>> this is "bloomberg daybreak: europe." i am dani burger in london with manus cranny in dubai and these are the stories that set your agenda. manus: seeking stability, china cuts its benchmark lending

rates. beijing looking to boost -- and a worsening housing crisis. sentiment restrained. u.s. futures and nikkei index in the red as investors look ahead for further fed tightening indicators at the jackson hole summit later this week. the nuclear option. chancellor schultz ways in -- clog the energy gap as gas supplies continue to fall short. very good morning. the question we need to ask ourselves, is the summer of love over? could jackson hole break our tight market rally? dani: the summer of discontent spreading more widely. so far, we are looking at european and u.s. futures. it was a pretty dramatic fall on friday. more than 2% for nasdaq so let me show you where we are at.

we are seeing china stocks. some of the property developers. we will get more from our team on the in just a bit. we had a lot of calls from various analysts saying it is time to get more negative on european stocks. it goes to what you are saying. are we going to get a narrative chain from the fed with a market that perhaps there is a bit of a disconnect where dozens believe the fed can continue to be as aggressive? losses at .5% for the s&p and nasdaq futures, manus. manus: i wonder how he will buy optionality with tightening the screw. how do we set up this week as we go in? yields rising. the market is the most bearish since 2018. the net shorts are the most bearish since 2018. iran could come back on the market. how quickly can they add back another million barrels?

we will talk more about the negotiations between the big four in just a moment. the dollar remains resplendent. no sense of exhaustion. will stephen gallo -- the rally in the dollar? the biggest since april 2020. frontload and rally on the risk-off narrative is how the dollar is performing. cable comes back to flat. the question you need to ask yourself, is this sterling anemia or just dollar strength? dani: something we will ask stephen gallo about. we have enda curran in hong kong on beijing's latest rate moves. juliette saly will be looking at the asian moves out of singapore. manus: stephen stapczynski, lizzy burden in phoenix.

where the labor strikes are set to threaten the you play supply chain -- u.k. supply chain. the economy struggles. the banks have lowered their benchmark lending rates and the authorities are stepping up support with additional loans. let's get to enda curran. how far do these measures go as putting a floor under the current set of woes in the market? enda: they are more than expected. it is the benchmark for five-year mortgages by 15 basis points, a bigger cut than anticipated. the second thing that is happening is they are coming up with ways to funnel funds into properties to ensure that those projects get finished so it speaks to two things. a, additional support for the real estate sector in the broader economy but b, this sense of urgency that the central government is intervening in trying to ensure there is a floor for the economy. we know it continues to worsen.

the ongoing impact from the lockdowns are around containing covid. all of that is putting much more pressure on china's economy then was asked acted. this time of year, something a were -- something of a recovery period. dani: thank you very much. enda curran. that is the scene for us. let's get to the market reaction to what he was just describing with juliette saly who is in singapore. juliette: we know it is a dollar strength story about the offshore yuan weakening quite significantly against the dollar on the back of this move, essentially holding around a two-year low against the dollar. 6.845 is where we trade and we have fixing from the pboc in line with consensus, giving market participants some kind of idea that the path to the pboc is ok with the yuan depreciating a little bit further. let's have a look at what else we are seeing because there has

been a big rally coming through in a lot of these development stocks. bloomberg intelligence saying a little bit of disappointment with the one year lpr. it lost 30%. china stocks getting a boost. we really need to see more stimulus coming through from government authorities rather than a monetary policy because the data is clearly showing that cuts in terms of monetary policy are not having too much of an effect. we are looking at jackson hole, too. risk-off across the benchmark index coming down for a third day and exports in south korea barely budging in august, weighing on the south korean won , dragging down em currencies. the korean won at a 13 year low with 1340 insight, it is weaker by 1%. dani: thank you. juliette -- manus: thank you. juliette saly.

