dani: this is "bloomberg

daybreak: europe." i'm dani burger in london alongside many cranny -- manus in dubai. manus: trey truce, bloomberg learns president biden is considering a sooner than expected rollback on tariffs on chinese goods. mainland stocks in a volatile session. 5050 the rba delivers a back to back 50 basis point hike for the first time ever, and does not rule out further tightening to put the brakes on inflation. uniper is in talks of a 9 billion euro government bailout with the german government. gas prices continue to decline. a good morning, the bond markets , they believe the fed will go hard in terms of raising rates.

they are not focused on recession this morning. big moves in the short end. dani: that is what is keeping momentum down, through the morning positive. if i can take you into the equity story, we did start the morning strong. that started to fade considering what you are talking about, the two year yields, jumping 10 basis points. chinese assets, the cfi 300 is down about 0.3%. i was planning on showing you u.s. and european stocks, but they are higher this morning but only slightly here begin i do not know what these chinese shenzhen is -- it is a composite. you take it away. manus: let's go back, i think you are right, what you have is a narrative. the bond market is repricing.

on the short end of the market, the fairytale of the recession was the alpha of the bond market is no more, it is about the fed doing more. let's look at the two year government bond yields, along with the aussie dollar moving along this narrative that you have potentially a rollback on some of the tariffs. we will get back to the market boards in a moment. dani: let's jump to those reporters around the world. in hong kong we are covering the tariff story. juliette saly will discuss the rba back to back 50 basis point hikes. dani: we will talk about uniper 's possible bailout.

the team is assembled. u.s. president joe biden is close to announcing a rollback of the trump era tariffs on chinese goods. sources say he may make that decision as soon as this week. we have been getting kite flying on this subject, how real and relevant is this? how big would a rollback be for global markets? >> there seems to be momentum behind this. we had the first calls since october between china's vice premier in the u.s. treasury secretary, they spoke about tariffs, and areas of economic cooperation on supply chains, and they agreed to talk again. that comes against the backdrop that the u.s. is moving toward easing some tariffs on u.s. goods. we do not know specifics, if it will be industrial or consumer goods, or how much the tariffs

will be eased or win, but i will say there was a view among economists here that such a move would neither be a game changer for u.s. inflation nor for demand for chinese made goods. it would be an incremental move, as a nod to the inflation pressures but not changing the overall relation or economic story. dani: bloomberg's enda curran in hong kong. the reserve bank of australia delivered its first consecutive rates hike. perhaps not much enthusiasm and it comes to the market reaction. juliette saly is in singapore. juliette: let's get that chart on what we are seeing on the rba. there are gremlins in the system today.

they mentioned inflation at a 21 year high, 5.1%. they are hopeful to get it back to 2%-3%, but they did mention it is not as high as in other countries. the rba indicating they will hike further. the market is close to a 185 basis point hike by years end. it will impact a lot of households, and we are looking at the cost of rising prices from floods, gas and electricity. in terms of market reaction, the aussie dollar dropped after that decision. yields looking flat when it comes to the three year. and the other story in the asia-pacific was this report about rolling back some tariffs. a big boost coming from the tech players in hong kong. manus: thank you very much.

we will see what the actual delivery is. bloomberg has learned the german gas giant, uniper, is in talks with the government about bailout package for 9 billion euros. it is one of the biggest importers of russian gas, it's shares plunged 28%. this is a systemically important company in the german industry story. why the need for such a sizable bailout? >> they are very dependent on russian gas. they built their business model on cheap russian gas. now they are not getting it. russia cut gas supplies to germany by 60% last month because of the nord stream 2. that is a key supplier for uniper. because of this supply cut, uniper is losing 30 million

euros a day, a lot of money that is adding up. they are struggling to procure more supply and continue operations, and they need this bailout. they are a big dump and he, and without uniper, it will be difficult for germany to restock gas for the winter. all this together is creating a difficult position, and germany needs to keep uniper afloat. dani: it is not just uniper relying on russian gas, it is germany's economy as a whole. let's get to m&a news, staying in germany, kkr will leave the bid to buy a stake in the sprawling wireless business. this is a huge deal, how is the back-and-forth shaping up now? >> this might be one of the largest infrastructure deals of the year. $20 billion might be the number

