anna: good morning and welcome to bloomberg markets. i am anna edwards live in london. mounting recession fear is casting a shadow over markets after its worst performance in three decades. german unions were in the country's gas prices -- th 's gas crisis could wipe out entire injuries and looking forward to a week including the u.s. payrolls report. we have european equity markets moving higher this morning, up

.7% on the stoxx 600, the ftse up a percent, the cac 40 up .7% in the dax up just .1%. a little bit of positivity coming through on european equity markets. u.s. futures are lower although we are without the u.s. trading session. no u.s. cash trading. european stocks moving higher. we have futures, we have cash trading in europe where we see yields going higher broadly in europe. you can see that on the italian 10 year. we are buying stocks and we see the italian 10 year yields, 3.197 is the deal right now. gas prices up .6%. ongoing focus on germany. a renewed call for bailouts of the big german utility business.

unions warning about the extent of the impact we will see on the german economy in various parts of the german economy from the potential of russia to shut down flows of gas into germany. a big reduction -- iron or in focus. growth concerns in the united states casting a shadow over wall street as economists race to downgrade outlooks. >> economists have begun to cut their top-down economic forecast for gdp. >> we are looking at an economy losing momentum faster than what we anticipated. >> input costs have risen substantially. >> we have the two biggest quarters. >> we are see demand destruction in some areas. >> the consumers on more fragile footing. >> companies and consumers need to get ready. >> we think they can keep going. >> there is a change in the underlying economy.

>> we do not see how we do not get a recalibration. >> we expect more downgrades. >> we are getting clear signs of slowing. anna: some of the guests talking to bloomberg about their expectations for the global economy, the u.s. economy in particular. let's talk to goldman sachs fixed income macro strategist. how much of a base case is recession in the u.s. becoming, or if it is not your base case what are you waiting for? >> it is definitely a big concern. we thought it was the end of last quarter and the focus on recession risk. when we look at other economies we find soft landings are more common when inflation expectations are anchored in the private sector is healthy but they are less common when inflation is elevated.

in today's cycle we find we see all three elements. evidence of inflation gravitation back towards target. there are two key things we are focused on. what happens in the labor market , do we see any signs of softening, and secondly inflation expectations, for which commodity prices are relevant. anna: are you therefore saying there will not be a recession. are you coming down on that side of the argument or tell me more about your thinking about whether we see a recession? gurpreet: gurpreet: our base case expectation is not for a recession. we expect continued monetary tightening but like jay powell acknowledged last week at the ecb conference, a deceleration

in growth is expected and there is a hope growth remains positive. that is not guaranteed and so you may well see a technical recession but what really matters when you're thinking about the investment strategy is the magnitude and the characteristics of that recession. anna: are you expecting to see any softening in the u.s. labor market? we have payrolls data and i know for some that will be a key area to watch. gurpreet: what is interesting is central bank tightening is occurring against a backdrop that is always showing signs of a moderation in growth, and we now have this cost-of-living increase that will start to impact the services side of the economy. central banks have started to dialogue hawkish rhetoric in the fed expected to deliver another 35 basis point hike this month. we would say that what central

banks are trying to engineer is a degree of softening in the labor market. they want to slow the labor market to the extent companies -- do not necessarily engage in large-scale layoffs. we will have to monitor the data closely. the expectations this year are for the unemployment rate to remain stable but for the pace of job gains to moderate. anna: we have seen some energy prices moderating a little bit, at least since highs earlier on this year. do you see signs the higher energy prices we were talking about were killing off themselves or demand destruction come are you seeing that in any sectors? gurpreet: with the energy sector , there there is a long-term inflation story. the grading of the economy will lift inflation through higher commodity prices but also the magnitude of investment needed. as it relates to fossil fuels,

we have had under supply. given the global economy is still more than 80% powered by fossil fuels, until that changes that will be inflationary and central banks like the ecb acknowledge that last week. where we do see signs of improvement on inflation is the supply side issues. the pmi data is starting to moderate. the hope for a soft landing scenario, good prices start to come down due to normalizing demand but also de-risking and supply chain. anna: we will see whether we get those improvements in supply chains. one thing that would alleviate that supply chain situation might be a bit more normalization in china. that is still long way off. in terms of that global growth story, what role would you

expect china to play? gurpreet: we think we have seen some positive signs in terms of china easing restrictions. china could be a source of positivity for the global economy in the second half of this year. we think we are moving past that peter negative imports with china. we do not expect any big bang in terms of the policy response in china given policy makers are focused on deleveraging more broadly, but we expect there to be some easing in activity restrictions. that helps to ease a lot of the supply chain issues that have been causing higher inflation and most advanced economies. anna: for some people deglobalization is one of the effects of the supply chain issues and post-pandemic a lot of people are thinking about it. is putting production in friendly geographies going to be something we substantially invest around or will this happen but only at the margins? gurpreet: we are seeing there is

a globalization and it relates to trade in goods. it peter 20 years ago and it is now coming down. from a globalization point of view the trade and digital services is still globalized. more localized production -- provided it is not closer to home as a result of a lower cost of technological innovation. that will be a theme in the years to come. one of the more thematic things we are focused on is decarbonization. 2d carbonized the global economy you need innovation and investment and incentive and that investment will be offended by green bonds. the fixed income market will be an important source of funding. anna: a headline we just had across the bloomberg. we said the ecb is to tilt its

corporate bond holdings to reflect climate risks. that is on the corporate side of things. you were referring to the sovereign debt side of things. are we issuing enough green bonds? i saw some coverage suggesting we were not issuing enough of those products to meet climate change commitments. gurpreet: there is more demand than there is supply and that has led to a premium. for investors, we would note that premium does not necessarily translate into weakness in the secondary bond market. more long-term, companies and countries that issue bonds tend to be more innovative and forward-looking and we think over time we will start to see performance differentiation and we are starting to see in increase in supply. it is worth noting there is not yet any global standard on what constitutes agreed activity or project. until we have that regulatory, i think you might still have under

supply relative to demand. anna: we are going to hear from christine lagarde this week in more detail about ecb thinking around rates but also around this anti-fragmentation tool. what you think the market is watching for? gurpreet: the market is expecting announcement on this july meeting. there is still a lot of uncertainty around which market conditions would necessitate its use. would it be open ended in nature? all of the details of the makeup and whether it is open ended or a fixed period of time. i think markets are more focused on what does this mean for the quality rate outlook. does the introduction of this tool allow for a steeper and faster rate hiking path? that remains to be seen. one thing that was clear for christine lagarde is she does believe we are in a stretch of a higher inflation environment as

a result of structural themes like deglobalization, decarbonization, but in europe also aging demographics. anna: thanks very much. good to speak to you. gurpreet gill of goldman sachs, thank you for being with us. coming up, special programming because it is july 4, if you are celebrating independence day in the u.s. or elsewhere, hope you have a good one. we are talking about markets globally. don't let optimism among equity analysts fullest. inflation interest rates rise. that is the view from our latest pollster. they will get the details about that. we will also speak to the european commission president about global trade and about reconstruction in ukraine. very topical. this is bloomberg. ♪

anna: this is bloomberg markets. welcome back to the program. midway through the morning in london. european equities making modest gains. up .8% on the stoxx 600. this pulse survey says to not let optimism among equity analysts full you, the stock market is likely to face and earnings shock. during a -- joining us is our market site editor. in earnings shock is something i talked to guests about. will that be the story in the second half of the year? >> i do not think that earnings

-- will come down going above trend growth in the economy. i do not think that will persist indefinitely. i think earnings is definitely on the cards. i would be careful in defining and earnings shock. not sure there will be as much a shock as a decline. next year in 2023 that is going to be the period when we get any kind of earnings shock because you see the yield curve has not converted yet and it is unlikely we get a recession before an inversion in the yield curve. that is never happened in history indicted on see it happening now. anna: let's hone in on one of the markets you've been looking at in detail. the ftse 100. earnings yield looking good.

dividend yield 4.4%. return on equity 12%. to have faith in any of those numbers you have to believe the margin estimates are up-to-date and the dividend estimates are up-to-date. should we have confidence in those kinds of forecasts? ven: i think that even if you give it a margin of 50, i still think that is a pretty decent pickup over what is on the s&p, which is likely to be lower. i think the ftse 100 dividend is compelling at this point and that is not saying the ftse will rally, but we have seen how the ftse has held better than the s&p this year and i think that may continue to be the story because of the return on the equity and the dividend yield.

anna: earlier we were all obsessed with inflation, but mom -- but bond markets seem to have turn things around and are having a different conversation. you pointed out what is going on in german bonds. that nations does give year bond yields slumping almost 60 basis points in the past. do you think that move lower in yields is sustainable or is this just a short-term focus on growth and then we get back later in the year to thinking about inflation? ven: i think the tactical rally of what we have seen in german bonds, simply because if you look at the market pricing on the oil on the ecb, the markets are expecting something like 140 basis points of tightening this year alone and that is a pretty phenomenal increase in the benchmark trade and if the oil markets are reading the tea leaves right, then there is no

way those front end bond yields in germany are sustainable. at the moment we are around 58 basis points if we get 120 basis points of tightening, more like 150 -- the front end german bonds, what we have seen as a tactical rally, not a secular rally. anna: and what about what we see in treasury markets? with the same applied? the direction of travel has been similar even if the magnitude of the move has not been. ven: absolutely. i think the markets have been threatening the possibility of recession or a sharp pullback in earnings. i think those concerns, they are overdone at this point. therefore i do expect treasury yields to decline from here. anna: and where does that leave

the euro? what is in the driving seat there? is about relative yields? is this about the ecb needs to keep up with the fed, or is this about the growth story in europe and gas prices? what will be in the driver seat for the euro? ven: the gas prices are a to the economy, no question. the ecb, from what president christine lagarde has been telling us, they are focused on inflation, on the inflationary impact, and they will start raising rates in july. if they do that, the euro is bound to be supported because, i do think the euro will be supported. anna: thanks for your time.

apologies for slight interference in the picture with ven ram, but an important conversation on the markets to be had. coming up on this program, as the war in ukraine continues, the government and policymakers are looking to the future. we will speak to the european commission evp around reconstruction in ukraine. this is bloomberg. ♪

anna: welcome back -- anna: welcome back to the special edition of bloomberg markets. here is leigh-ann gerrans. leigh-ann: russian troops are coming closer to their goal of taking over ukraine's donbass region's. ukraine forces withdrew from a key city. meanwhile ukraine will unveil a blueprint for rebuilding the country. it is expected to cost hundreds of billions of dollars. prices expected to raise in the next three months according to a survey from the british chamber of commerce. it is likely to climb further as firms pass on higher energy and wage goals. china is working to quash a new coronavirus outbreak that could spill over into one of its

economically significant regions. authorities have locked down several countries in attempts to keep the virus from spreading in the river delta region. senate democrats: president biden to repeal tariffs putting place by the trump administration. in a newspaper opinion piece senator tim kaine of virginia says the tariffs have changed china's trade practices and are contributing to higher prices for americans. tim kaine called the duties direct taxes on american families and imports. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am leigh-ann gerrans. this is bloomberg. anna: thanks very much for that. leigh-ann gerrans with an update. let's check out the markets.

european equities moving higher. it is the fourth of july. we are without the u.s.. stocks in europe moving up .8%. coming up we will speak to esty dwek. this is bloomberg. ♪ millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year

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anna: welcome back. this is bloomberg markets. i am in networks live in london. this is a special -- i am anna edwards live in london. in europe we are in full force. european stocks up .8%. we play catch-up with that. u.s. futures are pointing a little bit lower. we will see how long we hang onto these gains for european stocks. we are out of european debt and we saw yields have been going

higher. i just show you what has been going on with the italian story. interesting to keep and i what is going on with the bond markets as we pivot between inflation and growth concerns. let's get further samplings on the global economy. mohamed el-erian has been saying the fed could blink if does not slow. mohamed: the method was crystal clear from this week's response by central bankers. they worry about inflation getting entrenched. i think the notion the fed will blink early this time based on credit issues is not likely to happen. i think we face of flip-flopping fed when they realize the economy has slowed but inflation is still not under control. anna: interesting nuance from

mohamed el-erian. he does not think the fed will rank -- will blink when it comes to credit issues. this and the eu policymakers remain divided over the path of tightening at the ecb. esty dwek joins us with her analysis of what to expect from these very central-bank stories. let's start with the fed. mohamed el-erian talking about how he does not think credit will be the thing that makes the fed blink. he does the room for flip-flopping at a number of people we talked to talk about we will see this focus on inflation in the short-term, medium-term, but then we are seeing the market start to pricing cuts over the medium-term. when you think the fed pivots from this inflation focus to be more concerned about growth? esty: it depends a little bit on your definition of blank. if you think the ped -- if you think the fed will pause or reverse that is unlikely. at some point we are starting to

get different signals that are disinflationary. i do not know how quickly inflation comes down, but there are number of signals, whether supply chain, used car prices, commodity prices retreating, we are starting to see inflation should be coming down over the next few months, and hopefully by the time we get to jackson hole with a couple of these economic data prints showing growth has come down, by jackson hole the fed should be able to acknowledge growth is cooling and that means they might not pause or certainly will not reverse but they do not have to be in aggressive tightening mode the way they have been in the last three months. anna: you describe the situation which allows the fed to pivot. i spoke to a guest earlier on that it has to do with inflation level and that would allow the fed to pivot in its thinking but

then opinions vary as to how quickly we will get back to a level like 3% on inflation. what you think the fed is weighing up? esty: the fed knows it will take a year or a year-and-a-half to get back down to 2%, even if growth slows inflation will take some time to come back down. i do not think we are seeing 3% in the next couple of months. i do not think we can get to 3% by the end of the year. can we get closer to 4% on some inflation numbers? that would already be a move down and means your core is closer to that 3%. it is going to take time. i do not think the fed has a figure in mind. they want to see this is a trend. they want to see that month after month inflation is coming down and we do not have like we had with the may cpi that caused

so much panic. that is what they are focused on. in june the data issuing the economy is cooling. that might be happening sooner than they were anticipating as well. anna: where does that leave you in terms of investment strategy? we see some signals of disinflation still to come, but still at these elevated inflation levels. where does that leave you in terms of strategy and investment priorities? esty: still more on the cautious and defensive side. the next couple of months are going to be painful. we have not seen all of earnings revision we will see. even though the market knows they are coming, as we get a couple of warnings from some retailers over the summer in terms of earnings reports, that will cause a little pain and bumpy times for markets again.

higher cash levels, defensive positioning, less concerned about the sovereign side. we could get another spike, but it seems like we are seeing a big part of the move already. if those growth fears come back, there is a risk on spreads widening further even though investment great is holding in better. investment grade over high-yield. some of it is decided not to change too much. it has been a difficult first half for everyone, one of the toughest in the last 50 years. as long as your base case scenario continues that is also a decision not easy to make. anna: we are dissing a headline that says president biden may announce a decision to cut chinese tariffs this week according to other news organizations. we will be looking for confirmation. is that something that could

make a material difference or is there politicking at the margins? esty: it feels like it would be more at the margin at this point because we know the tariffs are adding a little bit to inflation but it would not suddenly bring inflation down a couple of percentage points during the next couple of months. in the middle of a lot of not positive signals. certainly a step in the right direction but not a game changer at this point. anna: not a game changer but a step in the right direction. thinking about here in europe, we will hear from christine lagarde at the end of this week and from the ecb later on this month. there is an unknown around the exact details of this anti-fragmentation tool the ecb is working on. post mario draghi there is a lot of expectation they can continue to bring out these projects that will satisfy market demand.

what should we look for? esty: that is the big question. they wanted to shut the qe and close out the emergency program before hiking rates. that is done so they can hike rates in a couple of weeks. the question is what kind of anti-fragmentation tool can you have that does not have qe or outright bond purchases. if there is not any qe and it is more of an esm loan mechanism we see some of the southern countries do not like the conditions that are attached to that. would there be enough demand? the rhetoric has worked well. there is confidence the ecb could do something. practical details will be a little bit more complicated. we have seen with the ecb in the last couple of years we might not get all of the details we are hoping for by july, especially if spreads have held in the meantime.

i think more question marks but at some time if they want to rate in the spreads we have to have some form of purchases. anna: thank you very much for your time. esty dwek. keeping you up-to-date with news from around the world, here -- here is leigh-ann gerrans with your first word update. leigh-ann: in turkey the inflation rate in june hit 79%, slightly less than expected. global shops in food and energy markets added to pressure from princi depreciation and low interest rates. inflation has been in the double digits almost continuously since 2017 in turkey. the ecb is exploring ways to keep banks from making profits from a subsidized lending program according to the financial times. the ecb provided more than $2 trillion in loans to europe during the pandemic with interest rate set to rise.

banks could earn up to $25 billion in extra profits. european governments are alarmed by a russian disinformation campaign happening in africa. russian diplomats are pushing the narrative that sanctions and not russian blockades are causing shortages of grain and fertilizer in africa. the senior european intelligence officers says the kremlin has manufactured the debate as a means to get all of those sanctions lifted. more changes at credit suisse. bloomberg has learned it is cutting more than two doesn't frontline jobs at the investment bank in asia. credit suisse has warned of a third straight quarterly loss tied to volatile markets and clients cutting back on rest. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries.

i am leigh-ann gerrans. this is bloomberg. anna: thanks very much. coming up, more u.k. firms plan imminent price increases. more on the british chamber of commerce quarterly economic survey with the director of policy and public affairs. this is bloomberg. ♪

anna: this is bloomberg markets.

