dani: this is bloomberg daybreak: europe. the stories that set your agenda. manus: market maelstrom, u.s. stocks crater, one -- wiping out $1.93 trillion. it continues in asia. no to neutral, the former fed vice chair says rates need to

hit at least 3.5% to tame inflation. job status will provide -- the hopes flight in frankfurt. says the ecb could decide on the rate hike next month with other governing members pushing for july. we just hit a brontosaurus moment. that is what is happening in markets. good morning. dani: let me tell you how bad this market selloff is. this is basically my barometer exhibit was so bad we had folks out there putting the moves in points dropped in the dow. that is a cardinal sin in my book. let me show you what the equity markets of doing so far this morning. you are looking at a little bit of a bounceback, not as bad as we saw yesterday when it comes to s&p 500 futures. still decline, the average decline so far 2.3 days, that is

the longest amount of selling we have seen since the 1980's. nasdaq futures down more, those long-term duration assets. the fed decided yesterday they are hawkish, europe's stock features not down as bad as you would expect. that selloff concentrated in u.s. box. asia-pacific down more than 1.5%. a lot going on with china tech. we will get to that in a moment. manus: what broke it, was it confidence a soft landing could be achieved? andrew bailey was the one that quietly laid out the truth. as is most manifest -- we come back to it in the moment. collapse by the most since 2020.

the dollar is at a 20 year high, dollar-yen, nine weeks about rally in the dollar, nine weeks in a row in which the end collapse. you seeing bitcoins of the correlation with equities at a record high, down by 8% yesterday. bonds, 3.05%. recession cannot be avoided, this is the moment when bailey spoke -- this is the personification of reality. double-digit inflation and recession on the way in the u.k.. trying hard to avoid it. dani: certainly that feeling of capitulation. ing earnings coming in, they missed when they comes to their earnings. a higher loss but is risen --

higher loss provision than expected. estimate was just under 700 million euros, it is all about russia. ing's of their impact, 34 million, one of the biggest exposures to russia of european banks. we are going to be speaking with the cfo on the first quarter earnings. manus:go to these market moves, let's get to reporters around the world, we have our executive editor for markets, he will bring us up-to-date on what broke and because the market selloff. just ahead of the jobs mark -- jobs report, will talk chart asia marker -- reporter. dani: let's talk about the puking in yesterday's market, just one day after it celebrated the fed signal that there wouldn't be any jumbo sized

hikes. markets have made -- done more than $1 trillion of value. let's get for asian markets at the dirt, paul, what broke yesterday? paul: i think is manus was saying, the doe laid it out, -- the boe at laid. if you step back from the pace of easing, and the bond curve keeps going higher, that rails back to equities. if you slam on the brakes to types of the market and in as well. wonderful environment for traders, terrible environment for long-term investor. take it safe and bonds or equities. very bleak. manus: taking 75 basis points

off the table was a mistake. let's talk about jobs, leaving the fed with a complicated path as it ramps up against inflation. let's get to our asia economy reporter. michelle, the former vice chair says they need to go up 3.5%, nearly one full percentage point above the assumed neutral rate, how likely is that? michelle: the debate we've been having about the neutral rate for years now. this is the idea they would move that fast is up for debate, especially actually -- after the fed action this week, producing mixed feelings about what's next. the jobs report, this is going be tricky. by all accounts, we should be another robust figure, we should we -- we should see downward pressure on the unemployment rate.

that is going to complicate things for the fed that wants to carry on a certain measured pace with these rate hikes. they've already ruled out, at least paul has of that 75 basis point hike. that was working in the dovish favor. we are seeing signals, because resolve the ongoing conflict in ukraine, we have this global rate to the upside, a long list their hiking. a lot of pressure on the upside, this jobs report is complicating. 1:30, when the jobs report comes out. dani: top policymakers gathered a special seminar to discuss the continents policy response, government councilmembers calling for hikes within the next two months. the nuggets of the one standout, saying we are in stagnation. let's go to our european

