>> this is bloomberg daybreak

europe. these are the stories that set your agenda. >> focus on energy. g7 leaders are set to be exploring a price cap on russian gas and oil. supply concerns mount. crude climbs for the third day. central bankers converge on the portuguese hillside where they will look to set the tone on inflation. strategic outlook. nato is set to label china systemic challenged. instead of an adversary. with the new guidelines issued, sources say russia will be called a direct threat. a very good morning to you. a gathering in sintra. who will be the last central bank to raise rates? we will talk about that in a moment.

good morning. >> it is a debate playing out through markets, the merry-go-round keeping equity investors on their toes. what started out as gains yesterday pleaded -- petered out by the end of the day come little change for the equity market that continues to experience the reflation, or inflation in -- and economic whipsaw. we are at the dreaded crunch of s&p 500 futures, down 0.1 percent, barely changed. tech weaker, a lot of factors to contend with. the macro picture, nike post marking earnings yesterday, disappointing outlook when it comes to china and margins. at the same time, the big banks after passing stress tests, morgan stanley and goldman upping investor payout. some of the pain in tech is more acute in asia. lower in terms of asia trading, down 1.6%, asi asia-pacific

un-able to hold onto gains despite hopes there might be a rebalance hoping to lift markets higher. manus: that is buybacks driving perhaps the underbelly of the equity market. what happened to the duration hunters? where did they go? they didn't turn up, they didn't turn up for the five year bond auction. it was the worst demand in 10 years. bmo warned it was bearish. bitcoin, lots of interest for 25,000 will be your range. oil is up and macron said saudi arabia and uae have supply constraints but the emirates say they are producing at the maximum of the current agreement . we will of course renegotiate that. the bank of japan, lots of people piling up to sell.

the only market in the world telling them to short. let's dive into credit suisse. a couple breaking lines. we will have the range in a moment. remains focused on execution of the strategic plan. this is a little more detail in terms of a strategic review. they have cost cuts and reputation management to consider. dani: we will keep on top of the headlines because we learned credit suisse are holding an investor deep dive session on risk management compliance so any updates we will bring you. manus: let's get to the team. our reporter joins us from bavaria on the g7. in sintra it is windy for the ecb for. dani: we have bruce standing by who will break down nato's

designation for china, and juliette saly keeping us up to speed with the market moves. manus: on the g7 and germany, emmanuel macron told president biden the uae's ruler confided in him the country and saudi arabia are already pumping almost as much oil as they can and that contradicts official data from the two gulf energy giants. we are hearing about price caps on gas and oil. let's get to our government reporter on the ground in bavaria. don't tell emmanuel macron your secrets. >> exactly. good morning, everyone. dani: when it comes to the price caps, how successful are they likely to be? >> talks on price caps and energy price caps have been going on for months and weeks.

in particular, italy for gas and the u.s. for oil. the mechanism of how this would work is still very hard to be laid down in particular because it would be very complicated to have a global common joint agreement. nonetheless, in the g7 that is ending today in the bavarian alps, it seems there is progress towards having a joint language on the matter. with all energy caps explored. that would include oil and gas. dani: thank you very much. chiara on the ground in bavaria. also with a beautiful backdrop, sintra kicks off. president lagarde will give remarks.

francine, despite winds and nice weather in portugal, what are we looking at? francine: we are looking at central banks coming together, telling each other their expectations for inflation. sintra is a retreat so that gives a bit of time for central bankers to pause, delivering messages they want markets to know. this is a good time. it is like the european jackson hole. the conversation has changed. we heard jay powell having testimonies three days last week. we heard from christine lagarde and bank of england posco and her. seems like they are in crisis mode. what they would say is inflation expectations and monetary policy, if you see the structural shift, not only because they are dealing with a crisis, the gas and oil possible embargo from russia, but structural reforms like