i am in edwards in london. european stocks making gains this morning. let's focus on what is happening in the u.k.. more u.k. firms than ever before are expecting to increase prices the next few months according to the british chamber of commerce and their quarterly survey. joining us is the bcc director of policy and public affairs. very nice to have you with us. give us the top line, summarize the big takeaways from this quarterly survey. alex: i would like to highlight two things. the first is two thirds of firms we survey our picking up prices and about three quarters of firms are not likely to increase investment. those are troubling findings. i would say not a huge surprise given the inflationary pressure on businesses at the moment, but

they are watch out for the economy and things we would like to governments about. anna: what would be the thing that would encourage business to invest more. if you look at the past, since around the middle of the last decade, things have been weaker in the u.k. than elsewhere in with labor costs on the rise we would like to think that would set of eyes some businesses to invest, especially with an expectation money gets more expensive and interest rates are also rising. what is needed to encourage businesses to invest? alex: it is a good point about investment and productivity in the u.k. needing a jumpstart. right now the government has a good chance to make a real difference because it is reviewing the way it uses the tax system in the u.k. to incentivize investments through various capital allowances,

meaning you can offset investments or in some cases upgrades to buildings and premises you can offset that against profits. we are calling on the government to set a stable and clear and business friendly approach to these investments so we get a long-term view and this is clients can invest in playback a tax against that investment. anna: the other trend you point towards his around companies increasing prices. you said two thirds are set to increase prices. we know what the drivers are. they are experiencing higher costs. what will this mean for higher margins? will businesses be able to pass on cost significantly? will they protect those margins for then not be achievable? alex: it is hard to generalize

through different sectors. what we hear through our chamber of commerce networks is margins are highly stretched and this is what is causing the survey results we see. rising costs for consumers is not what anybody wants to do. it is a delicate balancing act at all times about margin and cost, but certainly these kind of inflationary pressures are not those that can be absorbed by businesses and that is why you are seeing prices go up, you are seeing increasing inflation in the cake which will probably stay that way for some time. anna: subsequent to that we may see labor asking for more money. what does this mean for the bank of england? what clues does your report hold? this line about prices being on the rise will fit with their own

findings and expectations. alex: it is a contribution to the bank of england. clearly they set monetary policy and that is vitally important. there are structural inflationary pressures around the job market and about supply chain costs. covid shut down the global supply chain for two years and it is still rebooting and taking time to come through and we've all seen delays. across the eu as well there is a shortage of people to do the jobs. staff costs are increasing as well. interestingly we are seeing reports that consumer confidence is following and that is a worrying trend. it is the banks trying to manage demand or incentivize increased demand.

consumer spending is two thirds of our economy and gdp and it is important at this difficult time to encourage people to not hold back too much on expenditure so we can keep businesses going and write out this rocky period. anna: thanks for joining us. alex veitch there. coming up, larry summers, former u.s. treasury secretary. we have more on his view, next. this is bloomberg. ♪

anna: former u.s. treasury secretary larry summers says there an increasing risk the u.s. -- the looming recession he is anticipating will start in 2022 and inflation might cool as a result. he spoke in an interview with david westin. >> we are seeing that inflation, the end of the fiscal stimulus that gay people a lot of cash

last year, higher interest rates discouraging housing spending. generalized increase in uncertainty and a bit more feeling of insecurity, all of that is taking a toll on spending. my guess is that will continue for some time. i think you have to say that whatever you thought about recession risks a month ago, the recession risks through the year 2022 have to have gone up in a material way. i have felt for a long time that we are not going to have inflation return near target without a significant economic downturn. that downturn could happen

either because interest rates set by the fed rise very sharply , or it could happen because of a self-fulfilling process coming out of the high inflation and reduction to people's incomes. the later possibility is looking more likely today than it was. if the economy did go into recession in the next six to nine months, then you would probably see a reduction in inflationary pressures and you would see the fed fielded to push rates up less than it would if the economy was continuing to grow strongly and there was strong demand pushing up wages and prices. anna: -- david: i want to be very precise.

you and i have talked about the likelihood of recession this year and next. next year you think it is much more likely than not. you said this year maybe not so much. are you think given the date coming in a recession or significant downturn may be coming faster than you thought? lawrence: i think the risks of a 2022 recession are significantly higher than i would have judged six or nine weeks ago. we have the first quarter numbers in the bank. they are negative for gdp. there were many forecasters who believe the second quarter, which ended yesterday, also had negative gdp growth. it is not really the formal definition of recession but people often say it is a recession when you have two quarters of negative gdp growth

in a row. there is close to a 50-50 chance , maybe a bit less than that that we have had two negative quarters in a row. i think you have to say the chance that a recession is ultimately stated as having begun during 2022 has gone up significantly. anna: that was larry summers, former u.s. treasury secretary. let's check the markets. european stocks up more than 1%. the ftse 100 up 1.2%. perhaps it is the fact yields are retreating, the bond markets are retreating, yields are going higher. we have yields higher across a number of geographies in europe. here is the u.s. dollar -- retreating a touch this morning

and brent crude down .2%. coming up, more on the markets. this is bloomberg. ♪

>> good morning and welcome to bloomberg markets, i am anna edwards live in london. coming up, the shadow over the markets after the worst performance in three decades. german media warns the countries gas prices could wipe out entire industries. investors looking ahead to a big week, including the u.s. payrolls report. let's check on the market, christine lagarde speaking about the next move. it will be a focus later this week. here is european markets.

this is the markets snapshot. stocks are moving fire -- higher. the german 10-year, french and italian 10 year showing the same pattern. the contrast to the last couple of weeks, the german showing this rising. don't have cash on treasury markets but we have plenty when it comes to european bond markets this morning. here is the first word. >> russian troops are coming closer to the goal of taking over the ukrainian donbass region. it falls from a key city in the luhansk province, saying defending it would have consequences. ukraine will unveil a blueprint for rebuilding the country and

asked -- is expected to cause hundreds of billions of dollars. president biden may lift some trump era tariffs on chinese goods in the u.s. according to report. the president could announce his decision this week. janet yellen has called this a drag on the economy but others in the administration see this as leverage to get concessions from china. increasing prices in the next two months, according to a survey from the british chamber of congress -- commerce. the highest inflation range in four decades is likely to climb further. more changes at credit suisse. it is cutting more than two dozen frontline jobs at the investment bank in asia. the reduction falls across business including dealmaking and trading. credit suisse has been learned of a third straight quarterly

loss tied to volatile markets and clients cutting back on risk. global news 24 hours a day -- global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm leigh-ann gerrans. this is bloomberg. anna: downgrades from the biggest bank on wall street continue to roll in, the economy grows sour on the outlook. >> we are losing momentum faster than we anticipated. >> economists have begun to cut down their top-down economic forecast for gdp. >> can costs have risen essentially. >> we are seeing demand destruction in some areas. >> the consumer's on more fragile footing. >> the fed has been driving the car, looking through the rearview mirror. >> the fed is seeing this is collateral damage. >> properties and consumers need

to get ready. we think they can keep going. >> -- downward revision. >> we expect more downgrades. anna: we are joined by the ceo and fixed income show just cannot think of returning us. --income strategist, thank you for joining us. the u.s. economy is slowing according to a guest, but that will be collateral damage for the fed. do we have a sense of how much the fed will allow the economy to slow and the labor market to deteriorate? >> if you talk about the u.s., i have little to add with the other analysts have said. we are also quite negative on the growth outlook. it seems economic downturn is coming quicker than anticipated. if you look at this data. inflation is still high in the labor market is tight so the fed

is on a mission to fight inflation. the weakening and the growth is, and our view, no reason for the fed to change course. we expect aggressive rate hikes in the u.s. in the coming months. anna: do you get a sense that any pecan inflation would change that assessment from the fed or that just allows them to carry on packing inflation? we would still be in elevated levels even if it comes through its peak? joost: yeah, true. the peak level of inflation they're looking at, mainly look at the expectations because it is key for them to prefer expectations becoming the anchored - de-anchored so that is the biggest worry. so if inflation comes down, 2%

or whatever, and we see weakening in the labor market, the fed will be more confident that inflation is under control but it is not there yet. but now they are on a determined path. anna: is a technical recession in the u.s. quote unquote "all" we have to worry about or do you think it is more material? joost: economists have talked about the technical negative growth in the u.s., we might overly see this in q2, it is possible given consumption growth but you should look at this as a longer-term path and clearly there are a lot of negatives not only for the u.s. with the eurozone, where you

will see household consumption and household disposable income being wiped away by high energy prices, higher inflation more generally but especially energy bills will go up strongly. we see monetary tightening also and the ecb will start hiking rates, which will lead to most stable financial conditions and hit investment growth. still we have supply shocks that will ease that are still there and the war raging on ukraine. there are a lot of negative headwinds ahead of us, which are unlikely to go away soon. anna: yes. sticking with the global things, we will come to the european side of this in a moment, but speaking with global things, do you think a u.s. 10 year yield, we are up 2.8% now, we don't get

tax trading today or treasury, we have futures, but where is the duration of travel for that in the short-term or the median term? yields have been coming down despite the fact that we are in a fed tightening cycle and some suggest this temp. -- temporary, --what is the broad outlook for yields? joost: it is very short. we see rates go up in the near term and continue to come down in the medium-term as we do expect the fed already to start cutting rates in the second half of next year given the weak economic outlook that will also lead to of course lower interest rates. anna: were going to get the payrolls numbers later on, but from a fixed income strategy perspective, is this a number

that will hold a lot of value in the market because they focus on inflation that is where it remains? joost: i guess the focus will be on the weight of growth. if we see a strong wage growth, it become stronger, something the federal -- fed will loook at strongly because they have to event that happening. it will have an impact. if there is strong wage growth, markets comprising workers of -- could price in -- we will start focusing on next year and would

result in the dropping rates. anna: how is that factoring into your thinking? we have seen china taking the covid buy in a different direction rather than the zero policy. when we see this limited by for the clapped on, what you expected see for china? joost: for charter, our growth is four 5% this year, less than the chinese authorities say. but the end of the locked of measures, we will pay for with chinese growth and the fact that we are reopening the economy, loosening, the covid measures will mean there is pent-up demand and it will be positive for global growth. the story also for supply, supply-side partnerships are not leaving chinese harbors and we

feel the pain of that. that could be a bit of a softening in the coming months. anna: yeah. less of a drag. we will extend the conversation to talk more about europe but is your base case becoming that we get a recession in europe or that we are now starting one, or is it difficult to say? joost: it is always difficult to say, clearly in current times for profiting is hard. but we do not have recession in the euro zone in our base case at the moment. we do think it is on the cards and we will see more stagnation, especially year.

--next year. what could rise the recession on energy supply cuts in europe if the russian really stop providing any energy. anna: how likely, based on the research you have been doing, i know you have done a lot on this , the european economy ability to cut this off, -- joost: they are chances of getting higher and higher. we see a sharp cut in gas supply from russia to europe, especially germany and italy. they rely a lot of gas supply from russia. it is likely russia will cut

supply further. for now, the policy is to reduce, reuse or find alternative sources of supply. they are still working. but the supply is cut off --if supplies cut off for their week can't think of -- we can think of rushing or shutdowns in the industrial sector, which will then hit the economy hard. not the base case, but we get closer to it. anna: thank you. we back to you, joining us, speaking on our program. looking at the markets, the european --yields on the rise, selling out of various government debt and yields are rising across europe. falling commodity prices as well.

we will get the latest on rebuilding ukraine next. this is bloomberg. ♪

anna: this is bloomberg markets, i am anna edwards. while the war in ukraine continues, the cranium government and global policymakers are looking to the future, to look ahead to the reconstruction that will one day be possible. let's bring in maria tadeo, at the ukraine recovery conference taking place in switzerland. good morning. it seems incredible to think about investments in recovery in ukraine when we know so much destruction is currently still happening. maria: yeah, and the war we have seen has intensified in the east

of the country with russia making and sustaining gains for two weeks in the east of the country. today a lot of those conversations are about the fundraiser, reconstruction efforts going into the country. this is also by the swiss authorities. this country is militarily neutral, a major conflict over the past century. but with the rest of the european union, have done so on the russian federation. the numbers are enormous, 100 billion euros along for the short-term reconstruction. you look at the whole effort, if you range from five hundred billion euros to one trillion euros, that is floated yesterday. but the idea that right now you talk about a hypothetical, we don't know when this war will come to an end. we don't the type of piece that will be achieved if anything

between russia and ukraine, the bigger issue is not the future. it is short-term funding needs for the country that are burning through cash. that was a message from president zelenskyy, who said we will be back. you create is not going to give up on anything. annn -- ukraine is not going to give up on anything anna: how much does generosity depend on the countries showing up at the conference to generate growth and have a policy economic story of their own that they can use to raise money? it'smaria -- maria: ukraine does not want to just focus on rebuilding, this is a modern economy. this is still a country with a lot of corruption issues, but

there is this idea that ukraine right now does depend from the european union, from the united states. question is, for how long? we put that to a number of officials of the g7 in nato. they continue to say publicly they will do it for the long run , they will do whatever it takes to help ukraine. but the question is what happens with the economic fallout. there was no -- from deutsche bank research, we are concerned about energies for the european economy. pricing and potentially a ruptured into germany and italy, incredibly dangerous for the economy. public opinion potentially shifting as a result of the inflation debate. the line officially continues to be we want to support ukraine, whatever it takes, but it is the uncomfortable debate, the

elephant in the room. anna: thank you very much, maria tadeo at the ukraine recovery conference. let's get back to our guest, we talked about the straits of the european economy as a result of the hard line on the economy. you described how it gas cut off, and we don't know we will see that but people are fearing apple happen, if we do see that how that might cascade through the economy. give us a sense of how that moves through the economy? joost: of course. just supply will be cut off, that will work through two key ways for the economy. you will get a price shock because energy will become more expensive, so that will squeeze margins --and energy bills in

household income. that will reduce in companies maybe going bust and not be able to praise on the higher input costs. on that side it will have damaging impacts. from the supply side it will also lead to big cuts in production if countries get that shut up. we've got large-scale industrial shutdowns that will of course lead to lower production and that filters through to supply. the factories will hit a slowdown in demand. if some of the price shock and the supply shock, that will definitely bring viewers of the

economy into a recession. anna: if we do see rationing of gas across the euro zone, where will that fall? also incorporate an industry, most known individuals or will depend on the part of the euro zone economy in --and the way the domestic market functions? joost: yeah, looking at purely economies as a said and it is italy and germany who rely heavily on russian gas. these economies will be hard-hit and the german economy is the biggest. in the euro zone, italy is one of the six largest so that will have a huge impact. if you break it down by sector, companies operating in the energy sector will likely be hit but also the ones that use energy at the large-scale.

if companies go fast, maybe in the corporate sector, bacon filtered through to the financial sector with banks seeing an increase in nonperforming loans and increasing the provisions so banks can be hit as well. maybe if you take it to the max, if governments want to ease part of the burden, they need to step in and it will also cost money. anna: we have already seen that, in germany we are seeing that being talked about with the bailout being discussed. do you expect a bigger role for european governments for the fiscal side? joost: it could be. it is difficult for governments to continue to ease burdens that stem from supply shocks. they already did a lot during

the covid crisis, the government that has increased already limits to that. the capacity to do something good comes less and less. the german government finances are in good shape so there's more room there. but they want more within the eu. i think last week they were already speaking about the new approach. anna: absolutely. will focus on and listen today. joost beaumont, thank you. we will continue to focus on global inflation. this is bloomberg. ♪

anna: this is bloomberg markets, i am anna edwards in london. especial edition because it is july 4 if you are celebrating in the u.s. or elsewhere happy advantage stay. a picture across the european bond market space now, some trends over the last couple of weeks. bonds being sold off and yields rising once again, up by nine

point nine basis points in france, eight or so in germany. 14 basis points higher and italy and spain also shown to move higher in those yields. this in keeping with what we are seeing on broader assets and equity markets being brought. they are up by around 1% on the -- also up by just over 1%. here is leigh-ann gerrans with the first word. leigh-ann: the biggest cyber security breach in chinese history, after bridging the shanghai database. a personal group has offered to sell more than 23 terabytes of data for 10 bitcoins or about $2000. in turkey, the inflation rate from june hit 79%. slightly less than expected. global stocks in the energy

markets adding pressures from currency depletion and low interest rates. it has been in the double digits almost continuously since 20 17. the european central bank is reportedly exploring ways to keep banks from making profits from the subsidized lending program according to the financial times. the ecb provides more than $2 trillion in you -- once --loans during the pandemic. it could be up to 20 5 billion dollars in extra profits. tesla has backed a two-year streak of free -- delivery every quarter. they have two to 54 -- georgia 54 thousand cars, and the shutdown from covid in shanghai has hurt production. global news 24 hours a day, on

air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am we against. this is bloomberg. -- i am leigh-ann gerrans. this is bloomberg.. anna: if you are planning to travel europe this summer, brace yourself. travelers are paying more and have less of a chance of making it to their destination. the global world of aviation new you are about to talk about this. we have seen other broadcasters in belgium talking about brussels airlines canceling five hundred 20 seven more flights this summer. scandinavian airlines says it sees strikes leading to cancellations about 50% of their flights. a hot topic. laura: threatening to derail the recovery of the travel sector that the industry has been yearning for since the pandemic, the common denominator for strike action if we start there is particularly wages eroded by

inflation. they want to be fairly compensated, particularly at a time when demand in the industry is booming. capacity cuts announcements, airports and airlines struggling to operate --they announced their capacity will be 20% lower over key summer periods is. -- this year. the drop will be 11% and 10% respectively. many workers left the industry during the pandemic. they found jobs elsewhere and are reluctant to return to what is seen as a volatile sector. the worker shortage is exacerbated by long wait times. it is why i also forecast that the worker shortage is around two hundred thousand people from where it was a 2019. anna: thank you. laura wright. they have seen stock fall in

anticipation and other issues surrounding the sector. this is listening to the line earlier, they see a cancellation of around 50 percent, shares currently down in session around 10% as a result. the ecb hunting its plan to keep bond markets and check. it hikes rates. our chief economist will be here to talk with us. we were talking about one of the threats to the economy, and aviation sector that is booming and struggling to cope. but more broadly, the european growth story, i talked to one guest on this hour who was saying a recession is not the base case but if the gas tax from russia gets turned off it will be. give us a sense what your expectations are. >> even short of the gas tax being turned off, we can expect recession with the extent of erosion of real incomes we are seeing across europe.