correspondent reporting live from salzburg. is he alone dove at this point? maria: absolutely not. he is alone dove here, he is not a dove. when you look at the interview he gave yesterday to an italian newspaper, two days ago, when you look at the picture in the european union, we are in stagnation, we are going to potentially see a big declined growth. everyone now assumes the euro area will barely grow this year. with inflation jumping. it was striking to hear that as someone who usually stands on the other sides of sing we are in stagflation and we are when have to take action. that dominated the conversation salzburg ended the global europe -- central bankers will be here,

the economic affairs commissioner for the eu also will be here. a lot of this figuring out where we go from here, perhaps some clarity from european officials, if there's something i picked up over the last 48 hours, it is all about the war in ukraine, the round of sanctions, difficult to measure what this will do. who knows when this work is going to end. there a lot of uncertainty here. does the biggest concern in the european economy. manus: thank you maria, reporting from salzburg. the global selloff, wreaking havoc in asia with the stocks, bonds, currency, all of them down. juliette saly has a sea of red on her screen. is there any reprieve? any hint of pause in any of this market demolition? juliet: there are a few upsides, i will get to them in the moment. broadly, we are on track for the worst week since march.

bonds being sold out, the aussie curve steepening the tenure yield has been up by 11 basis points. now the hang seng tech index after we saw that demolition coming through in u.s. adrs. when it comes to japan, it has been out of action, p.m. talk about listening border controls. we've also got reports that china is to dump foreign pcs within the next few years. stocks in lenovo rising. it is a story of dollar strength. let's look at what happened to the offshore you on, does a fresh 18 month low. the dollar appreciation, expecting these losses to accelerate, and on. it is going to be difficult to take anything away from dollar strength. dani: juliette saly there with the latest market action.

let's look at what other market action could be happening, the key thing participants are watching out for, 1:30 u.k. time, the jobs report, also 1:30, canada releases its latest unemployment data. manus: jo cox of the sec -- 2:00, the sec -- hoover institute hosts the monetary policy conference, the fed governor chris waller and fed -- st. louis fed president, bullard, the arch talk. we will also get the on world food situation report for april is released. coming up, the cfo, tanate phutrakul, joins us with first-quarter earnings from ing. coming up on bloomberg. dani: later on, we are going to

talk about wall street bonuses, which plummeted by as much as 40%. on the back of a banking slump. we get you the details. this is bloomberg. ♪

dani: welcome back to bloomberg daybreak: americas. dani burger in london, along manus cranny in dubai. a hawkish fed, something different was going on here, with ing in the u.k.. warnings from the d.o.b. -- boe of potential damage as a hydrate storm percent saying the economy -- the sterling following its most since the start of the pandemic. this is the standout central

bank yesterday, one bonds everywhere were crashing. manus: absolutely. that is the biggest days drop, march 2020, 2%. it is the bond market, speculation already in the u.k., may push inflation over 10%, he also says there is a possibility of recession. the bond market took repricing, one of the reasons you saw the big move in the currency as well. the u.k., 25 basis point move in two-year paper. that was taking you down, the biggest one-day move into your bonds since the day after brexit and the u.k.. sing yields drop further, 1.54 at the moment. let's move along. ing has reported lower than expected first quarter, net income, 229 million euros.

834 million in terms of the risks linked to russia. let's have a conversation with the cfo of ing, tanate phutrakul . i just read the number for your exposure to russia? is that the worst case scenario or expected to be materially higher? good morning. tanate: good morning manus, is turbulent quarter. having said that, if you look at our underlying operations, it is written in. if you look at our net income, it is written in the first quarter, our incomes is one of our prominent quarter in recent times. our reports were down in q1. we generated sufficient capital. dani: [indiscernible]

i need to jump in here on russia. 834 million euros in costs related to russia risk? can you guarantee to investors that is the extent of damage emanating from the region? tanate: i think we are taking an assessment, we are seeing appropriately provisions for that. we are also reducing our exposure to russia. in the last 60 days, since the crisis is broken, we have reduced our exposure to russia by over one billion euros. that reduction of rate to russian customers are continuing. manus: where is your biggest exposure in russia? what have you got left? what are you going to struggle to manage down? tanate: i don't think we would struggle to manage. i think what we need is time for customers to repay us.

