>> this is "bloomberg daybreak: europe." the hawks seize control. christine lagarde announces the ecb's first rate hike in over a decade and signals more to come. italian yields jump but the euro tumbles. >> if the medium-term inflation outlook persists or deteriorates for larger increments will be appropriate at our september meeting. dani: a tale of two inflations. chinese consumer prices cool as demand weakens. all eyes turn to the u.s. where cpi is expected to top 8% yet again. plus insurrection investigation. landmark hearings kickoff in congress. lawmakers promised to reveal president trump's role in the capitol attack. happy friday everyone. it is still the inflation, the fears of growth, that bogeyman sticking with these markets.

it was a risk off session yesterday following the ecb decision. the hawks, are they fully in control? all eyes turn to the u.s. cpi that will hit about 8:30 a.m. new york time. we are seeing gains when it comes to s&p 500 futures. we are not even 0.1%. equities declined 2% yesterday. all of that having to do with yield markets that continue to selloff. they are continuing to selloff today led by the front end venture yield, hitting its highest since 2018 all being led by european bonds. the euro unable to hold onto any strength yesterday. initially after the decision from the fed, the euro was able to appreciate but it started to fall as we digested the impact of this idea of the way the euro area is going to invest. is it really the plan reported previously?

japan fighting off a 24 year low for their currency. also looking at a weaker oil market down by more than 0.5%, concerns about shanghai, districts being locked down, is demand going to be sapped? let's go to our reporters around the world. enda curran is in hong kong to talk about chinese inflation. juliette saly in singapore on a possible revival of the anti-po. bruce einhorn joining us to discuss the house investigation into the january 6 riots. let's start with the ecb and the european central bank has brought down the curtain on years of ultra-loose monetary policy committing to a quarter-point increase in interest rates next month, signaling a bigger hike in the autumn. a faster pace ahead for prices, faster than earlier thought. christine lagarde defended policymakers who got it so wrong

on inflation. >> all international institutions, all forecasters of repute have made the same mistake. underestimating or not anticipating some of the developments such as the war, the energy crisis. dani: of course the reaction was -- the reaction continues to spread out. let's dig into this more. we are joined at the moment by bloomberg's yana rehn in frankfurt. we learned about the ecb policy past this year, more than we expected. take us through the governing council decision. >> so the ecb is about to end asset purchases at the start of july. that is a prerequisite for rate hikes. the governing council was very specific in its decision. there is going to be a 25 basis

point rate hike in july and if things do not improve, there will be another increase of 50 basis points in september dani: that came -- in september. that came as a big surprise to economists and investors. they have revised up their forecasts. goldman sachs is predicting larger increases for example. they will also continue in the fourth quarter. that is something that is in line with what the president said she was talking about. sustained increase in interest rates also be on the third quarter. it is too soon to embark on a normalization path that will last for a while. dani: talking about, we expect to raise the key rate again in september. it might be even larger if inflation continues to be elevated. certainly seeming like perhaps a countdown to the hawks.

thank you, bloomberg's jana randow from frankfurt. now to china where david showed inflation moderating in may. weaker consumer demand is giving the government room to ease policy and add stimulus. let's bring in enda curran. this is happening as shanghai enters more lockdowns for some districts. how are we squaring these inflation numbers with the economic reality on the ground? >> on the one hand, subdued consumer inflation does reflect what is happening on the ground because consumers are rapidly under growing aggressive restrictions and lockdowns regarding covid but also those lockdowns are can tripping to price pressure. we saw consumer prices rose 2.2% but within that, prices for fresh fruit and vegetables sword as did the price of fuel. some of that is down to supply chain. on the other hand, a big collapse.

the headline on consumer prices, that is due to subdued consumer and producer prices. more interesting there, a dip in commodity prices has taken pressure off factories' cost base. there is a feeling that instead of exporting inflation, china will be exploring -- exporting disinflation. it is a very interesting story in china. dani: all eyes now turn to the cpi data out later today from the u.s.. what sort of picture are we expecting the cpi to lay out? >> we expect it to add to the view that consumer prices have peaked in the u.s.. some chatter may be around 8.3% but it is not far off the 8.5% peak that was seen in march. i do not think anybody really expects it to dip below 8% anytime soon. even if the numbers show price pressure is slowing down, it is going to be a long way from the

fed's 2% off target and it will consider to add to the idea that the fed has to go by 50 basis at least this month and may the next one as well. perhaps the headline number might confirm prices are slowing. nowhere near where they should be. still a long way to go before u.s. inflation is fully contained. dani: what do we think of these lines from janet yellen saying she does not blame corporate greed for inflation? this is something other policymakers have said. she is talking about supply and demand. what do you make of it? >> there seems to be a reckoning going on among policymakers everywhere now. they are being criticized for being behind the curve. remember the transitory debate led by the fed. the thinking was supply pressures would flush out of the system, but proven wrong. policymakers are hiding behind

