dani: can i tell you phrases i have heard about equities? it calls this week petrified caleb chasing. -- tail chasing.

it just shows how much confusion is in the markets. look at european stocks up 1.5% after a big rally in u.s. stocks yesterday. miss is in the forecast for amazon, china fears overspending, losses easing a lot of that thanks to the moves out of china, hong kong tech doing very well. let's dig into that china story. when china's tightly manage currency depreciates against the dollar, it can be hard to stop. more than six years after the 2015 devaluation roiled markets and spurred over a trillion dollars in capital light. we are joined by paul dobson reporting live from singapore. the you want is coming back a little bit, but also the slightly, but -- the yen coming

back very slightly. paul: the yuan having a bad time, the yen having a very bad time. let's talk about japan which has been a catalyst for weakness across asia's fx markets. you have got a central bank that is firmly committed to keeping its very dovish policy. we had confirmation of that again this week. the government providing little bits of support for the consumers that are being hurt by higher import costs. that is the boj policy to keep down bond yields and interest rates to try and get inflation back on track in japan which we have not seen for a long time. companies are starting to raise prices and get away with it and be endorsed by that in the stock market as well, so it is a

crucial time in japan. but you don't want the currency to go down too fast for that causes more problems than it fixes. flip over to china. you have got a competitor in japan. you saw a big rally in the chinese yuan against the japanese yen. at some point, that starts to feel uncomfortable. is it time to rectify it, so all of a sudden, we have seen that big flipped backwards in the chinese currency like you were saying earlier. the worst month for the offshore yuan in record. a risk of an roiling move there, so perhaps the market needs a circuit breaker. manus: you listen to the politburo lines, and if anything, that is fuel to the lower yuan. they want this economy to make those growth targets. i like what kit dukes is writing

in socgen, the dollar is in an avalanche, you are in the progressive final stage of the dollar rally. you have got monetary policy, rrr cuts, and a lack of faith in what we understand about the chinese economy, so where does that take me? paul: there are hundreds of reasons to be bearish on the yuan right now. it's got very low interest rates and plenty of liquidity sloshing about at the moment. it's got a worrisome growth outlook i would say. as well as the covid zero which is a difficult one for international investors to get over, because it keeps this stop-start regime going in the economy. on the flipside, the amount of dollars that has been coming into china all this year and

being converted into yuan is the only thing that has been providing that bull market. the problem is confidence, fears about capital flight, if everybody pulls back at once that creates the unruly exit that people don't like to see. it is damaging for the economy. was telling about the politburo today is they are making comments midway through the market trading session. usually it comes at the end of the day when they are done and dusted. it tells you they are taking this more seriously. they want to give reassurance to international investors that more measures are on the way. dani: it was only last week we were talking about how moves in the bond market could cause something to break. what about the fx market, good the moves we are seeing break something? paul: we saw a big twitter thread yesterday talking about how maybe this is the start of

something bad for asia's markets. people talk about the asian financial crisis. if you are to do a search on how may times that has appeared in stories recently, there would be a good number of occurrences. the general view is we are all long way from that still. china is looking at the benefits of weaker currency for example, it has got a long way to go before the economy is even all that bad. we are still seeing growth, although at a slower level than the government would like. the problem is some of these frontier markets are really starting to feel the pain from the stronger dollar, the likes of sri lanka and pakistan. the question is those middle countries, where are they on the spectrum? they have got more reserves and they are better equipped to deal with this kind of danger sign, this sudden dollar rush higher,

but at the same time, if you look at em performance you can see that people are worried about this. manus: kyle bass talking about fx is a worrying sign to me. every cfo in japan should be looking at their balance sheet. paul, thank you, joining us from singapore. we are going to catch up with another bank ceo, cfo, excuse me, stefan doerfler us in just a moment.

manus: it is daybreak europe, i'm manus cranny alongside dani burger at london hq.

2.4 billion dollars are the estimates, debbie vienna-based lender said net income came ahead of forecast. and the rest split across eastern europe. let's get to the cfo erste bank erste bank for, thank you for joining dani and i. you talk about the rate hikes from czechoslovakia, hungary and romania and robust mortgage lending. do you sit expect more mortgage lending will hold up and grow? stefan: good morning from vienna, thanks for having me. i think we are seeing probably most of the rate hike cycle already especially in the republic of hungary. however the impact of the rate hikes, while the mortgage lending remains to be seen.

lending has been holding up surprisingly well and is one part of our strong operating numbers. dani: step on, are you concerned about whether that holds up given that more than 50% of your exposure is eastern europe? thanks will be dealing with the fallout from the prospect of the reality of war in ukraine. stefan: the war is a big word for many of us. economically it is everything but good. let's look at the region we are operating in. so far, the economies are holding up very well and have been quite resilient. we have a very strong balance sheet at this point in time.