in europe, politicians are being forced to seek the alternatives. in germany, the leaders say the country may need to extend the life of nuclear plants if it cannot replace all of the imports of russian gas. stephen stapczynski is our energy reporter in singapore. this is a very unpalatable medical situation he finds himself in. how real is this extension? stephen: right now, it is unclear whether or not the extension will come through. their government is right now doing a bit of a study on it, whether they should extend the life of three nuclear reactors which are set to shut in december and the results, it's pretty unknown. we will see it later this month or early next month but there is a rising core. 60% of folks support extending the life of these reactors. it would not save germans the energy crisis but it would

certainly help if it could replace 4% of the gas imports from russia which isn't a ton but it is also better than nothing. there is a growing chorus among the people outside of germany pushing for it but still, other officials in germany don't think it is the best option. they are worried about safety and potentially reneging on the promises they made to their voters had with all those things combined, it's very unclear. there's going to be more and more pressure on germany to extend the license -- extend the life of those reactors especially if russia threatens to cut gas supplies to regions. you will see the nord stream 1 pipeline offline for three days at the end of the month. will it turn back on? traders fear not. all those things combined puts more pressure on reducing -- reversing their policy to phase out nuclear by the end of the year. dani: the german economy under pressure, more than most.

stephen stapczynski, our energy reporter in singapore. britain's summer has already been punctuated by travel chaos and there's more to come. workers at the country's largest container shipping port have joined the list of those on strike. for more, we are joined by lizzy burden, who is there for us. set the scene for us. what is the latest when it comes to the summer of discontent? lizzy: day two of eight days of strikes. about 2000 workers are expected to join this dispute over pay because we have double-digit inflation here in the u.k. it is going to disrupt trade. it is estimated it will impact $800 million worth of trade. to give you an idea of the scale of the trade, about 4 million of those containers pass through this port every year, the equivalent of europe's biggest port and trading hub and it's going to impact imports

and exports. port officials are saying that they can weather the storm. they have been through covid and brexit. the reality is, they are not going to know how bad it will be until they see how many workers cross the picket line. it is not just the disruption to trade. the economic cost is twofold because of yours there is the risk of a wage price spiral, not just workers here who are striking. it's also liverpool, the postal workers, the transport workers, the barristers, the nurses. if they strike -- if the strike continues to spread across sectors, the risk is that the unions add to the inflation surge they are trying to shield their members from. manus: thank you very much. heck of a backdrop. you half to hand the microphone between you and francine. you get a very beautiful south of england backdrop. well done to you. lizzy burden, it's a heck of a background. we will see you through the

morning. later in the show, we will get the latest and talk credit suisse. we have breaking headlines. a new cfo joining the team. reports at the investment bank could be bracing for a major shakeup. the big take later on this morning. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i'm dani burger in london with manus cranny in dubai. it is the unmissable event. this year, jackson hole will have even more weight than usual. we will hear from the full range of regional fed presidents as well as from chair jay powell on -- how many clues he will give on the size of the hikes we could see coming in september. manus: certainly, the dollar is primed both in terms of rates and fear but let me just put it to you, what stephen gallo has to say. the fed's influence on the dollar has mostly dissipated. but the influence of the dollar over risk appetite levels and the ability of the deteriorating financial conditions to cause

the dollar to strengthen are both still elevated. medium-term punch to medium-term drop. stephen gallo is the head of fx strategy. i like the narrative. we talked about dollar exhaustion but you make it very clear. what the fed is next is not necessarily what drives the dollar. it is that sense of fear in global markets. talk us through whether there's one more leg higher in the dollar. good morning. stephen: good morning. [indiscernible] the timing and the extent of the peak in the value of the dollar -- our view is the peak in the dollar is going to come between one to three months as we lean towards the -- the peak will probably be closer to the one-month part of the

curve, within one month rather than three months out. we just see in terms of the political risk, in terms of the hard economic risks in europe, we see a number of different factors potentially coming to a head. so risk aversion and the dollar -- the primary focal point right now for -- the dollar. dani: as you say, it peaks out perhaps over the next month or so but past that peak, i wonder how much desire there will be to move against the dollar. bloomberg has some data showing our most net short in about a year. the dollar rally gets -- how far can it fall from here? stephen: that is a fair point. we think it can fall gradually.