we are looking at. the asset has 60,000 towers around the country, and they might choose a winner as early as this week. the scoop on the m&a desk is that kkr is the front runner. there is competition like brookfield asset management, and a little-known company from spain that has built a huge european tower network business. it shows how hot this market is. a lot of telecom companies are choosing to split these businesses to raise funds that they urgently need to raise money for infrastructure so they can build out their networks. this is a development across the board. vodafone has done it. deutsche telekom might be next. we might hear this week whether kkr does get this asset.

manus: let's see if they win the prize from deutsche telekom. let's check on some of the key points markets will be focused on today. we had the rba raising rates by 50 basis points, the first back to back hikes in history. dani: we will also get industrial production data followed by global pmi at 8:50 a.m. we have the euro area, germany and the u.k. and then the bank of england will issue its financial stability report. manus: coming up, a rollback of u.s. tariffs, that injects a boost of risk in the market.

dani: we will also be talking about natural gas rivaling oil. soaring prices for the commodity push in europe to the brink of recession, that is on bloomberg's big take later this hour. this is bloomberg. ♪

manus: it is daybreak europe. i'm manus cranny in dubai, alongside dani burger in london. owing back the tariff, one could say that is a risk on china. yields are rising, we did

ratchet as much as 13 basis points on the short end of the curve. aberdeen standards say get ready for a test on two year yields. the aussie dollar, on the tariff story, we saw the aussie trade off of its two year low which it made on friday. and the first back-to-back 50 basis point hikes we have seen from the rba in history. some say it is a dovish hike as we have the overall risk on narrative that tariffs might be rolled back. dani: barclays saying the maxim effect of a tariff rollback is inconsequential when it comes to inflation and currencies. more importantly, the move in yields is what is capping the gains in equities, a half percent rise for the msci

asia-pacific. u.s. will be the first day of the week cash markets are open, happy fourth of july. china a little weaker this morning. the overall sentiment is capped by that move in yields. manus: absolutely. to the big story, president biden announcing a rollback on trump era tariffs on chinese goods. he may take that position this week, though the president has not made a final decision. it would mark biden's first major policy step concerning china as he grapples with inflation at a 40 year high, the stock market is reacting positively to the report. dani: here is the superlative, i want to point out these moves in treasury markets means the move index of treasury volatility in the u.s. is back at its pandemic high. manus: let's put these thoughts

to deepak mehra, head of investments, commercial bank of dubai. we are risk on this morning. it is amazing how quickly returned from recession obsession on friday to a sense of relief on the tariffs being rollback. in the first instance, is a rollback on tariffs enough to change your risk proclivity to equities? deepak: good morning. i think it is the signal, the sentiment we are changing. it is not by itself $300 billion of goods will now attract less status and have a material change in the inflation outlook, but it is the direction. it is the recognition that the government is conscious that they need to act on the supply side of the inflation issue, because the fed has been slamming the brakes on the

demand side where the real issue is supply. trying to fix that issue is giving the market a bit of ease and comfort. we are finally addressing the problem where it is. dani: great to speak with you this morning, when you look at the bond market, you are looking at two year yields going higher by 10 basis points. the bond market says, despite the movements we are seeing from the government when it comes to biden and trade, the fed will have to act aggressively. what do you make of it? deepak: absolutely. good morning. i think the fed will move. inflation is there, and we need to address it. the fed is trying to slam the brakes on demand and needs to do it further.

we are looking at the 10 year yields which were hovering around 3.5 percent, now below 2.8%. that means the long-term inflation expectations are down. investors are once again worried about growth, not inflation. manus: does that lead to further inversion of the yield curve? one view would be at the short end the fed will remain undeterred, and further inversion expected. will that happen in the bond markets? deepak: absolutely, we will get into a technical recession, and there could be an inversion of the yield curve, absolutely possible. the bond markets are telling us about a fed u-turn, a pause earlier than what the market expects. that is what the bond architect telling us. dani: i do not know if i believe it, can the fed really pause or u-turn?