democracy in europe that is changing. structural reform because of the green energy transition. what does that mean for uncertain monetary policy? there is talk about retail and real estate, which could be the signs that things will start to get ugly in the world economy. manus: indeed. we will talk about fragmentation as well to the periphery. francine, we will be back with you in a little bit. nato is said to be preparing to label china a systemic challenge when it outlines its new policy guidelines. nato leaders are due to outline the alliance's priorities for the coming decade. let's get to bruce in hong kong. 10 years ago it was a different statement. good to have you with us. why is nato making this change in its relationship to china? bruce: it is interesting because the document from 2010 didn't

mention china, which made some sense because this is the nato focused on europe, the mediterranean. china is nowhere near those places. china's influence has of course grown quite a lot since then, so people say nato allies are concerned about china's role in issues related to cybersecurity, disinformation, and the so-called no limits partnership china has with russia, that xi jinping and president putin announced shortly before the invasion of ukraine. given all that, nato countries are looking to designate china as a challenge. they are not calling at an adversary or a threat, so that is different than the attitude towards russia. but unlikely to be something china looks kindly on.

china already has suspicions the u.s. has been trying to organize countries in china's part of the world to contain china. china criticized what it sees as u.s. efforts to create a nato in the indo pacific region. they criticized the u.s. are trying to organize a nato in space. here we see nato actually taking some action towards china, so something that may provoke a reaction from beijing. dani: bruce, thank you. let's get to juliette saly in singapore, monitoring the latest mous -- moves out of asia. drama in the tech sector. looks like it is giving back the gains through the month. juliette: absolutely, struggling for direction, dragged down high-tech players in hong kong. the regional benchmark index in the red for the first time in four sessions. a stronger yen. we are seeing weakness in

tencent, dropping the most in six weeks after the dutch e-commerce giant said it would upload more of its stake in tencent. a bit of a backflip from april 2021 when it said it wouldn't offload tencent shares for three years. not that surprising we are seeing weakness in the hang seng tech index, up 11% in june but a 5% drop in the regional benchmark index. liquidity in tokyo's bond market, we are seeing futures and volumes at their lowest this year, down about 60% on the 12 month average. the bank of japan continues to crackdown on speculators betting it will tweak its yield curve control program. liquidity is said to be likely to remain low until there is more confidence in the jgb futures. manus: thank you very much.

surely they should be betting against it. the bond markets are flashing red. we will see you later. that's pickup on the credit suisse, revamping management. these are the top lines. they talk about the portfolio, credit suisse says the credit portfolio is sound and here is the point about cost cuts. they plan $600 million in technology cost savings. earlier statements, what have you got there? dani: they are also planning to remain committed on this execution of their strategic plans. this comes as they plan an investor deep dive session on risk management and compliance. that is set to happen at 8:00 a.m. lighten -- london time. they are bringing out the big guns, they have a compliance officer and tech and up send the ceo of wealth management.

you know about credit suisse wealth management. manus: we should probably catch up with him this month. i will go see the you bsc. with cost cuts, they penciled in one billion swiss francs in cost cuts. they are talking 600 million from technology alone. don't forget, does gottstein have the support of investors? they have 5% of the bank and they warned, they have support. the buyers will be circling. dani: this comes off the back yesterday of a fine from credit suisse from the highest swiss court in the monday laundering case. credit suisse says that is 14 years ago but that adds to that. along with the investor meeting, let's look at key things we will watch out for. hearing from francine that the

ecb and forum on central banking in portugal, inflationary concerns will be monitored. manus: whipping up a word -- a whirlwind in sintra. u.s. data at 1:30 p.m. u.k. time including the wholesale and retail inventories. finally, the federal reserve bank of san francisco, mary daly participates in a fireside chat hosted by linkedin. wonder what she will say about this big move. risk on move we had last friday and whether it changes the narrative for the fed. with a double down? dani: we have great conversations coming up. we will speak to tatiana, a portfolio manager. this is bloomberg. ♪

