♪ dani: this is "bloomberg

daybreak: europe." i am dani burger alongside manus cranny in london. these are the stores that set your agenda. manus: inflation hazard. price pressures prompt the imf to cut its growth forecast. stocks rise before today's cpi reading. demand drivers. brent and wti trade several hundred bucks a barrel pushed her by concerns over the economic slowdown. opec sees no relief in 2023. tweet back. twitter sues elon musk over his abandoned $44 billion takeover bid in what will be a very closely watched court battle. same time, same place. good to see you. dani: good to see you. manus: how do you get the heathrow seamlessly? dani: i don't think that's possible, given you cannot even buy tickets. manus: straight out the exit, do

not pack any luggage. dani: ready to buy me breakfast. manus: question is, how does barkin, how does the fed slow this economy without, i love the word, a calamitous effect? dani: porcelli sing his estimate for cpi would be 9%. he says if it does hit that level, we could be talking 100 basis point hike. manus: these equity markets, two year low in asia. we are struggling for a floor in america. dani: we are bouncing back slightly from that two-year low level. the msci asia pacific index a little bit stronger, some help perhaps from the lower oil prices. that is giving us a bounce. not a lot of volume today, given we are about to get cpi in the american session. what will that mean for markets? we are looking for some weakness in your stoxx 50

futures. we saw one of the biggest cell programs u.s. markets near the end of trading in about two weeks, so that brought us down. nasdaq futures outperforming. that's despite the fact that google said that they are going to slow hiring. it is a problem facing many tech companies. google really just the latest to express that. manus: look at this. we've got a full suite for you in terms of the asset classes. that story from google is about a slowdown in the u.s. economy. we are still seeing yields rise as we expect a 40 year high on the cpi prints. the inversion you see on 2's, 10's, 12 basis points, you are looking at kind of un-inversion set to go lower. euro-dollar, it is parity delayed but not denied. the worst-case scenario was from jordan rochester at nomura.

nomura at $90. crude is someone hundred dollars. copper -- crude is sub-$100. copper. losing the faith and dr. copper. as this a global recession narrative rises. said the -- sam fazeli said the fed can raise rates by 200 basis points and still not cause a recession. dani: we have a reporter standing by, and the current, annabelle droulers in hong kong. manus: a report in beijing. lizzy burden in london with the final poll of potential prime minister's is down to eight. dani: the imf warning a broad-based surge in inflation

posts systematic risks to both the country and global economy. we are joined by enda curran. walk us through this warning from the imf, of course, i had of cpi today. enda: slower growth and rising unemployment. they are now looking for growth of 2.3% gdp in the u.s. this year, down from 2.9%. they are expecting unemployment to go up to around 3.7%. they said policymakers need to be focused on tackling inflation but also said the stakes are very high. they warn it is going to be very challenging for the u.s. to pull this off without tipping the economy over into a recession. it does not give any details as to why they changed their forecast. we know the consumer side of things is coming off the ball. we will get the u.s. inflation numbers tonight, which are expected to come in around 8.8%

and probably reinforce views that the fed will have to hike by 75 basis points. manus: we gear up to 100 basis point, that would be a shocker. enda curran in hong kong. asian markets are higher ahead of the key u.s. cpi data later today. let's bring in annabelle droulers. a busy day for central banks. we've got jumbo hikes abound. we are waiting on data. take it away. >> that's right, manus. two central banks moving 50 basis points to the upside. that was the rbz and the bank of -- the kiwi dollar very steady. no major surprises. the korean yuan, we are seeing that strengthening. some of this down to that stabilization we are seeing in terms of risk in the region today. also as you said, trading volumes a little bit thin. with the bok telegraphing more hikes and.