we have to continue to make this distinction between the u.s. consumer and the eurasian consumer. the u.s. consumer has a greater legacy of stimulus, wealth creation that happened over the course of the pandemic that doesn't eurasia. eurasia is more exposed to the energy crisis, or at least europe is more exposed to the energy crisis. i think the mismatch between demand and supply in the area is less than it is in the u.s.. the reason why at this stage in the game we still have these inflation numbers coming through is because the composition has not normalized. we looked at the aviation industry at the art of the storm , the composition of demand that was excessive in the pandemic and in-home -- in in-home services is switching to travel.

but there's been no revenue to the sectors to which demand is no cyclic back. there has been atrophy in terms of lack of capex and as laura was saying, people are being sucked into jobs in other sectors and are not willing to come back. you're going to get these upside surprises and burst of wage price. i have tendency to say spiral but the second round effects. it seems like it is more one-off payments rather than that sticky rise in wage growth being pushed. anna: you're saying the u.s. consumer has more of a legacy of stimulus and would boost these buybacks during the pandemic, more than that eurasia consumer. european inflation though, still a lofty level. is that mostly -- is that very much being driven by supply

chain -- supply chain constraints? do you see signs of those deviating? freya: most of the inflation we see at this stage in europe is either imported or a result of the compositional effects that demand has not yet normalized. if we going to next year we will know what the composition of demand will be in a post-economy. at this stage, we've got the revenge summer and the composition of demand is toward an area of the economy where there has been an atrophy of supply. the supply demand mismatch at this stage seems greater than it is in terms of the aggregate of where we are trending for eurasia. the longer-term trajectory for inflation as a requirement for the ecb to stand out --step out inflation by running actively tight policy is much less than it is in the u.s..

anna: the anti-fermentation tool no doubt will get a lot of attention as we go through july. we have seen activity and bond markets, notes have been coming down. after we got mentioned for the third time of that tool. on the rise again, what are you looking for as you go through this month in terms of the detail? do think it will be detail forthcoming? freya: i'm not sure. there's not a great track record of detail on these things. we never have to answer a lot of the questions on how this is going to be sterilized, what is going to be brought, what is going to be implied spread and the markets will take it for granted that the ecb is there and there is an implied spread. beyond which they are not willing to allow it to go, and which case, what is the point of taking these costly bets against the ecb? but looking to other central banks as a precursor to this, the bank of japan has had a

yield curve target for some time and it does get tested every now and then. they do shift the goalposts. you could get some move like that. at this stage, it is not our base case. but you have enough of a test of the implied spread, which the ecb is willing to countenance. the tester from market is not great enough to actually raise the questions on how this is going to be sterilized. if there is a requirement for a greater degree of purchasing in the periphery, the logical way to sterilize that, if you are trying to avoid qe, would be to sell some equivalent security and you are marking up the same as you are buying. what seems more likely to be happening is you would be sterilizing by shifting around the short-term assets of the

banking sector and financial sector, which is much less of a true sterilization. there is the trend that this goes into a further round of qe and seeds into cash feeds into the weakness, which feeds into further cost pushing inflation, the ultimate problem the ecb is probably within the first place. that is a pale risk rather than the base stage -- base case. anna: what you expect from the euro stage? talk about differentials and how this plays out with peripheral spreads, the drive to the euro. but will restart of the conversation from a weak growth dynamic in europe and a threat from gas and russia. where is the euro in the context? freya: we have to look to what is happening in the u.s.. we probably are going to go through a lull in terms of fed

hawkish nice in that has been the main driver of a lot of currency moves we have seen this year. if we get that will --not in the u.s., generated by growth scare and the beginnings of disinflation which i think will turn out to be transitory, over the next six months or so, there could be a lull in terms of where the fed is going and we could get further downward pricing of the implied peak in the fed funds rate in march, april next year. that releases pressure on currencies from the european perspective as well. but going farther into the future, the reality is it probably does take the fed raising rates by raising nominal yields, such that real rates finally become concerning if you want to get the final reset of inflation in this cycle.

at that point, we could start thinking about farther depreciation, a problem for the ecb perspective because that is a spiral. i'm not willing to talk about wage price spirals but there is one of the current depreciation and growth differentials starting to tilt further toward the u.s. and further currency depreciation. anna: thank you for joining us, chief economist of ts lombard joining us on the fourth of july. i mentioned the lines here, scandinavian airlines morning the company future is at risk, they go on strike. a sense of details about other strikes taking place and other cuts to capacity because of understaffed levels. either in airports or air traffic control, or the airlines themselves. this is the impact we see of that on the fx, shy of 11%.

bonds catching a bid and investors search for cover. that has been as story in recent weeks. we will get big market we will get big market conversations what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work. ibm. let's create

anna: this is bloomberg: markets, i am anna edwards in london. admitted to bonds. have seen a global growth slowdown weighing on markets. just tina joins us now. -- justina joins us. with pot stocks catching a bit but of the last couple weeks story has been that we are looking for places to hide from recession fears. on markets have benefited. each of these trends presents? >> it is interesting because you have two calling the bond market in opposite directions. we have seen a rally across

bonds recently as the narrative shifted to a recession rather than inflationary fears. but today we are seeing bonds a little care. --weaker. as much as we are worried about growth right now we are still concerned about inflation, especially with european gas prices going up. if ecb does have to play catch-up, it is hard to see how european bonds can hold onto the rally they have enjoyed in the past few weeks. anna: you wanted to talk about whether we are seeing economic worries in stocks. it's interesting to talk about, in aviation, this is supposed to be the good times for aviation. this is a sector we really need it now, if people want to consume the products and conserve --under the weather that tells us anything about what we should look for in the broad stock story, what are you

seeing in the narrative at this juncture? justina: airline stocks are a good example. they are the rebound in demand but it is the supply-side that is cutting into that. we are seeing that across many industries right now. which is why analysts have been downgrading their profit estimates and a lot of people are saying they are expecting even more cuts to come. once we lose the support from strong profits, we can see a lot of pessimism possibly spreading across bond markets. anna: i know that was a conversation from another angle on the monetary policy side, we as economists think more about the supply-side. thinking about where demands live, is there demand for crypto despite the crypto winter we have fallen into? justina: yeah. as much as people have been talking for years about how

bitcoin is supposed to be an inflation hedge, it is turning out to be another risky asset. whenever the s&p is down, you see bitcoin and the crypto world falling as well. but it is not just that. unlike the stock market, the crypto industry is grappling with a domino effect from one of the biggest hedge funds, no going through liquidation, we have to see what happens to those crypto assets. we have had another crypto lender freeze withdrawals probably because they cannot afford to pay the high yields, payback their customers know that perhaps their own priorities have defaulted. anna: thank you, bloomberg's justina lee. 2022 has been a big year for boston. bicentennial celebration of boston becoming massachusetts first charted city, the tri-centennial of the amount of boston and 40 years ago's dutch

40 years ago cheers previewed. >> this is the two hundred your boston. in 18 22, the massachusetts state government moved to redesignate the rapidly growing town of boston to a city, population tripled, the decision was ratified in march that year and became official may 1. >> vote was 27 hundred in favor, about 280 in--against. some wanted to keep the old. >> today, dawson is one of the most populous cities in the doing will region. this is not the only my also be exhilarated by the city. this is also the tricentennial of the first printed map of boston. we have a navigator and shipwright's high trade to think. >> a new map made using his

math, they sketched in a new street. >> the mapping of the street, churches and public buildings along with the detailed location of waterways, stocks, shipyards and more now provides one of the most comprehensive representations of what boston looked like before the revolutionary war. 20 20 two is also big year for the newspaper of records, the boston globe. one hundred 50 years ago on march 4, 1872, globe published its first edition. it would be for sense and the front page included current events, where they could vent about what was bugging them. apple price inflation was bugging them. >> was the boston post, the largest paper in new england. it became the newspaper of the rising irish immigrants. >> over a history of keeping post-onions informed for

decades, it has 26 prizes. and the borrower everyone knows your name. the groundbreaking tv sitcom cheers air the first episode in 1982. it would last 11 seasons, when many emmy awards and make these actors household names. 20 22 is a big year of anniversaries for boston and there will be many more to come. anna: it is a big year for boston. where we telling you this? one of the ways we celebrate july 4 is with the boston pops concert, the fireworks spectacular taking place tonight. two and into that if you like. let's conduct the markets. european equity markets on the rise. we don't have u.s. equity markets cash trading, up by to shy 1%.

this is a pipe .4%. the italian 10 year yield, yields going higher and that is the story across europe, encounter to the trend we have seen over the last couple of weeks. we'll see which wins out. natural gas up by eight point six percent, just in today's session. this is worth watching because we have all of this conversation about whether russia is going to use maintenance period of nord stream to stop sending gas from russia to europe. we are focus on european gas prices and what they do in response to those developments. the outage of more treatment is expected to take through the middle of july. we'll see if that is reestablished. growth concerns, down by 4% right now, concerned about growth in china but also stockpiles of seven china waymo demand. --stuffed in china weighing on

demand. when it comes to doing points on the market, the asian session, u.s. features, a little weakness. we don't have training to the u.s. because of the july 4 holiday. futures are down .4%, that is for another day if you are so printing in the u.s. or elsewhere, have a good day. more programming on european and global markets coming ahead. this is bloomberg.. i ♪

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>> welcome to a special edition of bloomberg markets on the fourth of july, i'm dani burger. it is noon in london, seven :00 in new york at 7:00 p.m. in hong kong. u.s. markets closed for the july 4 holiday. here is where we stand in europe, after hours volumes late given that u.s. traders are out enjoying barbecues or whatever you're doing, if you're paying

attention to markets, this is probably risk on. european stocks almost up 1%, being led by energy shares this morning. it is mixed in the energy sector but that is leading is higher along with health care. interesting to look at this, the curve in germany, a huge rally last week. the biggest drop in u.s. 10 year yields since march of 20 20. the two-year it was a 50 basis point drop over the last two weeks. is the rally over? gas prices continue to unfold, concerns worsening, that might exacerbate inflationary issues. union officials warning that entire industries could collapse. in the commodity sector, iron ore dipping, slower growth down by 4.5%. goldman sachs cutting their outlook, iron ore slumped to 90 dollars, settling around $100 in the long term. but it is not just a growth

issue, it is a surplus of iron or, as growth slows down we have an access and that is not positive for the price. bitcoin in the past hour or so flipping to gains, struggling to get back to 20,000, we are around the 90,000 --90 thousand dollars level. we are starting to see some prevents and risk assessments even though futures are off in the u.s. is morning. let's get a check on news around the world with laura wright. laura: in the u.s., president biden it may lift some trump era tariffs on chinese goods according to reports. vulture journal. that president may announce this this week. janet yellen has called the tariffs a drag on the economy but the administration see it as leverage to get concessions from china. more u.k. firms than other are expected to --ever are expected to increase prices, according to a survey from the british

chamber of commerce. the highest inflation rate in four decades is likely decline further, because on higher energy fuel and wage bills. russian troops are coming closer to their goal of taking over the ukraine donbass region. they have forces in --ukraine has forces in a key city of hearts, saying extending this would not -- rebuilding of the country is expected because hundreds of billions of dollars. european central bank has made the most significant shift yet to make environment of considerations mixed with monetary policy. they want to demonstrate a better climate performance. those strategy to deep dusty carbonized through redemption expected over the coming years. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm laura wright. this is bloomberg.

dani: we are joined by marcus of bloomberg opinion. friday we get the record inflationary number, eight point 6% from the eurozone. we continue to have commitment from christine lagarde of the 25 basis point raise in two weeks. please the ecb heading toward a policy mistake? --is the ecb heading toward policy mistake? marcus: i think the economy would actually do better with these rates the bakeshop with negatives. we've got at precentral --potential recessionary environment. the u.s. is talking about recession for the third time this year. there is a threat of russia cutting off gas prices, a difficult decision for the ecb but they will get on with it.

and at the morning --at the moment, markets, different things with the tool, a dangerous way of going about it. the, they have managed to get italian yields back below 4%. i hope that continues, but i think -- to think they can last the whole summer, it would be 20 five basis points and not producing a proper safety net. the maybe working up to bad news. dani: an important point, it is two fires and fights the ecb is trying to fight at this moment. two they have the tools to tighten financial conditions and make sure the periphery spreads don't go out? marcus: i don't think they do and i think they know that. the market is suspicious of what is likely to happen. i don't think we are rearranging the deck chairs with the pet reinvestment is going to be enough. they could unfreeze some of the

remaining fires they did not use, another one hundred 50 billion, but also talks of conditionality and things that have to get through that i don't think will a hawkish counsel. it is a big risk, delivering that is, whatever it takes. dani's: marcus, how would best -- dani: how would this change the outlook of the ecb? marcus: we would worry about the solidity of the constant and the economy. i think all bets are off and they have to get themselves in a better pay. if things don't happen, worst case, they can move to a better case scenario. that means sorting out their approach on inflation and getting away from negative rates and allowing the ending of qe to

be something -- they do have to provide a proper safety net and that is something they have not so -- sorted on. it is contradictory. but the mistakes of their own making for many years. dani: and it just seem like we are in this environment where your to prepare for the. thank you, marcus ashworth [opinion. in the u.s., growth concerns casting a shadow over wall street. economists are raising to downgrade outlooks. >> we are looking at an economy losing momentum faster than we anticipated. >> economists have cut down their top-down economic forecast for gdp. >> input costs have risen sensually. it's parks we are seeing demand destruction. >> we expect the state be more aggressive.

proxima fed has been driving the car looking through the rearview mirror. >> the economy is soaring and the fed is saying that is collateral damage. cooks companies and consumers need to get ready. >> we think they can get going. >> i don't think they have peaked. >> we expect more. dani: let's add another voice, james, you saw 10 year yields falling 20 five basis point last year, the biggest decline since march 20 20. something changed in the past week? x this is something where we expected we would fight ourselves quite some time. we were early in the call of the initial recovery, we underestimated the fortitude of fiscal authorities and the spendthrift natures of consumers.

but we got that massive growth of recovery from unsustainable powers. there were no concerns. we had interest rates at the four, and markets booming. all of these have become headwinds over the last 12 months. economies really do exhibit inertia wednesday have a significant direction. it will continue to move in that direction. central banks cracking, capitulating of the person in trouble, they cannot do this when inflation is a .5%. --8.5%. dani: at what point does duration become attractive again? i know we have seen over the past two weeks begin your

long-term outlook. james: it has been volatile and that is a difficult spoke dutch aspect. who wants to own bonds? but you have to consider bonds in the context of alternative asset classes, you may investor be invested or no longer want to and they don't look quite as bad compared to equity markets which are also highly volatile but have fallen 20% plus without any real decline. the u.s. is -1.5%, negative two point one according to the atlantic --in q2, but top-down, earnings forecasts suggesting companies are able to maintain or grow record margins and earnings in that fire -- environment, it has been highly short squeeze driven rally in bonds.

and as yields pop up again. but it's up to 350. as we head toward this, we're going to see increasingly comfortable immediate term outlook, important to duration. dani: i have to pause on earnings, there was a great story yesterday talking about estimates in some cases, something like a three hundred percent rally in stocks. they seem unattainable at this moment. what would it look like in this market to factor in earnings deterioration? james: it's going to look pretty. i think we are better now, i'm not sure q2 earnings are going to be horrendous across the board. i think some of the more exposed sectors might season nasty earnings numbers and certainly there are companies that have gone into this highly overvalued. we may see that impression.

but i think guidance is critical. that is a dynamic we have seen the last earnings reports, as much as anything, how ceos feel about their own company outlook. it has been what depressed sentiments around here. if we see earnings in relation between earnings of gdp, what we would normally expect to see, there is significant equity price downside without considering what that may or may not do to multiple valuations as being attached to equity markets. the fact that we saw the bounce off the back of yields falling, driven by core data, it shows that equity markets are stuck in the previous paradigm where liquidity is all they care about. facing the fed is going to save them over the next six months. some week equity performance in this area.