dani: it's bloomberg daybreak: europe. i'm dani burger alongside manus cranny. the path is narrow for central banks to avoid a hard landing of the global economy. that is what the head of the bank for international settlements told me yesterday. take a listen. >> what is important now is for the actions of this program to proceed, and enact forcefully in a flexible way. i think we are at the beginning of the effort of turning inflation around by the central bank efforts. so far, so good but we need a ways to go forward. manus: interest-rate strategist at goldman sachs say u.s. markets are underpricing the risk of a recession in 2024. they joined a surge in bets to profit from a dovish shift in

fed policy. tatiana is our guest this morning, portfolio manager and cohead of public markets. there is a growing narrative that the fed will blink, inflation will roll over, even michael is saying backing up in the wholesale pipe will cause disinflation. are you a buyer of disinflation narrative and the blinking of the fed, which would lead rate cuts going forward, not rate hikes the echo -- not rate hikes? >> eventually probably. i think it is too early. where are we? it is harder now than it was over the last nine months because clearly we have a big move in rates that happened already. but where is inflation going to be? as previously indicated it seems

only now central banks are fully focused on inflation driven by factors beyond covid. there are other factors, in terms of structural changes, infrastructure changes, all those things are here to stay. all those things are here to stay. it will be hard to find it. -- to fight it. there seems to be at the celebration coming on but i think the timing of this metoo the extent it decelerates, those are all questions that will not go away for a number of months. even the market is only expecting a slight inflation in october. dani: you mention how bad this year has been. it is not just bad, it has been the worst year in history for bonds. jp morgan said their asset

managers in credit have moved from 77% high holding of cash to 20% of them saying they have high holdings in cash. what do you say to folks who are too frightened by the volatility in the market and are in cash, and the importance of not sitting on the sidelines? >> there are two things. one is in terms of performance. the message for me for the second half is, even if, and i don't think anybody expects it to increase as much as it did in the first half but even if there is a similar rise in interest rates and even if we saw the same spread widening in the first half of this year, the performance would look different. it doesn't translate into the same performance. we have much higher kerry within

that would help you over time to offset any short-term market price movements. i think what most people think is they have to translate one by one the changes in interest rates in -- and spread into the same performance. even if that happens, we would have so much better performance. we we calculate it, it is 5% with an iteration that is flat over 12 months. i think that is something to focus on. we have priced in the downside already and it is difficult to see for fixed income to generate similar returns. that was exceptional because we came from and negative yielding environment. manus: you are laying out a plateauing in the repricing of the rates market. maybe they will do a full 200 basis points. is that what we take away? i love your bravery, hard to

lose money in fixed income in the and -- next 12 months. where is the opportunity? where is the biggest opportunity? are we showing high yields in the u.s.? we are showing investment grade in the u.s. are you drawn to that on the predication the maybe default rates won't be as aggressive? >> first of all, a lot of default rates have been priced into current rates. in general, we don't think top rates will go up that high because companies have spent the last two years getting cheap funding, over funding themselves meaning there is significant liquidity. even if earnings deteriorate, the liquidity would help them stay current on their debt. it is difficult to see a huge spike in default rates.

the other thing to look at, if we are considering short-term continued volatility spread widening, what we are looking at is, when default is low -- dani: if i can jump in, perhaps the u.s. has priced in the default risk but what about europe? when we look at spreads widening four basis points, the week before it was 25 basis points. are those accurately pricing and what is coming in the european economy? >> europe has underperformed the u.s. and spreads in europe are significantly wider but a good 50 basis points. this is despite the short iteration. i personally think, we saw a russia attacking a mall in a large city.

they are clearly not content with grabbing land in the east of ukraine so there could be further confrontation. what is the response? also i think there is a problem in terms of what we call, europe is stockpiling and russia is counting their short. this could have an effect on the european economy. dani: thanks for joining us this morning. tatjana. nike reports earnings after the bell, revenue slightly ahead of the forecast. china headwinds abound. that is next. this is bloomberg. ♪

manus: it is daybreak with manus cranny. dani burger is in london.