there's probably cases to be made that the dollar doesn't fall that much against the major net importing currencies, commodity importing currencies. commodity exporting and commodity link currencies more -- whether it's a rising dollar or falling dollar environment, we think those currencies still offer value for various reasons which we could get into. i can think like you are alluding to, the weakness of the dollar -- it is probably going to be on even -- uneven across the broader fx space as well. manus: in terms of that uneven landscape, are you back or can i convince you to come back to parity on the euro?

we have it on the gtv library, the yield differential. two year yields to u.s. yields. that differential is obviously collapsing. do we retest parity, do we drive through parity? enda: the one-month part of the curve, we think that is higher than -- we think it is a nonzero risk, tilted in that direction. we think a lot of these structural and geopolitical risks could come to a head with a one-month portion of the curve so we are leaning in that direction and leaning in the direction that for the time being, looking out one month into the horizon, the risks of a bigger move for cable, euro-dollar, are towards a downdraft in the currency, if i

may. dani: fair enough. if i can jump in, you have sterling doing much the same dynamic that manus was laying out where you have the rate differential but that is not giving us the bid into cable. you talk about you have a conservative view in terms of where sterling goes but on the low end, you have 120 and we are below that measure at the moment. enda: 119 -- stephen: 119. dani: we are still below that. [laughter] stephen: you can challenge a little bit. dani: give me the 119 view. give me your thesis. stephen: you can look at 119 two ways. that is where we think it is going to be or you can look at it in terms of that is where we think the level is going to be after we hit the new low and

cable recovers so there's different ways you can spin that. it's the end of quarter or end of three-month forecast. you cannot get volatility in between those numbers. i would be pitching to you that forecast profile. before we settle that, you can get a deeper correction lower in cable within the one-month month to three month period. based on the mental backdrop and so on, we are going to have to go through all the fundamentals. we think that there are bigger risks than a downdraft in cable rather than updraft. if you are looking 18 months out, perhaps 120 in cable. not a bad idea to be picking up some pounds versus the dollar. there probably is some value there. that is what a number have been doing. near term, i would not be buying

the pound until we have full confirmation that headline inflation pressure -- manus: you are coming out fighting this morning. we like that. some would say china are hitting the panic button. i want to wrap it back to your commodity call. there is a whiff of panic in china which can have a bigger effect on some of those currencies. how worried about china are you ? stephen: look, china is touting the demand outlook when it comes to currencies linked to energy but regardless, if we don't have a hard landing for the global economy, it's a no-brainer. you want to own commodity backed currencies. if we do have a hard economic landing, then china plays a big role in that. medium-term, capacity constraints, higher cost curves

for a number of these commodities, and positive terms of trade for a number of the commodity link currencies, they are going to dominate the picture over the medium term for various reasons. we still do not think that prices, if they fall briefly and abruptly in the event of a hard economic -- we don't think that they are going to stay at very low levels. dani: wonderful to get your thoughts this morning to thank you so much for joining us kids stephen gallo, european head of fx strategy at bmo capital markets. coming up, no slow down lamborghini. our conversation with the ceo, next. this is bloomberg. ♪

manus: it is your monday edition of "bloomberg daybreak: europe,"

with manus cranny. let's get the first word news with juliette saly in singapore. juliette: germany's leaders say the country may need to resort to nuclear power is for cannot replace all its imports of russian natural gas. olaf scholz and robert hey max -- robert confirmed they could extend the lives of the nation's three reactors if needed. germany has previously said it would stop using nuclear by the end of the year. in china, a province is extending industrial power cuts as the heat wave persists. blistering temperatures and surging demand for air conditioning have caused gaps in generation. companies including toyota have already suspended operations in the region for several days. the power shortage adds another challenge to companies already contending with the country's covid zero strategy. it is reported members of the u.k.'s criminal bar association voted overwhelmingly to begin

