>> this is bloomberg daybreak europe. i'm dani burger. traders gear up for the central bank's biggest hike in two decades. energy guidelines, the e.u. plans to issue more details for vladimir putin's gas for rubles

demand. and sweden's omx tumbles 8% in minutes. bnp earnings coming in. a huge beat, 2.1 billion euros. that exceeds the estimate of 1.38 billion euros. it is trading revenue. 40% increase. equities jumping 61% handily beating the wall street peers. european banks strong when it comes to trading. stronger than wall street. the question that emerges, can they sustain this type of beat given that it was a spike in energy prices? we'll hear from bnp in just a bit

it is a volatile week. welcome to the volatility. that is a central bank week. no disappointment so far. rba hiking more than expected. in the u.s., here is how we're gearing up for tomorrow. the 10-year real yield has gone from a negative 15 basis points last thursday to positive at the close yesterday. these are crushing moves. we saw in the ism numbers yesterday. could that mean to a bigger hike or at least a forecast bigger hike from the fed? that would lead to a crushing blow from the tips market. that is sending the 10-year yield above 3%. ended yesterday slightly below that. japan is closed today. we're not currently getting cash trading in the u.s. 10-year yield. we are seeing markets up and

running when it comes to the u.s we had a rebound in u.s. stocks yesterday. perhaps some dip buying playing through. u.k. stocks are moving well. on holiday yesterday. they have to play catch up to the negativity we saw in europe. gold continues to decline. the bloomberg dollar, most of the losses coming in the form of a much stronger aussie dollar. the reason behind the aussie dollar move, the latest on the r&b rate division. -- rba rate division. john will fill us in. starting in australia which has hiked interest rates for the first time in more than a

decade. this was bigger than expected. the bank that was once reluctant to move in this manner. what has the reaction been like? >> previously a selloff. the three-year yield. basis points almost immediately. first time since 2014. the australian dollar also got a big lift. 1.4% against the u.s. dollar. the u.s. dollar has been pushing all the other currencies around because after this move by the rba, the fed is still expected to be far more -- than most others. >> garfield, thank you very much. garfield reynolds giving us the latest on tomorrow's fed rate

decision. the latest on asia markets. david, starting where you are in hong kong seems like you're going to be able to go to pools and beaches. >> yes, from thursday and two weeks after that, i'm a club person. i would be at a club until 2:00 a.m. by the way, i'm back in the studio, really underscores the story. just coming out of the lunch break now. the bench marks trading at 1.5%. it was a topsy-turvy session. hang seng index, at the start of the afternoon session. the reason i had the cost index up there, it was a 14-year high. let's talk about alibaba.

>> my bedtime is 9:00 p.m. i have no idea what you're talking about. alibaba. talk us through the volatility there. >> yeah, a report out today, alibaba's home headquarters, the city, an individual -- gentleman jack ma.a soft rebound. that looked like a small dip. that is $26 billion wiped out and then coming back up. as things stand, the clarity that we have is in the price. i imagine we'll follow this story closely. >> thanks very much.

giving us the latest on alibaba and his nights out. the e.u. will provide more detailed guide fans in the coming days on what companies can and can't do under sanctioned rules to pay for russian gas in rubles. the risk of moscow halting supplies. john, what were the key messages from this meeting yesterday of the energy ministers? >> well, i think the message is -- over how countries in the e.u. will be able to pay for their gas while countries try to present the united face, france's minister said the countries are not wanting to pay in rubles.