there had been a perception with the bank of korea, also the likes of the philippines, india slow behind the fed and moving higher. the bank of korea committing to hikes of the 25 basis point magnitude and the rbz saying we could see more outsized hikes add. we are still waiting on the official release. what we do have is the bloomberg calculations based on the customs data. what we are expecting in the month of june is a lift of around 21% on the year. that is quite far above of what we had for the estimate, which is growth of 12.5%, but a reflection that we did see in june shanghai, other cities moving to ease lockdown measures. we saw manufacturing activity picking up, shorter delivery times, on net positive, of course. we continue to await for the lockdowns as well. dani: thank you very much. annabelle droulers there. to the oil story, it steadied

after sliding below $100 a barrel on tuesday. there were escalating fears about an economic slowdown that rippled across markets. joining us is bloomberg's energy reporter. oil falling below 100. this is a very tight market, isn't it? >> yeah, exactly. oil is being pulled in two directions. on the one hand, the physical market, there is really strong demand. refiners are spending record amounts to pay premiums to get oil right now to convert it into high-priced fuel. on the other hand, you have these long-term concerns where high prices are going to maybe erode demand, strong dollar will reduce imports in the developing market and big markets like china, you just don't know what's going to happen with covid lockdowns. there's a bit of a concern that long-term demand is not going to grow as fast as we thought a couple months ago. that's bringing the price of oil

down, even though there is this really strong near-term demand for it. manus: we will see what comes out of biden's trip to saudi arabia in terms of a few extra barrels. our bloomberg energy reporter there. and then there were eight. former chancellor is out. the u.k. conservative party's search for the new leader officially begins. nominations are closed, with only eight of the 11 hopefuls securing enough support from mp's to make it into the first round of ballots. let's get to lizzy burden. good to see you. we are down to the final eight. that was a bit of a shocker. i wonder what went wrong. talk us through it. >> it was a shocker. you have the transportation secretary pulling out and a relative unknown. rishi sunak is leading the way. what's next? we've got the first round of voting. the mp's need to have at least 30 backers and not come last,

then they can come into the second round on thursday. there will be a series of other rounds. tv debates will be this weekend. at this stage, the debate is very much focus on text. the revolution foundation think tank has launched a thinly veiled attack on contenders. labour, the opposition party, is going to attack the contenders as well on tax. rishi sunak is all the one who seems to be saying that inflation is to be under control before the tax cuts begin. manus: that goes back to the heart of prudence, doesn't it? prudence, the core of the conservative strategy. you have bank of england yesterday talking about rates. dani: it could wantdani: more than 25 basis points -- dani: it could warrant more than 25 basis points, depending on what happens. manus: good to see you same time, same place and imprisoned. lizzy burden alongside us. dani: let's take a look at some

of the key things we are going to be watching out for today. 7:00 a.m. u.k. time, the u.k.'s monthly gdp, industrial and manufacturing production data. manus: a big day for the inflation prince. germany's cpi kicks off 7:00 a.m. u.k. time. of course, it is the big one, the 40 year highs we are expecting at 9% from the united states of america. your note this morning is perhaps the most prescient of all. what ignites 100 basis points discussion? dani: last time around, it was the cpi print coupled with -- that caused the fed to turn. it could be a big change for the euro. we are on parity watch. always watching on this program. coming up. , we are going to discuss that. we will be joined by erik nelson , wells fargo macro strategist, next.

manus: coming up on the showmanus:, twitter sous elon musk, taking their corporate responsibility seriously. he abandons his $44 billion takeover bid. what will happen? it's going to be a closely watched courtroom battle. will it be live and streamed? this is bloomberg.. ♪

♪ >> we are engaged in a very challenging exercise, which is to try to cool the economy down to normal levels in an effort to bring inflation under control, but without the intent of trying to cool and slow down the decline. the right policies to get inflation under control, period. manus: richmond fed president thomas barkin on the inflation threat, how to slow the economy

without a calamitous impact. dani: all of the dollar bulls out there bidding the dollar up because of that story, among others. i was basically holding my breath. i think i was nearly deceased because we did not quite get there. we are looking at a long-term view of the euro. a very busy chart. i am not going to go through all of it. basically, this is to say this is what's finally taking us back towards parity for the first time in 20 years. you have concerns about china demands, the dollar as a haven and russia guess, the possibility of that being shut off. the euro at 1.00003, pretty much parity. manus: well, let's see what pokes the bear to the downside. erik nelson is our guest this morning, macro strategist at wells fargo. good to have you with us. we can debate the minor shut of where parity is -- minutia of where parity is.

