tom: good morning. this is "bloomberg daybreak: europe." these are the stories that set your agenda. manus: a glimmer of hope.

u.s. futures rise after a brutal day on wall street. the fed warns about market liquidity. bitcoin sings. blackrock abandons its bullish call on china. softening sanctions. oil extends a slump as the eu scales back some of its planned curbs on russia. hungary sets progress over talks over an embargo. tom, good morning. bank of america says we are in a state of paralysis and not panic but honest says you need another 5% of a tanking day before the hurly-burly is done. tom: before the hurly-burly is down. goldman-s says swings will remain large into the path -- until the path of inflation as clarified. will we get that clarity on wednesday? the cpi is expected to come in

softer. we checked in on the markets. $20 trillion in market cap wiped off global equities compared to last year. you are seeing that pressure. you saw it yesterday in terms of the bloodletting on wall street. the biggest drop -- down to a 13 month low on the s&p. dropping around 17% year to date. the futures point to a bit of moderation. nasdaq futures gaining 0.9%. technology was worse. you would not want to swap places with kathleen would after an almost 50% drop in terms of that etf on concerns of the more frothy parts of the tech market. here in europe again ending lower on the session yesterday but pointing to gains on the futures. 0.2%. modest at this point when it comes to european sentiment on the back of the losses we saw

yesterday. the focus continuing on recession concerns. in asia, the benchmark down by 1%. manus: 50% of the nasdaq is down from the 52 week high. have we hit peak hawkish and us in the bond market? have a look at 10-year paper. 10-year paper studies at self this morning. the dollar is triumphant. my guest said we had hit peak hawkish and us. studying at 3.03 this morning. on the dollar you still have a dollar rampage overall you have it struggling around the 105 level on the euro-dollar. to the oil market you are looking at a bloodletting in oil because down over 6% yesterday.

the biggest drop in six weeks because the eu is softening its stance on its plans to stop tankers. you have a demand implosion in china because of a perceived softening. mike warns of more damage to come and volatility in crypto. let's get to the report is that will set the stage for us. paul dobson on the fed and bitcoin. juliette saly is in singapore on the stock story. tom: and maria tadeo has the latest on ukraine and hussman -- haslinda amin is in the philippines. manus: the fed warned about liquidity conditions across federal markets and it is getting worse. it is due to risks. joining me now is our executive

editor for asian markets, paul dobson. this report was written before the market implosion. what do we know of liquidity and what does it mean for markets? >> good morning. this is a known unknown. we know the liquidity conditions have deteriorated and markets and that is partly on purpose. the fed is withdrawing liquidity and tightening those conditions in u.s. markets and that feeds around to the rest of the world. combine that with the geopolitical uncertainty that we have seen. the elevated prices and price swings in commodities. that adds up to that riskier environment which means that traders are unwilling to bridge such spreads in the same way they might have done a year ago when there was plenty of easy money sloshing around the system. what has been caught like is the

timing. we are seeing extreme swings in prices in markets at the moment. market participants are already worried about liquidity. it means we see the more violent price swings. we see people coming in to buy the dip less frequently. and we are seeing a smaller exit for those in china. the riskier assets in particular are hurting in the markets. tom: in the market conditions affecting every asset class. mike is still bullish on crypto. >> the short term outlook is painful and it will be volatile with the rest of the assets as the fed adjusts from free money to normalized conditions. my medium-term conviction has not wavered.

i still see this as a very exciting asset class with a lot of momentum. tom: if crypto has as much momentum as mike suggests, he is talking about institutional buy-in, why is it taking such a big hit now? >> as he said and as we were discussing come of the end of free money is making it harder for crypto assets to appeal in the same way they were when we were in that environment coming out of the pandemic 18 months ago where everyone was underling in using their stimulus checks to inflate those asset prices. he makes a point that we could be in for short-term pain but for those that are believers and he is invested in it, it might not be bitcoin. it might be one of the other cryptocurrencies. there is a faith in making crypto work and finding ways and

uses for the system and the technology as well as the coins that is the glue that will keep those investors coming back especially when things start to look cheap again. manus: that journey is well evolved with various exchanges in europe and in the middle east. paul dobson, our executive editor for asian markets. the tech stocks sunk into asia. hong kong returns from a holiday with one house counting a warning about their exposure to china. let's get to juliette saly. how bearish is it? juliette: let's start with the overall picture. 1% drop on the msci asia-pacific pacific index. the seventh session of losses. we remain at the july 2020 lows. worth noting, we have paired a

loss of about 2% earlier in the session. the hang seng tech index has lost six wi-fi percent. growth worries flowing into a big selloff. we have a stronger cny. the pboc pledged more support vowing to keep the financial markets and the currency markets stable. some houses have turned positive on china. that has seen a rise in the afternoon session. one house -- blackrock is coming through with a bullish call. they came in modestly overweight in china in october. since then you have seen the msci index -- they are citing ongoing concerns of covid lockdowns. we did not think we would be and this position in may 2020.