revenues slightly ahead of forecast but china with the headwinds coming home to roost. laura wright has the details on nike and china. good morning. laura: nike trading down almost 3% after hours, china sales down 20% year-over-year. that is significant because the country accounts for around a fifth of nagy sales -- nike sales. lockdowns in china lead to a buildup in inventory, up 23% year-over-year. in the retail sector, inventory was already elevated because of supply chain congestion. that put pressure on growth margins, missing the forecast, 40 5% and expected to remain flat in upcoming quarters. nike's ceo on the earnings report reveals he sees china as a long-term bullish region for

the company. a note on north america, a disappointment with sales down 5% year-over-year, nike's largest market showing recession fears and inflation are starting to bite. for the time being, sales up 9%, a standup with asia-pacific and latin america. looking forward, it is about the direct consumer and online sales platforms. dani: thank you very much, laura. coming up, we will discuss the credit suisse story. mid single digits when it comes to wealth credit volume growth when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo, i was barely eating

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manus: this is "bloomberg

daybreak: europe." these are the dani: stories in your agenda. dani:dani: focus on energy. g7 leaders said to be discussing a price cap on oil. sintra censured central-bank looks to set the tone on tackling inflation. strategic outlook, nato labels china a systemic challenge instead of an adversary. sources say russia will be called a direct threat. the seesaw of -- that central-bank policy is going to be debated throughout the week in portugal. manus: tatiana just said is going to be hard to lose money in the bond market and the second half of the year. it is all priced in, the spike in yields. it is 6:30 in london.

7:30 in -- the news flows in from credit suisse, 600 million euros from technology cost savings. this is about trying to garnish support from institutions. entering the business rep. they're doing a deep dive session on risk management. one could say challenges are compliance. dani: it definitely has a sense of trying to calm investors, saying their credit portfolio is diverse and sound. hopefully tilting their hat that there are no more risks ahead, no more surprises ahead in this deep dive. manus: and they talk about their credit portfolio being balanced at the moment. we will get into the credit suisse story. let me show you what's going on with risk. macron told the jet seven, the

way said i met mass capacity, i am committed to producing oil. that brought the emiratis out to clarify. oil is up 5% in the past two days. bitcoin vacillates between 20 and 23. there's a lot of interest. the five-year, nobody turned out to buy it. the worst turnout in 10 years. who's going to break the bank of japan? there is mounting discussion that the bank of japan will at some juncture have to capitulate and offload control to 5%. dani: i'm looking at the equity premarket session when it comes to u.s.. i love what jeffries put it.

investors are between a rock and a hard place. the price action looks like capitulation, earnings have yet to be cut. perhaps we are not there. goldman-s, morgan stanley, increasing their shareholder payouts. the negativity continues in asia. hong kong has the biggest lacquered, down 1%. manus: let's continue the conversation about present -- french president macron, he told president biden, the e you confided it is already pumping almost as much oil as they can. micron -- we've been tracking the story from singapore. stephen, what did we learn? don't depend on the gcc to save you. >> does appear that way. right after micron made those comments to widen and provide

cameras, he had the uae mr. tse on twitter, we are producing at that max capacity according to the agreement we made before. that expires in a few months. he hinted that perhaps he could boost production after that. the fact of the matter is it is macaroon -- micron to meet the market when the gas -- gap is left by russia. russian output expected to decrease as europe tightens their ban on russian crude. while there are some discussions within the g7 to allow some russian oil to be left in the market by being sold at a certain cap, it is big distinction. that saudi arabia cannot save the market and they should not