what pokes the bear to really growl and significantly trade through one to the dollar? erik: this is all about energy, in our view. this is what got us so bearish on euro in the first price. july 21, huge day. you've got the ecb and you also have the end of the maintenance period for nordstrom. will russia turn off -- nord stream. will russia turn off the taps? we think today's cpi could be a catalyst to get us briefly to parity. it's all about energy. dani: we should say that erik is in london during a victory toward because he called this about a month ago. jordan rochester saying it could get to $.90. do you see it going down that low? erik: positioning really is not that stretched. a lot of clients are saying, how crowded is this trade? not that crowded.

the leveraged funds do not really have it, as managers do. this could go five or $.10 further. manus: you trade through, you break parity, the rate differential will continue is our base case scenario. 125 basis points to the ecb, 125 to the fed, minimum, the ecb. what does the switching off of russian gas due to the ecb and the rates differential, in your opinion? is that what provokes the stretching and the differential? erik: that's certainly part of it. the ecb faces such a challenging trade-off that the fed has not had to deal with. they are not there yet. from a rates differential standpoint, the gas situation exacerbates it. a very pure commodities story and not just about rates. dani: what can the ecb do to defend the euro, to make sure it does not get even more weak to exacerbate the inflation issue? erik: not a lot.

what's so interesting is that, look at the trade-weighted euro. yes, it's fallen but not nearly as much as the euro dollar exchange rate. ultimately, the ecb is looking at the trade-weighted level. that's really what is key. i think five or $.10 lower, it becomes more of a potential intervention story, we are just not there yet. manus: we talked about intervention, what provokes intervention in the yen. let's go to king dollar. dani has a note from rbz that you could see 100 basis points if the inflation print comes out at this 41 year high or more. barkin's comment, what he is saying is we want to cool the economy, so much so that the decline is not calamitous. what does that mean for terminal rate? how do you see a non-calamitous terminal rate in the u.s.? erik: it's a little bit of

wishful thinking. i expect the fed to over tighten. we think a terminal rate will be 4, maybe higher. the key was from powell. he has been talking about preempting the move in inflation expectations. what's really important is that the fed wants to avoid the 70's. they want to tighten too much now, they don't have to tighten to 10% or 15% two years from now. dani: when have we ever traded off the university of michigan's sentiment survey? these data numbers have become so important. how do you treat a day like today or on friday? erik: what the fed is trying to do with this communication is a we don't have to worry too much about one print in umiss or cpi. this is about the over tightening story and getting ahead of the inflation story.

manus: the question in my mind is, you know, we talk about parity, dollar-yen, 1.35, 1.40, but it is the demise of the yen, the demise of the euro. is the dollar, when you look at position in the dollar, explained to the audience how you see positioning king dollar at the moment? is the market sufficiently long dollar? erik: not as long as you might think. when we were seeing moves down towards parity, and a lot of clients were trying to buy upside options in euro and trying to fade the euro downside move. you look at the hedge funds, they don't have the dollar long trade on in any great size. yen is maybe the one exception. even there, we are not at record levels so this move could keep going. dani: when does yield curve control get abandoned? does it? erik: we don't expect yield curve control to be abandoned

anytime soon. kuroda seems comfortable with the extent of inflation and yen weakness we have seen so far. if we get a 5% move in a few days, the boj will try to intervene. i don't think it's a yield curve story. dani: thanks so much for joining us. i hope the stars aligned sometime soon and both you and manus are in london. that is erik nelson, macro strategist at wells fargo. manus: coming up, right camera, wrong camera? that camera there. germany seeks deals on lng supplies. producers are pledging to build more terminals. more on the energy crisis in europe right here on bloomberg. ♪

