dani: this is bloomberg daybreak: europe, i'm dani burger in london alongside manus cranny in dubai. the stories etc. agenda. manus: wti climbs to the highest level since march after saudi arabia boosts oil prices more than expected to customers in asia. public transport resumes in beijing as china's capital rolls back restrictions. plus, trade war reprieve, the u.s. commerce secretary says partially ending some trump-eric tarriffs may make sense to help tame inflation. travel and tarriffs drive the

narrative apps we see this china bounce drive higher. we start with a pro risk narrative this morning. dani: it feels like an even keel when it comes to risk assets. central banks are said to hike, this does not include the ecb. let's get to that risk story, looking at china stocks opening higher. they are coming off of a long weekend, they are up one and a half percent lead by industrials and materials. that gets to this idea of travel coming back, the s&p 500 futures are up .5%, euro stoxx futures going higher as well. playing a little bit of catch-up. u.s. stocks did end lower friday after strong payrolls numbers,

but a little bit of bounceback this morning. manus: i have it on good authority a lot of cake was eating over the weekend. dani: indeed. manus: we will come to the mliv survey in a moment. it is amazing how our viewers are more concerned over where rates end up than they are over qt. china stepping back from restrictions, the saudis raising the price of oil to asians. citigroup do warned that there is going to be a delay in iranian sanctions releasing barrels to the market, they are going for 113 dollars on brent by the second quarter. bond yields rising ever so slightly, again, hedge funds turned negative for the first time since 2021 on the bond market. you are seeing a clip to bearish positioning, the aussie dollar,

you have got to sell something and you have got ubs saying this is a phenomenal trade, buy yourself some aussie. what do you want to sell that against the yuan? bitcoin is up, it is on a race in a vast market higher, a bit of relief to bitcoin traders there. on the energy side, we have the story from asia. and emma o'brien on the covid situation in china. dani:cryptos joanna ossinger on the latest. saudi raised prices for july shipments to asia with expectations of a boost in summer demand. that price represents a near 3% jump since opec and its allies agreed to boost production in the latest meeting.

let's get the latest from energy reporter dan murtaugh, higher prices yet again this morning, is that the direction of travel? dan: i think so. last --week, we had the -- the saudis are talking to customers from texas to tianjin, so when they raise prices it is because they know customers are willing to pay up for it. that gives traders the idea that demand is strong and getting stronger. i am here in beijing and i just have to look out the window to the ring road to see that traffic is reopening, and it will pick up in shanghai as well. and we will see more goods being shipped and more office workers going back and forth from home to the office. that is all going to spur demand. the amazing thing about oil being at $120, is that it has risen that high with a major

importer with one hand behind it's back. as we look at the summer, it is really a question of how much higher prices can go. manus: vito telling the market of the weekend that washington can tolerate a little more already in f -- iranian barrels on the market. dan on the oil story. he mentioned beijing and mobility. beijing is set to roll back month-long covid restrictions, as china returns to normal. public transport will resume in most districts, with public venue set to open as the city hits a key threshold for unwinding curves, let's get two on normalization -- to emma on normalization -- mobility is returning, but how far from normal are we? >> you have still got a couple

of districts under restrictions in beijing. you are seeing a few things winding back, schools are not fully back on deck. there are still remaining curves in place. you've also got the fact that just because curves are using now, that does not mean they will not be reintroduced. that is always the threat in covid zero china where it cases glare again, you have that risk of that hammer coming back which i think is weighing on sentiment. we saw data from the weekend weighing on broader travel sentiment when it comes to china , with holiday travel over the long weekend down significantly. dani: to that point, you have hong kong that is perhaps one case where you have new cases flaring up, they hit a six-week i, what does that mean in terms of restrictions for the region?

emma: it just really shows the fallibility of the approach china and to some extent hong kong are deploying, even with these evermore contagious variants. they are trying constantly to keep it out, trying to keep cases suppressed, but they still keep getting in. this latest cluster in hong kong leading to the highest new case load in six weeks. it came out of a cluster of bars in the central district, you are going to get cases coming back, and that always raises the risk under a covid zero regime of restrictions being reimposed. we are seeing a little bet of that already in hong kong, they are starting to mandatorily isolate people who have been identified with new subvariants of the omicron's brain -- omicra on strain.

