dani: this is "bloomberg daybreak: europe." i am dani burger in london with

manus cranny in dubai. these are the stories that set your agenda. manus: covid divergence. shanghai hits a milestone for easing of lockdowns. with new york city facing a jump in cases that could lead to a new mask mandate. talking down twitter. elon musk floats lower offer price for the social network, she ending -- sending shares sliding. plus it is an apocalyptic warning from bank of england governor andrew bailey. the cost could have dire consequences for the world. good morning to you. where is your recession bid and offer? on the extreme, elon musk, we are already there, and depressing warning of stagflation who questions the former guidance. dani: good morning.

the doomsayers are out in full force. inflation and growth does not seem to go away this week, but can we get growth from china? we did see the msci asia pacific index being higher. we will get more into the china story with juliette saly but the main takeaway will be reopening in shanghai. yesterday, we did close higher in the u.s.. the team at goldman sachs saying that the outlook is flat for global equities, saying that the toxic make of -- mix of inflation and prices are not going away. and the nasdaq outperforming after underperforming yesterday. manus: there goes my chances of retiring, fat chance and a flat outlook. i am not going anywhere. i'm going to be holding on for a

while. let's take you through the assets of elon musk worrying we are in a recession. nymex crude is down 14% in the past sessions, so giving some more back. shanghai has had to days of no community transmission, so it is setting up there. the dollar has died down. do not forget that bnp paribas talked to you and i yesterday and they said it is extremely rich and where they want to be is in dollar-yen, which has 20% rally to come if we are in a recession. the commodity constriction you are seeing around the world could play to the high data. you are also seeing a positive news flow from china that could add the aussie dollar down. bitcoin. you go to bitcoin when another stablecoin?

we talk more about the stablecoin which deep pegged from the dollar. let's get to reporters around the world. we have juliette saly was a roundup of asian markets. laura wright is on the elon musk and twitter story. dani: we have also got charlie wells looking at the closures and we are joined by the latest for ukraine tensions. shanghai is -- has confined citizens to lockdowns for weeks. there saying that they're getting the transmission under control. where joined by juliette saly and it is all about that tech rally in asia. juliette: it is. let's talk with what we are

talking about in shanghai. how quickly can the city wrap up its growth engine and ramp up again do ease these strict lockdowns? we're looking at shanghai metro passenger volume. it is at a flat line and much weaker than what we saw than when we saw the pandemic hit. we could expect that to start ramping up as people continue to get about their daily business. it is a different story from what we're hearing in new york where they're getting towards a higher level of the virus and they could be reinstating those mask mandates indoors. let's look at the impact on markets because it is all about the reopening and we are seeing a third session of gains in asia. you also have japan announced that it is going to try allowing groups from some triple vaccinated countries, like the u.s., singapore, and australia, into the country this month.

the tech rally, a couple of reasons behind this. jp morgan more bullish on the sentiments after that on investable call that wasn't supposed to be published. we also have a symposium happening between some of the tech giants as regulations in beijing are hoping for an easing of the year-long crackdowns. we have tencent earnings tomorrow. that is up for a service session. manus: thank you very much. let's see what happens if it goes for reopening on the commodity markets. juliette saly's in singapore. you tell the world about elon musk showing that a viable deal at a lower price for twitter is out of the question. laura wright, what has elon musk done to take the wind out of the twitter bid? what has elon done overnight? laura: keeping up with elon musk

is a full-time job these days. he believes that 20% on account of the social media platform, there are big issues on the platform. yesterday twice the -- tesla and twitter trading down. there is continued convictions in the world's most valuable electric vehicle maker. this deal was thrown into jeopardy on friday after his team said that they disagreed on a statement of less than 5%. the spread between that bid price and twitter share price reached a new record yesterday, just shy of $17. you can see the social media platform has given up all of its gains which we first learned that elon musk has become the platform's largest shareholder back on april 4. the next thing we talk about is