dani: bad news returning to bad news again. the pavlovian urge to buy the dip, the fed coming to the rescue. thank you for joining us, the sooner investor -- investment manager at aberdeen standard investments. for those who are trading futures in the u.s., those are slightly off, down about point 2% for the s&p 500 futures. but here's your picture in europe. yields moving higher, up about nine basis points. later in the program, around 8:00 a.m. we be talking to alexander jackson, we will ask her about this, do markets to prices in? james said we normally see significant downsides this environment, the relationship between gdp and

earnings, what will that look like this term -- time? more in the program. this is bloomberg. ♪

dani: german unions wanting the

country's gas prices could wipe out entire industries. let's dig into the story, joining us is benedikt kammel in berlin. we have this morning from the union headed, the top union headed germany. what sort of industry is expecting that will be affected from this? >> the industry that is most at risk or the energy intensive industries, places like aluminum smelters, the chemicals industry, the largest chemicals company based here in germany. so the backbone of german manufacturing, if you will. it is at risk. these are not just bumps in the road that this union head forecasts, but permanently collapsing the industries, that's what she sees as a doomsday scenario. obviously the german government is trying to do that, but on the industrial side, the consumer

side they are keeping a close eye on. energy bills of going through the roof. the consumers both on the electricity but also on the natural gas side. and the same union person who warned of the collapse on the industrial side said we might face civil unrest in germany come those higher bills. several hundred if not thousands of euros in extra costs to people. in the next couple days, each german household will get a small aid package of a couple of hundred euros, that will go far enough to cover the actual costs. come winter, things could get ugly. dani: one we are looking out for is when nord stream had this maintenance, we might see goss cuts on flows, already cut down by 60%. that is had huge implications, and outlook for the rest of the year. where do we stand in terms of a

bailout for the company? benedikt: you're right. a week away, it is crucial. should have been a cut off and maintenance now looks --we are still in -- staring into the black hole, no one knows if they will turn it back on after maintenance, will it be a more reduced levels or will they keep it turned off? nobody knows. the german government are working on plan b, plan c to try and get gas from other places. the utility you mentioned are the biggest gas importer into germany and they have been hit incredibly hard by this. the chancellor came out over the weekend saying the government obviously knows a thing or two about bailing out companies given the experience, we don't know exactly what the planning might be. it might be extending loans or taking a story for my colleague

over the weekend, talking about this trend of renationalization of entire energy industries. 30 years after the market was liberalized, we might see it as being turned upside down again. countries, governments being forced to take stakes in companies simply because they are on the brink of bankruptcy. dani: perhaps that is more palatable to the voting base, then the future of the autobahn. i don't know how that will go over. thank you. the war continues in ukraine. the cleaning government and local policymakers are looking to the future, trying to mobilize countries, lateral institutions, looking ahead to reconstruction that will be necessary. this is taking place in switzerland. with spring in maria tadeo at

the ukraine recovery conference. that is looking for the future, the conversation happening where you are in switzerland. but where do you think -- but where do things stand in ukraine as the battle wages on? maria: this is why love that i am coming right after a segment on the german economy, what could happen in the next two months as they try to build up the storage ahead of the winter. that is that tension we see playing out in a conference like this. if they want to show that symbolism for ukraine, all of the government -- government and officials, europe will stand with ukraine against russian aggression first long as it takes. but what we are seeing in europe every day is the concern about winter, potentially gas being cut off.

this makes a conference like this feel slightly bipolar. we are looking at potentially billions into the construction. to give numbers, in terms of the short-term reconstruction, the numbers floated are about one hundred billion euros. it can go from 500 billion euros to yesterday, one trillion. but the real question, no one has an answer,, how does it europe whether this double storm? a war happening across the central europe and the comic fallout that will no doubt, the next few months. dani: that is a very good point. it is a concern over the economy in europe. how prevalent is that conversation, or is it all just about talking about commitments, you address the economic ones later? maria: it is incredibly difficult because they want to get the tone right. but this is a crude conversation to be having. we have seen that euro bank

provide financial help for ukraine. ukrainians have said they may need more cash on the short-term. it is incredibly expensive. and president zelenskyy, who address a conference today repeated that ukraine is not going to give up on anything. ukraine will not fall into a dictated peace by the russian federation. but times are difficult to put together, to try to shield their own economy but they depend incredibly on russia. we had a note from deutsche bank research saying we are incredibly concerned about the european energy venture. market participants are saying gas will be cut off and that could send italy and germany into recession. trying to keep ukraine and help them with this more, what is clear from in -- from ukrainians is they believe the best option they have is to continue to fight. if they give up now, russia will use this as a platform to further make this and that is a

no go. dani: thank you, maria tadeo at that ukraine recovery conference in switzerland. on the note of the concern about the economy, we see natural gas up another eight .6%. is this a market preparing for what the german finance minister are calling a lehman like moment if we get gas could offer the region? and might change the outlook for the ecb and they will tiptoe to rate hikes after concerns about the economic follow. tomorrow also calling for a eurozone recession. we will discuss private equities and speak with charles hayes. this is bloomberg.

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michael, credit suisse can't catch a break. how much is this something that

shareholders see as necessary to get through this period of recovery at credit suisse? michael: i think it is partly a credit suisse specific story, partially a regional story. they had pledged to accelerate some cost cuts they had promised last year. a lot of that is coming through the technology, but it does look like job cuts are going to be a part of that expense reduction. that brings to the asia side of things. there has been a slowdown in activity on the ball front and the investment banking front. they warned of another loss coming in the second quarter and specifically called out the slowdown they have seen in asia, and i think they are not alone in that. other banks have seen that as well. that is a region that banks have been investing in for the promise of future activity, but

the more that gets pushed out, the less it makes sense to have big staff waiting around for that activity. dani: i know we are reporting it is the dealmaking, the trading team, investment banking. could we see cost cuts to come in that sector? michael: i think this will not be the last we see of job cuts at credit suisse, but we may also see it the industry. there was a serious talent war when we had hung of activity, and we have seen a sudden stop on the equity issuance and some pockets of debt issuance. mergers have held up reasonably well, but you could see a slowdown there as the credit markets get a little tighter, so this may be just the beginning of kind of a pullback in the

expansion we saw last year. dani: we saw the ft reporting overnight a windfall profit from some of the subsidized loans coming from the pandemic programs. walk us through what we know. michael: this was long seen as a potential unintended consequence of these pandemic loans to the banks to try to keep credit flowing, and it was not much of an issue when you have negative rates at the ecb, but as those starts to go positive, you have the potential for a carry trade where the banks use those loans and just park money, earning a positive return. that is obviously something the ecb does not want. they want the point of these loans to encourage lending to the real economy, and i think this is just the ecb looking to ensure that happens.

we are still a ways off from those positive rates, but with more investors seeing that coming down the pike this year or next year, that is something that the regulators have to keep an eye on. when it dani: -- dani: when it comes to the mix for european banks, you describe some of the volatility in markets hitting banks. what are we going to expect for this year as we head into the second half? michael: i think it will largely come into how the trading desks hold up. you mentioned the trade-off between higher rates and slower investment banking activity. in the first quarter there was a lot of volatility in the markets and that helped european banks. many of them put up really strong trading results. in the second quarter there have been a decent amount of optimism, but in the last few weeks we have seen more

volatility in the credit markets . how the banks hold up in that environment i think will be kind of the swing in if this is a solid year for them or not. dani: thank you very much. as michael mentioned, there has been a slow down and some global m&a volumes. they have fallen nearly 17% in the last year. surging inflation, hawkish central banks, all of that fueling a slowdown in dealmaking. banks stoking the fire amid a pullback in lending. let's dig into it more. joining us is charles hayes, global head of financial sponsors derringer. is the end of easy money ushering in a new regime when it comes to dealmaking? charles: let's remember 2021 was a record-breaking year. i think it is reasonable to

revisit the playbook, and i think we will see private equity clients looking to see how they can leverage this period of volatility. but let's not forget, this is what private equity loans to best, deploying capital in asymmetric markets. it will not be long before we see them back to business as usual. i think a period of inflationary pressure, may be some interest rate rises to come, some are talking about a trend to 3%, that is perfectly normal. we have been here before. private equity can the ploy capital very well in these environments, generating significant returns. that is what we expect to see. dani: i do wonder if there's anyone that looks at these high valuations that everybody has been paying and says our kids are starting to fall, i am seeing that buyer's remorse.

charles: we see sectors such as life-sciences, health care, financial services, sectors which are well-placed to whether this financial pressure, potentially interest rate rises, there will be a lot of focus on operational management, plenty of things a private equity buyer can do with those assets to continue to leverage returns. don't forget, they can just old them for slightly longer and let it play through. dani: the only reason that private equity has not seen valuations come down as much is because they are not marked to market. do you think that criticism of the industry is fair, that it is almost one that is just the lack of volatility? charles: you will always see a bit of arbitrage between public and private markets, for sure. certainly what we are seeing is opportunities, and there's always opportunities for a

private equity portfolio. dani: how many funds now are looking at more privates going towards that p2p again? charles: with a 12% drop in serling against the dollar -- in sterling against the dollar, that is a great opportunity for investors, and we are seeing a huge inflow into public markets. there's more that to come for sure. dani: what is going on in the u.k. market? i'm asking that a little bit facetiously. you have walgreens of ending -- u.k., or are these idiosyncratic bills falling apart? charles: any market is bound to see volatility. this is going to correct over time. what we are seeing i think is expectations as to value between buyer and seller, a need to settle. but this volatility is perfectly normal and some private equity

firms will find correct opportunities to deploy capital there. dani: what about in terms of cross-border m&a? charles: the challenge for some private equity firms is going to be some of the regulatory intervention we are seeing. that is not unique to private equity. that is across the board. but again, cma, european commission, they are more open to that level of investment, so i think that a sum of money should be looked at carefully. dani: i did see bloomberg reporting the eu trying to hammer out a draft agreement on putting more scrutiny on foreign firms trying to buy up local companies. obviously there is a lot of volatility not just in the markets, but geopolitics at this moment. how much is the political affecting the environment? charles: nothing has changed in terms of the regulatory framework. this is just and enhance regulatory scrutiny from by

national politics and a domestic agenda. dani: isn't warranted -- is it warranted, this extra scrutiny? charles: not especially. the fundamentals are not changed. dani: sue perhaps just the politics at this moment. has it led to any pullback, any has been see -- any hesitancy in dealmaking? we are seeing others place more scrutiny. charles: i think people are having to go back to the playbook and thing about their tactics. certainly what clients are telling us is that they are frontloading the work they might have done to assess what the regulatory framework looks like. but it just means putting more weight on the buyers to do their homework. dani: we talked about some of the sectors that are attractive through this. one sector that has felt the pain is tech. be it in the public markets, the

tiger cubs who gobbled up private tech, feeling the pain of that valuation rethink. when it comes to tech, how big of a drop in valuations are we expecting in deal flow? is it outsized compared to the market as a whole? charles: there are always going to be opportunities within the tech sector. we have been focusing on sectors whether it is life-sciences, health care, supply chain, energy stability, security across the board. i think what we will see is people looking for greater opportunities across the broader spectrum, but the tech sector is huge, so looking at a macrolevel , certainly our clients will be looking for individual opportunities. dani: the does feel, not necessarily in private equity, but just asset management as a whole, a re-think when it comes to esg. you have frankfurt offices being stormed by different regulators. you have goldman sachs discussing this. there are many asset managers

who say perhaps we need to rethink this, and clients thinking it as well. are we entering a period where there will be a reckoning when it comes to esg, when it comes to greenwashing? charles: i certainly hope not. the esg story has been a great one to partners and their investors. from a private equity clients, it is a way of demonstrating real value, so i certainly hope not. dani: charles, great to have you with us. charles hayes there. as we get closer to the end of the hour, with the u.s. offline, we continue to look at equity markets in europe pushing higher . cash trading closed with u.s. equities and treasuries as well. futures are open in the u.s., looking at a slight decline, down about 0.2%, but it is the economic picture, the energy

picture which is ripping europe right now. german two-year yields been higher by nearly 10 basis points after a very strong rally last week. how much of that is a head fake? how much of that was just being opportunistic after we have seen yields very high? is the era of tin -- of tina finally over? as we look at selling in european bonds. when while, iron ore dropping 4.5%. goldman sachs saying it could be $90 in the medium term and $100 when it comes to the longer-term picture. not only are the concerns about growth, not only are there concerns about housing come about the same time, there is excess surplus when it comes to iron ore. that is beginning to become the story of the second half. coming up, a preview of the boston pops fireworks

spectacular marking independence day. i'm sure this year will be just as spectacular. we will have that for you next. this is bloomberg. ♪

laura: keeping you up to date with news from around the world, with the first word, i'm laura wright. experts are calling it the biggest security breach in china's history. hackers have stolen data on as many as one billion residents in china. the person or group has offered to sell more than 23 terabytes of data for 10 bitcoin, or about $200,000. in turkey, the inflation rate in june hit 79%. that was slightly less than expected. global shocks in food and energy markets added to pressures from currency depreciation and low

interest rates. inflation in turkey has been in the double digits almost continuously since 2017. crypto lender vault -- lender vauld has frozen withdrawals to explore a possible restructuring. there have been more than $197 million of customer withdrawals since june 12. soaring rent growth in london's premium districts set to slow and the second half of the year. the cost of living crisis is curbing the amount that tenants are able to pay. rent rose the most in more than two decades in the first six months of the year. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm laura wright. this is bloomberg. dani: thanks so much. 2022 has been a big year for

boston. it is the bicentennial celebration of austin becoming massachusetts' first chartered city, try centennial of the first printed map of boston, and the iconic show "cheers" premiered. romaine: it was on february 20 third, 1822 that the massachusetts state government moved to redesignate the rapidly growing town of boston to the city of boston. it was an acknowledgment of a 40,000 strong population that had tripled since the end of the revolutionary war. the petition was ratified in march of that year and became official on may 1. >> although the vote was 2700 and favor, about 2000 against. some wanted to keep the old system. romaine: it's population has swelled, making boston the most populous city in all of the new england region. this bicentennial is not the

only milestone being celebrated by the city and 2022. this year also marks the tricentennial of the first rented map of boston, and we have captain john bottom, and navigator and shipwright, to thank for that. >> in the 1760's, a new map was made using bonner's map. essentially they just sketched in a new street. romaine: bonner's sketches of waterways, docs, shipyards, and wharfs now provides one of the most comprehensive representations of what austin looked like before the revolutionary war. 2022 also was a big year for the city's newspaper of record, "the boston globe." on march 4, 1852, the globe list its first edition. back then a copy was $0.04 and writers could vent about whatever was bugging them. apple price inflation was a

frequent topic back then. >> there already were a lot of newspapers act than. there was "the boston post." "the globe" eventually became the newspaper of the rising irish immigrants. romaine: over its history of keeping bostonians informed him of the globe has won 26 bullet surprises. lastly, we raise a pint for the bar where everyone knows your name. "cheers." 40 years ago, the sitcom area its first episode in september 1982. the show would last 11 seasons, win 28 emmy awards, and make ted danson, rhea perlman, and kelsey grammar household names. 2022 is a big year for boston, and surely there will be many more to come. dani: perhaps a little early in the u.s. to raise your glass, but it is allowed today because the boston pops fireworks spectacular is back on for the first time since 2019.

also back on the banks of the charles river is bloomberg's romaine bostick, who is there now with a preview for us. 40,000 people set to attend. romaine: i think you need to multiply that by 10. it will be as many as 400,000 people packed on the esplanade here. this is huge. this is one of the bigger celebrations in any of the major cities in the united states. what other places more fitting that a place like austin, which is so emblematic of what was going on during those revolutionary times? the declaration of independence came officially on july 2, and then was officially adopted on july 4, but this is such a rich city, that revolutionary spirit and a real patriotic spirit here. dani: and of course, perhaps that i should multiply by a few factors as well, given that it is the renewed boston pops after covid. what does it mean for this city? what does it mean for tourism

emerging out of this covid period? romaine: everyone we talked to, they are so happy to have this back. the last one here on the efflandt not was in 2019. it -- on the esplanade was in 2019. it was disrupted by covid. you see more businesses reopened, office is to fill up. this big event, and we will talk later with the mayor of boston, michelle wu, on what they are doing to bring these big five events back to boston. everyone you talk to is so excited to have this. the people who live here, who are used to coming to this, have been coming to this for 48 years. they are used to it and they were really bummed they did not have the last couple of years. dani: talk to us about who david moog or was and why he is important today. romaine: he's basically responsible for what we know as this fireworks spectacular today. the original show was just kind of a small, classical concert.

it was david who came in the 1970's and said we should really amped this up. he brought in "the 1812 overture." he added fireworks come alive can fire, church bells. it became this much more dynamic show. he was also a big part of why the show ended up on television. he worked with television broadcasters not only here in the boston area, but nationwide, to really get this out there. it is one of the reasons why it has become so big and so popular, and why it has become one of the most watched fireworks shows in the entire country. dani: really excited to see you walk us through all of the spectacular later today. romaine bostick in boston. be sure to tune into night at 8:00 p.m. new york time for the boston pops fireworks spectacular, right here on bloomberg television. maybe i will even stay up to watch that one. middlesex county volunteer five syndromes are playing. it is certainly one not to miss.

coming up, we will speak with alexandra jackson, fund manager at rathbone. it is a complicated time for investing in europe. you are looking at inflation hitting record highs. there's concerns about earnings. how do you position for all of it? will equity markets continue to slump as we go from pricing in a recession, from multiples being the ones to get hit, to concerns about earnings? can companies hold on that pricing power? what does china mean for the growth picture? we will dig into that and more with alexandra on the program to come. this is bloomberg. ♪

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dani: welcome to a special dish

and of "bloomberg markets -- special edition of "bloomberg markets." i'm dani burger. here's where we stand in europe this hour. volumes are lighter because of the holiday, but it is still dipped by and continuing. up nearly 1% in europe, that follows the rally of last week, perhaps helping that a bit is that we do not have trading in u.s. treasuries. yields moved lower last week, the biggest decline of the 10 year yield over a five-day period since march 2020. that allowed at two rally -- allowed equities to rally. your two year yield, that is higher by nearly 10 basis points. did the rally and bonds in germany go too far given that the gas situation, will it be shut off from russia? if it gets shut off further, what does that mean for the region? growth concerns? still in the picture.