we have a split between onshore and offshore rest -- pressure risk. our offshore russia risk is reducing edit quick pace. dani: 7.2 billion euros in russia ukraine exposure, do you run those down or sell them? tanate: we are running it down. we have close to 7 billion euros, down to about one billion left within the last 45 days or so. manus: we've seen massive repricing and bond equity and currency markets in the past 24 hours. the talk now, bc raising rates -- ecb raising risks. will you materially changing your fear lending materia as we go towards the end of 2022? tanate: i think we mentioned before, we think the rate needs to move up in the euro zone.

they expect the ecb to respond shortly. having said that, i think we have always been conservative in terms of risk management. if you look aside from the russia risk, we remain solids, we saw very little risk. we are looking at a scenario of stagflation in 2022 as we continue to be conservative in our risk management. ing has managed its spread quite well. cox even so, when you see days like yesterday, how much more conversations with clients, with peers, what those have been like in terms of the sense of fear you are seeing out there? >> it is a lot of concerned by both retail and corporate customers. i think what we have told them is that rates are rising, we've gone into a rotation from a benign market situation, very

low and negative rates, to more positive right. and our customers need to get use to structurally higher levels of inflation. we do help our customers to make sure they can adjust so that new reality. and ourselves as well, terms or a that we have adjusted it for rising rates. manus: he the word stagflation. andrew bailey told the truth yesterday in terms of what we can expect of double-digit inflation and a recession. if you are facing stagflation? is it just possible you will no longer deliver a lending growth number of around 5%? if your base case is stagflation? tanate: it will be more challenging. will be more cautious in terms of extending credit. but we get guidance on the market that we expect lending to grow between 3% to 4% over time.

given what we see banks in 2022 -- manus: what is a deliverable number? 2% growth? percent growth? tanate: we are on the low end of 3% to 4% growth. dani: wall street is reducing bonuses by as much as 40%. are you seeing something similar to ing? tanate: we have a different kind of variable compensation structure, it is not the biggest part of our cost base, with the results things are, it will be automatically adjusted based on what we make during the year. we've only seen q1, we will see how that evolves over the next nine months. dani: you will have to keep us updated on that. thank you for joining us. coming up, the bank of england

governor paints a gloomy outlook for the u.k. economy. that story of growth expected just float sharply and impact u.k. assets. more from andrew bailey next. this is bloomberg. ♪

dani: welcome back to bloomberg daybreak: americas. denny been -- dani burger in london. the bank of england issued the gloomiest outlook of a central bank this year, as it raised its key rate. andrew bailey is warning britain to brace for double-digit inflation and prolonged fury -- prolonged period of stagflation. >> i would integrate with the statement that is higher inflation, we think of the work

in terms of the cure is going to be done -- we are experiencing a historically large shop to real incomes in this country coming from outside the country in terms of freight shop, import process, dominantly energy, food and some core goods. high inflation fuels high inflation, it doesn't as standard to mayan shock. -- in a standard demand shock. it is a real income push those the thing we think will do a lot of work to lower inflation. here's the complication, there are risks the other way. one of the big risks is labor, without a tight labor market in this country. it is a good story in many ways, we've come through covid, we had

predictions we were going to have a rise in unemployment, in the end it didn't happen. >> why are you convinced wages are going to rise to meet the inflation rate? i hear what you're saying about the cost of living crisis. nevertheless, there is a risk we seek which is going higher, you talked about this in the press conference, there seems to be a gap between the bank and business. i talked to ceo's, they said they are really struggling to hire, as a result of which having to raise wages to compensate for that. as a result of which, at the moment, wages are below inflation, inflation is going to come down, but that labor market may stay tight and we end up with the situation where -- >> that's why we think there are risks on the upside to inflation. we also think the story is a real income shock to the country. which will push down on

household income and company income. that is going to slow the economy down, is going to slow demand. we are already seeing some signs of that. look at the gap between consumer confidence and business confidence, which is quite large at the moment. i never advocate putting too much weight on one number, we have week -- a couple weeks ago. we are seeing some signs of things begin to happen. unfortunately, the shock to real income has to comes up it can't go anywhere else. i go around the country a lot, at the moment, firms are saying my problem is i can't hire enough people. manus: boe governor andrew gailey -- andrew bailey.