this argument on twitter between elon musk and twitter's ceo, parag agrawal. agrawal states that it is difficult to just know how many mai tais a bull daily active users there are on the platform. elon musk asked how it would retain value for advertisers. it looks like they would not find any other buyers on this stage. dani: the news on elon musk keeping you very busy. and when it comes to the hedge fund, it was a dismal first quarter. that is the bottom line from the latest u.s. hedge funds. among the biggest losers, we have some u.s. hedge funds. we have charlie wells with the news on that. what does this look like? charlie: the pandemic

stay-at-home darlings have been ditched. tiger global, which we have been talking about this quarter, liquidated its entire stake in netflix. this was the biggest loss since 2011. also doordash is down about 55%. we also saw melvin capital exit there, but it was not just hedge funds that indicated the changes here. what was interesting as warren buffett's berkshire hathaway leaving its wells fargo state. manus: they are lumping it large on citigroup. thank you very much. we look at it too $.9 million bet on citigroup. concessions. sweden and finland to nato are facing complications after

turkish president erdogan says he was -- not allow them to join the alliance. >> sweden and finland have a clear stance against terrorist organizations throughout this process even if they say they are against terrorist organizations, they have statement that they will -- certain terrorists. manus: let's get to our european government managing reporter. is this a russia-stumble -- is this a moscow-istanbul told? -- tilt? >> the expansion of nato north is a key move not just finland, but sweden who feels like they're are under pressure from

russia and also the baltic nations. those three countries on the south side of the baltic sea who have been most acutely sensitive to their vulnerability to russia. the oil quip thing is that putin has been threatening with retaliation if they declare their colors. one of their worries has been what happens in between declaring your loyalties and giving a guarantee, and now that they have the literacy, they do not have a clear path of protection from the u.s. dani: thank you for the update. coming up, recession is the word on everybody's list. we are going to talk about that with wouter sturkenboom.

manus: plus of the brexit deal is in jeopardy. britain stands off with the eu threatening to overwrite its ireland protocol. we have more on the story on the program. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe." i am manus cranny in dubai and dani burger is along side me in london. the jp morgan strategist saying that some markets are overpricing the chances of recession. meanwhile you have goldman seeing risk assets remaining flat. dani: we are all excited you're going to stick around for longer. at the same time we have elon

musk telling us that the u.s. economy is probably in recession which will likely last up to 18 months and that is after all of that, we have the fed president of philadelphia saying that they are too slow of reacting to inflation. we speak with our guest, wouter sturkenboom, chief investment strategist at northern trust asset management. your macro review is not changed, so what are all of these doomsters getting wrong? wouter: this environment is a tricky one to navigate, and we all agree that growth is slowing down. will it slip so far into recession that we're going to end up in this new macro environment that will drive

market to lower levels than we are today? that is where we see they are a bit too doomy. we think the markets are fairly well pricing the recessionary risks already, but there is a downside risk. but if you look at the levels that we have already reached, we are far along in the selloff of the market. dani: that is my new favorite phrase, "a bit too doomy." manus: good to see you this morning. if we step too far on the trade, what is the bond market trade? my question to you is that 2.9 percent, is that the doomy scenario capping the hike in yields? wouter: we do think we are getting close to the highs on

the yield side of things. the fact of the matter is that very soon, one policy will have to balance the growth slowed and with the inflationary outlook. we think we will get eight to five in a fast reaction, but in 2023, that is when the challenge will really come. it is interesting to see whether or not monetary policy can slow down its rate hike cycle in the face of this growth slowed down and still achieve that 2% to 3% inflationary outcome. that is the challenge ahead of us and that is where things like ukraine and the covid situation in china are important to see the results of getting clarity on. dani: all of these risks seem to play out in specific corners of the market, some of these stablecoins going haywire. to what degree does the fed look at that and say we are not getting wholesale destruction, giving them conviction to raise

rates even more? wouter: the fed so far has been given by markets a free pass in managing the mount airy -- monetary policy outlook without having all of this instability creeping on them, creating the tightening financial conditions where they would feel uncomfortable. but at the same time, all of the stablecoins, those pockets of the market showing signs of stress, that is an indication that they cannot push too far too fast either. they can continue to raise the hike cycle, but if they go too fast too high, they will see things break. i don't think they want to do that. manus: basically questioning the mettle of the fed yesterday. he is calling a stagflation like scenario, we are going to slow down, it is an inevitability. how far is this broadside?