the impact of high energy costs linked to the war in ukraine. but regardless there is a feeling looking at a lot of central banks around the world that policymakers have underestimated this. there have been -- they have been slow, they should have moved sooner. whether it has been supply driven or demand driven, the end result is most central banks are seeing inflation well outside the comfort zone and that is why they are having to hike with all the consequences that will have for economic growth. dani: it goes back to president biden saying inflation is the job of the fed to tackle. he does not seem to be looking at any sort of fiscal option or corporate option in order to contain it. thank you. now exuberance in alibaba shares faded yesterday. china denied a bloomberg report it was in discussions to revive ant ipo. juliette saly joins us. despite the development, more and more signs seem to be pointing to beijing easing this crackdown on big tech. >> absolutely.

what a big week it has been where we have seen these reports that china could be wrapping up its probe into didi and of course more gaming licenses as well. we have seen alibaba shares -- the sense was underperforming what you have seen in the tech hang seng index. quite a ruckus on wall street where we saw the golden dragon index snap a three-day rally and alibaba shares started reverse trade on that bloomberg news report -- after the denial of that bloomberg news report that ant is considering reviving its ipo. sentiment very much turning to the fact the worst could be over. we have the hang seng tech index actually on track for its best week since april. we are seeing upside in alibaba shares slightly in the afternoon session. billy billy is a different story. when you have a look at the overall bullish momentum for the

hangtag -- the hang seng tech index, more bullish. we are looking at two, divergence, we are seeing momentum, the highest since 2021. hsbc the latest to tell us they are getting more into growth stocks, looking at being more overweight in china tech. there is still the contrarian we have been siding all week -- citing all week saying the sector is still a sell. dani: now to the u.s. where we have had the opening night of hearing summarizing the funding -- the findings of a probe into the u.s. capitol insurrection. house members examine efforts by then president trump. did we learn anything new? >> yes, we learned a lot of new things today.

the highlight of the hearing, the first half was the presentation by republican congresswoman liz cheney from wyoming who presented the case almost like a prosecutor presenting a case to the jury in the opening statement. creating a portrait of then president trump inciting supporters, rebuffing calls to call them off, even though many of his advisors had told him that the claims that there was massive fraud in the election were just false. most notably there was video testimony from former assistant -- sorry. former attorney general william barr saying allegations of corruption, of fraud that were significant enough to affect the election -- he called them nonsense. the then-president's daughter appeared in video testimony as

well repeating what william barr had to say. from liz cheney, there was also talk about how on the day of the insurrection, then-vice president pence made multiple calls to try to deal with the problem. no calls from then president trump. there are going to be six more hearings, three more next week. a lot more we are getting from this in the days ahead. dani: is there any indication this could have repercussions for president trump? >> well, we will see. clearly the portrait that was created today was not a flattering one in terms of then president trump doing the basics of his job. that is going to be a message that is hammered home over the next few weeks as there are more

hearings. of course it is important to note that fox news did not cover these hearings live. most republicans are calling the committee itself illegitimate. so whether republicans are willing to listen to this is the question. on the other hand there are a lot of independents who might be quite sway-able. dani: let's get you set up for the rest of your friday. some key things market participants will be looking out for, 11:30 u.k. time we are going to have the latest rate decisions from russia central banks, one of the rare banks to be cutting than this environment. u.s. cpi gets published for may. markets anticipating that heavily. 1:30 p.m. we have the canadian unemployment figures amid a hawkish boc. today the bank of england and if so's released their findings from their inflation attitude survey.

eastern european central bankers gathered in bucharest getting ready for the nato summit in madrid. coming up, market reaction to the signals coming from the ecb. how much longer can the selloff last? this is bloomberg. ♪

>> by being somewhat more hawkish, and then more i listen to president lagarde, the more i realize she is signaling consequential change. this is a big deal. the market reaction is indicative that we have exited one regime and we have entered

another. dani: mohamed el-erian reacting to yesterday's press conference by christine lagarde. speaking of inflation, we have the u.s. cpi rating do later today and before that u.s. ambassador stanley drucker miller has warned wall street that recession is likely to strike next year and it is probable the bear market has a ways to run. joining us now is anita gupta at emirates mdv. do you agree that this bear market has further to run? >> good morning. what is going to probably happen is we are going to see a few more months. central banks are hiking. banks globally have taken up -- we are in a tightening regime.