iron ore a really to your indication of where the growth concerns stand. down nearly 5% today. goldman sachs have downgraded their price target for iron ore. they say it could go to $90 in the medium-term given how high stockpiles are, and the chinese recovery has not gotten back into full swing, but bitcoin rally in, up nearly 2%. it was down earlier in the morning. still unable to get back to that $20,000 level. let's could back to some of your other top stories around the world. here is laura wright. laura: the ambassador to china has called on the foreign ministry to quit spreading what he calls russia's lies. nicholas burns told a forum that he wishes the foreign ministry would stop accusing nato of starting the war between russia and ukraine. burns also said chinese officials falsely accused to the u.s. of having bio weapons labs in ukraine. president biden reportedly may

lift some of the trump era tariffs on chinese goods soon. according to "the wall street journal," the president could announce his decision this week. treasury secretary janet yellen has called the tariffs a drag on the economy, but others in the administration see tariffs as leverage. more u.k. firms than ever before are expecting to raise prices in the next three months, according to a survey from the british chambers of commerce. the findings suggest the highest invasion rate in four decades is likely to climb further as firms pass on higher energy, fuel, and wage bills. bloomberg has learned boeing -- learned airbus handed over fewer than 300 planes in the first half of the year, while behind the 12 month target of evan hundred 20. supply chain issues involving staffing and raw materials shortages are holding back deliveries. airbus said last month 20 planes could not be shipped before the -- shipped because they did not

have engines yet. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm laura wright. this is bloomberg. dani: thank you so much. european natural gas is extending its rally today, rising to the highest level in nearly four months as supply concerns deepen, especially when it comes to the russian flow through to germany. we are joined by bloomberg's eddie van der walt. i know we are looking at this mid-july date when nord stream has some updates to it. does that mean they will use that period to turn off the taps? this comes after we look at europe trying to fill up storage fast. where do we stand at the moment? eddie: i think what we are seeing is that demand in europe is coming forward a lot are usually these are the sort of traces we see late in the autumn, early in the winter. then you expect prices to ramp up and demand to ramp up

significantly. i think what we are seeing here is that traders are very worried about this winter, and for good reason because the drawdowns were significant at the end of last year. but i think what we are seeing is that they are getting gas as fast as they can from everywhere. we have already seen a significant amount of inflows this year, putting us on course for where we were previous years where inventories are concerned, despite the fact that we had those really big drawdowns over the winter. dani: how close are we to that level where inventories are the same as prior years? eddie: i think we are just about there. we saw a really fast inflows from the end of march to the present period. i think we saw more or less 30% of full up in european natural gas capacity. we saw a really quick inflow. that has steadied a little bit, but it slowed, and fact. i thing that is because russian gas, we are not seeing as much

russian gas coming in. the problem is you can fill up as much storage if you want. if you don't have a continuous flow over the winter, we are going to be in trouble in europe. i think what europe is trying to do now is get all the gas they can to fill up the storage, but also look for other sources. be that lng or coal or maybe even using more nuclear power, i think all of those sources will be very important as we go into the winter. dani: that question of will we have inventory when we get to the winter has the union chief in germany warning that multiple industries could collapse because of it. what would be the implications if europe can't find alternative sources of fuel come wintertime? eddie: they were talking about utilities will suffer.

the glass and chemicals and aluminum industries were specifically mentioned. all of those will suffer because this is a direct input into those industries, but those industries are upstream and used by a lot of other industries. you can't get high-end glass and aluminum, you can't make new cars. if you can't get chemicals, you can't make plastics. you can't make fertilizer. if you can't make fertilizer, you can't grow food. so the implication is significant. i don't think anybody can for see where this will end, but the good news is storage is filling up fast, and as long as that is the case, we have the summer to think of other ways to get us of that trouble situation. dani: both glass half-full and half-empty. we appreciate that. eddie van der walt from bloomberg's mliv team. inflation hit a record high in europe. the ecb preparing to hike, but

where does all leave investors? let's bring in rathbone's fund manager alexandra jackson. is the market pricing in this potential further energy crisis when it comes to natural gas? alexandra: i think we are going a long way in certain areas, particularly in the u.k., where u.k. assets are now trading not only on a discount to their historic levels, but also to the u.s., to the euro zone. we see most u.k. assets are trading at around the typical distress levels we have seen recently, so that gives you a really nice cushion. the german gas situation is certainly something we really need to be keeping a close eye on. but if you are looking for an area where valuations are already pricing in a huge amount of bad news, you could definitely do worse than looking in the u.k.

dani: does that mean you want to jump into that market? have you? alexandra: we are very selectively topping up a few things that we already own. i don't think people want to make many big moves at the moment. i don't since there is much appetite for that at the moment. maybe over the summer as liquidity softens a little bit, we might see markets grinding a little lower. we've also got to work through these mid-july trading updates. we will see a lot of those in the u.k. mid to late july, and we will hear from companies about current trading where most of them are reasonably sanguine at the moment, but the key will be what they say about the outlook. we have seen more and more cautious commentary creeping in, which makes sense. that will be really instructive, i think, and that will definitely help investors to work out where we are in terms of wage inflation. i hear signs from id companies

that software inflation might be topping out. inventory is something to look at as well. dani: that inventory question i think is fascinating. you have seen it with retailers in the u.s., this idea that they have stockpiled inventory because of the supply chain issue, and all of a sudden shifting. how big of a problem is this for the retail sector? alexandra: alexandra: i think it could definitely be a with the fact where the retailers are stocked with too much inventory, you can see it in new orders which have tracked down from the manufacturers. we are pretty light on retailers in general. some specialty retailers for sure that we would be having -- we would be happy owning and where valuations have been compressed, but generally we would be happy to avoid most of the retail space. dani: it will be interesting to see how anymore because we get. ceo's can't act surprised in this current environment if we get a recession, that they need

to be preparing for it now. they need to get conservative because if they say they are surprised by a recession, he writes that they will essentially be laughed at by their shareholders. using that is right? are you expect them to see ceos get really conservative for this corporate earnings season? alexandra: i think the risk is there that they want to do that. it feels right when you are staring down an environment that is so uncertain, where certain indicators are contradicting other lead indicators. it is hard to divine the future from that. the incentive is there for ceos to get very conservative forget the other thing we have seen in the u.k. is quite a lot of ceos and cfos moving on, so a lot of resignations happening. for me, the last time we felt this was 2008, 2009, when people were seeing a lot of uncertainty and thinking i don't think i can go through this again. that is an interesting clue for me as well. dani: while we are busting

cliches in this market, you write about the tendency for managers to complain that a lot of the investors we have currently were not in the market 40 years ago, they don't understand the current inflationary environment. why are they wrong to bemoan that? alexandra: i hear that a lot. maybe we weren't investing in the 1970's, the 1960's, but markets move so quickly now, i just don't think a lot of those environments are hugely relevant anymore. we can learn from history, we can learn from our mistakes. the data is available. you can parse this and understand it. dani: thank you so much for joining us. coming up, we are going to discuss the tesla story. tesla deliveries dipping in the quarter, breaking a two-year streak. we will have details for you next. of course, u.s. markets are closed, so we will not get that instant reaction from over the

weekend, but we are looking at futures softer today. u.s. futures down 0.3%. we while, european stocks are able to push higher, but volumes are off. perhaps they are able to rally than the fact that we are looking at yields that are up by nearly 11 basis points. the rally we saw in the front end of the curve in germany last week was remarkable. about a 60 basis point drop over the past two weeks. is this a market that is now rethinking that? can the ecb pull back, just do 25 basis points later this month , given inflation continues to be a problem, given natural gas higher by about 9% this morning? there's concern that nord stream, when it undergoes maintenance later this month, that flows from russia will be cut off. iron ore down more than 4.5%. a concern of growth when it

comes to china. goldman sachs saying that stockpiles are high. bitcoin is moving higher, still unable to break the 20,000 level. we will continue the market conversation next. this is bloomberg. ♪

dani: welcome back to "bloomberg markets." tesla's elon musk told bloomberg there are still unresolved matters about his bid for twitter and he sees a recession

is likely. he spoke with bloomberg editor-in-chief john micklethwait from the qatar economic forum indo half, powered by bloomberg. take a listen. >> with with specter the twitter transaction, there is a limit to what i can say publicly given that it is a somewhat sensitive matter. i like to be measured and my responses here. such is not to generate incremental lawsuits. >> that seems to be a risk you sometimes managed to overcome. >> yes, deposition minimization i think is important. [laughter] >> has twitter given you enough information? >> there are still a few unresolved matters. you probably read about the question as to whether the number of fake and spam users is less than 5%, as switcher claims, which i think it's

probably not most people's experience when using twitter. we are still awaiting resolution on that matter. that is a very significant matter, so we are awaiting resolution on that. and then of course, there is the question of will be debt portion of the round come together, so i think those are the things that need to be resolved before the transaction. >> what about the general state of the economy? you described it as you have a super bad feeling about the economy. i just said to you earlier, joe biden has come out and said that a recession in america is not inevitable. how do you feel about the economy? >> well, i think a recession is

inevitable at some point. as to whether there is a recession in the near term, i think that is more likely than not. it is not a certainty, that it appears more likely than not. what do you think? [laughter] >> i'm with you. i agree with you. i think it is more likely. can i ask you one particular thing to do with the twitter bid? you are one of the biggest and fastest growing investors in china. tesla, you have talked about it being 1/3 of your sales going forward. you are now buying twitter, the kind of public forum for free speech. chinese historically don't tend to be very enthusiastic about free speech. are you worried about whether you can keep those two particular waters running? is buying twitter going to get you in trouble with the chinese? >> twitter does not operate in

china, and i think china does not attempt to interfere with the free speech for the press in the u.s. i assume you are not under pressure at bloomberg from china. so i think i don't think there's going to be an issue. >> in terms generally of that issue of freedom of speech at twitter, you have talked about twitter making it even freer and letting more people onto it. is there a limit at all to who you think should be allowed onto twitter? >> my aspiration for twitter or in general for the digital town square is that it would be as inclusive as possible. that is, it is an appealing

system to use. so ideally i would like to get 80% of north america and perhaps half the world or something ultimately on twitter. that means it must be appealing to people. it cannot be a place where they feel uncomfortable or harassed, or they will simply not use it. dani: tesla ceo elon musk on bloomberg tv. let's get to a man who surely is tired of us asking him questions about twitter and 11 musk, bloomberg's alex webb. let's talk about what we got over the weekend. we had tesla quarterly sales coming in over the weekend -- or deliveries come rather -- deliveries, rather, disappointing. alex: they expected a drop off because the factory in shanghai was not operating for several

weeks. we know about the big lockdowns in shanghai. tesla was affected by that. it was even fewer deliveries than had been telegraphed anticipated. so clearly a certain amount of cause for concern. the comments assistant -- the comments since then seem to have be broadly optimistic. as long as the demand continues to be there, the issues of supply tend to be just a blip rather than a long-term concern. dani: we have heard from elon musk, he talked about in that interview we heard from prior weeks, we've heard about him cutting staff. so where is the concern coming from? alex: he said this quarter was likely to be flat compared to the directly preceding quarter not a year earlier. it was up substantially. that perhaps gets at some of those issues of demand. we have generally seen maybe some correlation between tesla and the performance of crypto,

for instance. these are relatively macro factors that can affect demand for those vehicles. it is still trading at a hefty premium, something like 59 times forward earnings. compare that to the established carmakers who traded less than 10 times forward earnings, there's a lot of enthusiasm still around the stock. the target price is still $150 above where it is at now. dani: why should we be comparing -- what should we be comparing tesla to when it comes to valuations? who are its peers? alex: ultimately tesla is slightly dislocated from the reality of the automotive industry. sometimes the carmakers that tend to be trading up there that are not in the electric space, something like ferrari, it has framed itself quite well as a luxury brand, comparing itself to the like. it trades at about 35 to 40 times forward earnings. maybe that is a place where tesla ultimately settles. don't forget, tesla already makes a lot more cars in any

given year than the ferrari does muster nothing in the old automotive space is directly apples to apples. dani: thank you very much. coming up, we turn back to the story in ukraine. ukraine will avail a blueprint this week for the country. we will go live to the ukrainian recovery conference in switzerland. our maria tadeo is standing by for that. the countries deal not just with supporting ukraine, but their own economic outlook. how much can they afford to do as inflation cuts into the cost of living? all of that next. this is bloomberg. ♪

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laura: welcome to bloomberg. we are keeping you up-to-date with news from around the world. with the first word, i'm laura wright. inflation in switzerland accelerated to the fastest pace in almost three decades last month. prices rose at an annualized rate of 3.4% in june, well above the swiss national bank's 2% target. russia's war with ukraine has been a significant factor in

swiss inflation. the central bank also blames persistent supply chain bottlenecks. the european central bank is making its most significant shift yet to mix environment to considerations into monetary policy. the ecb says it will tilt its corporate bond holdings toward issuers that demonstrate a better climate performance. officials plan to de-carbonized bond holdings through the reinvestment of redemptions expected over the coming years. experts are calling it the biggest cyber security breach in china's history. unknown hackers have stolen data on as many as one billion residents in china after breaching a shanghai police database. the personal group has offered to sell more than 23 terabytes for about $200,000. crypto lender vauld joining last-ditch measures to save a market rout.

there has been more than $197 million of customer withdrawals since june 12. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm laura wright. this is bloomberg. dani: while the war in ukraine continues, the ukrainian government and global policy makers are looking to the future, trying to mobilize countries and multilateral institutions to look towards the reconstruction that will be necessary. maria tadeo is at the ukraine recovery conference in switzerland. again we are looking towards the future here, but also, some challenges remain for ukraine in the short term. frame the debate for us. maria: there must be a delegation about to fly out of here because we hear the helicopter above us. when you come to a conference like this, at times it does feel

like this is almost a bipolar discussion because on the one hand, there is a big hypothetical debate about the reconstruction of ukraine, how that should look, the amount of investment that could go into the country. some of the numbers floated around this morning are incredible. just on the short-term, this idea that can take 100 billion euros just to fix some of the damage that has been done to the economy, but the overall package to really restore and get this country rebuilt can go all the way from 500 billion euros to one trillion euros. then you have the short-term impact and the immediacy of war for ukrainians. this is about securing the short-term funding they need. it is a country burning cash to try to stay competitive in this war. for the europeans, they try to present this united front alongside the swiss government, which put together this conference. they are militarily known for being neutral, but they say when it comes to russian aggression, they are equally on the side of

the european union and condemning that. we know that for them it is about shielding their own economies and dealing with a very difficult winter that is to come on the energy, so it does feel like the long-term and short-term issues here really clash in a way that makes this very cloudy. dani: in the short-term, and ukraine we have seen putin making gains. has the pace of this war shifted more into russia's favor? maria: i think that is the debate right now. when you look at the ukrainians, they still continue to say we won't give up anything, but they have had some losses. president zelenskyy spoke and said that giving away land is not going to solve the issue, that it will only serve for the russians to go into another invasion in the future from a better that form, so the ukrainians have not changed their main, which is they will

condemn you -- they will continue to fight until they get to a peace deal they can live with. for the russians, we heard from vladimir putin, who will thank and recognize the work on by his army, saying well done for making those gains, the plan will continue as scheduled and the invasion will continue as long as the objectives are not fully met. if anything, you see they have growing momentum. dani: thank you very much. bloomberg's maria tadeo at the ukraine recovery conference in switzerland. what impact will this have on the global economy? inflation has certainly remained high, as are recession risks. -- joins us now. nina, i want to start with your take on the data we got last week. of course, the week capped out with a record 8.6% reading for the entirety of the euro zone. what do you make of it? nina: probably not an overly surprising reading. you can look into the data, and i think if you do that, one

thing you see is that the sources of inflation are now well and truly those that are associated with the ukraine-russia situation. in recent months we have seen some sources of inflation coming more from supply chain disruptions, and more that post-covid demand driven inflation. i think what we are seeing now in the inflation figures is really that energy spike and that trickling down into other segments as well. dani: this i find interesting because we have no american viewers today, let's say. they are all at their barbecue. but if we make a difference between the two economies, we can say america is so big a part of it as you described, this demand resuming post-covid. how does that compare to europe? you mentioned it is part of the inflation story, but is it as big a part of the u.s.? nina: i think another element to what you just mentioned is how is this impact of russia-ukraine impacting the inflationary pressures in the euro zone and the u.s. for the u.s., there's less of a

direct link. there is less economic linkages there for there to be a direct impact of those inflationary pressures, and not to mention that the u.s. and some other ways a little bit stands to benefit as an economy given demand for their own domestic sources of oil and gas, so the u.s. is certainly facing a lot of its own inflationary pressures, and we have seen the fed be very awake to that and very willing to respond. but in some ways they are not as impacted by the conflict as we are hearing europe. dani: of course, it is everyone dealing with this inflationary environment given what it's direct impact is coming from, and it really has translated into the political. we have seen world leaders trying to grapple with how to make sure voters stay on side for them. are you concerned seeing some of the political movement from these countries that it might counteract what is happening in the economy? that perhaps it is not the best path to go down, but is just

very politically influenced? nina: i don't think it is resonating very well with the electorate. we've heard policymakers talk about, for example, how people should not be asking for higher wages because that is only going to feed into higher inflationary figures. that is an economically sound argument. i can recognize the economic principles that is coming from. but that is just not how consumers think. that is not how companies think. companies will we worried about how they keep their workers on site. people will be wondering how to face higher energy bills, higher food bills. so i definitely think we are probably going to be seeing some tricky maneuvering from politicians working to appease those immediate pressures. dani: let me get a little more direct here. we saw this perhaps strange twitter spat over the weekend, joe biden tweeting, "bring down the price at the pump," speaking to gas companies. bezos had a weird interaction,

heading back. what do you think of these interactions? nina: he might have a point, the president might have a point, and what he is saying, but in general, companies don't tend to respond very well to being told it is now up to you to rescue the economy at the cost to your own profit margins. can we really expect companies to actually be responsive to that? i think if the government wants to step in and act with some direct subsidies or in some sort of more direct way, then perhaps they will need to do that, but our companies really going to respond to that sort of messaging? it certainly seems unlikely so far? dani: the calls for recession keep getting louder. nomura think the eurozone, u.k., japan, south korea, and canada are going to into recession within the year. it does feel like it is becoming consensus. but how much of this is about

