>> good morning. stock futures on the european

indexes plunge. i am tom mackenzie. this is "bloomberg daybreak: europe." battling the energy capacity. europe weighs emergency that's measures as russia closes down nord stream 1 and the unthinkable becomes the reality. risk collapse. stock futures on the continent plunge as the energy issues compounds future is. and liz truss will succeed boris johnson and become the uk's next prime minister. let's check in on the markets as we way up the closure of nord stream 1. that surprise given that the early part of friday we saw that data suggested the flows would come back online but that did not happen. the g7 putting a cap on russian oil. and then the russian decision to

keep nord stream 1 closed. europe confronting the prospects of blackouts this winter. an emergency meeting at the end of this week and the implications for the ecb which will focus in on the euro because the pressure will be there on the single currency on the back of this news. let's start with what happened in asia. there is a story around technology and the u.s. considering further curbs on investment particularly in chinese tech companies. you see that reflected. european futures down 3% after gains on friday. the expectation on friday was at the pipeline would reopen and then the shock came through at the end of the day that this would not happen so pressure on european stocks. it is labor day and the u.s. so markets will be closed. futures pointing to when they reopen on tuesday to gains of 0.2%. also worth mentioning, nonfarm payrolls coming through.

a sweet spot. wages softening and the participation rate coming out. jobs numbers coming through. the calculation as to whether the fed goes 50 or 75 later this month continues to be debated. let's get to our reporters around the world. juliette saly is in singapore with the latest market reaction to china's ongoing lockdowns. europe's energy crisis -- hours after g7 leaders agreed to implement a gas cap on russian oil. you energy measures are preparing for an emergency meeting on friday where a number of special measures to rein in soaring prices will be discussed. we are joined by steven, our energy reporter. this moment in february would've

seemed unthinkable but it has happened. what are the market implications? >> this is definitely the worst case scenario that folks were talking about when the war started. we have seen this big drop in gas prices in europe over the last week. mostly because people were expecting this nord stream pipeline to resume output on saturday as planned. inventory was filling up pretty quickly in france and germany. it was a pretty big bearish mood last week. after the market closed on friday russia surprised everyone and said nord stream 1 one will not restart as planned on saturday. it will remain shut. it was -- it is likely it will remain shut through the rest of the winter. even if you refill inventories to 95% in germany for example, it will not get you through the

entire winter. you still need russian gas to keep topping up the inventories. there is a prospect of gas ration in which means industries will have to shut down more than they are right now. that all wants to be avoided. this could have an enormous shock on the region. we will see it play out in an hour when european gas futures open. >> a dramatic moment. our energy reporter has been across all of the changes and ruptures across the gas market for us this year. sticking with the energy crisis, germany, the most affected announced a package to protect consumers over the weekend. the german chancellor's coalition unveiled a relief plan worth about 65 billion euros. we are joined by our berlin bureau chief. what are the details of this funding plan? >> the government has presented

a huge package in terms of individual measures which is aimed at giving almost everyone a little bit of help. it won't compensate for the overall price rise in energy costs for the households but it gives the people the feeling that they are not left alone. so there are measures being done in order to help especially the low income earners, for example and they are also speeding up the investments into climate measures. but this is really a little bit done for a feel-good factor. what we heard before, the economic impact of these rising oil prices cannot be solved by any of them. tom: what is the mood?

is there a sense of panic among business and industry? did they foresee this? is there anything else expected from the chancellor? >> that is the biggest criticism coming from industry. the package does not have a lot in there in terms of industry help. it only helps a state run bank credit line but we do know that a lot of companies are genuinely struggling and they only had plans in there where they were looking for more measures to stabilize industry. they have not put a figure to it and they have not made any concrete commitments in the ways they're going to help business. tom: our berlin euro check on the support coming through from the chancellor. there is a headline coming

across the terminal. the euro declining low 99 u.s. cents for the first time in two decades. euro currently trading at .9889. underscoring the dilemma for the ecb as they look to that decision on thursday. the latest market pricing is this -- is 65 basis points. the debate remains live among ecb officials. there is the headline, the euro declining for the first time in two decades. to britain, the u.k. will have a new prime minister tomorrow. either liz truss or rishi sunak will be named. at lunchtime today. joining us is lizzy burden. walk us through the choreography of the next few days. >> we are going to find out who

has won the contest at 12:30 p.m. today. this will be the fourth prime minister and the u.k. inside see years and it is likely to be the third british prime minister in history. over the weekend there has been a discernible shift in tone and the u.k. newspapers from what liz truss would do if she was prime minister what she will do and that is since voting closed on friday. tomorrow boris johnson and the winner will fly to bal moreal to see the queen after which liz truss will make a speech behind the black door or in front of it and address her priorities. it is expected to be the urgency of the cost of living crisis. on wednesday she will run her plans to deal with it past her new cabinet and have her first cabinet meeting before she goes to prime minister's questions.