watch this space when it comes to hong kong. dani: emma o'brien there. commerce secretary gina raimondo says it may make sense to lift arabs -- tarriffs on some goods as a way to lift inflation. she was saying president biden is open to any good idea that will help american families. >> steel and aluminum, we kept those tariffs because we need to protect american workers and our steel industry. that is a matter of national security. other products like household goods and bicycles, etc., it may make sense. bruce, we have heard this lingers before over the past month, what is the process and likelihood of these tariffs to be relaxed? >> secretary romano did say the president is looking at this issue, as far as the timetable,

we don't really know. this all relates to tariffs the trump administration imposed on $300 billion worth of chinese exports to the u.s. it is not just tariffs on chinese goods, secretary raimondo referred to tariffs on steel and aluminum. that is also on imports from the eu, so those seem to be off the table. but the big question is what happens to tariffs on chinese goods such as clothing, shoes, bicycles, household goods all these are things that were subject to tariffs during the trade war. at the time, critics said this will contribute to inflation. now with inflation probably the top political issue for the biden administration heading to midterms, it's something they are looking at. on the other hand, we also know

that the u.s. trade representative has said these are actually good leverage in negotiations with the chinese. so does the biden administration get rid of them unilaterally, or as part of something that is a broader deal with china, we have to wait and see. manus: diesel and gas are around at the white house's neck as we go into midterms. bruce on the potential for tariff renegotiation. bitcoin miners are selling tokens amid rising costs. joanna, this bitcoin in another itself has leapt since we started our show two hours ago, we are now up 5%. what is happening with the miners in the first instance? joanna: miners have been moving their coins from their wallets onto exchanges, an indication they may be planning to sell them.

they may also be doing other things, so it is not a perfect match. but the amount of bitcoin moved onto the exchanges did rise the most in may since january. this is after they may have made plans in the fourth quarter, buying expensive machines, with bitcoin in the $60,000's, and they may be having to sell some of these to keep their operations going. dani: underscoring that with that rally we are seeing back up above $30,000. joanna: bitcoin tried to do it last week, we got up to $31,000, but it has been really stuck around that level. the 50 day moving average is right around high $33,000's, that might be one to watch. if you look at a graph, it has really been stuck at $30,000

even if it makes a break one way or the other, it comes right back to it. dani: coming up on the program with manus and me, citi's fraser thinks the u.s. is closer to recession. this is bloomberg. ♪

>> europe definitely felt more likely to be heading into her session then you see in the u.s. we all know it is much more about rates, this is a recession, it is not our base case, but it will not be easy to avoid either. dani: this citigroup chief executive officer weighing in on the session -- recession

conversation, also -- in a tweet, he said if i am managing a big company, i am prepping for the worst, but the economy is coming from a strong place. he ended by saying it is riskier times, but we may just land softly. let's turn now to ben emons, managing director at medley global advisors, there are a lot of different opinions. if we are now in the world of tarot, which you write in your most recent note, there are reasonable alternatives. our bonds a reasonable alternative when the path of the economy is so unknown? ben: it is unknown. if you look at data over the past week, it suggests that there is a soft landing after this first quarter of 2021.

but then we have inflation as well, and this inflation number comes on friday, i'm afraid there will be a lot of pressure from the food and energy sector. i think therefore that the reasonable alternative for bonds may not be as reasonable. there is much stickier inflation, particularly with food and energy, and it is much stickier now. manus: ben, good to see you this morning. . we are still in that normalization process of adjustment, and no material drop in inflation. what does that mean for a neutral rate, are we still not prepared for a much higher neutral rate and if so, what is

