>> this is bloomberg daybreak: europe. i'm dani burger in london alongside manus cranny into by. the stories that set your agenda. >> survival at stake. george soros warns russia's invasion of ukraine could lead to world war iii. in the end of civilization as we know it. >> we have the beginning of the third world war and our civilization may not survive it. manus: poxon frankfurt. -- hocks -- hawks in frankfurt.

>> i believe gradualism is the way to go as long as inflation expectations are well and good. if we were in a situation where we anticipate d anchoring, or if we had a surge in demand, that is a different story. manus: plus, the hike in new zealand. the rv said raises rates by half a percentage point again and signals more to come to tame inflation. good morning. you have an expeditious fed. you have an ecb not panicking. you have the rbnz wanting to be ahead of the curve. dani: all of that coming with the hard and soft data starting to turn over. abysmal home sales, the worst in nine years. we are seeing a repricing of not just the fed, but also of risk. let me walk you through.

we are seeing a rebound in equities this morning, looking at asia pacific up 0.4%. the s&p and nasdaq fell yesterday. we did see some of the heaviest of the losses start to pair during the end of the session. there is the sense that if the fed is going to back off, perhaps investors can more comfortably wade through some of the carnage, so some buying this morning when it comes to european futures. manus: bridgewater called it stagflation. the rbnz want to get ahead of the curve. darby and said not only raise rates, but they want more with the narrative in terms of where we expect to go and that is toward 4% by the end of 2023. two your paper, the short end of the curve imploded yesterday,

down the most since may 2020. that hard data, housing collapsing, richmond fed at a two-year low, we are on the cusp of stagflation. the breakeven, so bill ackman says inflation is out of control and inflation expectations are getting out of control. the euro is down, the dollar is a little bit higher. that is the state of play. breaking headlines. we come back to china conducting military exercises near taiwan to warn the u.s. dani: let's get to our other top stories. details of the fed's path forward. manus: plus we have our bloomberg anchor francine lacqua in davos, no sleep, and a lot of

partying, and interviews. juliette saly is in singapore with the rbnz. and investors fleeing. traders are now dialing back the expected pace of fed hikes is the data cools. let's get a little bit more on that. one of the latest market moves, the two-year paper imploding yesterday -- what does that tell you about the probability of hikes in september? >> what they are telling you is that right now the markets are dialing back those expectations of fed rate hikes. of -- we have seen the expectations come down. you have seen them come down. that is because of this much

softer data coming through. the rate hikes that we have seen up to this point, maybe they are starting to work themselves through the economy. of course it is early days, but what the markets are looking for is are we nearing the peak in inflation? is inflation going to come down at a consistent pace? most of the worry is around this slowdown and the minutes from the fed are going to be incredibly important. dani: to that point, we had bostick talking about causing in september. you have bullard switching to the potential of rate cuts late next year. is this a tonal change? is something different happening at the fed where they are starting to take this step back and pause type of approach? >> that is really interesting. we are starting to see these

mutterings and it is definitely something that the markets and investors are looking at very closely. i do think it is early days to say that we will see a pause, but definitely it is something we are starting to see markets and investors talk about more. as you mentioned, inflation still a problem. the rbnz incredibly hawkish going forward. in the u.s., it is definitely something that we are going to probably see a lot more talk in the markets about a potential pause. dani: as stephen englander writes this morning saying, be careful what you wish for with the fed wanting to slow down the economy. manus: absolutely. i think it is going to be a volatile week. dani: it certainly is. thank you for helping us get set up for the rest of the volatility.