yellen and her other pre-dissenters have not gone after bernanke that hard. what is your call? wouter: i was surprised. normally central bankers are more circumstance when calling on the policymaker mix. when we have inflation in high levels in the u.s. and other parts of the world as well, the response to the covid measures on the monetary side were in retrospect a bit too much considering what was coming through as well. that is the mix that he wants to see addressed in the public sphere. at the same time if you look ahead at the inflationary outlook, if you look ahead at some of the drivers on the energy front and the food front, i think monetary policy can only do so cold much -- so much to

address those concerns. dani: are you underweight or underdeveloped on spn? wouter: we were worried about the regulatory fallout in the em space and also within europe, the ukraine impact. the food and energy prices are still a risk. if europe tightens on sanctions to natural gas, that is a major risk to the european outlook. manus: this is your moment. where's the bottom of the s&p 500? you have got infamy. where is the bottom? wouter: this is a tricky one that is putting me on the spot. i do think that when it comes to the balance of risks, there is more upside potential than downside risk. especially given everything that is going on, another 10% drop could easily happen. if you look at the upside

potential, that outweighs the downside risk price significantly, which means for us a small risk on stance as warranted here. dani: a good way to answer without giving us a number. we appreciate that. we have six straight weeks of declines in u.s. equities. when you have clients coming to you and saying it is time to start buying yet, what do you tell them? wouter: where looking for what we think are interesting trades that will give us some hedging capabilities, give us more risk premium. we are blocking the high-yield spectrum more as well as the natural resources spectrum than the equity market spectrum, but we are telling clients that the balance of risks and now is better, valuation is better, and we know sentiment. we have seen all this hedge funds deleveraging. that is all giving us a contrarian signal that perhaps the bottom is closer than

otherwise. manus: that seeing the capitulation narrative. briefly to finish off, in the breaking there have been clients calling much more about china than the rest of the world. have those nerve-racking calls ended? how does the narrative shift in china for you? they have risk more of 4% than 5% for china for the end of the year for the growth. wouter: we see the official growth forecast, that is really ambitious. you will see a bit change of fiscal and monetary policy in china to get near those goals, and we have not seen those changes yet. we are on the cautious side for the chinese growth outlook, but at the same time we have to acknowledge that the valuation slide on the chinese equity market is low. that gives the market to bounce -- the potential to bounce.

we don't want to sell out right. we do think there is the potential for a rebound as soon as we get confirmation that the policy mix is shifting in a favorable direction. manus: thank you very much. we have to chief investment strategist for emea at northern trust asset management. coming up, we will get more on the news of hedge funds. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i am dani burger with manus cranny. it was a dismal first quarter for the tiger growth, and part

of the line from the u.k. to u.s. hedge funds was the top losers and how much they pulled out of tech. global supply ships sold by almost 40%. one of the things that they slow down was the pandemic favorites, doordash, netflix, and zoom. it has been about the text destruction in the first quarter, how poorly these hedge funds surrounded by tech have done, but they did pull out of some of it in the first quarter. >> time after time you see these stay-at-home pandemic names pop up again. you see netflix which has fallen 70%, tiger global backing out of that local gated -- we dated stake entirely. you see melvin p pulling out as well, so it is a significant draw out of these tech names. one of the interesting moves we saw was warren buffett's

berkshire hathaway getting out entirely from its wells fargo position. he was a long supporter of wells fargo so that is a significant exit as well that has nothing to do with tech. manus: absolutely and you have got big additions of massive growth. the question is are you surprised that many more hedge funds did not last? has the landscape changed? what you learn from this? >> a difficult quarter, particularly for hedge funds focused on equities. if you think about tiger global, that is the fund we have been talking about for a long time now, down already present for the quarter. the question is that is such a big turnaround from 2020 where we saw it up about 50% and a lot of clients have and asking, why was it down so much?

