manus: good morning from our middle east headquarters in dubai. we are here with stories this at your agenda. lower gas prices to record levels. security of energy supply. an additional one trillion yuan's. and i on inflation. investors turn their attention to jackson hole. just after 6:00 a.m. in london. 50 degrees out there. getting harder. grasping their last breath.

equity markets are right. stocks may be up around 2%. let me check as far as equity futures are concerned. pushing a little bit higher. a lot of it, perhaps the bar is high for hawkish supply. the market is still convinced they will get to inflation. the top a look. role of the dice. we will come back in a moment. let's get to our reporters around the world. we have the latest on global gas prices is where -- as well as oil.

on the back of the massive stimulus from beijing. we are joined with a preview from jackson hole. his turn our attention to the energy market. national gas prices are soaring. asian markets of the worst of the energy crisis in decades. opec might have to curtail production. other opec countries have joined in behind saudi arabia. running readout is an energy reporter. -- joining meat now is an energy reporter. gas is up. >> a couple things. everybody knows about the tension between russia and

europe right now. on top -- on top of that, there are planned and unplanned outages. the same time, u.s. export has delayed resources to november. russia has decided to cancel one shipment to an asian customer because of issues. triggers are very concerned that this is an increase in competition. green buyers, maybe chinese buyers trying to draw its way. that is pushing prices for everything up. even u.s. national gas prices. they hit $10 earlier this week. manus: this is where it begins

to get really tight. abided administration is banking on gas prices. the equivalent of over a thousand. let's take a little deeper into the opec story. saudi arabia have been concerned about disconnect in futures. mentioning the word cut. they are uttering their support. what do we know? >> we are still waiting to see how it turns out. since early june, prices have dropped down to nearly $90.

opec is concerned about that. they concerned about the training. we now, they are not really capturing how much demand there really is. they are saying they might need to cut a little bit to remind them to use the market. they want to stimulate more producers to drill to keep it a well oiled machine in time for winter. manus: that goes back to the secretary of energy from last week. thank you so much. the very latest on the moves from the gas market. china, the pledge was more stimulus will stabilize the slowing economy. an additional $43 billion in policy. stimulus pledge this morning,

getting a bit of a boost. the question is this, a decline in that you want. stimulus in terms of energy. >> it is. it is an effort to shore up the economy. headwinds, shanghai lockdown. power place wing into the economy. how much more is this stimulus? we are seeing them take charge. there is a slight gain. we are washing the reopening of hong kong. it was lowered. you do have hong kong stocks jumping in the afternoon.

the stimulus as well is boosting the likelihood without to be positive. we also had the bank of korea with interesting rates. they get the rate up to 2.5%. the also adjusted their forecast to the highest since 1988. when it comes to the currency markets, you mentioned that you on. how much of a balancing act is it when you have the trading at two year lows. we did actually have today speaking versus consensus. this is suggesting that perhaps beijing is not that comfortable with that narrative. they probably want to see the ahead of jackson hole. manus: thank you. a little bit of stability going

into that. central banks cannot hike to aggressively. that is the view. >> raising interest rates did not solve the supply side. what we want to do right now is invest more in supply-side bottlenecks. raising interest rates makes it more difficult for those investments. manus: jackson hole oppose them. what kind of message will he put forward? let's talk to garfield reynolds. it has to be a tough job for jay

powell. his you go towards jackson hole, where do you think he is going to lean? is he going to lean steady or will we get more pools toward state? >> they have been preaching not to give them much freedom at all. markets are seeing financial conditions almost mutual at one stage. they are extremely concerned about inflation. they want to see if powell go through the hawkish. i think it will be hard not to go hawkish. i also think that is open to a volatile session. next week there could be another

situation where there is one set of takeaways and we will have fed seekers coming out next week they could try and pick apart some of these interpretations. i think it is interesting that if you look at the move to index , that is the most elevated it has been. there are times when it has been more elevated and may be in 2009. now, we have the fed hiking rates. it is a very anxious time. hands are crossed in the markets.

if they go higher or lower, it will change the calculations are all range of investors. manus: what is interesting is, i was opening up the standard chartered notes. the whole narrative is short and. they take it a step further, i like it. talk about medium turn -- medium-term inflation shot. this is sticky inflation. they will have to state the task. we were discussing it this morning. but type of inflation is further

out. >> they are tightly focused. they are forecasting that. there is also a dynamic going on of a worry on the lead of the narrative. we have strong inflation, the central banks hiked a lot. they discovered the inflation. there is a trade-off between getting inflation down in that route. manus: i lead you with this. the next guest we will talk about a soft landing.