they are turning neutral on stocks and bonds in china. tom: blackrock adjusting their views on china. juliette saly in singapore, thank you. hungary says progress has been made in talks on imposing an embargo. this is after a visit to budapest by bonder leiden. what do we know about how close we are to a deal on this russian oil embargo? what does the timeframe look like? maria: we know they want a deal and that is the reason why she went to see viktor orban in good oppression is asking her for more time. we are talking about concessions

to a package that has not been approved yet. that is the context. the other big issue is it is not just about the oil. the european oil wanted to -- the european union wanted to band the services involving the oil industry. the greeks are pushing to get an exemption. that would mean greek ships could still continue to transport russian oil. that is another concession in this package. the idea is that this has to get done this week because there is a nato meeting at the end of the week but also g7 finance ministers our meeting next week. if this is not done by then, it is not a good luck. manus: a lot of pressure on the political elites to get unity under their belts. oreo taddeo with the very latest -- maria tadeo with the latest.

according to unofficial results, marcos has won a landslide in the philippines elections wringing his family -- bringing his family back to power. >> if we are fortunate, i would expect that your help would not wane. manus: for more, let's get to manila with haslinda amin. what are the challenges ahead for him? haslinda: a lot of challenges especially in terms of the revival of the economy post-pandemic. first of all, what a revival of a family that was once forced to flee the country. took a flight to the u.s. 36 years on, the family is back in a big way. what does it mean in terms of policy?

there is a sense that we will see a continuation of policies adopted by the duterte government. very little is known in terms of his policy because during his campaigning, he was vague. some say perhaps it is his plan going forward, take a look at where we are in terms of reaction from the markets. there has been some strength in the currency despite the fact that we have seen a week you want as well as -- a weak yuan as well as a strong dollar. there has been some rebound from losses we saw earlier in the day. the sense is that perhaps the markets are waiting for more

clarity from him. tom: haslinda amin on the ground following that election. a change in prospects for the country potentially. we will speak with the cohead of public markets for muzinich & co., tatjana greil castro. that interview is next. manus: and we will take a look at a luxury sector -- has the war hit the sector? this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." the fed is getting worried about

worsening market liquidity and the rising risk of financial instability. the instability report itself warns of rising risks from the war in ukraine and higher inflation. in europe -- climbing above 100 basis points yesterday for the first time in more than two years. tom: joining us now to discuss all of this is tatjana greil castro. from muzinich & co.. thank you for joining us this morning. what do you make of the pressure we are seeing across the credit markets? are you seeing any opportunities at this point? tatjana: good morning, both. indeed the market has widened significantly since around mid april in spread terms in addition to the rising interest rates and the overall yield now looks pretty attractive. that is also what the clients

are seeing. if you have a longer term view and you want to lock in a carry, we are scaling and saying over the medium term, depending on what strategy you invest in, you are likely to lock in a certain return and that is now in the mid-digits if not higher. all of that speaks that you should be looking at credit. short-term, there are still some concerns. one is clearly the ecb is ending a purchase program which is weighing on european markets. manus: let's break down some of this. you want to get involved in credit. what we want to try to understand is we look at three major credit markets. the u.s. credit market has the

worst start since 1973. it is a demolition. europe is under pressure but the u.s. is by far the most battered. what is the basis for stepping into credit for you now? some say we are at peak hawkish notice. tatjana: there is a number of ways to look at this. one is which asset class would you move into? you could go into cash. you could also say, i would like to withdraw from equities because i am concerned what this production of liquidity may do. if you go from equities and a credit you will always be able to lock in the carry. your only worry would be if there is a number of credit

losses or defaults. to the extent that you can either go and say -- i limit that by going into the asset class and i am not weighing in on currencies, that is one way of staying clear of losses and get -- and that gets you back to the carry and the carry seems attractive. we have short strategies where you only have a two-year iteration but your yield is around 4% in your -- in euros and 6% and dollars. you could say i go in and get my part so i will have a pretty decent chance that over the next two years i will get around 5% which looks attractive in a market with a lot of uncertainty. tom: you are suggesting to move