there has also been a lot of talk in davos about ecb rate hikes and adding to that was francine lacqua speaking exclusively with the person in charge, president christine lagarde told her monetary policy in europe is at a turning point. >> i believe the gradualism is actually the way to go as long as inflation expectations are well and good. if we were in a situation where we anticipate d anchoring or if we had a surge in demand, that is a different story. manus: let's get to the world economic forum, francine is standing by. great interview. it appears she has sparked debate, healthy debate by whether we should have a jumbo hike for not panic. also during that conversation, she drew the differentiation between the united states inflation and european inflation. >> yes, she did and there is

still a hoe but the back of her mind for a lot of people on the governing council that this inflation is due to pent up demand from covid. this is real inflation. the idea is that it is gradual. 25 basis points in july was very well telegraphed. it gives her more optionality. if inflation goes down, there is no policy mistake done by the ecb. i think she was thinking and hoping together with others that this gradual increase in interest rates, was that with blog post monday, the message was clear. do not speak openly about something that would contradict the main message from the ecb. this is in mario draghi used to govern. going to speak person-to-person. we saw that if not backfire, but everyone was not on the same message yesterday, with two

governing counselors saying it makes us look weak and trying to fight inflation. this is really at the crux of the matter, the fact that the ecb wants to portray a message of consensus and everyone being on the same page. certain hawks just want the ecb to be much more aggressive in dealing with inflation. dani: i also love what she said to you that she means what she says in terms of that blog post, being really concrete in that. you will have many more interviews from davos. that is francine lacqua. to more central bank news with new zealand central bank that hiked rates by 60 -- 50 basis points for the second straight meeting. they added that more aggressive hikes could be coming. we are joined by juliette saly. i hope you are impressed by me saying zed instead of z.

[laughter] >> we are going to get you to this part of the world at one point. we are seeing the rbnz saying the greater risk is going too little too late rather than too much too soon. they did suggest there would be more aggressive hikes on the way. this is the second time we have seen a 50 basis point cut. the first time that that has happened since the official cash rate again in 1999. we will see further rate hikes. 50 basis points could be in july and august. the rbnz saying the economy can handle this and their main priority is stabilizing inflation, prioritizing that overgrowth concerns. let's see how the market has reacted. stocks and bonds have fallen. the yield on the 10 year up by some five basis points. when it comes to the asian

economic picture, it's a positive session. we did have some more positive session. that is going to be important. the bloomberg survey came through suggesting we will not see the ambitious growth target. bloomberg economics estimates 4.5% growth for the chinese economy. the offshore you one -- yuan weaker as we see some lockdowns. we could see the offshore slide 272 the dollar as we see these growth concerns in china. manus: the evidence just mounts day by day. thank you very much. great wrap up on jumbo hikes and the risk in china. george soros has a stark warning for the world on russia's invasion of ukraine. the 91-year-old billionaire spoke at the world economic forum in davos. >> russia invaded ukraine.that

has shaken europe to its core . the invasion may have been the beginning of the third world war. and our civilization may not survive it. manus: meanwhile, russia is moving ever closer. the u.s. a lot of key sanctions waiver to expire. dani: the carveout expired an hour ago, means that banks and individuals are barred from accepting. he does indicate the u.s. is prepared to force russia into a default. coming up on the program, we will have more how markets are repricing as fed hike expectations change. this is bloomberg. ♪ manus: a little bit later, we are back to davos where francine catches up with a guest. we will get the update on bloomberg. ♪

>> for the moment, we are not seeing a recession in the euro area. >> clearly the economy is starting to weekend. it comes down to inflation. >> supply shocks, demand shocks mix into one. of course it is unclear at this point in time. >> we may see it going higher and becoming a major risk for recession, for the developed economy. >> there will be a slowdown. but labor markets are so tight. >> there is no one increased risk of her session, but we do not anticipate a global recession. dani: some speakers that davos talking about a recession and it

does feel like the doom stirrers -- doomsters are gaining the upper hand. markets swiftly repriced, that is equities tumbling to year's lower. traders are doubting the fed's path pricing and 20 basis points of rate rises, down from 253 weeks ago. is our next past -- guest part of team doomster? are you part of this market eat thousand that has changed their thinking in the past month around risk? >>, part of deem -- team doomster? i think unfortunately right now. there is an element that we are talking ourselves into a recession a little bit. some of it is not quite as bad as that. i'm not all the way in the camp. dani: a little bit of hope.