i know are many options that year. 300 basis points of a hike and then they backtrack that. i will lead you with that, 6%. garfield, thank you. garfield reynolds, joining me on his view ahead of jackson hole. of course there is special coverage period they are arriving ahead of fed positions. let's take a look at some things that markets will be focused on. july policy meeting. we will get u.s. data, including gdp. stock market will be very much in focus. it is a three for one, if there

is any attention to that, we will see it later in the day. coming up. ts lombard senior global macro strategist, skylar koning will join me. second quarter gdp along with this climate report period we will have a preview on bloomberg. ♪

>> if we get negative data in the next couple months, that would be something that would give us pause. with that narrative for equity

investors, my biggest concern in the last few weeks is that there are 15.5 times and that has been our target. but now we are at 18 times. prices went up. manus: do you think it is fair with that big distinction next year? they are not talking about anything but hikes. >> the feds will have to go much higher. with they have talked about a lot is there still is a lot of labor shortages everywhere. forget about rate cuts, i think that is a fantasy. there is a wage price step -- spiral.

regardless of where the gdp is. manus: morgan stanley, bob, speaking there. let's get to ts lombard's senior global macro strategist skylar koning. good to have you. we will get beyond three quarters from around 4%. now there are big implications for the scenario. what is your analysis? skylar: is interesting. if you look at the previous, they're looking at a soft landing or a hard landing. the economic outcome where they do not significantly damage the economy.

it happened in 1994. i don't think people give them credit for this. we saw the economy stayed strong. it was a soft landing. those cycles over tighten, you need to have this ground where you get sort of a soft landing. had fed jay powell say it and we heard it elsewhere. a very soft landing in a very hard landing. some stuff with employment rising. once we are more past the recession at the end of this

year, call it a soft recession, as long as there are two quarters of negative gdp growth and not huge rise in unemployment [indiscernible] manus: in a sawfish -- softish landing, what does that do to your equity position? you have this rally, give me your equity call and then take me through the credit aspect? it will be a hard and brutal pricing in credit, up to a hundred. equity's, then credit. skylar: we divided them into our softest landing and our hardest landing.

equities want a hard landing. i will preface that i think there is a lot to get through. we're seeing a free markets already pricing in caps off while the outlook is more positive, it is much better than a hard landing. i think credit markets are pricing in more of a recession risk. we are at negative in equities but more neutral on credit. there is that hard landing. we are also seeing the credit markets. it is not as bad as equity.

that is going down as well. manus: you don't see these credit spreads as being dominant? skylar: in terms of relative value, i don't think the default is priced in. you want to be somewhere higher on the risk scale. there is that kind of trigger looking better. i would not see it as neutral. manus: that has an interesting narrative.

where we talk about a rude awakening. the narrative has been built. and that is in some of the commodity prices. we're in for a rude awakening. we have turned it around. softest landing, how much of that is predicated on a vicious commodity offspring? skylar: you have got it right in terms of outlook. so much of what has happened is based off energy prices. that is something that they cannot fight. they are looking at overall inflation.

this is in terms of looking at micro stories. they are saying it is too high. you have that resurgence in oil prices. it is a sawfish landing. manus: thank you very much. skylar koning from ts lombard. coming up, gas prices surge close to a record high. the story on bloomberg. ♪

manus: it's "bloomberg daybreak: europe." a manus cranny in dubai. yesterday, some existential angst, this is an explosion, the like of which is hard to imagine what happens here. the today move in the u.k.

manus: i manus cranny, with "bloomberg daybreak: europe." parabolic shift over gas prices jumped to near record levels. as france's macron travels to algeria in the struggle to secure more energy supplies. beijing announces in the additional one million true on -- one million yuan stimulus. we turn our attention to jackson hole, where jay powell is said to take the stage. equities are clawing their way back on the china stimulus story. the narrative will shift from jay powell in the fed, ts lombard sees a soft dish kind of landing. in terms of the markets, you got

crude oil, up .5%. other nations falling in behind saudi arabia, the issued statements supporting the saudi narrative. we know what the put option is for the saudi's. euro-dollar again, a little recruit -- repeat, up .25%. europe starting slightly larger this morning. some hot -- huge moves on the ibex. there is the equity narrative now, up slightly this morning. let's get to the rest of the stories. the world is grappling with story inflation and the effects of the war in ukraine and the risk of recession. we spoke to three nobel laureates in economics about the