permanent strike action for next month. court cases have been disrupted by criminal lawyers. a strike could see legal cases postponed or collapsing. singapore is repealing a colonial era law that criminalizes sex between men. the country's prime minister says removing the legal ban is the right thing to do and something most singaporeans will now accept. he stopped short of recognizing same-sex unions, adding the constitution will be amended to protect the definition of marriage as being between a man and a woman. 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. this is bloomberg. manus. dani: thank you so much. juliette saly in singapore. despite rising inflation, fuel prices, and borrowing costs, it seems the supercar market is holding up just fine. lamborghini set new records for the first half of 2022 including its best six months ever for sales and profit.

the ceo told us the italian carmaker has orders booked through 2024. >> high interest rates and high inflation. we are still going strong for you it also with the prices of energy skyrocketing, especially in europe, we have not seen any slowdown yet. dani: the lamborghini ceo speaking with bloomberg's guy johnson. manus, i literally have nothing tattooed to this besides the fact that i was talking to matt miller about my desire to get a lamborghini. that is all i can add. if anyone wants to buy me my next one -- manus: i know what part of london you live in. let me tell you a couple of things. you will not be getting very far in a lamborghini. the speed ramps where you live in your part of london will prohibit you from ever re vving this car. here where i live, they are a time a dozen.

lamborghini me up outside the palace on a friday night. [laughter] dani: i know what activity i'm doing next time. manus: i will leave that to yousef. he is the kid with a fast car. a little bit of speed. i feel the need, the need for speed. he likes that movie as well. we will talk about that in just a moment. this is bloomberg.

manus: it is your monday edition of "bloomberg daybreak: europe." with me, manus cranny, and danny bergen -- dani burger. dani: china cuts its benchmark lending rates.

an economy saddled by a worsening housing crisis. sentiment restrains u.s. futures in the nikkei index in the red with investors looking ahead to further fed tightening indicators at the jackson hole summit later in the week. the nuclear option. german chancellor schulz weighs plans to fix the energy gap. it's all about the energy crisis, unabated inflation in europe, and the economic woes and a u.s. gearing up for jackson hole. will the fed try to strike a distinct and perhaps different tone than what the market is reflecting? manus: christine lagarde is not going to physically be in jackson hole this year. i put it to you, one of the trickiest things that ecb has got to do is thread that needle. will they go ahead with the 50 basis point hike in september as everybody is saying? i will ask our guest that question. the pension funds are salivating at the thought of 3.5% on yield.

they can load up. brent is down. china cuts its rates. people are worried about a hard landing. cable -- stephen gallo at bmo says you risk a downside before you settle into 119, 120. naughty, naughty, naughty. dani: i was going to say, it is kind of you to say he was not pleased with us. when it was me, purely me. [laughter] manus: you, all you. dani: in all fairness, you are talking about the risk-off mood this morning. it is so apparent in equities this morning. the only thing getting a bid is china, off the back of that lpr cut. the hope is that it would boost the property sector. we are looking at s&p and nasdaq, all in the red. underperformance when it comes to the u.s.

we are looking at the s&p and nasdaq down about .5%. a pretty substantial tumble yesterday -- i mean friday. down about 1.3%. the nasdaq goes down 2%. have seen a pretty remarkable bear market rally. everyone is gearing up for jackson hole to see whether that type of pivot narrative can stick. manus: exactly. britain's summer has already punctuated travel chaos and there is more to come. workers at the largest shipping port. felix has joined a list of those on strike. we are joined by lizzy burden. she is at the docks. what is the latest you can tell us in terms of the scale of this strike? lizzy: manus, about 2000 workers, as you can see behind me. some of them are striking. it is the second day of an eight day strike over this inflation

you have in the u.k. they have had to divert three vessels and it is monitoring 11 more. flex port says it will take 24 days to clear the backlog of cargo. that will have a knock on effect on other ports around europe. they are expecting that this will impact about $800 million worth of trade so it is a significant hit to imports and exports. the port is trying to play down the impact because they say they have already been through covid and brexit so they are going to be able to weather the storm. but really, the impact is going to depend on how many workers cross the picket line. i hate to mention this in august, but retailers are looking forward to christmas at this point of the year. it will be a disruptive time. dani: christmas, we are not ready for that. good work there. manus: i'm ready for christmas.