[laughter] >> exactly. manus: good to have you back in the studio. good to have you with us. you are not fully on team doomster. try to clarify the debate for us. i'm looking at breakevens. the biggest monthly rolldown since 2008 and yet we are still apoplectic about inflation. how do you see the inflation outlook? if the breakevens are already rolling over. >> yes, look, i think the main issue with inflation is the current inflation problem.we do have sort of a sneak peek at the may readings throughout price debts information, which looks at the price trends from online prices. i can tell you so far the news from that is not good and suggests inflation remains above average.

expectations are beginning to come down, but they are still at a level which is concerning for central banks, that is why we can't relax on the rate front just yet. we saw a bit of that from the rbnz overnight. dani: you are sounding a bit like ackman. does that mean that this noise, this market expectations, bostick saying there is a pause in september is overdone? >> i thick it is too early to say we can pause yet. we have been here before. we were here this time last year thinking we were at peak inflation. the annual inflation rate is beginning to rollover, but nothing like a comfortable level. that is my principal concern at the moment. manus: i was drawn to your two fx calls, very defensive trades. you want to buy some yen and sell some sterling.

i've completely missed the bottom of sterling. if i change some money, it is over. you want to buy yen. is that one of your biggest protection trades? how much more brutality will there be for cable specifically? >> let me start on the end. the yen traditionally is a safe haven and does well -- it has not done well this time around, but because it was trading much more off rising yields. i think now that we are in a risk aversion that brings yields down, not up, which seems to be the case and i think the yen has a potential for repatriation. we are worried about this stagflation issue. it seems much more likely that the u.k. is going to suffer from that first and the question of that means for peak rates and will central banks follow through on rate hikes. this is probably a bigger

question there and that is why sterling and used to be under pressure. we have brexit on top of that coming back which doesn't help. dani: the debate around the dollar peaking as well, if sterling is not going to do so well, perhaps not. what about this idea that the hawks are out in force? >> it is interesting. the divergence you are already seeing from lagarde suggesting more. i do think at the moment the ecb's gradual approach will win out mainly because they don't have much evidence of wage growth yet like you do in the states. the ecb keep drawing the differences between the u.s. inflation and the european inflation and i think they are quite clear. manus: i like your line on u.s. growth. jamie dimon said the storm clouds are clear. dani and i got excited about the richmond fed.

you say there is no real smoking gun on u.s. growth risk. that is a big call, michael. >> i did write that before the housing yesterday. manus: you can't know! >> i'm not going to walk it back. [laughter] the reason i say that is the consumer in the u.s. is still showing really good signs and the consumer has this massive cushion of excess savings. i think that is why you might get an industrial recession or manufacturing recession like we had in 2015 or so, but the consumer is reasonably healthy and that is why you can say that even if there is a slowdown it will be quite mild. manus: ok, we will hold you to that and when you come back in the next time, we will talk about those mortgage numbers and i guarantee you they are not going to look pretty. michael, thank you very much.

head of microstrategy at state street. we will head back out to davos. francine is out there. right here on bloomberg. ♪

>> the account balances of the consumer pre-pandemic to now are multiple figures. if a person had an average balance -- excuse me, it is now almost $4000. so just up back and think about that. it grew 5% in the month of april to march. consumers have more money in

their accounts. the idea that they spent the pandemic money is just not true. the question is they pay down their credit card balances. the third point is are they spending? that is what is interesting. the first two weeks of may they spend more than last may. consumers spending -- people say does inflationary. >> i don't want to interrupt, this is the real moynahan. this is the bank nerd giving us the operational stuff here. >> this goes to the heart of the economic questions. everyone is talking recession and stagflation. what you are saying does not scream of stagflation or recession. >> this makes the fed's job hard and easy. easy in that you have consumers in good shape, not overleveraged, home values went

up. the prices went up and people didn't borrow down. the bad news is what is going to slow them down. tsa travel sunday was over top 19 by 10%. >> what is going to slow them down? >> nothing right now. the fed has this very difficult thing of getting the slow down without slowing them down too much. second thing is the unemployment rate is really low. he's got this year -- she's got next year mid ones. but it is slowing down. the idea is that the fed's work slows you down. the problem is he still has unemployment 3.5% to 4%. you can slowly consumer down because they have money to spend. that is the difficulty.

i believe that they will be able to manage the flow, but it will be tricky in execution. and then there are things outside of our control. pandemic resurgence. the war. manus: a little bit from bank of america's ceo brian moynihan. the bid is brian moynihan on his bullishness, nothing going to slow the consumer down. dani: at the same time, i think of target's ceo saying the consumer has drastically changed in the past 13 months. it is a lot of conflicting noise. manus: if you work at bank of america and you earn 100 thousand dollars, you are in for a 7% a rise and they value in electric vehicle. dani: another crazy day?