why was it not possible for these equity strategist to see this coming? when you look across the hedge fund industry, you have not seen these down moves in the strategy. if you look at macros of bridgewater, that is up 16% this year. if you look at multi-strategies, you see up about 6% quarter, so there are big questions around equity strategy. manus: thank you very much. so much has happened today as we close that q1. coming up, investors in the credit space, how worried are they?

manus: this is "bloomberg daybreak: europe."

i am manus cranny in dubai. dani burger in london with the stories that set your agenda. dani: shanghai hits a key milestone. new york city faces a jump in cases that could lead to new mass mandates. elon musk floats a lower offer price for the social network. plus, an apocalyptic warning. andrew bailey says a surge in food costs could hold dire consequences for the world. the doomsayers are out in full force. manus: those darn doomsters. elon musk says we are in the grip of a recession that could last 12 months. there is a real risk. how is it affecting risk this morning? shanghai could be a non-covid community transition. maybe there is normalization risk in china.

record high prices. bitcoin doesn't get any of the flow which -- a stable coin that de-pegs. dollar bulls over. recession would cast doubt on the strength of the dollar. they reckon it is 18% overvalued. it is screamingly rich. dani: the other interesting note is the team at the equities side of things are saying that they are flat. it is a mix of inflation and growth. it seems like they are subsiding somewhat. we are looking at a positive day for the futures market, and they

fell yesterday. msci asia pacific index up 1%. we have hopes of a reopening. hong kong tech outperforming jp morgan after they said it was an investable. -- uninvestable. manus: the worries about rising rates. the credit markets see a global recession. that is the stress point. losses in u.s. corporate junk crossed into double digits for the year and that is something that could be a warning sign for the fed officials. perhaps more than falling stock prices. does it cause more discontent? he is in aberdeen investment director. looking at credit, high yield,

investment grain, good to see you. double digit plunges abound. there is one stark fact. it is that credit has not included in that means the fed has a lot less to worry about. according to elon musk, is it a misallocation of capital? >> i guess you compare it to what happens next. credit tends to flow out when it hits the unexpected. you hit march 2020. those are the really stress points. sovereign crisis in the middle of the last decade as well. when we know the recession is coming, it starts to get priced in. what else do we need to price in as well? inflation but that is our biggest issue. if we get to a 3%, 3.5% inflation, wouldn't that be

lovely? in the u.s. market, with that kind of number, we will have a real positive concern. dani: so you are saying that the recessionary fears, the extra cushion of yield you get for that default risk, that is all already done? >> it's already done. i think we are getting there. you are in the investment for sure. we are two standard deviations away in the last five years and that includes march 2020's spike in recession and it means the market has done a lot of the work for you. the u.s. is getting there. it is close to pricing in that risk. if we are in the territory -- i think. manus: if you look at those three markets, the three very different economic risks, aren't they? if you think of them live

serve -- the mliv survey yesterday, where will the greatest dislocation be in credit and your view going forward if you avoid a recession, tortured recession in the u.s.? the u.k. looks most vulnerable, yes or no? >> the u.k. is always a little bit viable, isn't it? it is such a small market. we get pushed around on the international stage pretty dramatically. there are good things as well. we get around $70 billion of money coming into credit. a lot of pension funds are fully funded and switching their allocation from equities into credit as well. there's some good signs there, manus. the liquidity is not as great. i don't think it is one where

they have the biggest issues. the ecb has yet to tell us how they are going to unwind there massive purchasing program. that is really small. dani: what do you do with the european market? are you hanging on the sidelines? luke: pretty much. you can pick up one or two interesting things. it is starting to get into cheap territory rather than just fair value. nibble around at the edges paid we need to see what the ecb are going to do and when they are going to do it in detail before you can get really invested in the european i.t. market and high-yield, as you said earlier on, perhaps high-yield is the one area which has not priced in an awful lot of the risks yet. that is one place to avoid for now, may be over to the states on the other side of the pond. look at high-yield it. sterling is worth an allocation. manus: when you talk about

high-yield, we have this chat when the guys get in at 4:00 a.m. -- there was this view on the call which was energy is stacked and packed into high-yield. financials have had a bit of trouble. this energy blows out, luke, and we have people talking about the risk of 130, the risk of 180 -- $180 -- do you think it would misbehave then? luke: i don't think that is a bad thing generally for energy. we were having -- manus: what i meant was a little more 150, 180 gives me a hard