dani: of course. but maybe not great. you laid out some of the arguments for what the disruption will be but do we have any numbers in terms of trade specifically, what the impacts will be? lizzy: you have got about $800 million worth of trade set to be affected. this container port handles about one third of the u.k.'s container trade. liverpool, where dockers are expected to strike, is more atlantic facing. it's not just the disruption to trade that will be the economic cost. there is also the risk of a wage price spiral as the bank of england has warned about because the workers have already turned down an 8% pay rise. you can understand that when you have inflation in the u.k. perhaps. the risk is that this spreads to other sectors. you have the transport workers striking, the barristers, the

nurses, the postal workers, so the risk is that you have a wage price spiral adding to the inflation surged in the u.k. it has become a hot topic in the conservative leadership race. she is saying she will clampdown on industrial action and the disruption that it causes as well. dani: thank you very much. lizzy burden in felixstowe for us. chris, thank you for joining us. yet another thing to keep this u.k. economy down. people are talking about perhaps the need for rates to go to 4% considering that double-digit inflation. we need to be cutting. what can this economy actually handle from the boe amid these threats of the wage price spiral? chris: this is difficult for the bank of england. it is such a dilemma. we are expecting the u.k. to fall into recession because of that disruption we are talking about, because of soaring energy

prices. at the same time, we are forecasting inflation to hit 14% at the start of next year. what do you do as a central banker? in terms of our forecast, we have gradual rate rising through the back end of this year because you have to respond to that high inflation. the bank of england is trying to show it is taking inflation seriously. as that inflation really kicks in, or as the recession really kicks in, eventually, as long as gas prices don't keep spiraling upwards, we see the bank of england can and will take a pause through next year. we don't see all that much in the way of further rate rises but of course, really uncertain times. manus: look, as an economist, you are not going to want to be answering an fx question but there is no doubt about it. sterlings weakness has a number of different issues for the economy in terms of lower capital in and in terms of deficits. given the scenario that you think that maybe the bank of

england will have to hit a pause button on rate hikes next year, is that even more of a flesh wound to sterling? we have it in the library which is the rising short end of the curve but yet no succor to the currency. chris: it is hard to feel that constructive at the moment. we have got a world where we think that in the u.s., the economy can sustain a number of further rate rises. you have the fed moving upwards. in the u.k. and in the euro zone, we expect those pauses to take place through next year and we are not sure if all of that differential will be priced into markets so that you can expect creates additional weakness in sterling. also, there are those underlying issues you have just been discussing. strikes. the current account deficits. there are all those woes in the u.k. where it's not easy to be constructive. the potential effect of that is a weak pound will push up further on u.k. inflation so

it's hard to tell a very optimistic story. dani: you make clear that your optimism does not extend to the rest of europe. pmi's out tomorrow, it seems like recession is inevitable but how bad will it likely be? chris: as far as pmi's go, this is for august. we see the stagnation before the storm for manufacturing, the pmi's also posting towards slight contractions. in services, we are expecting flattish activity. what you are still seeing in the euro zone is potentially some reopening fx still going on, particularly when we talk about tourism, for example. european households have not turned their heating on yet. when they do, when that inflation gets even higher, when the real squeeze from higher energy feeds through in a significant way this winter, that is when things are really going to get difficult and that is the point at which we expect the euro zone economy to start contracting which i think is pretty much becoming the consensus. manus: people will probably start throwing eggs at the