there are of great existential angst, not just in my life, but bond markets, this is what happens when tenure paper drive-thru 3%, it drives the bond market. aussie rates up by eight

manus: this is bloomberg daybreak: americas. i'm manus cranny and the by, dani burger in london. he said the story sign your agenda. dani: u.s. stocks crater, wiping out and $.93 trillion. as inflation concerns hamper bonds. the vice chair it says rates need to hit at least 3.5% to

tame prices. holtzman says the ecb could decide on a rate hike next month. as of an art -- other government councilmembers pushing for july. yesterday felt like capitulation. i'm going to steal your statistics. please forgive me. it is the fourth time in the past 20 years about stocks and bonds has sold off more than 2%. the subject of fact. manus: that's fine. she says a lot more:04 than i do. the bond yield risk, an existential moment of reflection in the bond markets. tenure 3%, it is driving the market. you've that tenure paper way above 3%, that is trading at a level unseen since 2018. the dollar at a 20 year highs of

the yen has been demolished for nine weeks in a row, bitcoin correlation dropping by 8% yesterday. just off the january lows and that bitcoin trade. we have this moment where the markets are saying, you're going to need a recession if you want to quell inflation. dani: you need those financial conditions tightening if you want to stop inflation. does that lead us to a recession? what the market say you can't have stocks going higher and inflation tamed. it is interesting to see both s&p and nasdaq futures continuing to fall, ever so slightly. on average, the selloff has lasted 2.3 days in the u.s.. that is the longest stretch going back to 1984. in europe, not as bad as we were in the u.s.. europe not taking as badly. i could change once markets down .25%. the asia index down 1.6%. manus: negative guidance from

adidas on the corporate front. scheduled to vote 6% to 11% on the currency neutral basis. they have been aiming for 1.8% tonight -- 1.9 billion euros. it sounds as if the recurrent themes are there. there cutting their margin based on the use of lower-than-expected cells and china. yet they returned to job -- growth in china the second quarter. china is going to be the bane of their life, growth -- net sales will grow up, chinese sales down on lockdown. the operating profit comes in above the estimate of 437 million. where about the 391 expected, but they have got a deep cut on the back of margins. dani: this season is all about who can deal with china, who can deal with inflation. look at the broader market,

stocks and bonds continuing their slide today. we have inflation, rising borrowing costs, much like adidas, depressing sentiment from covid lockdowns. >> this is not a good date, or a good year. >> we are already pretty firmly in the big bear market. >> at the end of the day, it's about inflation. >> i think the market is trying to determine what is the most important fact going forward. there are a single mandate fed, only focused on inflation. >> i believe the market is going to go at least 50% below its peak. >> we think things are overdone. we've got to get rid of the excesses and the undermined -- underlying fundamentals are still pretty good. manus: executive editor for asian markets paul dobson, i've had a variety of opinions this morning, one that was andrew bailey told the truth of the double-digit inflation and

recession. how worried should be beat? -- should we be? paul: things are looking worrisome everywhere. the double whammy of bonds really starting to hurt and -- offering a place to hide right now. all around the world, you got china, with the adidas earnings, is bad for a lot of people that rely on china for their income. the lockton is going to take a big dent out of the company earnings, out gdp for china. over the course of the year, i think when you look across markets today, one of the things from an asian perspective is that strength of the dollar, how it is starting to schedule it -- you're talking about the end, now a whole bunch of other

currencies of the taiwan dollar, you name it. that is starting to feed through into those emerging market currencies, really starting to make it felt. dani: the most worrisome thing is the dollar there is of the thing that could really act to break market? sarah: paul: the dollar could wreck everything for everybody and spoil the party, could rip through it. the thing pushing the dollar higher is the's u.s. yields. i think the bloomberg index for u.s. treasuries is now 18% down from its peak. the bear market, pretty unheard-of, that is where that pain is coming through, if your pension fund, long-term investor, you may think differently. you're going to be feeling the pain. he got nowhere else to turn. dani: paul, a little dour, but