bloody nose in terms of global recession and it gives me defaults coming out of my ears. $180 oil. luke: energy credit. it will be so important at that point. we are trying to look at margins. we are trying to look at the companies where they have been able to control margins over a long period and a lot of industrials have a really good track record of cupid their margins stable during rising energy environments. that is the stress area. the recession that is coming, it is coming to consumers. dani: then why isn't more of that going to be priced into credit? we might be fully priced in here. i'm going to loop it back around and challenge you on that. if there is concern for

consumers, shouldn't that mean more widening spread? luke: financials are huge. dani: let me take this to you. if that is not going to be a problem for credit, if energy is behaving, margins are behaving, what does that mean for the fed? usually, we talk about credit being the true fed put. what does that mean for how much more aggressive they are going to be for a pain in the credit market? luke: the fed needs to move hard and they need to move fast and if they get that done, i think credit can get through this next one or two years without blowing out 500 basis points in investment grade. we continue to rise and rise quickly for the fed. this was well flagged. this is not a surprise recession. this is not a financial crisis that has suddenly come upon us.

it is fairly controllable and visible which way we are going which gives me a lot of comfort. dani: after talking to luke, it feels good after hearing from all of the doomsayers coming into that manus:. luke hanging on by his fingernails, hanging on by his fingernails and going what is christine lagarde going to do? dani: that's true. maybe more confident on the u.s., less on europe. youth, thanks so much for joining us. let's get over to the first word news. juliette saly standing by in singapore. juliette: shanghai starting to unravel. the punishing lockdown confined millions of people to their homes for more than six weeks after the financial hub reported no new covert infections in the broader community for a third consecutive day. the city reported 823 infections for monday that was down more than 100 on sundays total.

turkey's president said he will not allow sweden and finland to join nato because of their stances on kurdish militants. they poured cold water on expectations that opposition could be easily resolved. he accuses nato allies of ignoring his concerns about kurdish militants operating inside turkey and neighboring countries. 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. i am juliette saly. this is bloomberg. manus. manus: thank you very much. juliette saly in singapore. coming up on the show, brexit deal in jeopardy. the u.k. raises the stakes in a standoff with the e.u. we get the latest on the northern ireland protocol. that is next on bloomberg. ♪

dani: it's "bloomberg daybreak:

europe." i am manus cranny in dubai. the u.k. government has set out its plans to unilaterally override the northern ireland protocol. putting the brexit deal they agreed to in jeopardy, raising the risk of a trade war with brussels and it comes as the bank of england governor warns a surge in food costs could have apocalyptic consequences for the global economy. >> i have to tell you that i think this is a big concern. two things the finance minister said is that ukraine does have food and store but it cannot get it out at the moment. what he was optimistic about -- he said we have no way of shipping it. dani: for more on this, we have a great roundtable for you.

let's kick things off with you. we have those comments on food prices. they come at a time when we are going to get inflation figures due tomorrow. >> we are expecting inflation prices to rise to 7%. this is going to be bleak. largely it comes from the rise in the energy price cut 51%. but it's also to do with food. andrew bailey was warning and apocalyptic rise because of the rise in fertilizer prices, for example, -- the biggest chunk of their income on food, on the essentials, so april was a difficult month. we have been reporting on that anecdotally and we will see that in the figures tomorrow. manus: we will get a jobs snapshot in a little bit of time and of course it is a question of job openings.