the report is that she will announce the package on the go of the covid furlough program. the challenge is going to be staying in there because her opponent rishi sunak and boris johnson will be on the back benches. she will have to keep and for a challenge of confidence vote. she will also have to prepare herself for a general election. it is due in 2024. she will have to appeal to a different audience. the tory party members who will have gotten her to this stage. but if there is one thing that we know about liz truss, it is her ability as a politician to change her spots. tom: that decision or announcement at 12:30 p.m. local time and not an enviable inbox for whoever wins that contest. let's check in on how the markets are faring in asia with

juliette saly in our singapore studios. >> not very well. we woke up to the news of the 3% decline coming through in european equity futures. and you have the domestic problems in asia. the chengdu lockdown. in expansionary territory but below estimates. this is all way in through two a -- to a negative tone. sending the benchmark to the lowest since june 2020 which means we are at a two-year low. let's have a look at the detail of china. morgan stanley saying you could see -- still see earnings downgrade in the market. where you could see some upside later in the year is when we have the congress which could give a lift to chinese shares but likely to keep a lid on the yuan. the pboc is trying to stem the weakness but it is all about

dollar strength. the yuan is still at a two-year low. and weakness in the japanese yen. goldman sachs saying with a 140 yen you could see 145 in three months. tom: 145 in three months. the differential between the boj and the fed. juliette saly in singapore, thank you for walking us through the asian markets. let's look at the key things markets are watching out for. results of the u.k. conservative party leadership contest, the results will be announced with liz truss the firm favorite. the reserve bank of australia tomorrow reveals its latest policy decisions. great reporting on the bloomberg on the drop in house prices in cities like sydney. on wednesday, the fed releases its beige book of regional economic data. we will get the cpi later this

month. on thursday, we will have the latest rate decision from the european central bank. what a decision that is from adam lagarde followed by a press briefing from christine lagarde and on friday, eu energy ministers will attend an extraordinary meeting in brussels to discuss an emergency intervention and electricity markets and eu finance ministers meet in prague. a busy week for officials in brussels as a wrestle with the cut off of gas from nord stream 1. let's check back in on the single currency. the euro declining below 99 u.s. cents for the first time in two decades. it drop of close to 0.7%. the weakest euro adding and exacerbating these inflationary pressures. the ecb will make its rates decision on thursday. the market is pricing in 70.

let's check out the european futures. a drop of more than 3% as markets weigh that energy shove. it will be a brutal day for european equities. coming up, the julius baer yves bonzon. and later, we will have more on the race to become the latest uk prime minister and the mounting economic challenges facing whoever takes up residence at downing street. this is bloomberg. ♪

>> we are convinced that year,

if -- the level of inflation could be reviewed. i'm not saying it is going back to what it was two years ago of course but it will reach a peak and begin to decline possibly next year. tom: european economic commissioner speaking to bloomberg at the forum over the weekend. the euro at .9889. dropping below that 99 level for the first time in two decades on the back of the announcement that the nord stream 1 gas flows have been completely turned off. equity futures pointing lower as well. more than 3%. reworking the gains of friday by

some extent. how much more will be priced in? mark cudmore has been talking about this for weeks. let's get some analysis with yves bonzon, cio at julius baer. your reaction to this news. is it self, sell across european equities this morning? yves: i think we have an adjustment to the turnaround in u.s. indices during u.s. sessions on friday. and european markets -- there has been additional bad news with the news from russia that the pipeline will not reopen. after the temporary interruption. i think the whole energy complex is in a situation of complete disruption and dislocation. and i think the news from politics, not only on the front of the war but in terms of the measures, we see more sanctions

and i think people increasingly doubt whether they are effective. tom: does this measure though by russia, cutting off the pipeline, does this cement recession for europe? yves: i think it cements serious political pressure and trouble. you have the consumer being squeezed. have talked about capping of russian oil prices through a complex mechanism involving caps on the ability to ensure oil transportation. with potentially dubious impact on energy markets. actually, we have a situation with politicians having the money and the butter. if you cut the russian oil supply you have a deficit of supply in the markets. we see a substantial amount of oil channeled to india which has helped oil declining from $100.

whole situation is in flux. i think politicians feel the pressure in europe. we have talked about the consumer burn but there is also an impact on industry. their energy bills have gone through the roof. i think we are facing a difficult autumn and winter season. tom: pressures on the euro as well. a drop of 0.6%. the first time it has dropped to these levels in two decades. what does the ecb do on thursday? can they go 75? yves: they are on a path of tightening substantially. but i am not sure this will help . maybe this will mitigate the pressure downwards on the pressure because that also has an impact on inflation. on the other end, europe does not face an issue unlike the

u.s. economy which is in the process of advancing. europe is hit by a massive supply shock and deterioration in terms of trade. tom: how do you allocate in this environment given that context? yves: we sold the summer rally. we restated hedges in portfolios in mid-august and we now navigate for the short term. in an environment that is so politically charged that anything can happen, let's say the path of least resistanc hisr downwards. tom: you touched on a demand conundrum in the united states but you think it is a clearer question for the fed and they will make the decision later this month. the jobs numbers suggest the labor market remains tight. how does that change the