depend on the country. dani: at the same time, there is reporting that the g7 is moving toward reversing their commitment to help the financing of overseas fossil fuel project. walk us through that thinking. >> back at cop26, the g7 and other countries agreed they are going to stop by the end of this year, all fossil fuel investments, gas, oil, coal overseas. with the war in ukraine happening in russia curbing gas exports to germany and other key markets, there is a fear germany will cut off the pipe altogether and that is going to leave germany and the rest of europe very short. g7 members are saying what can we do? walking this back. we need to keep her -- investing in fossil fuels. we need lng projects. we need to maybe build some more plants in other nations. it is quite a reversal. contradictory to the climate

rules set late last year. that is the impact of the wars in ukraine. it is making everybody double down on what they are used to, oil, gas and coal. dani: thank you so much. g7 leaders are said to be looking at the cap for russian prices as well as oil. the deep cuts in russia's natural gas supply to europe, let's get to our guest. joining us now is holger schneidewindt. thanks so much for joining us this morning. i'm going to use the vice chancellor's words. is this a lehman moment for germany? is the gas cap that much of a systematic issue for the region? holger: good morning. thanks for having me. i'm a positive guy.

we can still cope with the situation. it might get worse. it is intensive for german consumers, but for everybody. manus: good morning. you are the voice of calm. dani and i, we got one thing we look at, the price of gas, it is $200, we are nowhere near the zenith where we were at the start of the war. our question to you, we are at a critical level in germany. do you expect a retesting of the high at the start of the war because of a lack of recent storage. how critical are we and what will that do to prices for gas? holger: the stage is tough.

it has not reached everybody in germany yet. maybe that is a good thing. we will have several rounds of price increases regarding gas, and germany we have a target for gas storage. one is reduced a lot. they were having maintenance. we will probably meet our targets, we will know that soon. it is the third level of our emergency. dani: you say gas is likely to go higher in terms of price, how much higher should we be expecting? holger: we have a wide range of

telling. there are people who say it we will have five times higher prices. we will have one or two rounds till autumn. we already have very high gas prices. the prices we have now are hard to pay for many consumers. we don't have the ability. we may have the adjustment by the supplier, but we don't have the bills yet. it will be a tough awakening for consumers. the discussion is on several weeks how to mitigate these prices. especially right now, there is a hot discussion. manus: many europeans have said

europe, germany can wean itself off russian gas by -- considering export bans, the qatari's are not for shifting their flow from asia to europe. can your up really -- can europe really wean itself off russian gas by 90% by the end of the year? >> i don't think there's anybody who really believes in it. i'm a positive guy. it will be tough. looking at germany, we have not used all her instruments yet. we are still inserting more gas than we use. net the storage is filled now.

it is still july. it is a tough target to reach. manus: it really is. we are going to need a lot of help along the way to get there. thank you very much. is the energy law expert and founder of energy democracy. let's get the first word news. >> nato said to be planning to label china as a systemic challenge when it outlines its new policy guidelines later this week. the so-called strategic document is likely to have partnerships between beijing and moscow. it is due to be summed up by nato leaders. china will not be called an adversary. a russian missile strike on a shopping center in central ukraine has killed at least 18 people and injured thousands.

zelenskyy says more than 1000 people were at the mall at the time of the attack. this comes as russian forces have stepped out these attacks in recent days. g7 leaders condemns the strike is a war crime. sri lanka has told residents to stay home and limit fuel supplies to essential services such as health and public transport for two weeks. with foreign reserve exchange, the lowest. the premise are one bid nations economy has completely collapsed. u.s. banks are boosting dividends and share buybacks, clearing this year's fed stress text -- stress test. morgan stanley is raising its orderly dividend by more than 10% and authorizing a multiyear share buyback program. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in

more than 120 countries. this is bloomberg. dani: thanks so much, juliette saly in singapore. coming up, credit suisse set to hold a deep dive for investors. as it deals with the historic money laundering can action. -- conviction. more on that next. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe." credit suisse, making promises to boost the business. it also wants to cut costs, is technology. it's been hit with a historic money laundering conviction. a deep dive, 600 swiss desks 600

million swiss francs of cost scott. they're going to focus on hong kong and singapore. how bad is it? >> some might think credit suisse might need to take a few more radical steps. the definite they have to look at three priorities, cost cuts, arrest the flow bad news. most important is to show we can kickstart growth and with markets going the way they are, we've seen stocks in china slumping. it looks like a recession possibility worldwide. dani: of course we had a credit warning from credit suisse earlier in the month. some of the targets there laying out, weatherby cost cuts, high single digit wealth volume growth, how difficult is this going to be for credit suisse to achieve?