that from your perspective? ben: i think that is an open question, but something many of us are trying to figure out. you had this major boost from the reopening, plus, you edit all this fiscal stimulus so it lifted the growth of the economy to a higher level than pre-pandemic. that is what that neutral rate i think is about. instead of the lower rate affecting two and a half percent, the inflation rate is also running higher. so, you think about a potential neutral rate that is maybe three and a half, and that is where we need to go first, so, it is very different -- dani: perhaps some in this

market are starting to heat that morning, we have seen leveraged hedge funds for the first time since 2021 flip short on u.s. 10 year treasuries. ben: i think it is right there, with hedgers placing short bets. we have people saying we have overshot with yields, 3.2% recently, you could be in for another major selloff, therefore another big correction of 10 or 15% in price. it is asymmetry at the moment for bonds. as opposed to stocks which may have temporarily hit a bottom because the economy is not actually in a recession.

corporate bonds are already linked to treasuries because of interest rate risks. manus: we have had two cracking good weeks on credit, two weeks of yields compressed, i then look at this roll call from jamie dimon to elon musk, who has got a "super bad" feeling, jane fraser talks about the risk of european recession, but when you look at that level of rhetoric -- what does that say to you about credit? you should look to credit shortening? ben: i think what jamie dimon is doing is preparing himself for

contraction in credit. bonds tightening was kick started last week. this is all about reserves that can be transformed, this affects the draws on the amount of reserves, there is not as much credit available in the system. this is what jamie dimon is pulling at. he has to put a more defensive position on his balance sheet. some unemployment comes along with that, too. then you are drawing more credit out of the system, he has to be defensive, i think that is where he comes from. dani: does the call get more intense for tech? elon musk and his super bad feeling. other tech firms talking about pausing hiring as well. is the problem acute in terms of

becoming more defensive or technology companies -- for technology companies? ben: they experienced pandemic demand, coming off of these massive growth rates of earnings-per-share of 100%, now back down to the low teens. companies have overspent in terms of meeting this major demand that is cooling-off now. so, i think this is where the technology sector is in a temporary winter. it will come back though. there is enough demand for technology long-term, but they are overspent and overextended, that is why you are seeing these layouts. -- layoffs. manus: how tight is the oil market, the saudis raise their prices to asia over the weekend,

our guest on friday, she is worried that oil could reach much higher levels. and yet i had a guest this morning saying the next step down towards the 70's in prices, where you see the oil market going? ben: light colleagues who are energy experts have done a lot of work on this. the balances are so tight in energy. if you think about spare capacity, opec is going to be diminishing even more towards the end of the year. the only meaningful player is saudi arabia, and they are having significant demand, despite which prices are being risen. what we are talking about is something like a million barrels a day towards the end of the year, we are sitting at $120 on wti, you are talking about wti

easily towards $150, if those bounces continue, this is vicki macro uncertainty going into the fall. add to that the unclear situation in terms of natural gas, because we do not have enough inventory if there is a cold spell. manus: i think when we go back to the wintertime and have this major constriction in capacity, it could be that we have mispriced. let's see how the narrative goes with the narrative goes with a warrant those sanctions. $140 is attainable on the oil market, the call from the macro strategy side at mentally global. we look ahead to this week's big event, the ecb policy makers are set to roll back the purchases. we discuss on bloomberg.

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manus: this is bloomberg daybreak: europe, i'm manus cranny in dubai. dani burger in london. let's get up to speed, juliette saly is in singapore. juliette: bloomberg understands the prime minister of the uk expects rebel mp's to undermine his leadership in the coming days. calls for johnson to step down have intensified since a report was released on illegal parties at downing street during the pandemic. ukrainian president zelenskyy visited an area in the south where fighting is ongoing.

the u.k. says it plans to send rocket systems to ukraine that will let it strike locations as far as 50 miles away. this as explosions were reported in kyiv over the weekend. 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. dani? dani: thanks so much. coming up on the program, we are going to talk about the ecb, but also how are investors pricing in qt? according to the latest survey, it is all about crypto, and tech. as futures charge higher and bitcoin trades above $30,000. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." these are the stories that set your agenda. dani: back in demand. wti climbs to the highest level since march after saudi arabia boosts oil prices to more than expected to customers in asia. on the road again. public transport resumes in beijing as the chinese capital roles back covid restrictions. stocks and futures rise. plus, the u.s. commerce secretary says partially ending some trump era tariffs may make sense to help tame inflation. a long weekend for china and the u.k., but those positive stories, aging easing up -- beijing easing up or tariffs easing up, helped with some of the mood music this morning. manus: think of and unleashing of the european activity.