if what they are trying to do, they are trying to crimp demand and get it in line with supply. once they do that, why would they turn? deepak: because it is having an effect. if you look at the data points, it tells us demand is coming down. because of consumers spending, the fed's thank you to will be slower, and consumer confidence at a 40 year low. think the fed is achieving what went to achieve. there is a way to go but the market, we are wealth managers. we look at these as opportunities. be greedy when there is so much fear in the market. manus: you are not greedy enough to buy chinese stocks, are you?

they are going in a different direction from monetary policy. a progressive regime shift on technology and education, but you do not remain on investable. you are not greedy about china? deepak: no, we are not speculators. manus: do i need an exposure to china? deepak: i think we can live without, we have clarity on policy matters. big issue is the housing market were 80% of the consumer is exposed. that is a long-term issue for the government to steer the economy away, and get into a domestic internal consumption mode. we stay away from china. dani: the idea of the housing market was on goldman's call yesterday over iron ore, the idea that stuck oils are high and growth in china is not as

robust as it needs to be. how does that affect your commodity outlook? deepak: some of the data from china points to improving pmi data, great news for global inflation. if china's factories can come on stream and export goods, then we have lower inflation worldwide. as for domestic chinese economic growth, and commodity prices are concerned, i think we still have a long way to go before china comes back full on. manus: you can live without china in the portfolio for now, i must remember that. the debate the three of us are having is about where the fed goes and whether they are spent or not. the consensus from you and others is that the fed will go expeditiously, at least another

couple of 50's or 75's. does the dollar still remain strong, driven by yield differential through the end of the year, but then something different turns into 2023 for the dollar? deepak: absolutely. my consensus is, my belief is the next two rate hikes will happen. 50 or 75, maybe 75 with the coming one, then 50. at some stage they will remind us they are data dependent, and data will tell them the economy is slowing down and their actions are having an impact. something will turn at some stage where i believe the fed will pause before the markets are anticipating, and that is a turning point. until then, the dollar remains strong. we will see euro interest rates going up, that will be some reprieve for the euro.

the european economy may have its own challenges. dollar strength is here to stay for a while. dani: one thing that caught my eye yesterday, the euro zone, u.k. japan and south korea and australia and canada will all head into recession. i know you have skepticism about doom and gloom. are we about to see a global recessionary environment? deepak: i think the central banks are talking tough right now because they want to achieve the slowdown. this is not when the engine broke down like in 2007. the engine is fine. the situation is different. i'm not so pessimistic about global growth because i think the central banks are maneuvering it well. at some stage, they will pause and there will be a u-turn

sooner than expected, therefore, yes, the world will get into recession. we will see yet in europe and in the u.s., some other countries as well. this is an engineered recession. manus: let's leave it there, smart and interesting calls from you. we can live without a bit of china. that will stick in my mind. deepak mehra, head of investments, commercial bank of dubai. dani. dani: coming up, oecb secretary-general says russia should contribute to ukraine's reconstruction. we have the interview, next. this is bloomberg. ♪ cool goodness dani: welcome backg

daybreak: europe." i'm dani burger in london alongside manus cranny in dubai. russia should pay for ukraine's destruction, maria tadeo in switzerland spoke about ukraine's recovery. >> russia should contribute, and there is a broad consensus that given the circumstances of this war of aggression and the devastation it has caused, of course as part of the overall financing effort there ought to be reparations from russia. manus: that was maria tadeo speaking to the oecd secretary-general at the recovery conference. we will talk fx shortly, but cable is trading at -- this is

one of the worst quarters we have seen since 2008 on the pound. dani: it is stark, and stark what economists have said about the u.k., writing that the u.k. economy is being pulled apart. gorman sack saying the probability of a u.k. recession is 45% in the next 12 months. manus: we will keep an eye on the new targets. coming up, we will talk about the rba and the back to back 50 pips. jumbo hikes from the aussies. jumbo - [announcer] imagines. we w having fuller, thicker,