challenges. >> we are in a period of extreme uncertainty. we've learned there can always be an unanticipated shop that pushes it up or down. the wave ukrainian war goes could have a huge impact. that is difficult to predict. >> that's why i think we need more, so as not to shock expectations too much. >> i think there is a real risk that the central bank asked to aggressively, raising interest rates too fast, too far. >> a can also happen a fiscal policy worldwide is on average much too expansionary. we could have no recession

because we fail to succeed in bringing inflation down. manus: joining me now is themos fiotakis. there is the narrative around the nobel laureates, i think it is interesting, he talks about rate hikes are not the solution to the supply-side problems we have. we are in a rare hiking cycles of 2.75% is where the market projects we will talk about. is not fully explored in the dollar on a broad base? themos: i would say i agreed, the central banking side has received disproportionate emphasis relative to what is actually driving the dollar. sales in the beginning of the year, we were thinking the ecb would rise more than the fed. that has happened.

rates have actually increased in both places, but the euro has led quite a bit more than we originally thought. which is hardly a statement of the fact that central banks, but there are other things driving the dollar in particular. manus: i know your view, and that is the correlation to natural gas. if you are saying there are other risk elements driving the dollar, i want to start with the narrative, the it tops out in one month, not three. what is the outfoxed of the next dollar? themos: i think if you were to look at the dollar rally from february to now, it did two

things, one of the drivers that we identified is the enormous issue of energy security in europe. that accounts for about 6% of the euro-dollar drop. over the last six or seven months. the rest is driven in our models by the substantial slowdown in china, which has substantially -- it is less important for growth in the united states. the rest of the world relative to the united states accounts for at least half of it. manus: that's what we are showing is a correlation between gas prices and that gas security narrative. and you mentioned china, obviously view on -- the yuan,

against the euro, dollar, yen, cannot drive the yuan -- can the rate narrative in china tried the -- drive the yuan? themos: i think what you're saying is spot on. the main difference here, the surplus underpinning the stability of the, what if it goes from here. what they are facing is a slowdown that is mostly driven by fundamentals of china's policy. zero covid policies, and the deleveraging policy.

they are looking for leverage, to boost their economy. the least explored so far has been monetary conditions, and since the day of the meeting in august, we have seen a shift towards more easing. there's no reason why it should be so expensive. i think to bring the currency basket to stabilities, as it wasn't early 2021. manus: that is going to be brutal. i wonder how the fx will move. let's talk about one currency, i looked at the short end of the u.k. yesterday, valerie put this

together for us. how is the shore and curve, link ed. there's always been a current -- emerging-market currency. a much lower does ago given the gravity of the situation in the united kingdom? themos: not enormously so. realistically, the pound against her currency like the euro as the pound has created very little volatility. if you look at the markets in terms of -- the pound is stable against the euro. what is driving this is -- is not to say there are not risks.

you can have new leadership that explores a more aggressive angle against europe in terms of trade relations. in that sense, the downside risk. manus: let's close off their. do you think that is a real risk? 25% of u.k. that is in inflation linked bonds. -- 25% of u.k. debt is an inflation linked bonds. themos: i think you are correct. i think the rate market has been on the long and. there are two things to think about, a trade relationship, be, the u.k. is presumed to be immune to the natural gas shortage issues europe a face this winter. these are the two ways that

probably tilt the scale up slightly negatively for the pound. manus: we've got to draw a line under that in the short. he's the head of fx research at barclays. the foreign exchange market -- julie at sign -- juliette saly in singapore with the first word news. >> european and asian natural gas prices stir close to natural -- natural highs. it increases competition. tensions have intensified, as russia prepares to close the nordstrom pipeline. pushing wholesale energy prices to more than 10 times their seasonal average of the past five years. china is giving up its economic stimulus with a further 100 billion dollars of funding.