if we are at the thumbnail start of normalization in china. travel and mobility are driving the narrative, and tariffs and the possibility they could be partially rolled back. dani: i was afraid you were going to say tara. manus: tara is tina's sister. dani: too many t's for me this morning. we are going to start with stocks, look at china stocks. s&p up more half -- more than half a percent. ftse futures up more than half a percent. everyone still full off their cake and witches but still trading higher this morning, up nearly 1%. manus: there was a lot of cake

over the weekend. let's look at the rest of those markets. it is about intensive relief coming from china and the risk narrative. even though it is a big central banks week, the ecb in there. the saudis raised pricing to asia for oil. how much of arise are you going to see? the risk is this is a tight market and we are under processing it -- underpricing it. bond market turned negative. flipped to a bearish position on treasuries for the first time in a couple of years. a note from ubs, buy aussie dollars. that ties into the china story as well. bitcoin, up four and a quarter percent.

dani: it is kind of an awkward timing for bitcoin to be doing so well because if you were to see our latest survey results, it was one of the top things that is likely to get hurt by qt . this is the markets live pulse survey and we asked which assets would be the most vulnerable to the start of quantitative tightening. the overwhelming response, along with crypto, the bubble of easy money darlings about to deflate. >> they have to do qt. they don't have a choice because there is so much liquidity in the system. >> liquidity will become a problem. >> we will see a withdrawal of liquidity start to bite. >> they have to remove liquidity to stop speculation. >> i don't think the slow beginning of runoff will cause raw -- because volatility in and of itself. >> not a surprise right now. >> we are seeing it priced in. >> it is very much in the price right now. >> the way we are thinking of

this is the end of easy money. >> qt is not an unknown. >> i don't understand how it is going to work and i should do. >> no one does, let's be honest. dani: i love that response. who knows? we surveyed about 700 folks, a range of different traders. crypto one of the top responses, and that combined with tech, about half of the people thought those were the most vulnerable assets. perhaps not everything is priced in and tech business models will have to change if growth at any cost is no longer in. one thing to point out, mbs of the bottle -- bottom of the rank. that was the driver of the last crisis in 2008. junk bonds, if there were traders in the market before qt started, they are more than likely -- they are more likely

to say junk bonds. the fed put a large part of the conversation as well. traders are concerned about the pace of rates, not necessarily qt. among respondents asking windows qt and and the fed pulls back, two thirds thought it was because something bad happens, be it repo market fears or the economy. only about 20% thought it would be because the fed is able to hit their inflation target. manus: you know, you take all of that and it is interesting you get people like all, i think he was slightly tongue-in-cheek in terms of we don't quite know how it will work. but liquidity, people across the breadth of economists have said quiddity is the big unknown. 53% in the survey said we are underestimated --

underestimating the impact of qt on the draw. let's take some of these questions and put them to our guest joining us now. nina, we are at the start of qt. what are you most concerned about -- 53% of our survey are concerned about the quiddity. -- liquidity. does that touch a nerve? nina: one thing i would point out is some of these things can be self propagating. what i am most concerned about is what everybody else is concerned about. if investors are looking forward with angst, i would agree it is probably going to mean a big headache and a time when a lot

of portfolios are already under pressure. i think this could be self-fulfilling. dani: what does it mean that this isn't just a u.s. story? six central banks set to tighten this week. australia, chile, poland set to raise rates, and added to that the ecb having that discussion as well. what would this mean for a global tightening cycle? nina: the ecb is the biggest global banking story of the week. other central banks have been for months, already gearing up for this tightening. while other major central banks are timing, the ecb is just starting. only as recently as a couple of weeks ago that hike was unlikely. what has changed is the element of protection. inflation has been higher and

more persistent but also wider. a greater range of goods and services. it is becoming more entrenched. the ecb probably has been the biggest prize, the biggest change in their narrative recently. manus: with an 8.1% print on inflation, the debate becomes whether two 25 basis points hikes is sufficient to have an impact. do you think it is? nina: probably not sufficient but probably what we will see. i would be very surprised if there was a surprise to markets, either 50 basis points instead of 25. i would be equally surprised if they did that in june and july.