jumping on the bandwagon, about taking the safe bet, which seems to call for recession right now versus the data actually telling us that multiple countries are going to be entering a recession within the next year? nina: a couple of things. something i have been saying for , even before invasion was near the levels it is now, is if we see inflation, and this can be applied to any range of developed economies, if we see inflation around 7%, 8%, 9%, you can probably bring that little down with monetary policy measures. but if we see inflation consistently in the double digits, if we see inflation consistently above 10%, it is going to be really hard to bring down that level of inflation without an economic downturn, and i think that might be a reason why we will see a lot of change because people are now saying central banks are taking this seriously, but at this point inflation has really gotten out of control and we just can't bring this down without a downturn. dani: if a recession is a

feature of monetary policy, is it right that markets should be pricing in cuts once we get to that recession? if the point is you've got to keep demand down at that level in order to keep it with where supply is? nina: if we are talking about 2023, we are probably looking at environment with more of a stabilization of monetary policy. i would not necessarily be keen to expect cuts because even for next year, if inflation starts to level off, it still has a very long way down to go. certainly for the rest of 2022, i think there is a genuine recognition certainly in the fed, i think the bank of england is a bit more wavering, that even if we continue seeing disappointing economic data, we need to what we need to do to bring inflation down. we can't let it go on like it is for another few quarters and see what happens organically. dani: a simple but perhaps difficult question, what would

china returning to normal growth mean for this entire inflationary picture of the world? nina: it would certainly boost things on the demand side. on the other hand, a lot of the out outlook for europe and the u.s. is coming from the lockdowns we have just had in china and from a slightly downcast chinese outlook as well. we have seen those lockdowns now easing and are more -- and a more optimistic outlook for china, so that would probably alleviate some supply chain pressures. it just really depends what of those factors ends up being the most positive. dani: what would that do? nina: it is probably more of a geopolitical question and probably u.s. looking to repair a little bit of the relationship with china after a bit of a rough patch earlier in the year. it would have some economic impact, but i do suspect any

sort of tariff conversations are going to be more political in nature. that is something that is truly going to have wide reaching economic impact. dani: and somehow we returned back to the politics. i'm afraid that's all we have time for. coming up, we are going to look ahead to tonight's boston pops fireworks spectacular. a preview of the boston pops is what we are going to be looking at to see those splendid pictures of fireworks. you're now looking at an indie band stand. of course, not just the bandstand is empty. markets in the u.s. are closed. i suspect a lot of trading floors in the u.s. and new york look similar to that because here is our picture in europe. european stocks are moving higher by nearly 1%, but of course, they don't have that guide of the u.s.. we are looking at u.s. futures floating downwards today by about 0.2 pie percent -- 0.25 percent for s&p 500 futures off the back of a rally. s&p cash markets surged 1%, so a

little bit of a breather, but the yield story, continued to pay attention to that. airman yields pushing higher after a remarkable fall last week. to the fireworks story next. this is bloomberg. ♪

dani: welcome back to "bloomberg markets." airlines and airports preparing for significant disruption over the summer at a time when travel is returning to pre-pandemic levels. for more we are joined by bloomberg's laura wright. what sort of disruptions in the travel sector are we expecting the summer? laura: walkouts at carriers including ryanair and easyjet. in fact, easyjet's coo unexpectedly resigned. a national rail strike in france. grounding that heathrow. all of these strikes have something in common, pay. workers want to feel they are being fairly compensated against

this macro backdrop, especially at a time when demand is booming in the sector. that said, airlines and airports are struggling to operate at a time when passenger numbers are normalizing. it is why we are seeing capacity cuts from british airways, lufthansa. a further headline crossing earlier that brussels airlines will be shelving 500 flights this summer. any workers left the industry during the pandemic. they found work elsewhere and are really reluctant to join what is now seen as a volatile sect. the shortfall in workers for airlines will be 200,000 at the end of this year from where it was in 2019. dani: what will be the consequence of all of this? laura: in the short-term, flight cancellations. my board shows flight cancellations per country for the month of june, compared to the same month in 2019. italy is a notable laggard with flight cancellations up 442% for

the period. interestingly, the u.s. is the outperformer, illustrating that the issue is less pronounced in the united states compared to europe. in the medium-term, the key question is where will demand be after the peak summer season. the cost of living crisis. ticket prices are already at elevated levels. we have seen some ugly share price drops for airlines over the last month, and analysts are trying to determine whether airlines are a bargain or still considerably overvalued at these levels. dani: a debate that is happening throughout markets, it seems. ahead of tonight's boston pops fireworks spectacular, we are taking a closer look at the city and its food because that is the most important thing of any city. estonians are quizzed -- bostonians are quizzed on three

famous foods. >> boston is known for many foods. >> lobster. >> and also -- >> lobster. >> lobster and clam chowder. >> besides seafood, bostonians have been dining on certain staples for decades, even centuries. >> do you know a nickname for boston that has a food in it? >> beantown. >> i don't know. >> the home of the beans. that's what it is. >> and besides oysters, they know a thing or two about baked beans. >> baked beans started in the 1600s when the colonists arrived. the native americans helped them by teaching how to cook beans. >> it starts with salt pork and onions. >> this recipe has been used for about 100 years. it has not deviated since then. >> it is time for a roast beef sandwich. >> i did not know rest --

did not know roast beef sandwiches were a boston thing. >> we claim we invented the roast beef sandwich. >> back in 1951 when a canceled wedding caused a lot of beef. >> the facility next door brought it over to the hotdog stand and hand sliced the roast beef and put it on the hamburger rolls. >> and the roast beef sandwich was born. >> we could get medium rare. the role is toasted to golden brown, thinly sliced mayo and cheese, and plenty of barbecue sauce. >> for dessert, i'm thinking boston cream -- >> boston cream doughnuts? >> boston cream pie? >> that's the one, invented here at the omni parker house. >> it is really a cake because they only had pie pans bake with in the late 1860's. >> after prepping a basic sponge cake and pastry cream, assembly begins. >> we cut it in half, at our

cold filling and top layer. then we are going to take some pastry cream around the outside and pour our chocolate ganache. we do a spider web. you take your skewer and go into the center, and we come back out. we put almonds around the outside to finish our boston cream pie. >> from history to presentation, a lot goes into these boston food staples, but only one thing really matters. >> it just has to taste good. dani: how did we not talk about lobster rolls and that? maybe that is more of a new england wide thing. someone who has been getting all of his phil is bloomberg's romaine bostick, who is in boston now for the boston pops fireworks spectacular. romaine: they gave me a gigantic slice of this pie, cake. it was humongous. it was lights out. dani: you are getting treated well. next time i've got to get out to boston.

i feel like you are about to be inundated with crowds, so perhaps it is a fair trade-off. what you expecting over there? romaine: on the stage behind me here, and less than 12 hours that stage will be packed and the concert field in front of us along the charles river, we are expecting as many as 400,000 people here at the boston pops orchestra, led by the maestro keith lockhart. heather headley, a tony award winning performer, will be doing a lot of numbers throughout the night. we will hear from javier colon. the middlesex volunteers five syndromes, that old-school drum sound -- all in tears fifes and drums, that old-school drum sound. and the legendary chaka khan. we just heard rehearsals and she brought down the house, so you can imagine what it is going to be like. dani: i thought i was already jealous when it came to the great food you are being treated

to come about after that, i am seething with jealousy. thank you so much. really looking forward to that. that is the boston pops fireworks spectacular at 8:00 p.m. eastern time. check into that if you don't want to be left feeling left out and jealous. that is it for this hour. we continue to look at european markets trading higher as the u.s. is off for the fourth of july holiday. volumes are light. hopefully trading floors are empty. hopefully you are able to get out to the grill and enjoy the holiday. that is it for us. more bloomer to come. this -- more bloomberg to come. this is bloomberg. ♪

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the world, this is bloomberg markets with alix steel and guy johnson. die: it is 9:00 in new york, happy fourth of july. these are the main stories we're are tracking for this july. gas prices continue to soar in europe, traders are turning their attention to strike spine region energy workers. -- norwegian energy workers. germany sees its first monthly trade deficit in 30 years.

the prices of important food and energy surge. despite all this, the ecb will seek to decarbonizing its balance sheet. interesting timing on that. from london, i am guy johnson. welcome to bloomberg markets. let's talk about where we are with those markets right now. this is the picture we find ourselves with. we have very light volume. the u.s. is out, that is in the european markets. that is largely reacting to the friday wall street close. energy stocks are significantly big. we will talk much more about energy throughout the show. the gym and -- german 10 is off. it was massively big toward the backend of last week. we've been as high this year as 1.7.

that can contract down there at the bottom, that is dutch natural gas. that's a contract we use along the u.k. it is up sharply today. pay attention to the story, it's going to become more problem attic as we head through summer and into winter. it is a key driver of the german deficit and the inflation narrative we are watching. let's try we will see with the second half is going to look like an understand where you can put your money to work. the inflation narrative has dominated the first half. it the recession narrative will

dominate the second half. how do you not lose money in the second half of the year? let's bring in an infrastructure capital advisor manager. happy fourth of july. thanks for joining us right and early. let's talk about the second half of the year. the first half was very bumpy. how do i avoid losing money in the second half? >> it's great to be on. happy fourth. the first thing is there is one critical element that almost every investor is missing globally. that is that the fed is not behind the curve. they have been neutralizing their bond purchases for over a year. they are shrinking the monetary base this year by almost 15%, which is the fastest since the great depression. if you look at the commodity market, the fed has brought down the ppi type inflation. commodity inflation is down by 20%, driven by a lower monetary base which drives the dollar up 10%. we think the second half, at least the market will figure that out. the risk is the fed is behind

the curve. they are more keyed in. they may be the last to figure out they've carved inflation. we think we are near the bottom. you can enter the bond market. we think we are stabilizing 3% in the area where we are stabilized on the 10 year in the u.s. we think you can make money in bonds, defensive dividend stocks, it's not time to go into bitcoin or profitless tech. there are a lot of bargains out there on defense stocks in the bond market. guy: it sounds like it starts ultimately with some stabilization in the u.s. 10 year. last week was incredibly whippy. you think there is more downside significantly on that 10 year yield?

do you think it's going to stabilize around 3%? walk me through that bond trade. >> i wouldn't necessarily go by treasuries. a lot of fixed income securities, we love props over preferred stocks. the treasuries stabilize, that provides a bid for all assets. the 10 year is a key driver of the valuation. our value on the s&p is 4400 at roughly 3% 10 year. that would drop 15%. it doesn't just stabilize the bond market, it stabilizes the equity market. we are reasonably constructive. we don't think the next report will be good in july. the report the comes out in a week for june, the july report that comes out in august, commodities will be down, gas

prices are down. our natural gas prices are down 33 percent while europe is skyrocketing. u.s. inflation should cool off in the fall. we think that's a good backdrop to move into assets. september and october are usually volatile. we could catch a pandemic level in the fall. buying dividends and fixed income now is probably the way to reenter the market. guy: let's stick with equities. the earnings susan is soon to be upon us. what will that deliver? >> it will mostly be winners, clearly some losers. but a lot of viewers in the u.s. don't appreciate is europe's loss is the u.s. gain. it's not just energy. it's also materials including steel, chemicals, fertilizer. you mentioned there might be

shutdowns in europe. guess where that shortfall is coming from? the u.s. that's a huge support for earnings and the fundamental economy. we don't think the u.s. will have a significant recession. it's off the backs of failed energy transitions. we think utilities will be strong. some consumer stocks will be weak because they are moving from goods to services. guy: is this the fabled's to -- soft landing -- fabled soft landing? >> we think so. we could have negative growth this quarter. that doesn't mean it's a recession. normally, recessions are characterized by significant increases in employment, which we don't see. all of the manufacturing businesses are booming. our housing sector is very

strong. we have a shortage of housing. normally there are tremendously office and housing. we might have a recession, but not a significant increase in unemployment or defaults. we think it's going to be a 2001 style very mild recession. dividend stocks do well on a relative basis. we don't see armageddon for the u.s.. europe is headed into recession. the u.k. in italy particularly, they have excessive exposure to natural gas. we are constructive about the u.s. guy: given all that, you are saying you don't think there is going to be us recession -- a recession or won't feel like one. the housing market still looks very strong. you think we can it continue to deliver growth despite the fact that we still have significant

supply-side issues? i hear what you are saying about commodity inflation may come down. it's not just commodity inflation driving the issues we have. it is shortages across the supply chain. manufacturers are complaining about that. they are still focused on the fact that there are shortages. why is the fed not going to continue to hit that issue very hard? >> we think they are. they are perpetually behind the curve. they are -- powell is very much a politician. he was trained as a politician. we think they will overshoot like they normally do. that could risk more of a downturn in the u.s. if you look at our inflationary expectations, you can look it up on the terminal, they come down 1% over the last three months. the fed doesn't really look at that.

they should. we think we are on a path to reduce inflation and commodities are signaling that. it is a risk that the fed is looking in the rearview mirror, completely behind the curve, this time on inflation improving and they keep shrinking the monetary base. that's not good for stock and bond markets. that's what they did in 2018. hopefully they back off toward the end of the year. guy: enjoy the fourth. we appreciate your time. thank you very much indeed. we need to keep you up-to-date with what's happening around the world. here is an opportunity to do that. >> president biden reportedly may lift some of the trump era tariffs on chinese goods soon.

according to the wall street journal, the president could announce that this week. janet yellen has called the tariffs dragged on the economy. others see tariffs as leverage to get concessions from china. russian troops are coming closer to their goal of taking over the donbass region. forces withdrew from a key city, saying that extending the defense would have less fatal consequences. ukraine will unveil a blueprint for rebuilding the country. it's expected to cost hundreds of billions of dollars. the biggest cyber security breach in chinese history, hackers claim to of stolen data from one billion at residence in china after breaching a police database. they offered to sell 23 terabytes of data for $200,000. global news 24 hours a day on air and on berg wick take,

powered by 2700 journalists and analysts. this is bloomberg. guy: thank indeed. credit suisse cutting in asia. we will find out what's going on. that's next. this is bloomberg. ♪

guy: 40 minutes -- 14 minute past the are. credit suisse is cutting frontline roles. they grapple with losses and a weakening outlook for the global economy. joining us is our finance reporter michael moore.

thanks very much for joining us. is this a credit suisse issue? is this in asia issue? i want to know what the genesis of the issue is. michael: it's both. credit suisse has laid out an ambitious cost-cutting targets. this would help on that front. they talked a lot at their investor day about a good chunk of the cost cuts will come on the technology side. i don't think you can get there all the way from this. i think the other piece of it is asia has sloan -- slowed down. thanks of hired aggressively there in the anticipation a more deals coming. the longer that gets pushed out, the less sense it makes to have people sitting around waiting for the boom. guy: this is a story a lot of people are paying attention to. they are extrapolating, looking at what's happening in asia. they hired aggressively, there was an investment banking boom.

that sounds familiar to those on wall street at the moment. they are wondering if this incredible run we've had on wall street and elsewhere is sustainable. is this a harbinger of what could happen elsewhere? michael: it could be. we've seen ipos fall off the cliff. you've seen pockets of the debt issuance following -- falling. m&a has held up reasonably well. there was a lot of hiring amid the last two years. we had very active markets. that has come to a halt. asia stands out of that. credit suisse in their announcement last month said they will likely have a second quarter loss, they called out the slowdown in asia. it is standing out for now. as we see, volumes drop globally. some of those hiring plans could

be put on hold or reversed. guy: not just in asia but on wall street? wealth management, a different dynamic at the moment. is it affected by what credit suisse is doing? michael: less so. that is more of a case over the long term. wealth management, you don't get the aggressive swings of hiring and firing because it is less transaction-based. when you have this backup of deals that need to get done it, you are going to throw somebody's at the problem. i think wealth management tends to be a little more stable on the hiring and firing front. if we have seen wealth clients at credit suisse pullback because of the volatility, you could see some cuts there.

guy: in terms of talent retention, this is clearly important. that may change. credit suisse is laying people off into what should be a good labor market. how hard has it been for credit suisse to hold onto people? when they are let go and it starts in asia and maybe it spreads elsewhere, are they at the moment going to be going into a relatively good labor market? what is the labor market and finance? michael: it depends on the air you are in. the tough part is if you're in equity issuance, there's not a lot going on. there's not a great bad for people. in terms of credit suisse, they lost a lot of junior bankers who were very experienced. that seems to have slowed down. we will see how that progresses, if they continue to lose money,

that will be three quarters in a row. that could start to weigh on the talent. after that initial exodus, we have seen that slow down a little bit. guy: it's great to catch up. thank you very much indeed. it may be a harbinger of what's coming later on wall street. coming up, the ecb governing council is talking about the fact that they will -- there will be more hikes. this is bloomberg. ♪

guy: let's talk about what's going to be happening this weekend, tonight to be more specific, and boston. the boston pops is back. it's a huge event not only for boston but for bloomberg. we've been taking the temperature, getting a taste of what we can expect. >> boston is known for many foods. and also lobster. >> lobster and clam chowder. >> bostonians have been dining

on certain staples for decades, even centuries. do you know a nickname for boston? >> beantown. >> do you know where that comes from? >> it's the home of the beans. >> besides oysters, they know a thing or two about big beans. >> it started in the 1600s. native americans taught them how to cook beans. >> it starts with salt pork and onions. >> we add brown sugar and mustard powder. this recipe has been used for about 100 years. it hasn't deviated since then. >> it's time for a roast beef sandwich. >> do you know who claims to have invented it? >> we claim we invented the roast beef sandwich. >> in 1951 when a wedding it caused a lot of beef. >> they rot the roast beef over

to the hot dog stand and sliced the roast beef and put it on hamburger rolls. >> the roast beef sandwich was born. >> we will cook it medium rare. the role is toasted golden brown. we have mayo and cheese and plenty of barbecue sauce. >> i'm thinking a boston cream -- pie? that's the one. invented at the omni parker house. >> it's really a cake. they only had pie pans to bake with in the late 1860's. >> after prepping sponge cake, assembly begins. >> we cut it in half. we add the filling and the top layer. we will put cream around the outside. for the white chocolate, we do a spiderweb. you start in the center and go

into the center and come back out. we put almonds around the outside to finish our boston cream pie. >> a lot goes into these boston food staples. only one thing really matters. >> it just has to taste good. guy: i'm sure it does. we're going to take you back to boston a little bit later on in this program. romaine bostick is setting up for the lights we can expect later, the fireworks that will be on offer as the boston pops debt back into gear. that's later. that's get an update. we're looking at the business -- biggest business stories. angel: the crypto lender has joined its rivals in surviving the market route. the company has frozen withdrawals and hired advisors for a possible restructuring. there have been 190 $7 million

in customer thrall since june 12. airbus is running behind its goal for aircraft livery. the company handed over fewer than 300 planes the first half of the year. that is behind the target of 720. supply chain issues are holding back deliveries. airbus said 20 planes couldn't be shipped because they did not have engines yet. rent growth in london's premium district will flow into the second half of the year. it's curbing what tenants are able to pay. rent rose the most in two decades in the first six months of the year. that is your bloomberg business flash. guy: thank indeed it. coming up, we have the chief markets strategist, getting his take on the gas crisis that is gripping here. what it means for the ecb. we will get his take on what's

happening with inflation over in the united states of america. that all lies ahead. this is bloomberg. ♪ how will your business adapt to change? you could hire an office full of peyton mannings. what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha! or you could use workday. omaha. the finance, hr and planning system used by over half of the fortune 500. for a be-agile-like-an-mvp world. workday. for a changing world.