the economic recovery slows amid the lockdowns. the state council has outlined a 19 point policy package, including allowing state banks to invest further in infrastructure. the uk prime minister boris johnson has promised thousands of drones and antitank munitions to ukraine during a trip to kyiv , marking his third visit since russia's invasion. president biden has announced a sweeping passage -- package of student debt relief. he also announced another four month extension to the moratorium on repaying student loan debt. borrowers will be allowed to cap her payments due to their monthly income. 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. manus: coming up on the show,

u.k. lobby groups call for more government support is the energy crisis grows. next on bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i manus cranny in dubai. pressure is -- pressures building for the government to help -- tomorrow's announcement of the new price cuts. lizzie is an london, what do we

expect this to be tomorrow? >> they tell us how much consumers are going to be charged in the fourth quarter based on wholesale gas prices, the estimate is 80% to more than 3500 pounds. we are going to get more increases next year, which is what they're forecasting inflation in the u.k. will rise above 18%. there warning more than half of british households could be in poverty by january. these are two closely linked to wholesale gas prices. we talked yesterday about the six-month anniversary of the invasion of the ukraine and the impact on the energy market. in the u.k., where very reliant on wholesale gas. even in august, prices have risen more than 60%. it is not just consumers, the price cuts only applied to

household, but businesses are struggling as well. manus: the british chamber of commerce are making requests. this is where the bond market and currency market get nuanced, we need something on scale of what they spent on covid. it was $400 billion -- 400 billion pound. does that have credibility? >> on the business side, you've got industry groups warning that bible businesses are going to fall on their backs. in terms of the cost of their support, you've got previously unthinkable suggestions on how to handle this. you got the labor leader saying bills should be frozen, former prime minister gordon brown saying if energy suppliers fail, they should be nationalized. in the cost of all this could be

more than the covid cost. if this is the new normal, if russia is going to cut off energy supplies and europe is going to try to continue to wean itself off, it is a difference between what the energy suppliers are having to pay, it doesn't seem like a sustainable situation. manus: we are going to catch up with carrie and moment. how does the u.k.'s response compare to europe? >> the energy price and the u.k. is something of a misnomer. it is based on the average house energy bills. also, france is effectively nationalized yes. in the u.k.'s that we had this pretend retail market, the

energy suppliers are helped in the good time and build up in the bed, the question is can they do. scale nationalization. manus: if you think back to the privatization of a huge number of these utilities. lizzy burden on the energy crisis in the u.k.. what is happening across the channel, french president emmanuel macron is off to algeria. one of the world's largest gas producers. will he get there too late compared to the italians? how are you? the trip to algeria, is there enough gas to algeria to give to the italians and the french? >> this trip is not about gas,

it is not about energy, it is about improving the relationship that have been damaged by a lack -- a lot of misunderstandings. recently there have been tensions over visas. and of course the 60th anniversary of independence of night -- of algeria from france after more than a century of colonization. they have many business interests, france does not -- algeria needs more wheat, inside the exports from france to algeria. on the energy front, france is not as reliant on gas from other

countries, about 10% of the gas comes from algeria. manus: [indiscernible] on those three pipelines, and the southern european states, where does france rank in terms of algeria? what proportion can algeria help france with and where else are they looking, they can't all come from algeria. algeria has got to give italy, spain and france, if you win with one you're going to upset somebody else. >> last month, inside the $4 billion deal, they got an extra 400 billion cubic meters of gas,

to italy via the pipeline. italy has taken a lot of the extra capacity algeria can provide. there is another issue that goes through morocco, there's been a lot of tension. the pipeline has been shut off. manus: caroline, thank you. let's see what news from the non-gas or in visit, coming up on the show, it's a big day for german data. in the eagle business will report today, we preview that here on bloomberg. ♪

manus: it is "bloomberg daybreak: europe." let's turn our attention to the german economy, we are waiting for second order gdp figures at the top of the hour and also the business climate survey. how bad it will be. let's get to our bureau chief, gdp, everyone can scream at the tv, it is not the real state of the economy. give me the numbers. >> we don't have the numbers yet. we do know the economy isn't actually doing well. it has been stagnating already. economists see germany already moving into a recession. surprisingly, some of the base companies have been doing well, with the recent results,

increasing their profit. also gw, if you look at the problems germany is facing, supply chain disruptions, uncertainty about the gas and gas and energy supply. i do think the business sentiment is probably going to back up what we saw last month, that it is not a low level. manus: that's interesting, the german ceos came on during the earnings season, they are not worried about their energy dependence. we are going to get a new survey, what is not going to tell me? already last month, we saw that the business climate was going down. i don't know how much it is

already encapsulated in last month's data. i think it is unlikely to expect it is going up. business is obviously aware, it is going to look over the next winter. manus: we are going to have to leave it there. i'm sure they're going to look at the data as well. the euro trade at 99.94. it is deeply correlated to natural gas prices, spiking 18% yesterday. this is the alpha of demand. this is bloomberg. ♪

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