obviously they are trying to control inflation. equity markets are not always reactive to what we are seeing with rate hikes but the fact that inflation is going to be sticky, and the headwinds of the russia escalation as well as the china's slowdown are there. dani: it has still been a dramatic start to the year, the nasdaq in a bear market, the s&p 500 flirted with it. even the destruction we have seen in equity markets thus far. what is left? what more could we see in terms of the selloff? anita: we are definitely going to see more drawdowns. i think the summer is what is critical. the next catalyst for equity markets remains the q2 earnings. we had so many prophets come out

in q1 dealing with wage inflation, about supply-chain constraints, about not being able to completely pass costs on to consumers. going into the year end, we have remained constructive on equities, returns are going to be flat for developed markets and about 0.1% up for emerging markets. we have a little hope for china reopening. we are going to see a very up path going into the year end and this is a year where we have to be more reactive than predictive. dani: speaking of being reactive, you look at these hedge managers. i think of the tiger clubs meeting. an awful time of it to start the year. maverick and lone pine lost more than 30% so far this year. that type of strategy where you make these concentrated tech bets, these large holdings, is that strategy -- that sort of strategy, is it over?

anita: there are two parts of technology. one is the part that is going to be stickier, e-commerce. . you still have e-commerce growing globally. then you have streaming which has seen its -- people are not willing to pay from their disposable income. a lot of free content is also available whether you have a subscription to apple or amazon. you have youtube, a lot of free content. there are some tech giants that will stay, some that will not stay. you have about 25 companies that make up 40% of the s&p 500 -- dani: would you buy china tech? anita: china tech i am still -- i would buy china. overall i would add to it. i would add to that allocation. a little bit overweight. i would still watch what is happening on the regulatory front. dani: i know in general you do

like china equity. you say you could see that rebounding. what do you then make of shanghai continuing to have different districts go into lockdown? can you have a rebound in equities while zero covid is occurring? anita: we were hopeful that policy, which is going to continue in china, and the lockdowns, we know shanghai is almost fully functional, will allow for great china numbers. will that give us import into adding overall in our last asset allocation -- ema shares which includes china and india at this point. dani: thank you for joining us. coming, as ukraine seeks a new deal with the imf to shore up its finances during the war with russia, we are going to hear

from an interview with the nation's finance minister. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." it is cpi day and part of what we are grappling with, and the numbers today might help go towards this narrative of whether inflation has peaked or not. there was a moment where we saw things like the dollar peeking, breakeven speaking, that seemed to indicate the worst was over. however, u.s. breakeven inflation estimates started to turn higher. that is the chart i'm looking at from two to 10 year. the three year just breaking above three spot 10. that is just as the u.s. curve moves above 3%. if you are one of those people who around here thought

inflation had peaked, you were wrong. the inflationary picture is still with us. the ecb yesterday reminding -- revising their inflation forecast saying the average for this year may be around 7%. cpi numbers might also indicate services as well as consumers shift their spending habits. let's get to the top news items of today with your first word news, it is juliette saly in singapore. >> u.s. lawmakers investigating last year's riot at the capitol on january 6 have accused then president donald trump of inciting his supporters. the panel open public hearings with a primetime tv presentation . in video testimony, then attorney general william barr said fraud claims were complete nonsense. >> president trump had told them the election was stolen and that he was the rightful president. president trump summoned the mob, assembled them up, and lit

the flame of this attack. >> -- not pursuing business with credit suisse after reports of a possible bid for the europe based bank. state street says there is no basis for the rumors. the ceo of credit suisse called a possible takeover, quote, stupid. ukraine's economy shrank 15.1% from a year earlier in the first quarter of this year, the first official reflection of the economic damage caused by russia's invasion. moscow occupies 1/5 of ukrainian territory and battles continue in the country's eastern provinces. in an interview with bloomberg radio, ukraine's finance minister serhiy marchenko gave a forecast for the full year drop in gdp.

>> a 5% drop, but again -- the war is still going on. it is very preliminary. it depends on how scenarios are with russia. >> global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: juliette saly in singapore. you can hear more from that interview with ukraine's finance millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network, with the carrier rated #1 in customer satisfaction.