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daybreak: europe." these are the stories setting your agenda. dani: trade truce, president biden is considering a sooner than expected rollback of tariff s on chinese goods. mainland stocks in a volatile session. the rba delivers back to back 50 point hikes for the first time ever, and does not rule out further tightening to put the brakes on inflation. uniper is reportedly in talks, a 9 billion euro government bailout as gas prices continue to climb. it is all about the front end of the curve, repricing again. volatility at pandemic highs, a lot of whiplash in the market. manus: we just had the expectation of more rate hikes from the fed. today it is a reflection on the

inflation narrative. the short end of the curve spiked, giving back a little. we were up 13 basis points at one juncture. aussie rates are being repriced as well on the back of the back to back rate hike a 50 basis points across the market. dani: the story last week those yields dropping, it was giving equity markets some comfort, but how much of that move was about short covering and how much about portfolio rebalancing? we are looking at equity markets moving higher through the session. it was a bit more optimistic when it came to tariffs. what you are seeing is the close of yesterday and friday when it comes to the s&p 500. the s&p 500 futures up 0.4%.

manus: we have the rates narrative, i like what you said that the spike in the short end of rates is capping the equity narrative. juliette saly has the first word news from singapore. juliette: president biden may announce as soon as this week a rollback of some u.s. tariffs on chinese goods. it could go into more strategic areas as technology. president biden has not made a final decision. a move would mark his first major policy step between the worlds biggest economic powers. ukraine says it needs $65 billion this year to meet its funding requirements, excluding defense spending.

it is part of a blueprint for reconstruction, expected to exceed $750 billion. starting with rebuilding critical infrastructure this year. oecd secretary-general said russia should contribute to ukraine's reconstruction. >> russia should absolutely contribute. there is broad consensus and centering this war of aggression and what it has caused, this devastation. as part of the overall financing effort, there ought to be reparations from russia. juliette: scandinavian airline faces a walkout after talks with about 1000 crew broke down. the pilot union said the walkout would begin immediately, making the nordic region the latest chokepoint in europe's travel

network. it puts thousands of jobs in its future at risk. hong kong's new chief executive is looking at travel inconvenience but says it has to be balanced with covid-19 risks to avoid overloading the hospital systems. hong kong suspended flights due to covid cases. they still require seven-day quarantines for all arrivals. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: thank you, juliette saly in singapore. the reserve bank of austria delivered its first-ever 50 basis point second if hikes, the quickest tightening on record. the aussie dollar now gaining following the decision. also following a big rally in risk and commodity currencies overnight. joining us now is sonja marten,

head of fx & monteary policy, dz bank. thank you for joining us. looking at what is happening to currencies, were we premature last week culling the top of the yields in the bond market and the pausing and the rate hike narrative? sonja: definitely, there was a lot of concern about recession fears. we have seen it switch back and forth in the narrative between inflation and recession. central banks are trying to scramble to catch up, and that has leveraged fears in the market and caused massive volatility we have seen with investors try to keep up with the story as it changes day by day. the central banks are nowhere near the end of the rate hike cycle, there is more to come. that means recession fears are

here to stay as well. manus: you extrapolate that forward in different ways. we have seen uniper reaching for a bailout. we have seen gas put stuff to germany and a trade surplus that has disappeared. the alpha of the dollar is the nemesis of the euro. you are calling euro-dollar at around 1.10 by the end of the year. why such a call? sonja: we have to accept the fact that as far as europe is concerned, we have a lot of bad news at this point. the nearness to ukraine, the energy prices, we still have problems with global supply chains. having said that, the overbearing strength of the u.s. dollar is very much driven by safe havens and the

aggressiveness of the fed. that aggressiveness will come back to haunt us because looking at 2023, it is likely the u.s. will go into recession, and that means there is fallback from the dollar to be expected. we also have to discuss that the ecb finally is ready to move, and why that might be priced in. that will also impact europe. i'm not keen but technically speaking we are not far away from it at this point. dani: if the aggressiveness of the dollar comes back to hunt us, are you bold enough to jump back into the yen? sonja: not at this point. the problem the again has, -- the yen has, it is sticking stubbornly to the curve control. it keeps pumping money into the market with the balance sheet expanding.