guy: approaching half past the hour in london. you are watching bloomberg markets this fourth of july. let's talk about those markets. light volume is a feature of the landscape as a result of the holiday in the united states. stocks are up by 0.9%. u.s. futures are marginally lower. europe is pricing in the friday close. we do see a little bit of a backing off and it comes to the bond market today. no real surprise there. we see some significant moves on yields. let's run you around europe briefly.

the german tenure is up 10 basis points. francis up by 13 basis points. there it was a huge bid back into the bond market. it's with the u.s. out. the real story it remains what is happening in the energy markets. it's the only sector. gas prices continue to surge. we are contending with russian gas being reduced, we've got to factor in that norwegian flow could be reduced. we could be about to see some strikes by energy workers in norway. let's talk about the implications of all of this and how easy it is to gauge. chris whatley is joining us now. how do i call what is going to happen in the european economy in the second half of the year if i don't know whether or not the russians are going to leave the gas on or turn it off? chris: that's a great question.

that is a huge wildcard in terms of the whole equation. if it does get turned off, we will be having a distinct shortage of gas and energy in europe and a big spike in prices as a result. a third of european gas came from russia. they are doing their best to diversify. it's going to take time. it needs to build infrastructure to do that. if there is a turning off, proper turning off, there will be a spike and a recession and quite a chunky one. if things go back to normal, europe is skirting with the recession anyway. structurally, the european economies are dependent and in reasonably good shape. the inflation issue is causing a

major headache at the moment. guy: how hard do you think the ecb will go? chris: globally, interest rate outlook has changed dramatically in the last two or three weeks. the whole market has changed literally from the middle of june. coming into june, it was about inflation. now it's all about growth globally. people are worried about the growth outlook. you've seen what commodity prices have been doing, copper coming up dramatically in recent weeks. that's a sign that inflation should dissipate. it should dissipate from here. that's changing the outlook. the ecb will be raising rates over the course of this year. i'm not sure they will be doing that extra. i think they will be done by the end of the year. in terms of the fed rate cuts, in terms of the bank of england thinking about that in 2023 and

2024, they will start thinking about that in terms of the ecb as well. the market debate shifted in two weeks. the market is responding. normally, it's the central banks. guy: let's talk about that sequencing. the language from the fed remains very clear. we are going to defeat inflation. the bigger risk is we do too little, not too much. is that the base case, the fed in particular is going to keep its foot firmly on the break until it sees inflation coming down very sharply? chris: they are going to raise rates at the next two meetings and probably 50. we get into september, that's when the markets are starting to think about it. we've taken 25 basis points out

of the rate hikes 42022. in the last two weeks, the market is taking some of the hikes out. the fed's language is very hawkish. we heard powell last week about defeating inflation. they are going to do that. they will want to see inflation come down. look at the growth rate in the states. it is growing less than nominal gdp. nominal gdp is not that far off. it's much slower than the growth rate of normal gdp, which is not enough money to service growth. inflation should slow from here. we could see it come down pretty fast over the second half of the year. that could change a lot of the fed's records. the market moves ahead of the fed it. it has started to move the last

two weeks. guy: what do you do with equities? chris: the recession risks are growing. there's no doubt about that it is the base case in the states. what do you do with equities? there may be a resumption. the concerns are certainly building for the fourth quarter into 2023. it's been such a tough first half. what you see in tough first halves is improvement in the second half. inflation starts coming off, that will allow the market to breathe. it depends on your timeframe. if you are short, i would not be too bearish. if you are a long-term investor, i'd be watching things for the next weeks and months. we have a lot of information over the next few weeks.

that will be insightful and helpful, particularly the way commodity prices behaved. if the oil price comes off, that is encouraging for the equity market. guy: how low could equities go? over the median term, what could you be looking for? what is the potential downside if we do get a recession that starts to hit the earnings story stops? chris: if you've got the earnings revised down typically in a recession, between 20 and 40% depending on the depth of the recession. in 2001, it was milder. the pandemic was quicker. you've got to do that as a minimum. then you probably got to lower

the valuation metric on the s&p 500 as well. for example, the u.s. market is about 5.75%. you've got a seven or and nine. you can clearly get bearish if you want to. guy: do you think there is a reset? there used to be an expectation over the fast few cycles that we snap back weekly? we start to see some liquidity injected into the system by central banks more broadly and that sends risk assets off to the races again. are we going to see that again? are we in a new paradigm? they said they didn't think we were going to go back to that disinflationary world which would allow them to behave that way. chris: absolutely. for the 10 year, balance sheets

in the consumer level and the commercial banks are shrinking. they are getting their houses in order. it wasn't until the pandemic before they sorted those out. they sorted them out across the u.k. and the u.s. that was disinflationary. balance sheets were sorted. the economies are structurally strong. that is still there. housing the is about more than it was 10 years ago. these guys are in great shape, there is no longer disinflation. in the last year and a half, it's been a different ballgame. it's totally different from what we've seen since the financial crisis. guy: what happens with china?

covid cases are starting to surge in a number of regions, lockdowns are reapplied. if china can get a grip and decided can loosen some of these restrictions, we will see an explosion in demand from that economy, a sharp pickup which will drive commodities strongly and start to ease up some of the supply chain stories we've been watching. how do you factor china into your thinking? >> the real question is which of those factors is most important. globally, the opening up of supply chains. we've seen goods prices start to suffer. you could really get disinflation or deflation i should say. we should be quite careful as we see inflation dissipate in the second half. we need a bit more growth out of china. we need some opening up of supply chains. that would be very helpful.

i think china is the one part of the world that is easing, where the money cycle is in an easing cycle at the moment. that is quite positive. i think opening up the supply chains would be quite powerful for what we see in the west and helping with that inflation problem. guy: it's always a pleasure. thank you very much indeed for your time. chris whatley, chief market strategist. thank indeed. , up, where we go with european a policy from here. -- coming up, where we go with european policy from here. that's next, this is bloomberg. ♪

guy: european leaders are

meeting at right now to discuss ukraine's future, even as a country deals with its horrific present. let's go to switzerland and ring in maria who joins us from the ukraine recovery conference in lagarde no. -- conference. maria: we are here. the weather is changing. i don't know if it means anything. the commissioner is joining us now. i know you've been here talking about reconstruction of ukraine, some of the numbers are in norma's. potential he 500 billion euros. in terms of the actual short-term funding, what does ukraine need? >> first of all, we need to distinguish short-term assistance to help ukraine and

then more of a postwar reconstruction. the conference today, we are looking at both aspects. in regards to short-term financial assistance needs, the international monetary fund is putting financing out for ukraine. it's very substantial amount of funding. from the eu side, they are working on additional 9 billion euros. the first part of this is coming before summer break. the united states announced a program that they are already dispersing. it is a sizable mobilization of international coordination.

that's why it's important. longer-term construction, it's a major endeavor both financially and also from an organizational point of view. at the end of the day, this needs to be led by ukraine itself and they are working on a reconstruction planet. international donors are supporting this. from the eu side, they are organizing the work and providing financial help. maria: what do you say to those where you need that boost to morale. when it comes to long-term funding, you don't know. what's the point of doing this? >> when the war is ending, we

did start preparations now. we need to start with the construction. in between, we need critical infrastructure which needs to be done. maria: ukrainians need time to go back, they made some gains over the weekend. the g7, the german finance minister said there will be default, ukraine has the money they need. that is covered now. we hear from ukrainians saying it may be more on a monthly basis. are you prepared to underwrite that? >> i was mentioning that. we will be working and delivering this.

other countries and international institutions are contributing. the financing need is very sizable. it's estimated at $39 billion by the end of the year. maria: you think ukraine can avoid that? the country will need your help and they will help the country. >> we need to support ukraine and from other angles. politically, financially, militarily, humanitarian assistance. where are determined to do so for as needed. maria: what does that mean? it's difficult to put a number on it. we know it's going to be a difficult winter for european consumers. public opinion is going to shift to say yes we want to help ukraine, but we need to help

ourselves. do you worry about that scenario where the public moves away from doing whatever it takes? >> the best way to deal with the wars to stop the war. we can see how we mitigate the impact on eu households and companies as we look at energy prices and food prices. that's what they are working on. maria: we talked about russia cutting off the gas, is that something you are expecting. are you ready for it? is there a plan b. vladimir putin holds a lot of cards. >> that's why we are working actively to diversify our gas supplies. we are talking to our suppliers, the u.s. has agreed to supply substantial additional amounts with many other countries.

clearly, we see russia cut enough gas supplies to number of countries. that is something we need to take seriously. we need to see how do mitigate that this winter. it shows we cannot rely on it russia as a supplier. we need to move away from russian supplies. maria: you made that clear, it will be the end of russia's a major energy player. will india and china go for it? thank you so much for your time. have a great conference. we appreciate your time. guy: nice interview, right stuff. this is bloomberg. ♪

guy: i want to take you to

boston ahead of the fireworks this evening. romaine bostick is there ahead of the boston pops fourth of july spectacular. let's start a more somber note. a moment ago, we were in switzerland talking about the reconstruction of ukraine. will the war make its presence felt where you are this evening? romaine: we heard from the boston pops conductor yesterday. he talks about the importance of marking the war, 100 days since the invasion. there will be a special tribute to the men women who are fighting for their freedom over there. that's a big theme of the boston pops. they are celebrant in the boston -- birthday of the united states. it will focus on the fight for freedom around the world and there will be a playing of the ukrainian national anthem. guy: it's the first time you've been back for a while.

talk to me about what it's going to look like. how many people are you expecting between where you are and the charles river? romaine: they are looking at about 400,000 people coming over here. the bandshell is right behind me. in front of me is just the beautiful esplanade around the charles river. people will see the fireworks at the end which are over the charles river. this is a big event in boston and it hasn't occurred since 2019 because of the pandemic. there is a lot of excitement about this. guy: what does the lineup look like? romaine: heather headley, the tony award winning actress is here. the queen of funk shaka con. you have the boston pops

orchestra, a big part of the reason why a lot of people come here. they are fantastic. they do their traditional patriotic songs, this is going to be interesting. there are several new songs they've written for this, including one dedicated to the 54th massachusetts infantry, it was made famous in the movie glory, the second all-black regiment in the united states of america that fought during the civil war and was memorialized in that movie. there is a special song composed for this occasion. guy: i can't wait. it's going to be a little late for me. i'm looking forward to seeing those fireworks. have a great evening. thank you very much indeed. they will be warming up for that huge event later on it. the boston pops fourth of july spectacular, 8:00 p.m. eastern right here on bloomberg television.

we will continue to track what's happening with these markets, watching and equity market. we will take you back to that ukraine story and get details on the reconstruction. this is bloomberg. ♪ when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds

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>> this is "bloomberg markets" with guy johnson and alix steel. ♪ guy: 3:00 p.m. in london, 10:00 a.m. in new york. u.s. markets closed, it is independence day, the fourth of july. happy fourth. here are our top stories. as prices continue soaring in europe. imminent strike spinal region energy workers. the prices are nearly double since the start of june. germany sees its first earthly

trade deficit in 30 years. prices see -- surging. pivoting corporate reinvestments towards companies that pollute less. those are the headlines, these are the markets. we are getting headlines coming through from the ecb. the ecb's cautioning against the cap risk premia, the fight back against fragmentation. the tool being designed by the ecb to fight fragmentation is beginning to take shape. the germans are getting nervous, they are worried that it could influence them in a negative way. you wonder. we will talk about the ecb in more detail in a few minutes. exceptional circumstances needed , mr. naugle says of the bundesbank. this is where we sit with equity markets right now, we are

trading for 10 on the stoxx 600. energy stocks up by .7%. volume is ethically light, we see the fourth of july having its effect over here. the german 10 year is on offer, we are seeing yields coming back. they got sold hard at the end of last week. yields coming down on both sides of the atlantic. natural gas futures, pay attention to what is happening. nat gas, a look at the dutch contract and u.k. contract. sharply to the upside. energy crisis very real on this side of the atlantic. let's talk about how this is going to impact markets in the second half of the year. kate, i haven't seen you for a few weeks. we have a -- we had a lb first half. how am i going to avoid losing money in the second? kate: the way to avoid losing money is to invest best in an

inflationary world. we haven't seen this for 35 years. you have got to learn how to work in an inflationary world, that is what we are working on and seeing. guy: what does that mean? can you hear me? cate: i can hear you now. guy: we had a little glitch, a transatlantic gremlin. let's talk about what that means in terms of how i want to be investing. cate: well, what you have to do, guy, is stay away from things like cash. fixed income, anything that does not price with inflation what does reprice with inflation? real estate. equities broadly do. commodities really reprice with inflation. that is what you are seeing with energy, other commodities.

the problem with commodities is that they are stuck, they are terrible investors. you can invest in companies in the commodity space. a company like rio tinto is something like -- we like, yields are 12%. another company similar in that space is a dhp, also iron, or, copper. these are lousy from an esg point of view, which is important. if you are trying to make money in this environment, that is what you have to do. slowing rate securities, something like the -- yielding 9% because it is repricing. interest rates, pits, these things reprice. guy: right. come back to the mining stocks. copper is down 18% over the last few weeks, noun 25% since the recent high. some of these metals are beginning to unwind. aren't you concerned that may be

some of the peaks are in, and with inflation rising, these companies are going to get squeezed just as other companies are? the top line is not moving as aggressively, but the costs in the middle are going to be here. on the likes of rio, suffering and that -- are the likes of rio going to be suffering in that kind of scenario? cate: you are getting a 12% yield. nothing matters. rio knows how to operate this environment, they have been operating for decades. they have 12%, they make 25% cash flow margins. they have very light balance sheets. they are very successful, they know how to operate in this environment. guy: so you are not worried about capital appreciation? you are not worried what happens with the share price? it is the dividend that is part --driving you? cate: it is, and the share price will follow. you do not want to invest in the actual commodities, copper goes

-- if you buy the company said are getting the income, you may need a super cycle right now with everything going on. that is why i think these are interesting investments. guy: talking of earnings more broadly, we are about earnings season starting. there is a sense of nervousness that this could be the start of a deterioration on the earnings front. we have already seen all double compression valuation, are we about to see the second leg when it comes to equities more broadly as we start to see weakness in earnings? cate: we are, it is also going to be the kitchen sink phenomenon. where companies are saying, hey, it is bad news. let's dump the kitchen sink in. what is happening is, the market anticipates this. the market is probably ahead of earnings. i would argue that, even if we have weak earnings, the stocks may actually recover. the market is looking -- working through this.

guy: you do not think the market is looking through and seeing a recession on the others? cate: the market may see a recession. if we do, it is going to be the strangest recession i have ever seen. he will have labor shortages, we still have inflation, employment, a strong real estate market, so it is going to be a recession because the fed wants there to be a recession. the fed can keep raising rates, but it is going to be a strange recession. it is going to be a recession unlike any recession i have ever seen. guy: every recession is different. the fed clearly wants to slow things down, it clearly needs to deliver demand destruction. when do you start to see that having a material impact on markets? it has thus far, we have seen equity markets coming down. i do not think we have gotten to the point of fully pricing in a recession. what do you as an investor do in

the kind of recession you are expecting? you say we still got a relatively good housing and labor market. fed is going to have to stop on both of those. yeah. i am not liking the sound of that little noise i heard in my ear. usually indicates the call may have dropped. cate, are you still with us? cate: i am still with you. guy: excellent, that is good. we like that. what i want to do in that kind of recession, the fed, if it sees that strengthen the housing market and labor market, it is going to take that as a signal that it needs to or. cate: the main thing the fed is looking at as -- is the energy price. if people are feeling pain at the pump. i think as oil production ramps up, and we see a relief on the energy side, that is going to

greatly improve the inflation sector. the costs are not going to be as demanding as they were. we have had strong years, i would hope believe that inflation is going to ebb. however, in the end, so long as we have inflation, the fed are going to stomp on this and do their best. the equity markets have looked through it, they are going to reprice. we are going to be looking at companies that can break price. that are going to pivot, pivot to the items i talked about. pivot. slowing rate bonds. the market is going to react. there are going to be sectors that are winners, some sectors are going to be losers cate:. we are going to leave you there. connection issues starting to manifest themselves. cate feddis, president and cio of grace capital. we get back to the issue of rebuilding ukraine.