we have a little worried that the overall asset quality might deteriorate. there is a question mark in higher rates, and that is something we are monitoring closely. manus: you talk about the overall risk environment remains benign, lending costs are at 13 basis points, do you expect the risk environment given the unknowns from the russia-ukraine war, dear expect the overall risk environment to deteriorate and if so, materially, and therefore this 13 basis points, will that materially increase? stefan: once -- one should expect deterioration given all

the crisis around us. we are carrying forward a substantial level of provisions from the pandemic which will help us to mitigate the impact. we are guiding for the full year, for less than 20 basis points in risk costs which will still be a fantastic level. let's see how the second and third round affects of the crisis develop, and we will be able to assess in more detail throughout the year. let's hope the best and prepare for the worst scenario. dani: with your excess capital, buybacks or m&a, what should we be expecting? stefan: we are wrecking priorities there. we are committed to organic growth which is priority number one. we are looking into opportunities which might derive

from the crisis lasting longer than usual. this is something we are closely monitoring and i assume in the next couple quarters there will be opportunities. 40-50% is our dividend policy with regard to payouts. we need to monitor the overall geopolitical and economic situation closely. dani: thanks much for joining this morning, that is the erste bank cfo stefan doerfler. the hang seng has surged 7.5%, the biggest gain in a month. it's all about hopes that the politburo will step in to support healthy growth.

is this verbal intervention talk, leaders pledging for the economic targets which is leading asia tech stocks higher. manus: the initial pep in the step of that tech was china and the u.s. negotiating on-site audit checks as that risk of delisting comes through. let's give viewers a taste of the italian energy numbers. ne came out with $3.27 billion in terms of net adjusted income, almost a billion dollars above the estimates. operating level of $5.1 billion, above expected. let's get to juliette saly, she is in sydney. juliette: president biden seeking an additional $33 billion in aid for ukraine, and

new authority from congress to seize and sell property from oligarchs. a british national has been killed in ukraine and a second person is missing. he was believed to be fighting with ukrainian forces in either mariupol or donbas. the mayor of kyiv says authorities cannot give safety to residents after russian forces pullback from the outskirts of the capital. the exodus of businesses and people has caused at least a billion dollars to the city's budget. >> the senseless war, the genocide of the population, because our city is destroyed. i'm talking about u paul, -- mariupol, bucha, many cities which have been destroyed. juliette: 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. dani: juliette saly in singapore. we are going to get into the round up a busy week for big tech. hong kong tech shares are higher, but what about the u.s.? that story next, this is bloomberg. ♪

dani: is your friday edition of bloomberg daybreak: europe. apple has predicted that supply constraints could cost as china lockdowns hit their supply chain. pandemic spending surges are catching up with amazon has e-commerce sales slow. let's go to laura wright with

more, investors are being very scrupulous of these earnings buybacks from apple but not enough to satisfy them. laura: $90 billion not enough to satisfy. a record second quarter, but not enough to fight sentiment, apple down 2% in after-hours trading. they expect that hit because of rolling lockdowns in china to cost between four to $8 billion. robust demand for new iphone models and new macs, and their apple services division saw a record quarter. i've had demand was hit -- but ipad demand was hit because of a lack of semiconductor chips and an inability to get the parts they needed. manus: let's get to our quicktake editor, alex webb is with us. are there long-term concerns

about apple earnings? it's a wide gap, anywhere from $4 billion to $8 billion. alex: there has always been concern, it will continue into subsequent quarters. if you don't satisfy in march, that goes into the third quarter, and by that point consumers may wait for the new iphone later in the year. is it a long-term head, if they can't completely fix the supply problems, then baby. -- then maybe. but apple gave hints about supply in north america that they are working on. dani: this set of results feels like a change in tone. it was all about rapid growth, more warehouses, is that fair, this earnings is different from before?

alex: what we've seen in the past is investors had confidence if amazon has a drinking water. what week -- a tricky quarter. investors are talking about getting people used to amazon, but they are left with overcapacity that they don't need. it's not been able as quickly as in previous years to turn that spigot and generate profit. so that does create slightly longer term concerns. manus: facebook had middling earnings. there's a number of different things going on behind the meta-numbers, but run us through your thinking there. alex: they had a middling set of numbers, but the stock pop. after amazon had middling numbers, you had to valuation.

facebook was way down at 12 times forward earnings, so it had low expectations that it more or less beat, and therefore the stock benefited. apple and amazon already at the top, investors were therefore skittish. dani: nasdaq futures down about .7% so far. that's bloomberg quicktake's alex webb. let's pause and reset with natural gas. european futures are opening up in about four minutes. a sharp decline, the fracturing when it comes to how your approaches russia with natural gas. manus: we saw germany step forward in regards to gas and what they can do. but this is clearly a moment where hungary are doing their own thing. a silly have been an outlier in the energy discussion -- italy have been an outlier in the energy discussion .

they are setting up their own way to deal with moscow. dani: the european union morning you will violate sanctions if you open these ruble accounts. up next is bloomberg markets europe. this is bloomberg. ♪

anna: good morning and welcome to "bloomberg markets: europe." i am anna edwards in london. mark cudmore joins us shortly. the cash trade is less than an hour away. failing to deliver. amazon posting losses. and apple warns that supply constraints will hit revenue. china's yuan hits