♪ >> the natural gas supply situation is serious and it is

likely going to get worse. to create a buffer for heating season, to heat our houses, to place this buffer, we have introduced a publication to reduce storage. this filling operation is ongoing. it is already higher than 60% right now. dani: the eu's energy commissioner speaking to bloomberg. manus: let's stay with the energy story. germany has been discussing the details on lng supply with producers. the pledge, to build the more important terminals. officials held talks in sydney during an energy form with potential -- forum for potential procurement. germany is so, so dependent on russia. they need to wean themselves off pretty darn quick. how quick a solution is this with australia? >> that's the message they were giving people.

they went to australia, one of the world's biggest lng exporters. we are fast tracking terminals, now we need the molecules. they are looking for supply to be able to fill up these terminals and get the gas in to a place about 70% of the russian fuel that they import right now. it is not going to be cheap. european gas prices went up again yesterday after flows from norway into the continent reduced after some problems in the field. germany is going to be having to pay a pretty penny if they want to attract these cargoes away from asia into their new terminals. dani: look, the constant threat here is, what happens during the winter? will there be enough supply to survive the winter? do we have any clues as of yet? >> well, there is some bad news there. we don't even have to worry about the winter, we need to worry about the summer in europe this year. there is scorching temperatures, droughts, reservoir levels are

low and hydropower generation is low. you are going to have a much higher pull on gas power this summer than you did last year to keep people cool. less gas will be able to diverted into storage caverns. with these russian flows as uncertain as they are, europe is going to need to import more and more lng to book power there summer and fill up for the winter. that's going to reverberate around the globe, especially in developing nations in asia, which will not be able to import the gas and pay the same price that european nations are. manus: well, let's see what happens with the biden trip as well. you've got mbz going to paris to talk to macron, we've got biden in israel on his way to saudi arabia. we will keep an ion that supply story. thanks for joining us. the latest on the oil markets. coming up on the shelf, it is a $44 billion drama.

it is going to be live and it is elon musk heading to court. what is next? what's next in the saga? dani: of course, we have twitter, whose price has dropped dramatically after elon musk abandoning the deal. jefferies says that $23 could be the floor in twitter. without mosque, it might -- musk it might mean that, fundamentals come back into play. google saying it's going to freeze or at least slow hiring. but manus, so far, we are seeing nasdaq futures pop higher. manus: i mean, look, the thing about it is, it's a wonderful line from rick rieder the other day, it's about earnings dispersion, not devastation. peter oppenheimer spoke to guy and alyx yesterday talking about the risk going into the second

quarter earnings season. i think that google story, we're going to pick that up with our guest in a moment. where are we on the evolution of job cuts in tech? dani: this was my fun fact yesterday, 500 downgrades, net downgrades to stocks, be a price, earnings, the fastest pace in about 4 years. manus: how much can you tighten by? i love that line, you can tighten by 200 basis points and still not provoke a recession in the united states of america. we are going to talk tech, twitter coming up with our guest right here on bloomberg. ♪

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manus: this is "bloomberg daybreak: europe." >> price pressures prompt the imf to cut its u.s. growth forecast. stocks rise before today's cpi rating expecting to hit a fresh 40 year. high. brent and wti trade below hundred dollars a barrel driven by concerns of economic slowdown. opec sees no relief until 2023. elon musk has abandoned his twitter takeover bid in what will be a closely watched court battle. we are standing still ahead of the cpi but i want to euro to hit and trade below parity while you are in town. it is the least the market could do for us while you are in london. manus: we just had the

conversation with eric saying it is open warfare. the risk is of course the interest-rate differential widens further and the positioning is not that stretched in the long dollar trade. dani: for him it is all about energy, all about gas, and that is the threat could send it down to the 95 level. it could even go to $.90, so pretty bearish there. manus: you are seeing positions get added in the euro trade. let's check on the cross assets for you. this is what we've got. 10 year government bonds are trading -- let me come behind you, this is what you call a technical move. 10-year yields trading still at 3%. you can raise without bringing the u.s. into a recession.