there is a large conference taking place in lagardere, switzerland. maria tadeo is there, she is going to be speaking to the european banks through reconstruction and development, the president. that conversation is next. this is bloomberg. ♪

guy: european policy makers are discussing how to rebuild ukraine. doing so in lagardere, switzerland. maria tadeo is at the ukrainian recovery conference and joins us now. maria. maria: we battle the elements today, a meeting is happening. thank you for the european bank

in developments and reconstruction. i know you had a -- about the future of ukraine. the damage, i was paying attention to the debate going on behind the scenes. some of what i heard and listen to, they are enormous. in your analysis and to have done, how much money does ukraine need? odile: it is difficult to assess because the war is still going on. it is difficult to have a definite figure. i think the assessment of infrastructure, the level of infrastructure destroyed is around 100 billion. of course, you have -- the private sector because of loss of opportunity, loss of capital to develop, to sell your business and so on. i think it will lessen -- the impact on the economy is huge, a

huge loss of capital and revenue. maria: the east part of the country does appear to be fully destroyed. that is for the long term, and you say 100 billion euros, is that in the space of 10 years? odile: that is only for the infrastructure. then, we need to provide equity for the companies in the banking sector, more than 100 billion. maria: i have heard analysis of one trillion euros could be in the cards or long-term. on the short-term, it did seem that funding needs for the country were covered for the year. the g7 agree to, i spoke to the german finance minister the talk about a debt restructuring, a default of ukraine, that is picking up momentum. what was your impression when you spoke inside? odile: i think that has been a lot of focus, rightly so.

to cover the needs and it is following the g7, all committed and cover the 500 billion for infrastructure. i think this is the process of being implemented. it takes time, you have to go through parliament to find a way to get the financing. the e.u. is working on getting 900 -- finance, it is a process in the making. it should give the ability to the government for the next month. maria: it seems the germans are the ones pushing back, especially in talks on the eight hundred billion. i know you are asking, what do you say to your desk to your critics who argue, you come here, you talk about the reconstruction of ukraine, but a lot of this seems hypothetical. nobody knows if this is going to end. why is it important to show up to an event like this, even though we do not know what the

situation looks like and the peace ukraine is going to get? odile: we need to help ukraine, now. it is true for the support of the country and economy. we are financing the infrastructure, railways, gas company, electricity company, private sector, industries in the business and pharmaceutical. this is to keep the cut -- economy afloat. this will enhance reconstruction. the more the economy is on its feet and function, the more the private sector can do business. the better it will be, the better place the country will be for reconstruction. i think it is very important. it is also important to start thinking about rebuilding reconstruction, and also to think about scenarios. reconstruction may not happen at once. you may have a piece segment, everything is settled. you may start reconstructing,

investing, rebuilding, even if the war is still on in some areas of the country. i think that is something we need to work on. reconstruction is a huge start, it requires a lot of preparation, a lot of coordination, defining the priorities, the methodology. also, it is good to think about that early on. maria: briefly, i wonder, this will be the question. he the ukrainians say -- ukrainians say the russians will have to pay reparations. a lot of officials do not believe that will happen, putin will not pay a cent. the americans have spent a lot of money on the weapons, the impression i get is that this will fall predominantly on the europeans and european union. can the e.u. weather this, and provide this funding? odile: currently, i think the community -- the u.s., canada,

countries contributing to support the economy. we see a lot of donor support to enable us to take additional risk, because we are as a bank, financing the country now. for that, we share the risk consumer report. it falls from everybody, i think. we need to continue to be like that. maria: do you believe europe will lead this? odile: europe will have a big role to play because of the europe perspective. the country, u.k. -- ukraine is a candidate country to europe, everybody knows that reform will be driven by introspective of e.u. membership. it will also be intensifying support. it's -- it needs to be asserted fourth and two other partners globally, who feel concerned

about the government and will participate. maria: when you look at the situation of the country, a final question. you entered this twice, you mentioned word reforms. a lot of the criticism of the ukrainian economy for a while is very much that, by the -- there are problems with moral -- rule of law. do you trust that president zelenskyy can do with every previous administration has failed to? odile: it is important in reconstruction. what is important now, in the complex of the war, to revert from going back on reform. a lot of reforms have been done, public companies, so forth. there has been a lot of reform and transformation, fight against corruption. you look at the institutions put in place. it is important to preserve their functioning and ability to act.

the german contract is important. stop engaging in new reform whenever possible, because everybody understands that for the government -- are huge now, i think it is good to have this and speak about the key issue. when you think about reconstruction, you need -- and for that, reform will be very important to have stability, credible, transparent environment. maria: the ukrainians have said -- they blame it on the old soviet system, they want to transform the economy going into the future. odile: i think they know because of the e.u. -- is very interest. maria: thank you for that, president of the european bank of redevelopment and reconstruction. maybe the weather changes tonight. odile: hope so. maria: if not, we will try

again. thank you so much. guy: thank you very much, indeed. nice interview, maria taddeo joining us from lagardere. we also have heads coming out related out of germany this time, the chancellor has been speaking. this, after we see the task force meeting on the issue of inflation. schulz saying the current price is akin to the 1970's in terms of the historical president, germany faces a historical challenge with inflation and plans to develop inflation fighting plans over the coming weeks. this on the same day that we have seen germany delivering its first monthly trade deficit in 30 years, the inflation now from an center. gas, a big part of that story. we will continue to monitoring what is happening with gas prices. looking at now is a surge in gas prices. equities, going sideways. this is what the bond market looks like. german 10 year, 1.317. this is bloomberg. ♪

>> keeping you up-to-date with the world news. president biden reportedly may lift some trump era tariffs on chinese goods. according to the wall street journal, the president could announce his decision this week. treasury secretary janet yellen has called the tariffs a drag on the economy. others in the ministration see the tariff as leverage to get concessions from china. russian troops are coming closer to their goal of taking over ukraine's donbass region. ukraine forces withdrew from a key city in a province saying that extending its defense would have less than fatal consequent this. ukraine will unveil a brew print -- blueprint this week for repairing the country. it could cost hundreds of billions of dollars. the european central bank making its most significant shift to

make environmental confederations into monetary policy. the ecb says is -- it will tilt corporate bond holding towards issuers that demonstrate that are climate performance. the carbonized boned -- bond holding -- expected over the coming years. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2,700 journalists and analysts in more than 120 countries. i am angel for luciano -- feliciano. this is bloomberg. guy: markets, i thought the story related to president biden would have a bigger impact on futures. there was a minor blip when the story came out, but u.s. futures on the s&p, -.5%. nasdaq a little softer. at the moment, u.s. futures are negative. you can see what is happening there. the stocks 600 up by .5%,

largely reacting on friday to the close. the big story has europe with the energy story and inflation narrative, we heard the german chancellor making comments on that. talking about the idea that he needs to deliver more on the inflation front, or more on the inflation fighting front. that is the line you could type back into what president biden is talking about, reduction on tariffs may ease the banks of school issues, we could see an inflation story over in the united states. keep an eye on both of those. we are getting headlines coming through, the president and justin trudeau of canada are to visit mexico in november. again, interesting narrative around mexico potentially getting the re-shoring benefits. that has yet to fully happen. we will think about that as we work our way towards that trip. travel topping the pandemic agenda at the moment. we talk about that in the next

hour, we talk to the president and ceo of best western hotels and resorts. we have issues in europe, the focus on all of that in the next hour. this is bloomberg. ♪ millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year

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guy: we've got an hour to go before the end of trading in europe. futures -- wall street is out, which sucks volume out of the narrative over here. i want to talk about what is happening in the tray of -- travel space. the first i want to talk about is what is happening in -- we need to talk about airbus. let's start off with east jet. the local carrier in europe really struggling, massive stock shortages, -- staff shortages, problems without -- airports. all of that coming together to mean a number of cancellations.

as a result, peter, the chief operating officer at easyjet has decided that he is going to be stepping down. he came from ryanair to easyjet, clearly this is a man falling on his sword as a result of the problems we have seen. we talk about now -- that now, and airbus. we are joined by philip. let's talk about what is happening with easyjet. peter value is stepping aside, how is this going to solve the problem? >> easyjet, the ceo is leaving. just as it is struggling with various cancellation, when you join ryanair in easyjet from ryanair in 2019. even that was a natural split. it is a difficult moment for easyjet, the focus on improving the operations after -- they

walk out and spain. there is more strikes to follow this month. it is not easy. david morgan, who previously filled the role stepping in as interim ceo oh will have -- coo will have to deal with -- in amsterdam. guy: what is happening more broadly with the travel story this week? we've got trained strikes starting to kick in and france. walk me through what the rest of the week looks like. i feel like i need a travel update as to what we are seeing. we've got issues in saf, a number of carriers really struggling right now. >> the saf issues are different. the saf wanted to strike, they haven't come up with days they are going to strike. there issue is mainly to -- with job security. saf is in the midst of a massive

restructuring, they need injection of liquidity from new investors and existing investors . saf is looking at a bleak future at the moment, as things stand. that is partly why they have decided to strike. they haven't agreed on compensation plan. they still could -- still talk about a drill could be struck going forward. they have wondered any sort of strike will cost them about 9 million euros today. guy: sid, labor issues and supply chain issues. hip hitting airbus. this is a company with aggressive targets and turns of -- terms of ramping up productions. the eighth the 20 -- a320 aircraft is struggling. walk us through why. >> struggling with production

and supply chain issues across the board. that may be starting shortages. you remember why -- from the supplies, and talked about delivering 720 planes in 2022. so far in the six month, they have handed over than -- fewer than 300. it is to fits of the way toward the 2022 goal. the ceo has said the company has 20 narrow bodies built by the end of may, that were yet to receive engine's and could not be shipped. across the supply chain, there are bigger issues. guy: calling them gliders, we are building gliders. great stuff, thank you very much, indeed. siddhartha philip joining us and what is happening in the travel space. let's put hotels into that mix,

it is not just airlines that are seeing issues. got a huge surge in demand, but the supply-side is really where the challenge lies at the moment. we are seeing this in any parts of the world, and as we celebrate the fourth of july weekend, we think we should take a look at this. let's get a take from best western, larry cook kulik is the president and ceo of best western hotels and resorts. 18 brands, 4500 hotels worldwide , more than 4500 hotels worldwide. a great person to talk to. larry, the fourth of july weekend. huge demand for travel. what are you seeing this weekend? larry: thank you. first, happy fourth of july to everyone who was watching today. we are seeing tremendously strong demand, like an hour hotels, this summer. for context, this saturday --

the saturday before memorial day weekend, we set an absolute, historic record with regard to average, daily rate in best western hotels. we saw that continuation of strength through the summer season. interestingly, continued to be tremendously strong through the fourth of july weekend. on saturday, two days past, we had over 1000 hotels hit occupancy greater than 91%. demand continues, as we see an extension of the booking window, which is a truly -- reflection of consumer confidence that they are going to continue to travel over the summer months. guy: are all rooms available? i was talking to another large hotel operator, he was telling me they are struggling not to open hotels, but to open all the

rooms within hotels. what are you seeing? larry: our hotel meters are -- leaders are generally small business owners. i have to applaud them in that, they run their hotels on a personal level. they are doing their best to be employers of choice, and while through the pandemic we saw some struggling with labor issues, that is resolving itself. i would say the vast majority of our hotel leaders have 100% inventory open. guy: do you think this demand is sustainable? larry: we absolutely hope that it is sustainable. we do have headwinds, we recognize that as an industry. you have inflation, part of that is gas, cost to travelers.

the cost of flights right now continue to escalate. as i mentioned earlier, we see them booking -- the booking window continuing to expand, which is a true reflection of travelers being confident that, when they book, they will travel. something else that is very important is, american hotel association in conjunction with coal egret labs did a study recently. what they believe to be true, i have no reason to doubt it, 86% of business travelers say that face-to-face interactions are tremendously important and add value to their business. people prefer to do business in person. when one business traveler travels, you know the competitor will also travel.

it is that competitive nature, when one travels, the other must, as well. we see that as a positive with regard to business travel, which will carry us through hopefully the fall and winter shoulder seasons. guy: ok, let's delve into the details. relative to 2019, i.e., pre-pandemic, our -- our businesses back? how much of business travelers back as a percentage? larry: the study that i rely upon say that business travel is approximately 80% of where it was. guy: is that what you are seeing with your business? i appreciate the study, but is that what you are seeing in terms of the hotels you guys are running? larry: absolutely. we see that in week business, which is what we call the travel

business, returning to our hotel leaders. yes, sir. guy: in terms of the geography, you have got a huge --. what differences are we seeing geographically in the areas you operate? larry: north america came back early is down strongest. i think that was because of the way we had our vaccine rollout program, i think consumer confidence came back strongest in the united states. euro -- europe came back next. in that regard, i think it is terrific that the administration has removed the testing mandate for coming back into the united states, which has u.s. travelers traveling internationally and coming back, as well as international travelers coming into the united states.

we saw europe come back second. asia is lacking, there is no doubt about it. china is struggling. it is uneven internationally, i am sure you have heard that from others, as well. in the united states, very strong. actually, tourism is those key markets in europe that we are fortunate we have great partners in europe and the heb, central europe, their key destination cities such as paris and london. throughout scandinavia, doing tremendously well. where we have multiple best western and hotels that can meet the demands of travelers. guy: to go back to the demand question, do you think demand will be as strong next year? a lot of people pent up during the pandemic, very keen to travel. you got a super dollar, which helps you guys coming over here.

do you think this is a one-off, or people are set to change more broadly to the kind of, i am going to review my life, travel more, spend more time doing the things i want to do kind of mentality? larry: i think your take on it is absolutely correct. i do not think it is just pent up demand that will then wane. i think people have looked at how they live life, one to be able to say they enjoyed themselves throughout their lives and want to travel. travel is something that is in everyone's dna, it is experience, the enjoying life. i believe that will continue now more than ever. guy: larry, enjoy the fourth. thank you for your time, president and ceo of best western hotels and resorts. thank you indeed.

this is bloomberg. ♪

guy: italian debt currently trading 180 9.2 basis points over german debt. bowens, key spread he want to pay attention to. the ecb clearly is, it has grown concerned over the last few weeks that when it starts to prime monetary policy, you could see that spread widening out. you could see that transmission mechanism of the monetary policy, it is designing a tool that could potentially fight such fragmentation, spread widening. it is starting to see crack's

appear within the governing council. crack's that are maybe right to the corvette governing council. nogel at bullinger's bank indicating today that he has concerns about the use of this new, special, and defragmentation tool. what are his concerns and the impact it could have? i'm not seeing much market interaction -- reaction. alex, let's talk about mr. naugle's concerns. what are they? >> he is concerned that the distinction between what is a justified spread and what is an unjustified spread could get you in dire straight. he wants to see conditionality on the fiscal front to make sure the ecb is not dishing out cash to government. he is concerned in general that

this leads to questions dealt with the debt crisis, meaning monetary financing and that it it's in the way of fighting inflation, it is running at record levels. buying bonds, as would probably be a key feature of this new crisis tool, goes against the fragmentation to be dealt with. guy: presumably, he is trying to do this before we get the details of what the tool is going to look like. he is trying to shape the debate before the final tool is unveiled. when are we going to see that? alex: we are waiting for it to be at the next governing meeting, which is on july 21. we have heard from policymakers when it is going to be announced, otherwise, they announced they are working on this tool and do not think lagarde can say to the public at

another time without having something to show for it. what they are planning. guy: do you think nogle is alone? do you think others share his concerns over the governing council? alex: it is not as straightforward. today is certainly the most critical intervention so far on this topic. there are other hawkish policymakers like belgium's pierre schulz, which have been more constructive. the reason could be is they see it as a precondition for higher interest rates, so they may have accepted that, without such a tool, there may not be higher interest rates, which is urgently want. they may have concerns about that for now. nogel's intervention shows there are concerns about -- among the governing council. guy: thank you for stepping on

-- stepping in and updating us. thank you very much, indeed. from london, this is bloomberg. ♪

guy: let's go from old england back to new england.

over in new england, we find kailey leinz getting ready for the fourth of july spectacular. i want to start with boston, presumably, this is a huge boost for the local economy. >> we are expecting 400,000 people on the esplanade on the charles river tonight. this is the first time the boston pops has been live at this location since 2019. in 2020, it was a different story for boston and the rest of the world. in 2021, it was a subdued affair at tanglewood. everybody is excited to be back in boston. a lot of people coming in for the holiday weekend for this event, that will provide a boost to the local economy. big cities all over the world often took a major economic hit during the pandemic. you can still see empty storefronts as you walk around the city. everybody is excited for this revitalization and bringing so

many thousands of people back this weekend. guy: how many thousands are we talking about? what is going to be topping the bill? >> 400,000 people are expected, no pressure for myself or romaine bostick who are hosting this event. they open the gates in about an hour, you will start to see the people flooding in. they are here for the music, the orchestra, the boston pops, some big headliners. shaka con, she sold 70 million albums, will be playing a couple of songs you can find the backstage dancing. we will be honoring our military, we will have laptop helicopters flying. we will have cannons flying. it is going to be a great event. guy: everybody is in safe hands. kailey, enjoy. as kailey says, it is coming up on bloomberg television, 8:00 p.m. eastern, it is going to be

great. up next, we got the european close, light volume today. the u.s. is out celebrating what is best what i guess is the original brexit. this is bloomberg. ♪

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>> monday the 4th of july. european markets doing fairly well as you can see. the countdown to close starts right now. >> the countdown is on in europe. this bloomberg markets european close with guy johnson and alex steele. guy: 30 men's to go and we have a situation with light volume in europe. the americans are enjoying the four