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dani: this is "bloomberg daybreak: europe". these are the stories that set your agenda. the hot seas control. ecb has their first rate hike in decades. the euros have tumbled. >> medium-term inflation. >> a tale of two inflations. the man's we can. all eyes turn to the u.s. work cpi is expected to top -- again. congress kicks off. generally six attack on trial. -- the january 6 attack is on trial. market participants, are the

scared of the rally? yields across the globe continue to head higher. for friday, we're seeing a little bit of a leap. perhaps not enough to compensate what we have seen so far. we are up a quarter of a percent but we are headed lower on equity. it is really led by european moves yesterday. euro yen, we will get into euro a lot in a moment. we won't tread on that too much. looking at yen, the euro is unable to hold on. concerns about demand are adding to that. china, parts of shanghai undergoing more lockdown. to europe where the bank has

brought down the curtain on years of monetary policy. leads to a quarter-point increase in rates next month and singles that -- signals the bigger ones might be up and fall. >> new projections we will see unreal inflations at 6.8% decline in 2023. 2.1% in 2024, higher than in march projections. this means that headline inflations at the end of production have risen. they are projected to be slightly above target. inflation excluding energy and food is expected to operate 3.3% in 2022, 2 .8% in 2023 and 2.3%

in 2024, also above march projections. dani: let's get straight to and. -- to anne. we have learned a lot more than expected period is christine lagarde really getting into what they are talking about regarding a bigger hike in september? >> it looks like that from the outside. what is true is that everyone on the council is extremely concerned about the path of inflation. we heard from the president the inflation will be above 2% in 2024. that is significant. what we learned yesterday is that they are actually embarking on a path that will not stop

after the september meeting which we already knew was going to bring us out of it. also, at the end of this year going into next year. that will be interesting because it means they have woken up to inflation and realize they need to act. dani: they believe they will take an approach that makes it different for them. you have the stone that you are describing. >> since the outlook, the ecb is not that situation. they are operating in a region has 19 different markets. it is also a concern to costs in the market.

there is a concern about fragmentation, about how quickly you can actually raise interest rates and ensures that policies are also transmitted. those concerns are valid. the primary goal seems at risk here. that is why the ecb has made it very clear saying that the decision was very unanimous and everyone agreed to it. the time for the increases has come and they are more aggressive and will be needed in the fall. they want the inflation out look to improve. dani: thank you so much. let's dig into this more. joining us now is elias haddad the senior currency strategist at cba.

does lagarde have control right now? elias: yes. i think they started 50 basis points higher. it is only -- almost double what the ecb has said. as they have pointed out, they have updated their projections and it now has inflation outlining inflation. i think the backdrop will come towards the ecb trend. they did yesterday and will do it again in september. dani: at the same time, a lot of what is concentrate on this

decision and what happening with the bonds going out near to order for do percent, i want to play for you what christine lagarde said. >> we will not tolerate fragmentation that would impair monetary policy transmission. we have existing instruments that i think we have described them in the past. it is the reinvestment capacity. dani: is this achievable to avoid fragmentation by reinvesting while the same time raising interest rates? elias: it will help. it will help contain this dangerous widening. the say, they still take an increase in measures. they're extremely worried at this stage about widening the

spread or increasing fragmentation. it is roughly under 2 trillion. a lot of reinvestment potential. everly countries to set up shop. they are widening toward a level. at this stage, the ecb will take any action. i think that is a big headwind period dani: let's get into that. it is interesting. neither time he is started this to find expectation, following nearly 1% yesterday. is not really a gut punch reaction? will we see a follow-through with a higher euro, given the hawkish pronouncement from the ecb? elias: if it was not for the

increase in fragmentation, it will be hired today because the ecb has indeed dialed up the hawkish this. i think they will do so again in september. that is the first reason why they are constructed here on the euro. obviously, more cautiously right now. the other reason is that i think the u.s. dollar has topped out in the sense that in the sense that i do not expect them to remain gradual, largely because they are already starting to see growth momentum improving insides that u.s. inflation pressures are moderating. they are flattening out and hopefully today, the cpi print will add evidence to that. secondly, because other major central banks are cranking up hawkish this as well --

dani: i want to jump in. i cannot let you go without talking about it. how we see the lowest of the lows in the cycle? with the yen? elias: going forward, the dollar-yen direction will be driven or determined by how high the u.s. estimate is rated. right now it is between 2% and 3%. it is the fed and the right. it tops down around 3%. 10 year treasury yields, above 3%, it is not sustainable period

it increases the likelihood that we could see sharper given the recession. it will be priced in money markets. u.s. 10 year treasuries have peaked or close to topped out. the dollar yen will struggle to make new cyclical highs. but now, this is good with inflation. the right -- the rate is actually higher than 3%. through be plenty of time for the fed to raise rates. dani: let me bring this back to china. i know you want to talk about it. is there a scenario where the weakness in the yen, given that it needs more competitive or