into quality and avoid some of the junk out there because of the blowout in spreads we have seen. which sectors are looking most favorable and what are you avoiding in that credit space? and on defaults, are you seeing a pickup? tatjana: we have not seen an increase in default but we have seen some downgrades. the number of downgrades is going out. with regard to certain sectors. the food sector, the retail sector. they are impacted by the high input costs that are difficult to pass on. there is a string there. overall, we look at credits as less sector is sensitive. if a company goes into a downturn with a decent cushion of liquidity and a modest

leverage, we can go through the decisions and that is the focus we always have on our credit analysis. tom: week -- manus: we got the message. touch on a raul castro from muzinich & co. coming up, bitcoin, half the value wiped out since november. we look at this story here on bloomberg. ♪

tom: welcome back to "bloomberg daybreak: europe." i am tom mackenzie in london. bitcoin extending the losses it has seen in recent days. galaxy digital ceo says he expects more pain ahead. the next few quarters will be volatile and difficult as crypto remains tied to moves in u.s. equities. >> unfortunately, unlike major sellouts we have seen, if it was the crisis for covid, 2018, 2008 the fed was able to respond. the best response we will get is your only going to hike 250 and they will not make that claim until they see inflation expectations come down and we are a ways away from that. we are in for volatility and pain until there is an all clear

on inflation. >> and in for correlation. that is the prayer. this is a non-correlated asset. more institutional players have come in and are having to sell as they see the nasdaq go down. >> it had less correlation until we had free money forever. the correlation increased dramatically after covid because every central bank took a firehose of liquidity and sprayed it on the tarmac. can look at the correlation of any collectible to the nasdaq to as debts -- two assets. we are unwinding this era of free money. it is not surprising to me that bitcoin is selling off. i think the correlations will break down or will lessen the moment we find some stability in the market but right now, if you are an investor, you have 100 fires to put out.

you overcommit to venture? you have enough to pay your private equity investments? i seem to be at parity. very few people want to put on new risks in a moment of this kind of chaos. once it stops, once the chaos stops, i think you will see the allocators who have been doing their homework -- i just went around the country to a bunch of conferences and i am wildly convicted there is infrastructure being put in place to bring a lot of capital into the space. and so, it is surviving this unwind that investors have to manage. manus: this is what happens when the spray gun on the tarmac ends with liquidity. this is bitcoin -- it broke through the 30,000 level.

that was mike speaking exclusively to the team and caroline hyde. we have bounced off the 30,000 level. 55 percent down from the record highs. it will be volatile and difficult xfinity mobile runs on america's most reliable 5g network, but for up to half the price of verizon so you have more money for more stuff. this phone? fewer groceries. this phone? more groceries! this phone? fewer concert tickets. this phone? more concert tickets. and not just for my shows. switch to xfinity mobile for half the price of verizon. new and existing customers get amazing value with our everyday pricing. switch today.

manus: this is "bloomberg daybreak: europe. --.". dani: takes a dive, as blackrock abandons its bullish call on

china. plus, softening sections of oil extends in slump. the eu scales back some of its planned curbs on russia. hungary sides progress in talks over the embargo. manus: another day of earnings. manus:the supply chain issues complained to many -- both in terms of the operational level, 14.6, we are looking for 13.66. almost a billion euros worth of sales. it comes in 353, way over the average. they are confirming the outlook for the rest of this year. a massive provider to the world. they have some litigation issues. in terms of a number of issues

around the world. these numbers are very comfortable on the top side. tom: let's check in on the future is then after that wrap up on wall street yesterday's of the nasdaq the most pronounced selloff there, up on the days of down more than 4%. the s&p down about 17% year to date, at a 13 month low. the futures pointing at again, .7%. tech index gained more than 1.2%. how much conviction will be behind this. the u.s. -- looking at cpi, that is the most important. the future in europe gaining .5% as we continue to look at the discussions within europe. the m's -- msci down .6%. manus: this moment of reprieve,

or paralysis and not panic could be part of the narrative around the equity story. one line in the first quarter earnings were not negatively impacted by the ukraine war. from your equity buys, what's going on with the bond market? you get a hawkish in us, come out of equities, get that trade, the dollar is still triumphant, up another eighth of a percent. there's a liquidity potential coming, or continues dying. the eu softened, backtracked, faltered on plan to his moving russian oil. it's a pretty toxic combination for the oil market. beck coined, they warned of a

bumpy time. down 55% from its record high. tom: we have an insurance company in germany booking almost 700 hits from its exposure to russia and ukraine. 700 million euros in the first quarter. let's talk about what's happening in the u.k., concerns about an economic recovery that is starting to stall. queen elizabeth will miss the opening of u.k. parliament today for only the third time in her 70 year reign. this is a 96-year-old monarch suffers from what they call episodic mobility problems. her speech laying up the government's agenda for the parliament session will be delivered by prince charles. what is the purpose of the queens speech? what are we expecting to hear now from prince charles?