the president of the ecb in particular has been putting a lot of effort into not surprising markets and having robust forward guidance items. what we will probably see is a very firm commitment to hikes in july and september, but probably no surprises. dani: am i interpreting you correctly that you believe the ecb is potentially headed toward a policy mistake and not getting aggressive enough? nina: even for the central banks that have been more aggressive, such as the fed, even then you could say they actually could come on is an argument to be made. but there still seems to be a lot of hesitance for the ecb. they have the knowledge that their inflation forecast were

not anticipating the extent. even now there is that acknowledgment. you need to be quite cautious. there is an economic downturn. that is one of the arguments we've heard to act. they are saying this window we have for normalized monetary policy is narrowing, given economic headwinds are coming. so we better start hiking now or we might not get an opportunity for another year or so. manus: to translate that narrative, if you think they firmly guide to a july and september hike, what does that do to the bond markets in europe and the spread markets, which have been a little frisky late -- of late? nina: hopefully there will be an adjustment period, given they

are firm on giving guidance. we've already heard pretty firm indications from various heads and members of the ecb counsel. hopefully we won't have a big reaction coming on thursday where we hear the announcement confirmed, but certainly the fact that there is a tightening coming in the ecb will add to headwinds on top of the bond purchasing program coming to an end, and also the global headwinds coming from a global tightening in a number of key markets. it is a little bit of a perfect storm. dani: you said a few times this idea that they are firm on giving forecasting, not wanting to surprise markets. we have seen the ecb do that, christine lagarde blog post. cleary -- very clear in their intentions for hiking rates.

why would they do this? why does it make sense they would avoid trying to surprise the market? nina: it is part of their mandate, or a secondary part of their mandate to provide robust forward guidance. a couple of months ago, rate hikes in 2022 is unlikely and now it is may and they are saying -- dani: does it mean they don't have reading room -- breathing room if they don't do this? nina: they are limiting their options somewhat, but i think at this point they are banking on the fact that they have been underestimating the inflation. i think at this point they are thinking we are so far behind the curve there is almost no chance -- so we feel comfortable

guaranteeing a rate hike in july. dani: nina, thank you for joining us. coming up, there may never be a new refinery in the u.s. again, that according to the chevron ceo. we will have more from our interview next. this is bloomberg. ♪

manus: it is your monday addition of "daybreak: europe." from my part of the world, the saudis wrapping up the pricing to asia, there second-biggest market. oil markets on fire this morning as we see a big buildup in momentum. china is relenting on some of their zero covid strategy and

this is an oil market with china opening up with one hand tied behind its back. some say you could see 150 in a tight market. brent at 120, right now. dani: a big part of the narrative is the lack of investment in the oil patch as we move toward a greener world. to that point, the chevron ceo says there may never be a new refinery built in the u.s. despite the surging energy prices. policymakers are moving away from fossil fuel. he spoke about his outlook for the crude market. >> we have seen a cycle that frankly is different than past cycles in the depths of the pandemic, demand collapsed at a rate we had never seen before. activity contracted because it had to end there was no demand for incremental production. we were looking for ways to

store production that the world didn't need and now we see the reverse. a dramatic increase in demand and economies have largely reopened but not completely. >> no demand destruction? >> the opposite. strength in demand. international air travel the strongest since before the pandemic. china still has a ways to go. a lot of signs demand continues to be strong and demand typically in our industry moves faster than supply in both directions. we saw that in 2020 and we see that today. alix: you are working hard in the permian and production looking to be 15% increase. if i said to you today, pump more, could you? mike: not today. the incentives today are to pump as much as you can and the decisions that lead to today's activity were made two years ago. there are leadtimes in all of these things. it is land work, permitting,