there is much further to go according to commentators. euro-dollar still has not technically made a red headline on parity. we have just had conversations with eric nelson, 95 is certainly there, positioning the market, it is not long dollar neither is it short euro on a relative basis. crude sub $100 on nymex. goldman sachs yesterday were cutting their view on copper down to $6,700 or thereabouts. we are waiting for trade data from china. the recession obsession is what is driving the downside. then of course the inflation prints could be at a 40 year high. dani: it is hard to see equity markets having conviction until we get that print to see if it is at a higher level. the oil story is back to bad

news is good news. oil might be supporting risk assets. we are looking at asia trading higher. bouncing off a two-year low, it got ugly. more covid cases, more tech fines. european stocks have to play catch-up. the u.s., the biggest sell program in two weeks. there was also the cpi report floating around. a lot of jitters, but for now looking at a mostly flat s&p 500. nasdaq up by 0.1%. manus: let's talk about the big, big story of the market. the battle is beginning, it is underway. twitter filing a lawsuit against elon musk over the abandoned offer. lawyers told the delaware judge the world's richest person changed his mind, trashed the company, and walked away. musk blames twitter for not

providing enough data on fake accounts. let's bring in edwin chan. i was watching succession on an eight hour flight. it has all the hallmarks of it. what is the latest between elon musk and twitter? >> that is the $44 billion question. it is a lot like succession now that you think of it. a lot of powerful names and egos at work here. i think trying to figure out musk's intentions at this point is not only impossible but possibly counterproductive. a lot of the debate has shifted to the points that have emerged in this lawsuit, that we have seen since it was announced. two things we noticed today are that twitter is going to be using a lot of musk's own words against him, his own tweets

online as it were, which have gone from making light of the situation to espousing grandiose visions of global free speech and the other thing is twitter has said it wants to wrap this up really quickly, within four days of possible. dani: i have never sued the world's richest man for trying to get a deal completed. forgive my ignorance here. twitter's lawyers think they can prevail in just four days? how would they do that? >> there has been a lot of discussion about the fact this is taking place in a court in delaware that is historically known for being shall we say four discouraging frivolous attempts to knock down agreed-upon mergers. i am not saying musk's attempt is frivolous, but a lot of legal experts seem to feel the onus is

on musk to prove there was what we call material adverse effect. a lot of experts think that is difficult in this case. he may be on the back foot when it comes to this. manus: one billion-dollar dollar payday for twitter, could certainly be interesting for twitter. walk us through the tweets elon has put out and how they are going to play against him. >> i think one some particular they highlighted just over the past 24 hours, the first 36 hours was essentially a series of tweets, a meme of himself that musk posted on his account that essentially had him moving from -- between stages of hilarity and i think that was quite telling. at least to twitter's lawyers it

was telling of his attitude throughout this saga. and actually not just this saga, but in years past when shall we say it has been a bit -- he has been fast and loose with his comments on social media. i think they are doing this to highlight to the judge that perhaps his heart was not in it to begin with. musk, his argument would be that twitter has not been forthcoming with the data he needed to assess the risks in completing this transaction. the long and short of it is i think you are right, it will be a really interesting showdown. dani: thank you very much. now joining us is the founding partner at tech investment firm hockessin ventures. you have bought many tech companies before, ones whose valuations have dropped since inking the deal.

what do you make of this? what do you make of the world's richest person trying to get out of this deal he signed some time ago? >> is having a grand time, having a lot of fun with it. i am not sure what twitter's endgame is. even though he is the world's richest man he is not particularly liquid. it is hard to force someone to do a deal. they may have a strong case in court he has made the agreement but he -- pulling $44 billion out of his hat is not something he could easily do. i assume they are just trying to get the breakup fee because you cannot really make him go through a deal like this. manus: but if you were putting a deal together and a backer pulled out, the sovereign wealth fund, one of your deals, you would sue the pants off them, wouldn't you? >> of course, but what can you really do? it is hard to see someone make a deal happen.