we will take it. our executive editor for asian markets. that is fitting considering the damage yesterday, but will today look like with u.s. jobs figures out later? that leads the fed with the complicated path as it ramps up its fight against inflation. joining us now, sarah hewin, we need more days like yesterday? if we are to get tightening of financial conditions and lower inflation? sarah: yeah, i think we are all racing that tightening of financial conditions. i wonder if we are stopping to see some element -- the starting to see some element of nervousness from the fed. the commentary we had from powell earlier in the week, not as hawkish as expected. i have to be taking into consideration the dollar, the

strong market we've seen in yields in recent weeks and days. really thinking about the impact on the real economy. let's see what the data brings today, we are expecting in the coming months that we will see faster general economic data, we will start to see employment fading, and the rate rising as we get a faster growth trajectory for the u.s. economy. manus: sarah, good morning, what you make of the proposition andrew bailey is the one that told the truth, i didn't read the 150 page report, but someone did. he told the quiet truth, recession, double-digit, inflation, 600,000 jobs need to go. bailey told the truth relative to what the fed said.

do you agree that bailey said it the way it was? sarah: i absolutely do. to be fair to boe, -- they were very clear, to achieve low inflation, there is clearly going to be growth risks. the recession forecast is contingent upon rates moving in line with what it the market expected. it suggests the yields are getting ahead of themselves. it does not drive unemployment, that could drive the economy into recession, the agency getting inflation back to target, not to drive it below target. all the forecasts that the bank of england released yesterday essentially say the market

pricing is too aggressive. we are starting to get some hint from the fed that there are similar risks to the u.s. economy as well. certainly we are looking for the recent growth trajectory. dani: that's exactly what i wanted to ask you, andrew bailey is the one telling the quiet truth, what does that say of powell what he is not telling us? sarah: i haven't looked at the u.s. data, they've held up recently well. we are in some kind of softness. i think you earlier component said there has to be inflation, at the moment there is strong support across business and communities for inflation to be

-- the inflation problem to be addressed. the fed is taking the action now , with rate hikes. we think we will have enough data showing the economy in trouble and will have an update to show you if it is starting to come down for the fed to be able to call it at that point. we don't buy the market's of ongoing effective rate hikes through the year. manus: but the bond market doesn't believe it? the bond market just does not believe that the fed has got a hold of it -- of inflation. they cut -- cap 75 basis points out the table just when they had the bond market in their hand. sarah: there are some concerns, obviously, if we take the view,

high commodity prices in particular, pandemic related goods inflation, those features -- the key is what is happening to wages. we have a surprisingly high cost index, 34 productivity numbers. if they are right, there's a chance that would get inflation embedded, let's see what the earnings says, those earnings have projected that wage earnings are peeking out, we are gain conflicting data at the moment, we do need to have wage growth, what the trajectories for wage growth in the u.s., or whether there is inflation pressure or inflation we are

seeing is transitory. manus: ok, it is andrew bailey who told on the record, thank you very much. this chief economist for standard chartered. let's get to singapore, juliette saly with first word news. >> bloomberg has learned that china has ordered governor and government agencies to replace foreign computers with domestic alternatives within two years. after change to locally made alternative that runs to met -- domestically developed software. one of asia's most aggressive effort so far to eradicate overseas technology. there close to signing an agreement. sources say the consortium could reach agreement as soon as

friday with chelsea its owner. the sanctioned russian oligarch. it would end a weeklong bidding process for one of the biggest english football clubs. the covid-19 death toll climbs almost 16 million in the first two years. this according to a new report from the world health organization, which is about one and 500 people died globally during the pandemic. the figures far higher than the official numbers, and include steps in directly caused by the virus. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. dani: thanks so much, juliette saly and singapore. coming up's of the ecp expected to hike rates for the first time in a decade. will be june or july? we will discuss governing council members remarks head of the special meeting in salzburg today with maria tadeo. this is bloomberg. ♪ ♪

manus: it's daybreak europe, and manus cranny in dubai, dani burger in london. viktor orban delivering this -- the home group won't back it. the proposal is to not quite russian oil. they are happy to talk about a new proposal in russia, it will take five years and exemption from the eu russian oil according to viktor orban. and to access ecb's funds. maria tadeo with us in salzburg. the very essence of this is that fractionalization of europe in terms of banning russian oil,