this has caused the 20 year low recently, and the government is getting concerned. the finance minister has the possibility to intervene but there is no point in doing this if the boj keeps pumping money into the system. i do not think the yen has a strong possibility of a real turnaround anytime soon. i do not know if the week and more -- weaken more. appreciation is not in the cards either. manus: one currency bruised is the pound that that has to do more with sterling weakness. you have dollar strength in sterling weakness, a double punch. we have had the worst quarter since 2008. do you think the government

would welcome this weaker pound at the moment, and do you think we have weaker to go on a technical recession as some are calling it? sonja: definitely the recession risk is there. does the government welcome a weaker pound? if it does, that is a dangerous game to play given that inflation has reached new highs. the boe expects inflation to peak at 11%. the last thing we need is a weaker currency. i will not rule out in short term we will see those levels given that we have plenty of political uncertainty. there is also the lingering problem of the north ireland protocol. there are reasons to be negative

in the short-term, but it is a risky gamble to play, and one that i do not think will work out. dani: one of the tail risks is quickly perhaps becoming the base case. walk me through what would happen if russian gas completely dried up? sonja: that will be a major problem. we are already looking at the nord stream 1 work that was done, and there are hopes that it will be renewed. that has major implications for europe and the european economy. the longer that embargo continues, the worse the risks will be, that means higher energy prices. that also means we will have to see rationing in europe this winter. that will impact the economy. we are not looking for europe to go into full recession but growth marginally around zero,

so very low. if the situation worsens, and that scenario might be at risk, and if we get recession in europe, that would cause massive problems for the ecb because they are starting to hike rates. if we were to see a recession, they might have to stop the rate hikes earlier than currently expected. we still might have quite high am place in. manus: -- sonja: we still might have quite high inflation. manus: we have joe biden talking about the first move on tariffs, maybe rolling them back. he saw the aussie come off of its skid. how justifiable is it to be long commodity currencies given the torturous second-quarter and the recession probability? sonja: it is very risky at this

point. we like to think about currencies in a simplistic way. the reality is not that easy. different commodity currencies -- and that there is commodity currencies we have seen recently, they are very sensitive to sentiment. high energy prices are overlaid by those concerns, and in the emerging market spectrum exposed to political risk. it is too early to call for the bull story on the commodity cycle even if prices remained high. the news on china is encouraging but we have seen in the past that we will have to wait and see what happens. there might be a bit of a rally

but it is not the time to jump in with everything here. manus: thank you very much. a little caution on the commodity calls. sonja marten, head of fx & monteary policy, dz bank. coming up, natural gas rivals oil now as the fuel shapes geopolitics. soaring prices for the commodity pushes europe to the brink of recession. and today's big take, right here on bloomberg. ♪

manus: it is "bloomberg daybreak: europe." i'm manus cranny in dubai alongside dani burger in london.

shortage of those of gas or threatening recession and a further wave of inflation. it is becoming the driving force of a new cold war. that is today's big take. the numbers are staggering. our reporter focuses on gas. to fill that void is huge. the current situation for natural gas, is it flowing to asia? can any of that be re-diverted to europe? >> actually, a lot of it is diverted to europe, and that is the problem. russia is such an important supplier to europe, that even if you are diverting as much supply as you can spare from asia to europe, you are not even able to fill the void left by russia. that is the problem we are at, there is not enough gas. russia's curbing of nord stream

is affecting the european economy, and the german government has to bailout uniper , the biggest buyer of russian gas because their supplies are being current. it will be a 9 billion euro bailout. this is the first of many bailouts to come because gas is so important to the european economy. asia as a whole, too, and the united states. dani: what does this mean for the winter? >> the less gas you get now, the less lng to refill your inventories, the less there is available the winter when demand for natural gas, the heating of fuel spikes. maturities in europe are 50% full. they want to be 90% by winter. it will be challenging to do that with less russian supplied. the key nord stream pipeline will shut for maintenance later in july.