screen when i ask you this but let's have a go at it. -- had to backtrack from its rate hikes. his folly in the eye of a great crisis and had to backtrack. is there any risk that christine lagarde could have the same fate? chris: it's possible. we could see rate rises and then cuts. it's not our central case. this time is different to what we saw back in 2011. i think it was easier to tell a transitory story of inflation. we had higher energy prices and then those dropped out and then we had a soft underlying inflation environment. this time around, we expect headline inflation to start falling back through the course of next year after a peak this winter. then again, what we are seeing through europe is wages are stronger than we saw 10 years ago. we are seeing relatively elevated rates of core inflation and that points to a lot more stickiness in terms of the inflationary environment. under that sort of environment,

it might be harder to imagine a significant backtracking in those rate rises that we saw 10 years ago. dani: i just look at last week. we had those german ppi figures that i mean, it was a nosebleed with how far up they went. we talked about the fact that this august, the european economy was saved a bit from the tourism push. are we about to witness a period where because the energy crisis is so acute and germany specifically that perhaps the country fares worse than the rest of europe? chris: germany is one of those that is set to potentially be hit harder by the energy crisis. if you want to find any silver linings, the supply buildup of gas in germany has been better than a lot of analysts have expected and in terms of our central macro forecast, we do not have outright rationing as part of our central pace but it's more of a price issue instead. you also have softness in the global economy and that's going to be a big headwind to german

industry and we are already seeing that. with regards to germany, i think things look pretty tough over there in the months and the quarters ahead. manus: we will see what those pmi's deliver this week in terms of the data front. for christine lagarde. chris hare, senior economist at hsbc, thanks for joining us this monday morning to set the agenda. coming up, the credit suisse story. two names a new cfo and staff at the top level anticipating cuts from the latest emergency. we focus in on the trouble of the lender. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe."

i am dani burger in london. manus cranny in dubai. first word news with juliette saly in singapore. juliette: a senior diplomat is reported to say that russia does not fear diplomatic solutions to the war in ukraine and expects a long battle. moscow is investigating a car bomb that killed the daughter of a russian nationalist who had been sanctioned by the u.s. and u.k. it comes out of this week's six month anniversary of you -- russia's invasion of ukraine. banks have lowered their benchmark lending rates while authorities stepped up support for the property market with additional loans. the five-year loan prime \ rate was reduced to 4.3% after being cut by the same amount in may. this as beijing battles a worsening housing crisis. germany leaders say the country may need to resort to nuclear power if it cannot replace all of its imports of russian natural gas. off schulz and robert hamberg confirmed they

could extend the lives beyond december if needed. it would stop using nuclear by the end of the year. unitedhealth, amazon, cvs health, said to be among bidders for dignified health. sources told bloomberg that they have submitted the highest did in excess of $30 a share while amazon's offer is close behind. they are holding a board meeting on monday. 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. this is bloomberg. manus. manus: thank you very much for juliette saly in singapore. today's big take was on credit suisse and the start is anticipating deep cuts from the latest emergency restriction as the lender gives up on his ambitions to be a wall street titan. we spoke to david about the

issue on friday. >> the last 10 years have been very bad for the bank but you look at the situation today, trades at less than one third of book value. it still has a robust private wealth business. all you have to do is prevent the investment bank from losing money and get it back to some sort of growth. manus: this morning, the bank has named the new chief financial officer. joining us now is jonas. the scale of the shakeup, they want to rip up the script at ubs . what number of job cuts does credit suisse need to credibly put on the table? what do we expect of the investment bank? >> we are talking with the new ceo with a pretty huge shakeup for the investment banking arm to leave it more focused on

wealth management. the scope of the shape up is not clear right now but from what we are hearing in the most extreme case, senior figures say it's as much as two thirds of the investment bank could be on the block. marking a massive retreat for the firm. it's a possibility that the investment bank as a separate unit with them folded into separate units. we are hearing one that looks relatively secure. if you have an advisory team -- but still, the questions are over areas for income. we already exited the brokerage cases. dani: at the same time as manus mentioned, these announcements this morning, a new cfo will shape up as well. already seeing some of these changes take place. how significant are these? in