hungry needs exemption -- hungar y needs exemption. will this skill grow from here? maria: or been a specific, and political to the specific seen in the country. he has lit -- written an open letter to the head of the european commission, saying we cannot afford this by the end of the year. we would need an exception. it is not just one year as of european commission said hungary and slovakia could have an extra year. viktor orban is now pushing that saying we need five years. it is clear that is not going to fly with european authorities. in order to do this, the eu would have to unblock some of the funding they have blocked because of the rule of law issues that have, because of the referendum on some of the rights

of the lgbtq community in hungar y. the eu says they are not going to allow that money to float, they are trying to extract a lot of leverage to get that package going. what viktor orban knows is he needs a unanimous decision. is he going to get the exception, it is difficult? the eu does need viktor orban. dani: or been saying they also want back -- want back sanctions. sing a hike in june is what he is pushing for. when it comes to that divide within the ecb, where are rate hike estimates collecting -- coalescing around?

maria: we are going to find out, we are at the global europe seminar happening in your salzburg. officials -- we have the economic affairs commissioner for the eu, going to be speaking with us later today. a lot of the debate, focused precisely on that. can they managed to afford to hike rates but also stimulate the economy? did they stick to -- do you do it in june or july? at this point it is clear the hawks are in command of the ecb. the question is how fast? and what is the impact of this on the economy? the word nobody wants to say out loud, stagflation, weighing on european policymakers, is this recession -- if we get more sanctions and energy, as i pointed take affect, is it main we are going to get into high

inflation, by an economy struggling to grow. dani: maria, thank you very much. our european correspondence of maria tadeo from salzburg. she will be on that conversation as the european economy's of troubles continue their. later she is going to be speaking with the eu budget commissioner and the european open show. coming up, wall street bonuses could plummet by 40% this year on the back of the banking slump. details next. this is bloomberg. ♪

dani: enter friday edition of bloomberg daybreak: americas. the maker does -- macy buses

drop as much as 40% as underwriting businesses start to slow. we are not joined by david scanlon, the story has been banker bonuses, inflation, everybody's got to get up a day to stick around. why would they take such a big hit this year? david: it's been a good run for investment bankers. has been for a couple of years. this is not look to be a great year, 40% decline, two things going on here, one is higher interest rates zapping demand for deals, especially those that require leverage. the other side, you've got the selloff in markets, making it more difficult for companies to come to market and sell stocks. either the secondary market or that second -- primary market. ipos are down. as a tough thing. we still got a lot of the year to run.

the start of the year does not look great if you are in that business. manus: let's see how the rest of the year plays out, it looks like it is going to be more months of volatility. which can work out well for the rate traders. where are the bright spots? i know i said last week when i was in zurich, i want to come back in junior banker. where the bright spots? aneeka: >> david: david: developed comeback as a fixed income trader. guess you've got to come back as a fixed income trader. the volatility is tough, stocks and bonds, is painful. piercing volatility pickup. all that volatility means more trading, more revenue. the outlook for investment banking or trading isn't bad on the equity side, a be 5%, 10% increase this year. fixed income even better at 10% to 20% this year.

manus: i was a lousy trader. david: not too late. manus: i'll come back as a broker. dani: [indiscernible] manus: david, thank you very much. flying high, take it away it with a little bit of iag, what they do, a lot -- a whopping loss, 784 million. dani: it is interesting, there first-quarter passengers actually -- the estimate was for 14 millions. it is all about margins, and inflation. they do think operator would be positive the second quarter. manus: we had the ceo on last week, that is called revenge tourism.

rip off your masks, get your passport out and fly. dani: come back to london, we miss you already. you should be doing this revenge troubling as well. that is it for us, bloomberg: is up next. this is bloomberg. ♪ ♪

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dani: good morning, welcome to bloomberg markets: europe. amanda edwards in london. we join us once again from singapore. look at the market action this hour. cash trading less than an hour away. u.s. stocks traders, wiping out $1.3 trillion following the post fed valley. inflation concerns --