but are willing to pay in wreubls for a few months at least. we'll see where that goes. >> thank you very much. european power reporter john ainger. back to bnp which reported a 19% year-on-year rise in first quarter net income. the trading activities surged. equities trading revenue up 61%. >> the growth is for the fact that we entered the quarter with a very risk averse position. on top of that, if you look in europe there, a high demand. we were open to do that. we have the activities in prime

brokerage and prime equities. that was strong demand. >> that was b.n.p. paribas c.f.o. we'll hear from him later in the show. key things that market watchers will be keeping an eye on today 10:00 a.m. u.k. time, we're expecting u.k. data. the largest economy, a couple of key data points for the u.s durable goods around 3:00 p.m. u.k. time and finally the big one, the beginning of the fomc policy setting meeting. day one of two-day starts. up next, we're going to talk markets. coming up, we'll also talk energy, oil. i'll be speaking with olli

henson. this is bloomberg bloomberg ♪

>> it looks like the 10-year has priced in the expected rate hike. >> we have more inflation. >> at some point the economy starts to weaken. the fed will be less hawkish. >> a year from now, the 10-year yields are most likely going to

be lower. >> i don't think we're at the peak yet. we have not backed off in the market. you can see any -- have not seen capitulation yet. dani: some of the bloomberg guests answering where will u.s. 10-year yields peak? most think it will end above 3%. joining us in and out of now, the chief investment officer at bank a. we're already there. over the past two trading days some breakneck moves. 10-year plus 3%. 15 basis points. what is your take on this? >> we do think that the u.s. 10-year yield is probably going to go as much as 325 in the coming months. reducing. when we consider the markets for the world such as the chinese bond markets. dani: certainly you have some

issues there. when you look abroad especially are there any duration buyers left? >> well, we think that there will be because you know, a lot of pension funds have a lot of liabilities to match and therefore this type of interest rate level, this is becoming interesting for many -- to start again doing investing. also what is interesting to watch is the u.s. mortgage market. you know that u.s. mortgages are now at 5.4%. so it means there is going to be a big impact on the real estate market in the u.s. and this is going to slow the economy and the fed is going receive some restriction, which is what they are trying to achieve in the current cycle. dani: it is interesting you say that. perhaps yields looking at attractive levels here to buy again. people have said that frequently

over the past few weeks. those who have said it continue to get crushed. so what do you see as the all clear signal? the all safe to dive back in to be sure that fed rate hikes won't continue to hurt any long bond positioning? >> you know, we are never sure but the -- the future, but we are currently -- another way to think of the position and we think between 3 and 350 is the level where we would want to become bank neutral. obviously very difficult to time the exact moment. because of the eye level of mortgage rates as i was explaining before, we don't think there is a huge margin for rates to go much higher. and the other side of the question is clearly the inflation side. we think that inflation is very high currently. we know it is 8.5% in the u.s but we do that slowly inflation for sure

will diminish. we do expect by the end of 2022 to have inflation in the u.s. slightly above 7%. 6% in europe. small improvement in inflation is something which will be favorable for the treasury market as well. dani: presuming that you do get some more calm in the treasury market, that yields top out soon why not be more bullish in this space especially given the destruction that we have seen? >> well, actually, i think we are a bit less than neutral. our cash positioning needs to be neutral. also some options strategy. we have a hedge of something like 6% underweight in equities. why are we not more bullish?

basically we know that the central banks in the world want to reduce you know, demand. we do think that earnings of the company in the coming months are not going to be as high as analysts expects. there were expectations that corporate earnings would grow by 10% or 11% in 2022 at the beginning of the year. we think probably only slightly positive or slightly negative. so we think that the markets need to reprice and that is what has happened so far and there are still a lot of uncertainties in the market. the conflict noo ukraine seems to be reescalating a little bit. dani: if i can jump in here. apologies for interrupting but i want to get this in. i want to know to what extent your concern goes. mike wilson over at morgan stanley points out the fact that

real yields, real earnings on s&p 500, the lowest since 1950. he says anyone who tells you we are in a bull market has a lot of explaining to do. would you go that far and say we are in the throes of a bull market now? >> i would not go that far. there are three main threats we have to monitor. the situation in china. will the chinese be able to manage -- they want to stick to the zero covid policy. we need to monitor what is the situation in china. much worse results in terms of growth and for corporate earnings. we need to watch deflation. we also need to watch the

evolution on this russian-ukraine conflict to make sure it does not escalate to the point where nato gets involved. dani: hold those thoughts. we'll get into that more in just a bit. chief investmentors stays with us. >> the u.s. supreme court is reported to be poised to strike down the landmark roe v wade degrees, women's right to abortion. there is preliminary support from four other republican-appointed justices. they are scheduled to rule on the case by july. a flash crash in europe yesterday. tumbling after a sudden 8% decline in swedish stocks.