manus: do you think $1 billion is cheap to get out of it? >> for him it probably is, it is less than 1% of his wealth, right? dani: this kind of thing, perhaps not to this degree, it has already happened this year. i was speaking to orlando bravo about renegotiating a deal to buy anaplan, the tech firm. their shares had tumbled. bravo continues to say it is because they reached a covenant. is this becoming more commonplace with destruction we have seen in tech, that investment funds are trying to tip away -- chip away at these funds? does this go beyond a musk specific problem? >> when there is a falling knife, no one wants to catch it. as prices go down you want to retrade. across the board that is a common tactic for any kind of buyer, to say things changed, i want a lower price. it is not surprising.

on both sides of the deal with twitter, does twitter really want to be acquired? the reports coming out of the company, i'm not certain the twitter folks want to be acquired by him. there is a lot of political misalignment across the board. employees are quitting because of his politics. it is a real mess. mark: -- manus: you are on the board of babylon. we were chatting this morning in the newsroom. make your call because a lot of people i have spoken to said come september, it is sit or kill on the next round of funding. do you think september is set or kill for people raising funds? do you think the growth story has had its cathartic moment? are we at the bottom? >> at least for tech we are getting pretty darn close. these are companies that are genuinely good companies that are recession resistant.

my general thinking is if you look at the longer-term trends and the reversion, tech companies are somewhat undervalued compared to historical values. but i think we are touching on the end of the downside for tech. but it may flatline for a long time. people are predicting recession, i don't know what is going to spike prices. facebook has been on a hiring freeze since q1. dani: to that point, babylon has cut jobs in a bid to slash costs. what -- are you preparing for recession and what does the conversation look like? >> i am not on the board anymore at babylon but we are telling all companies, manage your cash very wisely. it may be a long and difficult cycle for the next 24 months. if you can save a dollar here or there it is worth doing.

cut things that are relatively discretionary. make sure you have a much longer buffer. mark: thank you -- manus: thanks for being with dani and i, rob kniaz at hoxton. >> rishi sunak's resignation. hong kong residents have been urged to stockpile food and medicine as lockdown fear hangs over the city. the financial hub reported 55 new infections for tuesday all found in people who have already quarantined. a compulsory measure for cases and close contacts in china. chelsea football club's new owners are grappling with tax liability for luxury cars given to players. the consortium discovered the issue during due diligence. the british tax authorities are investigating.

the u.s. bureau of labor statistics says a release circulating online is a forgery. the release attempted to mimic the formatting of the cpi report but with different dates and numbers including some errors. palatine shares jumped after it said it will stop building exercise bikes and treadmills as it closes factories and rely on production partners instead. it is part of a strategic shift to cut costs and streamline strategy at the fitness company. peloton boomed during the pandemic but has struggled as jim z economies reopen -- as gyms and economies reopen. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: thanks so much. coming up on the program, u.k. politics and the economy in

focus. we are going to have gdp figures out at the top of the sour -- at the top of this hour. this is bloomberg. ♪

>> there are more options on the table. those options can go both ways. we have had no growth effects with gdp. but very good growth overall. i reject the notion we have some aspect of domestic -- what we have had as a series of very big supply shocks. manus: a very british affair,

governor bailey of the bank of england rejecting the notion that the bank of england stoked domestic demand. if it was not the bank of england, i wonder who it was. five rate hikes, 5.25%. he is broadcasting and making sure we all know he is ready to do more. dani: we have heard this across central banks. i do wonder when or if the tone will change. like the bank of korea saying a 50 basis point hike today, but increases desirable in the future. i wonder if that is to reset expectations. mark: he did not say the pound. king dollar story, but it did not do anything to set up the pound. it will only come if and when we know the next tax policies from the next tory leader. that might redefine the growth