>> i don't think they would send out targets which are going to the impossible to achieve. any bank at this point, it's like saying targets -- no one knows the way markets are going to pan out. for big wealth manager, how the markets go ultimately decides how much money it manages. manus: the issue is this: no matter who you talk to, everybody now talk about credit suisse value on the floor. anybody who buys this, they chop up the bank, shred the investment bank, that is proposition out on the street. do you think their people literally praying over credit suisse at the moment? >> the difficulty has been

stopping the flow bad news. yesterday we had the verdict relating to the case about drug running. it is starting to look like an upset of markers for credit suisse. it is difficult to imagine a buyer coming in and saying we are going to buy this bank as a whole, you could look at merging the international wealth business with credit suisse or another big firm. was is difficult now is the investment bank. as we move into a period where interest rates are being hyped. especially if they've got plums out to dodging clients, it is difficult to imagine many banks would be interested. dani: let us pause on that money laundering conviction, is this strange, unusual? 2 million swiss francs in the scheme of things, not that huge.

what does it do to this question of credibility credit suisse? this was 14 years ago. >> the historic thing about that was not the fine itself. it was that credit suisse got found out and found guilty in switzerland by a swiss court. that is unusual. that's what people are talking about in terms of tarnishing the bank's reputation and the fact it came out of nowhere. a slew of bad news, which the bank has to shake off. dani: thank you very much. patrick winters bring us the latest on credit suisse. coming up, we have your bloombergquint take, the end, investors betting against the bank of japan. more on that next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." the yen is the theme of our big take today. the bank of japan says is committed to keep it -- low despite pressure to hike rates. they're betting it will be forced to abandon its cap benchmark bond yields. joining us now is our asia economy abenberg. what is the so-called widow maker that investors are making against the boj? >> it is that the boj will close 1.25% yields. given the global inflation trend and hydrates we are seeing. the deficits of banks that we

have to do the same. we are currently seeing investors make bets against them. at other investors have been against the boj, and come out with -- manus: a lot of the nuances are going to come down to what happens with dollar-yen. we've had various people talk about that. what is the bank stance? they seem committed, you said 148, despite the window. at the boj doubled down on this? >> the been pretty rocksolid.

they will not budge on rates. he said speaking opportunities, they are not to pre-pandemic highs, what they are seeing is a lack of real wage growth. the yield curve hasn't changed. they will keep that 1.25% line. manus: let's see who will break the bank of japan. thank you. there is a talking head on a stick. i love the oil stories. you know what i learned today? dani: please enlighten me. manus: don't tell your secrets.

dani: i don't think i'm in danger of doing that. manus: you never know. you never know when you're going to be in versailles. macron told biden, the emiratis are mass production -- max production. this is the capacity, yet we are producing at the agreement of opec-plus. let's look at gdp. there renegotiating that contract. dani: even though oil is having higher today, it is back and forth in the commodity complex, front end yields, there some salt biden there, nearly four basis points lower in terms of two-year yields. it is the bond story that has been dominating this market.

that, with the commodity story, typically you see equities able to rally. it looks like a market that is hard to have a conviction. you are not going to lose money in fixed income in the next year. manus: famous last words. i'll have to google this, the bullwhip effect. disinflation. dani: those places -- prices start to move down. inventory site, they need to sell. that's it for us. this is bloomberg. ♪

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mark: welcome to "bloomberg markets: europe."