a u.s. bank said one of the traders made an error but it was corrected within minutes. boris johnson is set to deliver an address to ukraine eas parliament today becoming the first world leader to do so. comparing ukraine's struggles to britain's during world war ii and they have announced 300 million pounds of military aid to ukraine. powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. dani? dani: thanks so much. coming up, we're going to continue that conversation on china where lockdowns are hitting investor confidence. this is bloomberg.

dani: welcome back to bloomberg daybreak europe. i'm dani burger in london. when it comes to chinese equities there has ban lot of pain over the past year, at one point at the dearth of the selloff. is the bottom in? from last week's bottom we have seen hong kong rise some 18% as president xi talks about supporting more platform companies our guest still with us. is the bottom in when it comes to chinese stocks? >> i would tend to think so. from a position of underweight chinese equities. there is you know, a move on our side to become neutral here this year. so we are becoming more

interested in the evaluationor chides stocks. the future of chinese stocks, very much depends on what the chinese authority will do both on a monetary and fiscal side but also on the -- side. i think part of relief last week was related to the fact that from a regulatory point of view the chinese -- they will be more lenient with the chinese companies but we are a little bit worried about the global environment. we think that there are also probably good opportunities in the u.s. sectors. we need to look at the companies that sell much more than their original situation. dani: that is an interesting call. considering tech has been at the -- bearing the brunt of the beating when it comes to higher rates. you say some companies might be interested in u.s. tech, what

are you talking about? >> well, you know, we want to focus on the companies that are generating i would say cash flows that have strong balance sheet opposed to the tech companies that are just promises for the future. clearly the one that are promises for the future are much more affected by the rate hike. some good earnings and good results. dani: i take it -- i take it you're not a buyer of art then? >> no. dani: it is an even the. it is an e.t.f.we had conversate past month that it is difficult to be an investor who buys on the index level. is this a market where you need to be more discerning?

you can't have that broad based exposure? >> absolutely. i totally agree with that comment, dani. i think it is very important in the current context to be an active stock selector. as said, we want to focus on two things, value and quality. that is what we are considering that works well in the stock market environment. we are focusing on companies that have strong balance sheets, generate cash flow and are in sectors that are attractive we like the energy sector and the healthcare sector at this point in time. dani: i do think it is interesting to look through impact that inflation is having to earnings. just yesterday, clorox, that cleaning company, the staples company missing estimates because of higher prices. in this environment, where inflation is so key to earnings, how you distinguish the winners and losers when it comes to that

impact. >> well, the winner, the ones that have pricing power. if you are like clorox where you don't have a lot of pricing power, you may unfortunately be on the loser side but on the other end, certain luxury companies are quite well protected in the sense that they have a lot of pricing power. dani: really great to speak with you. chief investment officer. now markets continuing to react more hawkish central banks. just in the past hour, we had the rba decided to hike rates more than expected. come up, we're going to speak about that more. the european energy ministers discussing a potential shortfall in gas supplies.

we'll speak about european energy and the u.s. energy complex as well. wti rent down .1%. this is bloomberg. what's it like having xfinity internet? it's beyond gig-speed fast. so gaming with your niece, has never felt more intense. hey what does this button do? no, don't! we're talking supersonic wi-fi. three times the bandwidth and the power to connect hundreds of devices at once. that's powerful. couldn't said it better myself. you just did. unbeatable internet from xfinity. made to do anything so you can do anything. whoa.