what is the data going to tell us in terms of the bank of england's guides on rates? >> it is the story of tightness. staying in line with its pre-pandemic low and masking the tightness in the labor market which we will see more in the vacancy rate which we are expecting to be at an all-time high again. economists at bloomberg economics are warning that this tightness in the labor market is not going to shake out for a yet until inflation gets so high that it weighs on demand and forces them to get rid of staff. i was speaking to the deputy governor of the bank of england last week and he was saying that consistently, the tightness -- the resilience of the labor market has been underestimated. that is an upside risk for inflation and it means more hikes are likely to be needed in the coming months. dani: let's bring you into the conversation because not making

the economic environment any easier is the u.k. setting out these plans that might reach the brexit deal unless the e.u. backs down. what exactly is the government planning here? >> there's only three ways out of this impasse in northern ireland. the first way is some kind of a negotiated settlement and that is what boris johnson is trying to achieve. there will be legislation put before parliament that is not exactly going to threaten to sort of blow up the deal but it holds in reserve the prospect of amending the protocol domestically so that it can -- so the u.k. can circumvent some of the checks it says are imposing costs on northern ireland. a negotiated settlement is obviously what the prime minister is looking for. the other possibility is that that legislation goes through and we end up in a tit-for-tat

trade war because the e.u. retaliates. the power-sharing arrangement in northern ireland breaks down completely. it is already suspended and i guess the third scenario is that we end up in some kind of continual state of limbo where they can gets kicked down the road as we see in the past, nothing gets resolved, but they cobble through some kind of agreement. the upshot for northern ireland is that while the protocol is bad because it is a trade barrier, it imposes checks on some goods going between great britain to northern ireland, what is worse is uncertainty. it has economic uncertainty due to the way that the protocol has been forced which is -- enforced in a patchy way. the best solution for northern ireland is some kind of a

negotiated settlement. it is hard to see how they get to that now, however, because the democratic unionist party, the northern ireland unionists that are not taking up their seats in the power-sharing agreement, they are refusing to budge until the protocol is substantially amended. manus: at protocol leaves northern ireland as a pawn in the political game. this is not the time for unilateral action to be announced. of course, massive historic shift in the voting from where i am from over the weekend. this is just one problem for this british government. does brexit complicate things? you have a number of other issues. will this come through? will you northern ireland issue come through? theresa: i think it sort of adds

to the suppression of a government that is flailing from one problem to another that in some ways seems to be using each of the diversionary tactics. i think he needs the problem of northern ireland to go away because it tarnishes his brexit legacy, at least open to complaints from brexiteers that it is incomplete. the protocol is hated by the brexit wing of the party. he really needs some kind of a resolution, whether that is a negotiation that produces a change in the way the protocol is implemented because the e.u. are saying we protocol cannot be changed. some sort of fudge. it is not helping him. as to this impression of a government that cannot really get on top of its brief and

cannot move beyond brexit. manus: there a personification of the northern ireland protocol. dani: i am not a fan. manus: thank you very much. unfortunately, it was in short supply. lizzy burden, bloomberg opinions contribution. thank you very much for being with us. coming up, we are back to stable coin land. is it significant for the wider crypto landscape? this is bloomberg. ♪

manus: it's daybreak europe. dani burger in london.

the peg, dani, to the dollar. dani: go on, manus. manus: let's have a quick check. where does the flow of money go as we see another stable coin de-peg? you see some stability in bitcoin pier 1 happens next? is it that you get more regulation and where does the flow go? where does the confidence go? dani: we see bitcoin above $30,000. another stable point falling out. for now, it seems the bigger cryptocurrencies cannot -- i was asking him what does it mean if we have these smaller corners of the market like the stable coins collapsing? this is just an indication that if the fed keeps pushing too hard, it won't just be these corners of the market.

it won't be more widespread. manus: absolutely. there was a much bigger story in terms of the value, total market value. it dropped across the bloomberg and i would encourage everyone at the -- everybody to go and have a read. the market value dropped $1.36 trillion. when you were away last week, we had -- regulated crypto exchange in the uae. when you see stable coins offering you 20% interest rates, maybe you should stand back and go, why? you have a quarter of a percent. dani: are you saying i missed something in markets? i thought it was all boring. manus: you went on revenge terrorism.

and then by friday when we got into that, deep into crypto land, but stabilization for the moment, you know who has gone quiet? a tattoo. mike nova brad -- mike. dani: one of the most read stories on the bloomberg terminal. the story is, has not been tweeting at all, but still, bitcoin above $30,000. that is doing ok this morning. manus: absolutely. "bloomberg markets: europe" is up next. this is bloomberg. ♪

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anna: good morning. welcome to "bloomberg markets: europe."