>> this is the government's set to -- chance to set out its parliamentary agenda. it is written by ministers, but usually delivered by the monarch. she had to pull out, so it will be delivered by her son prince charles. it will be debated in both chambers of parliament. does the textbook answer. but the reality is the boris is going to try to infuse the mp's after a set of actions that were terrible but were terrific. because they were overshadowed by the cost-of-living crisis and the party gate scandal. he is going to try to turn over a new leaf today. >> let's eat what's in the queens speech later on today by prince charles. our economy reporter lizzie. joining us now is robert wood, thanks for taking the time. this currency is under huge pressure. there is a very negative outlook

on the u.k. economy. the pessimism was pervasive from the bank of england in terms of downgrading. how about will the growth story be for the u.k.? let's start there. robert: it's already pretty weak. of the past few months, that is because real incomes are being squeezed heavily by high inflation and which is not keeping up with that. and tax hikes squeezing as well. consumer confidence is a good reliable indicator of where consumption is having. that's a low. it looks like consumer spending is going to fall. when that happens, the economy is usually close to recession. my forecast, we have -- a technical recession. the bank of england looking weak for next year, i think that is where we are heading.

it could well be weaker than that. if the bank of england has to keep hiking through this. manus: the reluctance of the boe , what does that mean for additional hikes that might be coming down the pipe from the bank of england? are they going to have to rein it in? robert: they are in a tough position. as central banks of your art with inflation skyhigh. i don't think the bank of england can rely here on inflation expectations remaining static -- it is too high for too long. it is supply shock driven, this is driven by strong demand in the u.k.. nonetheless, inflation is running too high to ignore it. i think they're going to have to keep hiking until unemployment stops rising. that is not a positive outlook, i think it is what is going to be necessary to feel comfortable

with the -- inflation expectations. ultimately, that's a higher cost of pay, try to get through this within -- inflation expectations close to target. quite a tough outlook. i'm looking at three rate hikes, two consecutive means plus november. manus: that is your roadmap to qt, you would argue, this is the third great sterling implosion, post-brexit, i remember very well, back in 2016, that was the brexit moment in the global health crisis as well. here we are, you would take rate hikes -- it is ultimately this damocles of growth that will take it lower.

does to get worse from here and do you see to lower your outlook ? how should i look at it? robert: when we think about sterling at the bank of england's it feeds into the decision to raise interest rates or not. and it will raise inflation, that is yet another reason for them to continue hiking rates here. it does put us under a lot of pressure, the only pressure here is if you like the real income squeeze, but that means for inflation a couple of years out. it is a tricky outlook. tom: we've been talk about liquidity conditions as a result of the survey, a report has come out from the fed, what about liquidity conditions here in the u.k.? you touched on qt and your

expectation that will happen, the make -- the u.k. may give the boe pause for thought on that? robert: i think it could skip if financial conditions tighten significantly or there's more volatility than we expect, on the other hand, i don't see a lot of evidence in what's happening that this is the sort of indication that the bank would need in order to not go ahead, we need we pricing for sure. i would see enough volatility, they don't want to add to that, i don't think we are at the threshold yet. you see from governor bailey a lot of emphasis on running down the balance sheet, he has presided over it, you have to have passive qt, i think that is

far too slow. i think they are going to want to speed that up. i don't see it in markets now that would dissuade them from doing that. trying to set it on top is like try -- watching paint dry. it is not tied into economic conditions in any way, i think it will start in september and maybe november. tom: september or november for qt from the bank of england with three additional 25 basis point hikes from the u.k. central bank. thus the forecast from robert wood. at bank of america, formerly at the boe. let's get to the first word news, and singapore. juliet: the fed has warned of was running liquidity conditions -- has warned of worsening liquidity conditions. in its semiannual financial report, they said the liquid has deteriorated, was higher than normal. if i'd a notable dysfunction and

commodity markets caused by the fallout. a former prosecutor made his name taking down the president has been sworn in as south korea's new leader. yoon sukk yoel, the brother of resigned as prime minister. demonstrators have been demanding that with local report saying the ruling party is being targeted, soaring prices on everything from petrol to essential medicines and fueled unrest in the country. goldman sachs is pulling out of working with most of its spac's. the been telling sponsors that will be ending its involvement.

bank of america has also scaled back. it follows new guidelines from the fec that would expose them -- from the sec that would expose them to greater risk. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: coming up, china's -- the story on bloomberg. ♪

tom: welcome back to "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.