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manus: this is "bloomberg daybreak: europe." >> george soros warns russia's invasion of ukraine could lead to world war iii and end civilization as we know it. >> it may have been the beginning of the third world war and our civilization may not survive it. dani: more ecb government councilmembers say hikes should be on the table but president lagarde says there is no rush.

>> gradualism is actually the way to go as long as inflation expectations are -- if we were in a situation where we anticipate the anchoring or we have a surge in demand that is a different story. dani: a jumbo hike in new zealand. the rbnz raises rates by a percentage point. you have new zealand on the half-point hike, ecb, the hawks flying. the u.s. is trying to get fed expectations as worries turned to growth. manus: the soft data -- you know, looking a little bit bear. so jumbo rate hikes for new zealand and no panic at the ecb. the qe flying higher. we'll markets are tight. this is what we've got. the kiwi is up by 0.5%.

oil inventories are imploding. you are seeing the saudi foreign ministry saying we have done everything we can. in terms of supplies to the oil markets. the two year yield imploded yesterday, the biggest one-day drop since 2020. the euro-dollar -- well, the dollar has gone stronger i think on the back of some tech moves yesterday. the ad tech moves were really quite fatalistic. dani: they certainly were and it does go back to the debate that is unfolding in this market right now. are we heading toward a recession? what does it look like? our last guest talked about the u.s. consumer is still healthy. as you say, the soft data, housing prices, some of the

surveys coming in looking weak. that was enough to dip stocks yesterday. they did rally into the close, but the rally is continuing this morning. asia up more than 0.25%. s&p futures and nasdaq futures up more than half a percent. euro stoxx 50 futures up nearly 1%. we are also back in davos for the penultimate day of the world economic forum. let's get to francine lacqua there. >> we are joined by the chief executive officer of -- we have been talking about inflation, about the supply chain, and the next six to 12 months. i'm delighted to be having a conversation. thank you first of all for joining us. you were telling me it has not been easy getting the parts you need. what is the lead time? >> it has been worse and worse over the last year and a half. covid started this. we then had many things that

sort of unfolded and then we have had a stop and not least with the lockdowns in china. that actually gives the ripple effect to most countries. >> in my small world was waiting for a sophia for six months. -- sofi for six months. if you need to wait for a piece of equipment for six months for a business, how does that work? >> they help us across many of those things, but you have to have your colleagues on site longer than you normally would. it creates pressure, it creates the transport issue. everyone of our customers wants to have the turbines meaning the electricity output is more valuable than ever. >> so the biggest concern is maybe not funding in terms of things like that, but it is really the supply chain.

how many components are late? >> on the inbound, things that come through the factories, things come with a delay, and on the outbound where we are normally the one that look after that, it gets into the queue and then it gets late into more than 30 countries in your like this. >> do you have to do more to get things on time? are things going to get worse before they get better? >> what we do is we mitigate together with our partners. when you miss something your transport cost is gone and you have to rebook. that gives you the double costing. we have seen the experiencing and it has become worse. >> this is because of the covid zero policy and things like that , not because everybody is trying to create more turbines? >> it is a bit of both but we have had high activity for now a

couple years and we will remain doing that so i think it is actually the ripple effect, the backlog and the weights. -- the wait. there are 1000 container ships in queue. in that, many of our components are finding themselves. >> does that mean the transition to a greener economy will be delayed? >> we are going to give them the strategic tools. part of that is we hold a larger inventory. we try to protect ourselves and the customers from any delays. where there has been a delay, most people appreciate when they get the call on their phone and say there is a delay. >> often we talk about inflation as if it were some kind of textbook. you are running a company where there are a lot of inflationary pressures. do you see that easing? >> i do not see easing right now.