less competitive or countries, are there repercussions for china? for other asian nations and the economy, given this weakness? elias: in terms of competitive devaluation? dani: exactly. elias: it does not look like a big issue. i do not have a strong view on that. just judging from comments from other central banks, it is a concern from that. dani: we will leave it there. we could talk all day. that is elias haddad, cba senior currency strategist. let's get to first word news with juliette saly in singapore. juliette: u.s. lawmakers are investigating last year's right at the capital. the accused than president

donald trump -- public hearing from the primetime presentation. than attorney general said that it was complete nonsense. stag inflation moderate in may as consumer demands weaken. 6.4% from the earlier. this is in line with expectations. cpi came in at 2.1%. unchanged. bloomberg intelligence says [indiscernible] report has found the u.k. spent 4 billion pounds on unusable personal protection equipment and now plan to -- significant amounts of it. millions in not meet standards.

they want three quarters of all money spent on ppe [indiscernible] global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. dani: thank you. coming up on the program, days after shanghai celebrates the reopening after lockdown, millions are sent back to the homes when covid returned to the city. we will get the latest. this is bloomberg. ♪

>> we are urging markets to come

out of the pandemic. we are seeing some disruptions in china. our economic activity in china, despite what is going on, it remains strong. dani: that is the standard chartered ceo showing his competence in china despite the zero covid oc. this days after shanghai was reopened. that is after daily cases jumped on thursday. several places will be closed to allow for mass testing. for more we are joined by charlie and shanghai. how much of a setback is this?

>> concerns of a lengthy lockdown are returning after they announced last night that they will mass test millions of people in those districts. that will involve like 60 million people. most will be lockdown for only a few hours. they can go out after the test is completed. the risk is that if there are new infections detected where they live, there will be put under movement restriction for at least two weeks. that is raising a lot of concern from the residence here. dani: one thing that people are trying to grapple with, is this a continuation in this direction, are we going back to prior times or more of shanghai will be in lockdown or does it

seem like an isolated incident? >> currently the outbreak looks like it is under control. only a few cases a day. some of them are found outside government run facilities. unless mass tests are conducted, you do not know the real picture which is why the government is doing that. under china's covid zero policy, the risk of locking down both city or the entire district is always there. the policy is to lockdown the whole place, even if one cases detected. dani: thank you. jill, what are the takeaways from today's inflation print with the backdrop of what was just described? >> what you're looking at is a

different inflation picture than what we are seeing in the rest of the world. consumer prices rose less than what was forecasted. that is because people in china are rattled by these lockdown spirit by continued into may. looking deeper into that, he sought continued elevated prices. food prices, and you have an ongoing drop in core prices that driving down the headline number. the factory site, prices continue to rise. they are moderating a lot. that is taking a little bit of pressure off of those factors as well. dani: what does this mean for wider policy in china? >> what we're seeing here is that the government and the

central bank may have a bit more room to ease policy this year as they see fit. that is because these inflation numbers are moderating so much. china central bank has not done too much in terms of easing policy. they cut the benchmark interest rate in january really have not touched it since. right now, it might not be cut. we are potentially seeing some of that easing policy this year. dani: thank you. speaking of central banks, ecb is speaking right now to a french this this tv station saying that inflation is too high. markets should not doubt that they will combat inflation. ecb has the tools to fight fragmentation. also, it was dangerous to think

the public debt has no limits. fragmentation is something that really upset the euro yesterday, after the decision where they signaled rate hikes. initially, you had a strengthening of the euro. that started to gain weight after there were fears of what the ecb would you to combat fragmentation. they did talk about reinvesting things but a lot of inspectors are investing -- expecting a more concrete plan. coming up, state street says they are not pursuing a takeover of credit suisse. will have more on that, next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." [indiscernible]

dr. now comes a day after the swiss blog reported on the possible bid for the bank. state street says there is no basis for the rumors. the described a question about a possible takeover as "stupid." during us now is tom. language around this is that it is amusing. i love the statement saying that we have a long-standing company policy of not commenting on speculation but we feel a response to these reports is not warranted. what you make of it? tom: slowly audit a day. now it denial yesterday. it makes sense.

it was always a bit left field to me. dani: every analyst has said it does not make sense. tom: what will be interesting, the cat is out of the bag. cannot put back speculations. other bidders might emerge. it feels like it is one of the options. dani: 30 seconds, we are looking at the price, it is tumbling. could that say that? tom: i think yesterday we were seeing shares down to 5%. it will be interesting to see what happens today. is it now into freefall? perhaps credit suisse can focus on getting stuff right there. dani: thank you, tom metcalf. coming up, "bloomberg daybreak: europe." --"bloomberg markets: europe." european futures, low this morning. this is bloomberg.

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