roads, infrastructure. drilling rigs, completion cruz. there is a lot that goes into planning and executing production growth. last year was the highest euro -- year of production in the history of our country. we are doing our part to meet the growing demand, but it is not instantaneous. it requires a longer lead time. even in the shorter cycle portion of our activity, it doesn't happen quickly. alix: if we pretend maybe it could, where is the biggest bottleneck? labor, wages, transportation? where is the problem? mike: in the u.s., in the permian basin, it is all of the above. during the pandemic, operators shut activity down. the companies that support our work had to do the same. workers left and went to other parts of the country. rigs were stacked up.

those still in the field, when they had maintenance issues, you took parts off of rigs not in the yard. those things need to be reversed and there are real constraints. we work our plan, so our plans continue to grow. they were in place even during the depths of the pandemic. to incrementally change that right now, there is a lot of work that has to happen and constraints that have to be solved for. alix: it wouldn't matter how may times the stocks hit -- or the oil price is, you are saying. mike: the price doesn't affect our capital decisions and activity. we have a long-term deal on supply, demand, markets, technology, policy. that sets our capital spending. manus: the chevron chairman and ceo speaking to alix steel exclusively. though u.k. prime minister is --

the u.k. prime minister bracing for a possible confidence vote. it is an ominous, gray morning after the jubilee celebrations across the palace of westminster. we bring you the story in a moment. the challenge potentially to johnson's leadership, on bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i am dani burger in london with manus cranny in dubai. the pace of sterling has been interesting given the bank of england was the first to be aggressive with rate hikes, but with europe and the fed catching up, how much longer can any strength in the pound last? manus: there you go. sterling up four days in a row. i wonder to what extent ahead of the ecb.

just roll it over and you have a look at euro-dollar. maybe not the same trajectory as we see a little more correlation to risk. trading down at 12503. dani: we have to put all ticks takes into the picture as well. boris bracing for a possible confidence vote this week. a key ally of the prime minister has told bloomberg that johnson sees rebels in his own party triggering a vote on his leadership. we understand mps are seeking to oust johnson and may be on the cusp of the 54 letters required to force a vote. leanne, how likely is this to happen? leanne: if i could answer that, i would be worth a lot of money. we don't know at the moment. rumors are suggesting the number of letters are ticking up, and

as you mentioned in the intro, we need 54 letters for a confidence vote. we have no idea how many letters there are at the moment, only that the chairman of the 1922 committeeboris johnson went to st. paul's cathedral for the queen's jubilee and we heard boos in the crowd and future years. this could be unsettling for the tory party. they have seen the internal report into the party gate scandal where boris johnson was criticized for the culture in downing street during the lockdowns over the pandemic. it is squeaky chair time for boris johnson and he will have to come back to parliament today after all of those jubilee celebrations and face the music. manus: i have heard it called many things, squeaky chair is all new. [laughter]

who knows how many letters are in there. the public acknowledgment, to not prepared to face the public music. leigh-ann: letters, we just don't know how many. we could find out in the next few days if forced johnson does face a confidence vote. graham brady will tell him himself once he has counted the letters when he gets back into parliament today. he has also been enjoying the jubilee celebrations. some polling has come out, and this could be key to what is happening in johnson's government. we will see two elections on june the 23rd, a matter of weeks away. one in wake field. that polling is suggesting the labour party could win the vote, and that was one by the tories and 2019, part of -- in 2019,

part of johnson breaking through the redwall in that part of the country. also elsewhere. boris johnson will face a lot of heat once those elections have been and gone. manus: it could well be that the wait and see huddles come in before they go for any jugular. let's see how the hurly-burly at westminster gets done. dani, we've got a little bit of a bid in these markets, down to mobility in china. they are stepping back from the zero covid policy and that is driving the narrative. the men -- the mliv blog concerned about tech and crypto. dani: bitcoin is up, so clearly some risk appetite in the market. this is bloomberg. ♪

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