dani: this is bloomberg daybreak europe. i'm dani burger in london. fed day one, traders gear up for the fed's biggest hike in three decades. energy guidelines. the e.u. can't remove any ambiguity when it comes to vladimir putin's rubles for gas

demand. an error royaled european markets yesterday. welcome to a heavy week of bank decisions and all of the volatility that brings with it. we got a hike by 25 basis points. more than what we expected with the rba stating more are to come in order to get inflationary numbers in check. let me give you a review of the action. this is a preview of the volatility we could see tomorrow when it comes to the fed rate decision. the aussie dollar giving back some of the gains. stocks are not as bad as they have been but still under pressure. yields, three-year yield is up about one basis point. 14 basis points rather. we are definitely seeing some reaction. not as extreme as it has been but still a really wide range of forecasts from economists but it is the hawkish way that central

banks are going. again, it is the turn over the fed next. when it comes to europe, the e.u. will provide more guidance over what companies can and can't do regarding russia's demand to pay for gas in rubles. let's go back to brussels and to our european power and renewables reporter. we have this meeting yesterday of energy ministers. the key question was will there be a gas embargo from russia? did we get any closer to that? >> so, we're talking about the oil embargo there. we did get germany. they said they would not oppose such a measure. i think what is going to be key is how long the period will be. we know germany is -- russian

oil and gas very, very quickly. pushing for something that happen oafers the course of a few month -- something that happens over the course of a few months. the oil ban has had -- in the past. there is also some real economic concerns. hungary bag land-locked country along -- being a land-locked country along with slovakia. dani: talk me through this coming week, this come month. what would be the next step when it comes to the e.u.'s energy policy? >> right. as you know, there is a lot going on in the very near term. in the coming days. coming back with more

clarification. how member states can pay for russian gas. the position has been quite firm that paying in rubles is not an option. opening a bank account in rubles is not an option. but still some member states looking for compromises. that is the main thing. obviously the russian embargo and then in the middle of the month we're expecting -- the e.u. the plan for how the e.u. really plays out russian gas imports over the course of this year. that is going to include all sorts of things such as higher renewable targets. things like wind farms and solar. that is a key part of it dani: john, thank you very much. bloomberg's european power and renewables reporter john ainger.

i love this in your notes i feel like wie throwing -- you're throwing a little bit of shade on me. last time you were on this program, i asked you what the price of barrels for crude could hit. you said we're ob sing too much on this. the concentration should be on diesel price. why? >> basically because that is what we buy. you don't put a barrel of crude oil in your car. it is the refines products that we are using. that is really where we're seeing the stress now. hover agent this relatively tight race between 98 and 110. we're seeing gasoline in the u.s., heating oil in the u.s. and in europe all moving higher. in the case of u.s., record highs. that is where the pain is starting to come through. especially related to what's happening in europe.

we are not buying as much since we're not buying from russia. we need to go elsewhere. that leaves the gulf coast. they are sending their stock to new york. that's what we're seeing now. it is having an impact already in europe with these prices now. dani: east coast diesel stockpiles have dropped to their lowest level since 1996. what would be the ramifications for the u.s. market given all of these stockpiles are headed to wrerp. >> it would be have ar expensive driving season coming up. it is going to be -- we're going to see truckers starts to -- i think they already are change about these very high prices. to drive from a to b. we are going to see it eventually. because of these very high

prices. i think it really depends on the pain threshold among consumers. we came out of a two-year pandemic with less mobility. there is probability a lot of pent-up driving interests or traveling interests this upcoming summer. we may be a little bit immune to these high friis prices from a consumer expertive but from an industrial perspective these numbers are starting to eat into profitability. dani: i look at the domestic eck picture when it comes to the u.s you don't get that hydropowerred fuel. those dams. at what point, the weather events, it needs to turn more inward or that is not going to happen given how it is in europe? >> that would require political intervention. it would require a u turn from

the administration. at this point, yes, we have -- in the u.s norway, they are now for the second time this year, asking the citizens in ration their water consumption. it is not a place you associate with water shortages. dani: ole, how much do you factor in a russian gas ban? >> at this point not really. just trying to -- from the perspective that russia needs the money and europe needs the gas, some solution can be found but obviously both sides are pretty far apart right now. we also see that the russian crude export, seems to have picked up. revenues have not really suffered probably as much as as expected and that means russia