terms of what you are laying out, when can we expect some of those cuts to come? jonas: we already knew a big advantage to stepping down. he is a very experienced banker who comes through deutsche bank where he was treasurer. he worked at credit suisse previously. the new ceo is moving at speed. we could potentially see some details being laid out in the third quarter, after the third quarter. they are all working at speed to achieve the extra one billion francs in cost cuts that they have targeted. manus: let's be frank. since i sat down with the chairman on the results, the stock is down another 8%. the risk is this. they get bought out.

they are cheaper to buy out than any other bank. why would you stay given your long-term incentive? it's a hard, hard -- $1.3 billion. jonas: exactly. they spent a lot of money trying to prevent that. that is also raising internal grousing at the bank and why pay investment bankers so much when they have been losing money? they are between a rock and a hard place. dani: thank you very much. jonas bergman there. interesting stuff on credit suisse. you can read it online or on the terminal. that is where you want to head. coming up, extreme hot weather in europe is killing crops, worsening the energy crisis,

enforcing governments to enforce water restrictions. we are going to get the latest for you. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i am manus cranny in dubai. dani burger at london hq. dani: extreme hot weather has been drying up rivers, killing crops. the energy crisis forcing governments to enforce water restrictions throughout europe. the high temperatures exposed flaws in the water system and it could make it harder for countries unpopular privatized utilities to borrow money on public markets. investors are ready to demand higher yields, especially for providers lagging behind on their leakage targets. joining us now for more is bloomberg's priscilla.

when it comes to the u.k., we are already in the summer of discontent but what is happening in terms of the water management? priscilla: thank you for having me. in the u.k., in terms of water management, the companies have started to impose bans. businesses and houses cannot water their gardens. people cannot wash their cars and things like that. they are subjected to fines. this is especially true in the south of the country like east england. in london for example, it starts on wednesday. manus: good to have you with us this morning. was this a lack of capital expenditure by the utilities driving the returns to shareholders or is it just a combination of pretty darn bad luck in terms of both the weather, politics, and an energy crisis? priscilla: there's two sides of

this story. in one side, we have an extreme bad luck season with very hot weather. we have a very dry winter followed by a very dry spring. the hottest day in london since -- on record. temperatures reached 40 degrees pin on the other side, we have the utility companies and how they are managed. those companies -- over the past two or three years but they are still falling behind. what does that mean? it means that on average, in the u.k., above 3 billion liters of water is leaked every single day. that is like the average of 30% of what someone consumes on a daily basis. dani: in terms of investors in some of these utility companies, what are they saying? what are they doing? priscilla: like many other companies in the u.k. and even in europe, they have used the

bond market quite often in the past year to raise funds. the utility companies in the u.k., especially in england, because in scotland and northern ireland, they are slightly different, they account for about like 10% of all the bond sales in this country so they have a very broad investor base. there's a lot of investors looking. when they come to the markets in september, all the companies -- this is not only true for facilities -- investors will be developing more because the market has moved because of the central-bank cycle and rising interest rates. but for the water companies in particular, that headlines are not going to do anything for them. investors are going to be questioning their credentials. those companies, they are asking the population to restrict the water they use but at the same time, on the other, they are leaking. dani: fair enough.

that's bloomberg's priscila azevedo rocha. manus, look, it's really hard to get a bullish stance on sterling given all these risks which priscilla and some of our guests have laid out. manus: absolutely. it sets the tone for why we have somebody -- they are trading at 11.6%. that is where the u.k. believes inflation will be in a years time, hence the reason you lobbied for a pay rise. it's a beautiful day in london. bloomberg markets is up next. ♪

anna: good morning and welcome to "bloomberg markets: europe." i am anna edwards. mark cudmore joins us from singapore to take us through the market action this hour. the cash trade is less than an hour away.