narrative from where we are right now. dani: we have gdp figures out and about in 15 minutes time -- out in about 15 minutes time. what are we expecting about 7:00 a.m. u.k. time? >> the u.k. economy has not grown since january. bloomberg economics reckons that's going to continue. flat growth expected for may. remember the payroll tax that was introduced in april? it will take effect in may because most people get paid at the end of the month. you also have the windup of covid testing. all of this will feed into a contraction. the second quarter will not continue into the third meeting the u.k. avoids a technical recession. it is interesting you played that clip from andrew bailey. he is saying the bank of england is prepared to raise rates. to get in control of inflation.

that adds to the growing sense that the bank of england is willing to risk even a recession to get control of inflation. manus: they all want optionality. it is about doing enough to quell inflation but not cash the economy. there is a whole generation that has never seen 6% rates. you know i like to talk about generations. i paid my mortgage once at 12.5%. there you go. the average kind of mortgage that i pay was 5.5%, 6%, but at one juncture it was 12.5%. dani: i have a story for you later about a friend of mine in real estate who did not realize a base rate exist because it has been zero for his entire career. this is what we are struggling with. it is a different generation. manus: absolutely. dani: lizzie, what can you tell

us about the contest for the conservative party lead? >> the front is still rishi sunak you have lost candidates from the race. the former chancellor and health secretary and raymond shish me who you may have never known about. we have the first round of votes today. to get through that, candidates need to not come last and get more than 30 backers. you will have the second round thursday and then get your popcorn out because the tv debates are coming. manus: i am riveted by this. >> those are coming at the weekend and then they should have two names by july 21. those will be put to the -- manus: more about tax. >> one can only hope. manus: good to have you with us.

a good sport, lizzy burden there. our resident u.k. reporter. it is all about politics and the u.s. president joe biden embarking on a four day tour of the middle east from whence i have just come. he arrives in israel for talks with officials before setting off to saudi arabia where he will be speaking to -- nations. >> his first stop is right here in jerusalem. but do not expect any major breakthroughs when it comes to the united states and the israeli government. it recently collapsed and they are looking ahead to elections in november. biden and his administration will be in the hands of a caretaker prime minister. he will also be meeting with the opposition leader and former prime minister benjamin netanyahu. one focus of this administration has been to normalize more arab countries with israel and a key focus and country to watch out for is saudi arabia. but there will not be any

massive breakthroughs when it comes to dialogue or peace talks with the kingdom, but potentially more saudi airspace being open to more israeli flights. the president himself would be one of them, the first president of the united states to fry from israel to jed ha later this week. he will be meeting gulf country leaders. it is an interesting moment because the president is backtracking on a campaign promise to make the kingdom a pariah, but at home he needs the kingdom's help. in jerusalem, i'm annmarie hordern, bloomberg news. dani: coming up on the program, will manus ever be able to return home? heathrow imposing a cap on daily passenger traffic. this is bloomberg. ♪

manus: it is "daybreak europe." london heathrow is imposing a two-month cap on the daily passenger traffic to contain the flight chaos, a dramatic response to the uk's busiest airport to address struggles with surging demand for travel. leigh-ann gerrans is with dani and i. i came through the airport last night, it was a sea of bags. what is the passenger cap and does everybody have to chip in? who takes the most pain? >> i always do that and it is a way you will not get your bag lost. but no, i want to speak about these numbers. the decision made yesterday was super quick. 100,000 people per day now can

pass through heathrow emma that is the cap. this is really to deal with the demand and with how many people are going through the airport because we have been locked down for two years, heavenly? -- haven't we? now the staff shortages are really creating chaos at many airport hubs across the country. dani: thank you very much. leigh-ann gerrans now, weekly segment, travel tips. manus: rogers said it is all about inflation. dani: it adds to the summer of discontent, higher wages at a time when central banks are trying to raise interest rates. we have cpi later today. ♪