we are in a situation where we have to get used to that this will continue for not only quarters to come, but potentially years. and why is that? there is an underline where when i look at our components, a turbine becomes more expensive. electricity that major markets has become more sought after and also more expensive. >> but you should also be a booming industry. this is the industry of tomorrow. when are you expecting to go back to profit? >> when we have a more normalized -- when we are not having supply chain challenges and other things we will come back to profit. i am not nervous for that, but we have also just i think q3 last year we said it was going to be a difficult 2022. the 24th of february, it became

a complete lyons pricked of the year. we have had activities in ukraine and russia. i met with our customer in davos. we are finding solutions to that. but also now we have to face a climate that has been elevated to be part of security. >> but we are also using more fossil fuels. what does it mean that we suspend the transition for a little bit until the components come back? until the supply chain is working better? burn: till then? -- burn coal until then? >> a transition is an energy probably takes three decades. >> we don't have three decades do we? >> no. what has happened in the last four decades as we have and stored -- we have installed kilowatts of power, displacing

co2. it is the continuing activity that matters. >> do you have components you just cannot find? >> no. we are the world's largest manufacturer of renewable solutions which also leans toward hydrogen and others in the future. we work with partners that help us out. does that mean -- there is a factory that stops, but everyone can see the bigger scheme, the bigger play. if we cannot run we cannot give the world the strategic tools. >> is it china where you're components come from? have you had conversations with authorities that her understanding this and could relax policy? >> know, but i would try to talk that down. if i go back now, more importantly right now is that we do not fall into the trap of saying we have very high

ambitions, but we want to calculate the target that will reduce the climate affect and make us stay within the two degrees agreed in glasgow. actually right now my main concern is not the components. my concern is that we do not fall off the target. i will give you an example. last year we did half of what we needed to in europe. >> we need to do more. thank you for joining us. the president and chief executive of vestas wind systems. back to you. manus: henrik anderson. coming up after the break we are going to get back to another ceo conversation. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." we have gotten a lot of ugly data over the last 24 hours. you have fed surveys coming in. also housing data slumping the most since 2009. u.s. economic surprise index basically just shows in turning negative that economists did not see the extent of this slowdown coming. manus: no, the hard data -- how do you call housing sales more than sentiment? it is turning negative. as michael metcalf just said to you and i, yes, things might be looking shaky but you cannot

throw in the towel in terms of raising rates right now because in his view the inflation narrative and the inflation situation is still very tight. the dollar might react a little more to the softer data perhaps. it looks like we are all set up and ready to rock 'n' roll back in the hills of davos. let's return to francine. francine: thanks so much. joining us now is sander van 't noordende, the ceo of randstad. great conversation on the great resignation. is everyone resigning after two years of covid? >> i would rather call it the great rotation. it is people resigning but it is not like they are retiring. it is people looking for better opportunities that provide more of what they want. francine: is it better

opportunities are just that people are fed up and want to change? >> there is some of that. with covid people stay put, now they are looking for new opportunities. it is also do i get what i'm looking for? our research shows people are looking effectively for three main things. that is purpose, belonging, and flexibility. purpose is are the values of the company that i work for a line with my personal values? the has risen to the top of the list over the last couple of years. francine: this is great pr speak but i read a survey saying 70% of people resigned because they don't like their boss. >> you are absolutely right. at the end of the day. but the boss is also an example of the values of the company. if the boss does not behave according to how the company wants them to behave, then you get a mismatch of expectations and reality and that is where the friction starts.

francine: is this crystallize because of covid? people being at home and changing their values or reassessing their life ambitions? it feels different post-covid. >> there is some of that. you start thinking about life. more of that happened during covid because people were with themselves, with their families. i was with my partners and an apartment, i was out of work for a while. we know how to retire now. it was a special period absolutely. francine: how much flexibility do people want and does that make them leave a job? >> people want to have flexibility in when they work, where they work, and how they do their work. the research shows especially on when and where, 70% of people want that flexibility but only 40% of people are getting it.