it will be down for 10 days. people worry that pipeline will remain shut and will not go back to full capacity after that 10 day maintenance because of how russia and moscow is using energy as a weapon in this new cold war between the west over the war in ukraine. if they are not able to get the russian supplied, it will be challenging this winter. prices for winter for natural gas could surge to new records, after surging to a record this last march. dani: thank you very much. a group of oil and gas workers have gone on strike in a way that threatens european supplies further. laura wright has been digging into it. what will the consequences be of this strike? laura: it will take place

tuesday, thursday and saturday, 13% of norway's gas flows will be impacted. that is significant when the country is the second largest supplier of gas to europe. they think by saturday, with nine offshore plants off-line, it may be a cut of 25% for norway's gas output. it is why we saw futures spike yesterday, closing at 162 euros per megawatt hour, and an announcement from the norwegian government that they will increase gas production permits for 2022 and 2023 did little for concern in the market. manus: norway stepping into the breach with upping the supply, but then we have this strike. what about the rest of europe? it is dependent on russia. laura: it is looking to be a summer of discontent in europe.

there are pockets of industrial action in the french energy sector. we have discussed the travel sector disruption over the peak summer period. the logistics businesses in germany, and the threat that spanish truckers, industrial action may resurface. bloomberg radio yesterday speaking to the union that organizes postal and communication workers, they are planning a large national strike in the united kingdom this summer. these strikes have one thing in common, pay, workers feeling their pay is not keeping pace with inflation. manus: we will see what those negotiations bring through. laura wright with the very latest on the norway gas supply situation. coming up, credit suisse cuts dozens of investment banking roles in asia. what it means for the swiss

lender influx. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe." i'm manus cranny in dubai, dani burger is in london. credit suisse is cutting dozens of frontline roles in asia, this comes as they grapple with losses. for more on this story, we go to tokyo. go through the details in terms of the job losses, a couple of dozen jobs, but it depends on what kind of jobs are going. >> yes, these cuts have been taking place over the last few weeks in dealmaking and trading. those are the weak areas the bank flagged as behind the

profit warning last quarter. they are forecasting a third straight quarterly loss led by areas of weakness and dealmaking and trading. that is what has borne the brunt of these cuts in asia. dani: why is it the investment bank and not the wealth unit? credit suisse has talked about clients when it comes to asset management. >> they are really sticking to their guns on this transition to wealth management and away from the dealmaking and investment trading. they have flagged short-term that clients are being risk-averse in asia. there is a slow down but they are looking at the longer game. asia, in the long run, it is seen as a growing area for the bank according to ceo, thomas

gottstein. manus: i would love to be in that queue rapidly minting millionaires. this comes down to more challenges for thomas gottstein. francine will catch up with him later in the month. do you think the narrative job cuts, restructuring, is the narrative going to build that thomas gottstein's time is limited? >> investors must be losing patience. the company said this is a year of transition but with the stock down 39%, touching a record low last week, time must be running out. the call for changes must be increasing. dani: thank you very much, russell ward in tokyo. a quick look on the markets. i think is a story that

dominates equities, unable to rally as forcefully as earlier on that potential china relief on tariffs coming from the u.s. manus: you have nasdaq up 0.5%. what needs to happen? is the tariff rollback enough in itself to embolden risk assets? if you look at the rates market, short end where the twos have moved. that is where the real risk is, according to aberdeen. you have to be more surgical and check on the short end. dani: more bloomberg to come. this is bloomberg. ♪

anna: good morning, welcome to "bloomberg daybreak: middle east." "bloomberg markets: europe."