potentially has a bit more -- can put in a more aggressive stance towards europe. at this point, we are seeing reserves building rapidly. we are getting pretty close to the five-year average in the coming weeks. at this point in time, we don't have a -- this coming winter. dani: is that what your crude -- your outlook for there is staying in this a tight range? >> i think crude oil now is a macro economic story. we're going to see rate hikes from the fomc. the lockdowns in china taking barrels of -- reducing the demand for barrels. keeping the supply stable. if we had not had the china lockdowns we would have been higher. i think we will see higher prices. dani: this push and pull from two competing factors.

when you look at china and look at xi talking about lending more support to this economy. is that reigniting demand despite zero covid? >> it will. more the timing of it. the former guest talked about it as well. china will have to come up with some kind of response. they have to rectify that as soon as possible. we will see stimulus coming but we will also put a flow on the commodities sector. metal also suffer as a consequence as well. all about the longevity of this lockdown we're seeing but there will be a response from the chinese -- dani: ole, great to get your take on this commodity market. ole hansen. let's goat the first word news. >> good morning. the u.s. supreme court is

reported to be poised to strike down the landmark roe v. wade decision which protects women's right to abortion. it was written by samuel alito. the nine-member court is scheduled to rule in case by july. hong kong is bringing forward reopening plans. from this week, math will no longer be required for exercising outdoors. cases are back at february levels. the fifth wave of covid is under control. a bout of concern regarding jack ma triggered wild swings in shares of theecommerce company. alibaba plunged as much as 9.4% in hong kong after state broadcasters reported -- ma in

the company's hometown. police indicated the person's name was three characters. jack ma's name is the two character name. jane frazier said the financial sanctions on many of russia's largest banks caused citigroup to exit in the country. powered my bimore than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani? dani: coming up, b.n.p. paribas posts a bumper set of first earnings. we'll have details next. this is bloomberg.

dani: it is bloomberg daybreak europe. i'm dani burger in london. b.n.p. paribas reported a 19% year-on-year rise in first quarter net income beating estimates. the trading activities increased 48%. equities trading from 61%. the c.f.o. spoke to bloomberg. >> the growth is stemming from the fact that we entered the quarter with very risk averse positions on top of that, if you look in europe, there was a high demand for macro and all the rest. we were open to do that. more over indeed, we have been -- on activities in prime brokerages and prime equities. it is covering everything and that was strong demand in all of that. >> you note however an

environment that is more contrasted in the short-term. what is the impact of the war in ukraine on your business activities? >> what we see is the situation on the eastern borders of europe, we believe it might lead to some slowing down in the economy which is temporary. which should pick up again. therefore that should be similar in the markets. that is what we anticipate. that is why we really confirm our long-term objectives. when we took them into account, all of the program terse and if we see where we stand now, that is basically confirming. we confirm our 2025 plan. the first quarter really has shown that the almosts and the platforms of growth are really working and so that is basically how we will proceed. it might be a little bit volatile in the quarters going forward. >> deutsche bank and u.b.s. warned that the wages, inflation, the payroll pressure

as they call it, is that also a concern for you? >> there might be a pick up in cost just like there might be a pick up in other elements. if you bring all of those elements together for the 2025 plan. it is not as stake. >> you doo to have see some payroll pressure? >> that is still something else. there is indeed -- but that is something which is not new. there has been a war for talent has been going on for years now and that will not change. that is something where at b.n.p. paribas we have an experience. what we go for is that the offering that we have is a wide offering. we go for people that are interested in the wide spectrum of what b.n.p. paribas has to offer and that is how we position ourselves. dani: the cfo speaking with bloomberg's caroline.

fantastic interview. strong numbers from b.n.p. how does it stack up compared to its pierce? >> they had a much better performance than most of wall street and european peers have reportedded so far. you look at trading, especially, b.n.p. paribas, revenue jumped to 48%. air in with deutsche bank. they did .16%. you can see plus 16%. barclays which had a surprise jump, 37% jump in fixed income. equities, b.n.p. paribas trading revenues were much better than wall street, peers that have already reported. deutsche bank and also the addition of new clients from credit suisse after a deal with thes swiss lender.