then you start looking, and if you want more stats, i will stop, but the other stat is younger people, 70% is actively looking. all generations it is around 40%. this is a serious thing for us as employers. are we giving our employees the type of environment they are looking for? francine: if you look at the age brackets, who wants flexibility? who wants to be at the office five days a week? >> everybody wants flexibility. everybody knows now that people work from home and they actually do something. in the past there was a lot of mistrust. everybody now knows virtual working works. a lot of people tend to have -- to like going to the office more

because they get to know people. people now have sorted their lives out with kids and stuff, they can be more working from home. older generations such as myself , i'm traveling a lot. i'm not very often in the office. >> is it difficult to have a culture and a sense of purpose if you do not spend time together? >> you are absolutely right. spending time together is still important. but it depends on let's say what team you are part of, when that time is. if you are in the finance team and you are closing the quarter, that is your moment to be together as a team. if you are in creative marketing and you are starting that campaign, that is your moment to be together and defined with the campaign is going to look at. it is different for every group within the company and that is

why once i start saying everybody needs to be two days in the office, that can work. francine: do people want to get paid more into companies have to pay more because so many people are turning around? >> there is definite pressure in all markets, more so in the u.s. than european markets. francine: by how much? >> in the u.s., the wage inflation is 5%. in the eu it is bout three. -- it is about 3%. people are always looking for arrays and employers know that if they want to attract people they have to make it attractive. making it attractive is about the values, belonging, the flexibility. but nobody is going to move if there is not arrays involved. -- not a raise involved. francine: what is the biggest mistake chief executives can make not to retain talent?

>> retaining talent has always been important but because of the scarcity in the labor market , and that is not just something of today. that's going to be there. you just have to look at demographics and you will see the scarcity for the next decade. francine: thank you for a wonderful conservation. sander van't noordende of randstad. dani: thanks so much. i guess he did not say the way to retain talent is via giving them a little money to buy an electric vehicle allah brian moynihan and crew at bank of america. thank you so much. china pushes ahead with its covid zero policy moving to sterilize some residents' apartments. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe. let's turn our attention to china. president she continues to pursue strict covid zero approach. -- president xi jinping continues to pursue strict covid zero approach. officials in beijing are punished over covid clusters that flared up. john, in the words of george soros, there are two global leaders making mind-boggling mistakes. putin on the war but xi jinping sticking to zero covid policy that cannot possibly be sustained. it looks as if they have stepped up home disinfections. is this a major escalation in the fight against covid? >> good morning. i think xi does not feel like he has many options in the

situation. with questions about the effectiveness of china's vaccines, with the vaccination rate for the elderly at a low level, the leadership feels like if they do not lock things down, china is in store for a relatively high summer of deaths. they are paying an economic cost, doing as much is possible to try to soften the blow, but as far as we have seen to date, we have not seen the formula in terms of how to control covid and still have a growing. dani: we have seen the biggest weekly gain in two years. to what extent does the optimism fade when you have shanghai lockdowns easing but again, the fight continues throughout the country to enforce zero covid? >> the concern is even as shanghai is beginning to ease, you are going to see the virus popping up in other parts of the

country. we are seeing that in beijing now. we had officials punished today for not doing enough to control the number of infections in the city. it is still relatively low. we only had 48 reported today. still, they have not been able to take the number down to zero so there is growing concern the city will have to lock down to try to get things under control. manus: this just brings the whole view on the growth prospect for china more and more. the headline we have written today is the growth target -- you can helicopter money into people's bank accounts but they cannot get out and spend it. it is no use. >> that is the problem. you have levers that policymakers in beijing can pull but they are not going to do much good if everybody is stuck at home. they cannot go to work, they cannot spend.

still the covid situation either because china changes its policy or policy prevails and covid goes away, it is going to suppress the economy in terms of borrowing, spending, and investing. dani: thank you. manus, it is an important conversation, lest we forget the concerns of economic slowdown in china adding to the global picture of our be going to get a recession and what type will it be if we do? manus: we are stowing the -- showing the euro stoxx 50 at the bottom of the screen. that is interesting. if we have a flow in the euro, a rising euro, more stable euro, that correlates to stronger equity outperformance. all gloves are off when it comes to debating the scale of the recession. -- the recession that might come in europe. dani: more markets next.

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