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. china sticks doggedly to its covid zero strategy. joining us now is deborah akins, with bloomberg intelligence. in lightness, as it russia or china that is the biggest impact on luxury at the moment? >> china. there are concerns with russia, and the withdrawal, but what we did the work, we found out across the industry index, it is one to 2% of sales, whereas if we are looking at china, pre-covid, it was around 35% of the market overall. >> one is 2%, one is 35%? >> absolutely.

we had a situation whereby pre-covid, one quarter of chinese spending was done in china. tom: we come out of zero covid's of debate is when that happens, and how quickly that happens. i had someone here from emirates last week, he said it was revenge tourism. do you expect a monster revenge luxury unleashing? >> i think we go back to where we were free events happening, we have to take into account the sentiment, the consumer confidence in the marketplace. overall, there is a real pensions for demand out there. this is one of two or three, the other being air methods, -- hermes, that the spending will

be there. out how side of shanghai, shenzhen, we are seeing e-commerce can't catch up to demand given the supply chain issues to get confidence to those pre-covid levels already. >> accompanists is still there, the demand outside still there, what about prices? if a sector can, surely it is the luxury sector. they continue to push up prices, consumers continue to absorb the cost. >> there's cost savings as well as every other consumer company -- you did get a lot of cost savings taking place. typically we get pricing in any way. we expect by high single digit.

when you look at the cost basis of the company, the growth costs are low compared to selling price. tom: is there an immunity to that? i wasn't in the cute, i was walking past. have they got price elasticity? >> very low. the higher you go, the more -- the very high-end prices are easier to pass on. even at the lower end, we were looking at the numbers yesterday licensing to various fragrances and makeups of they are able to pass on high single digit prices

there, is about willingness to pay for the brand, having something. >> that is exclusivity. you, our consumer analyst for bloomberg intelligence on the items. coming up, progress in eu tops -- progress on the eu talks a lot more has to be done before they can back the measure. what is the blockage? we will discuss here on "daybreak -- daybreak: europe. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe."

it is paralysis, we've got the bounceback, i will look at asset classes, we picked the caucuses in the bond market. 10 year treasuries stalled, just easing out some rising this morning. my guess is going said liquidity is not as bad and the bond market as it was in march 2020. the dollar still strong, off by 1%, as we saw at this warning shot from the eu that they are deliberating the ban on russian oil. raphael says his bronze 2% to 2.5%. tom: the european futures, -- that ties into the discussion being had by the european

commission, the come -- the president, flew to budapest to break a deadlock on all -- on the embargo on oil imports. hungary says progress was made, a lot more needs to be done. maria, is a deal on a russia oil embargo now imminent? how much progress was made in these talk? maria: tom, you can see they want to get this deal to the finish line, to the extent that the head of the commission had to get on flight monday morning just to have dinner with victor or bond in budapest. -- orban in budapest. we still seek they need a more concessions, especially from the european union. the hungarians are playing the smart, they note the european union once this embargo done this week. they are asking for a multiyear extension, but also billions in funding. this money has been blocked for

months by the european union because of the main rule of law issues that orban ceases when it comes to brussels. the other thing are the details around this package. we are talking about concessions on a package that hasn't even been approved. we also understand that some are pushing to allow the transportation of oil. the european union said it would be about oil, but also services around it. some countries are pushing for an extension that would allow them to not use russian oil, but allow their ships and vessels to move around the world. manus: where are we on joint bond issuance for ukraine's long-term reconstruction? maria: ukraine needs five to 7 billion euros a month to be able to maintain their basic services. the european union is aware they are going to have to pay a contribution to this so the

country does not go into for -- financial collapse. they're looking into options of grants or loans with no conditionality for ukraine. manus: thank you very much. tom, a quick snapshot of what's going on the markets. you've got premium returns and there's a debate, this is what makes me sit up, you put out a great piece on linkedin using bloomberg data, there is sort to hide. from stocks. we see this repricing, in terms of yield falling in australia, japan. the coverage on the japan option, the highest since 2005. tom: even going for safe havens of that's been crushed, year to date, it is 8064. commodities under pressure, under concerns about china. futures pointing to some modest

reprieve. futures in europe gained .5%. manus: will it indoor? that is the question. -- will it indoor -- endure? bloomberg markets: is up next. ♪ so many people are overweight now,

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anna: welcome to "bloomberg markets: europe." the cap trading less than -- cash trading less than an hour away. yes futures after brutal down wall street, the fed warned of worsening market liquidity. bitcoin takes a bashing, cryptocurrencies briefly dropped below $30,000 before rebounding.