of course there is also this situation in ukraine which the cfo told me will impact european growth and the inflation outlook as b.n.p. paribas has about 3 billion euros of exposure to both russia and ukraine. of course that will be an impact going forward and on on thursday, a couple case from now we will get earnings from another french bank, societe generale. more than 18 billion euros. dani: so many macro forces weighing on the big banks. what else did the cfo talk to you about? >> we spoke about russia and ukraine before the war. b.n.p. paribas had about 500 people in russia. 5,000 people in ukraine which is quite significant. so the cfo did tell me some of

these people in ukraine are staying there. some have actually relocated to poland and b.n.p. paribas is looking at how they can redeploy this staff from ukraine to other country where is b.n.p. paribas has some activities. of course did ask the cfo about the long-term impact of inflation, especially energy inflation because if you look at the 2025 plan, strategy plan, it actually included the forecast for european inflation at only 1.3%. obviously that is a little outdated given the cpi for e.u. standards came out 7.5% for april. the cfo told me he used very conservative metrics for all of the strategic plans so even if

there might be some adjustments, this should not affect the 2025 target and on the wages, inflation, you remember the warnings from deutsche bank and the u.b.s. c.e.o. about the payroll pressure, the cfo is confident that the diversified model of b.n.p. paribas will be enough to attract talent. dani: thanks so much thanks for bringing us the latest and that interview. coming up, we'll continue the bank conversation where citi says its london trading desk was behind a flash crash in europe yesterday. we'll bring you the details. this is bloomberg

dani: welcome back to bloomberg daybreak europe. i'm dani burger in london citigroup has acknowledged one

of its trading desks was behind a flash crash in europe which sent shares trowblg. the damage was in sweden. that prompted the index to lose as much as 3%. j.p., first off, how did this even happen? >> well, we know that the guy or the girl, whoever it was, entered a wrong transaction and from the looks of it, i think the transaction was mainly for the nordic markets like we have one share in particular where we saw a strong drop, some data shows up that citi sold a lot of shares. the interesting part is like usually when something like that happens, it is very ice lated in that specific stock or that specific market. that of course has an impact on the local bench marks. but here, everybody was a little bit shocked that we saw that the

stoxx 600, this massive animal of an index dropping 3% because of a faulty transaction and when we first heard of it, that was like that can't be. that is so unusual. obviously that was the case. that shows us how fragile the markets are now. how jitterrish. whenever something happens in any corner, everybody goes nuts. dani: j.p., i have the same exact thought. for one, i was ok, perhaps it makes sense the stoxx 600 falls because it has some swedish stocks in its. the cac and dax drop too. what sort of ramifications could it have for the lehner itself? >> this never looks good. mistakes happen to every one of us. usually you should have some sort of safeguarding when a transaction is being entered, it

isunusual. usually the trader gets a warning. i'm sure the exchanges and also the regulator are questioned how this can happen and what citi will do for preventing this to happen again. will they get get a fee? i'm motte sure. -- not sure. dani: thank you very much. j.p. barnette talking to us about the fragility about this market that a fat finger could cause the wider european markets to fall. european markets shaping up better this morning. european futures up more than 1% after the dip buying in the u.s. yesterday. those gains sticking around when it comes to the s&p up .4%. we have a fed decision tomorrow. a lot of volatility possible in this market. some of which coming from what's happening in the treasury

market. three-year 10--year yields had been at 3%. tipped positive again. at 15 basis points gold moving lower because of that. the dollar hanging steady after a long streak of gains. that is its for bloomberg daybreak europe. market opens is up next. this is bloomberg europe.

anna: good morning and welcome to "bloomberg markets: europe." i am anna edwards. there are your top headlines. fed day one. traders gear up for the central bank's biggest hike in two decades. the rba raises rates higher than forecast. the eu plans additional guidance on put in's