calculation for jay powell and company? yves: i think things are heading slowly in the right direction. using the pressure on the fed. but as long as they don't have further evidence that inflation is in check to more reasonable levels they would decide on tightening too much rather than too little. having said that, i think the situation is improving in the u.s. clearly. tom: how are you thinking about the earnings picture and potential downgrades? we are looking at a concerted effort by european bankers to raise the cost of capital. what does that mean for earnings? are we seeing further pressure in terms of multiples? yves: i don't think they are rising in and buy themselves

from capital earnings. we have an a cause him -- we have an economy that is surprisingly resilient. the question is is the profit margin situation differentiated across sector? what we have seen so far is roughly stable earnings and expectation for 2022 and 2023 coming slightly down for the second quarter of the season. energy earnings have helped. i don't think we will see immediate pressure on earnings. i don't think we are at risk of major earnings short down -- shortfall. tom:ldman sachs they have said there is an opportunity to add further exposure to the energy sector. do you align with that? is the window still open? yves: given the situation, you do not want to be short the

energy sector. you have to be mindful that you are vulnerable to any political trigger that could weigh on oil prices. and that can happen. we had a lot of bad news since the beginning of the year supporting higher energy prices and prices in general. i think investors should be mindful that things could go reverse quickly in those sectors. tom: brent trading up at 2%, around $94 a barrel. the energy complex remains fascinating with everything going on with gas and the russia oil cap. yves bonzon, cio from julius baer, thank you. the euro pushes ever lower appeared coming up, china's chengdu extends the lockdown of most of its 21 million residents. the population in australia is

around 25 million and in the netherlands, 21 million for context. that as covid exists in the mega-city. stay with us. this is bloomberg. ♪

tom: good morning. this is "bloomberg daybreak: europe." reminding you of what is happening with the euro declining below 99 u.s. cents. the biggest drop, the lowest level in two decades. futures pointing lower as well by more than 3%. european futures. they ended friday in the green on the expectation that the nord stream pipeline would reopen but it did not happen sending shockwaves across europe as a

readjust to the lack of gas out of russia. a drop of more than 3% expected across european markets when they open at 8:00 a.m. local time the challenge for the european central bank as it makes its decision on rates on thursday. 50 or 75? the pressure remaining on the single currency and what that means for inflation currently above 9% in the euro zone. written well find out the name of its prime minister as economic problems mount. stay with us. this is bloo an xfinity rewards special offer. xfinity customers join xfinity rewards and get an early access code to play the open beta. early access begins september 16th, first on playstation.

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tom: good morning. this is "bloomberg daybreak: europe." battling energy catastrophe.

europe weighs emergency gas measures after russia and shuts nord stream pipeline. risk reversal. euro slums to a 20 your low and european stock futures plunged. and britain and britain in the balance. liz truss looks set to win the tory leadership race to succeed boris johnson and become the next uk prime minister. what an entree she will have. it is not just the single currency being crushed it is also the pound. there are a lot of concerns about her physical plans. that's check in on the markets. across the asian space, losses of 0.6%. you have to factor in concerns of the u.s. considering further curbs on chinese technology.

euro stoxx future lower by more than 3%. the end of the day on friday in the green before the news at nord stream 1 would be closing indefinitely. the nonfarm payrolls coming through as well. the debate around where the fed goes at the end of the month. a decent set of numbers as far as the fed is concerned in terms of slightly softer wages. 70 is still in the cards for the fed later -- 75 is still in the cards for the fed later this month. the weather will be a key factor. the future is stateside, the u.s. is closed for labor day and reopening on tuesday. losses on wall street on friday. checking in on the currency action. at was the key mover in the last 30 minutes.

euro-dollar, trading at .98. that is how many u.s. dollars you get hurt euro. a -- that is how many u.s. dollars you get per euro. the inflationary impact -- you have inflation in the euro zone above 9% and that makes the challenge more potent for the ecb. the pound is also under pressure. down 0.5%. the former economist of the boe warning investors could turn south on the u.k. on the back of liz truss' plans. brent in focus. opec-plus meeting later today. the switch up to oil as gas flows reduce. will that put pressure on prices? let's get the first word news

with juliette saly. >> you ministers discussing special measures to rein in surging energy costs including a suspension of power derivatives trading. an energy minister meeting on friday. russia's failure to reopen the pipeline is bringing renewed urgency to the debate. germany has unveiled a $65 billion package to support consumers. china has extended its lockdown for most of chengdu's 21 million residents with all indoor entertainment venues, schools and restaurants remain enclosed. all of the countries mainland province has recorded at least one vocal covid case over the last 10 days reflecting the broadest outbreak since february 2021 when the closures started. voters in chile have rejected a new constitution. dealing a blow to a three-year

campaign to temper free-market policies. with almost all ballots counted, 62% rejected plants. -- plans. john kerry says a russia's president has weaponized fuel by restricting energy supplies to europe. speaking exclusively to bloomberg in hanoi he also told us about the prospects of re-engaging with china and the fight against global warming. 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. tom? tom: to the u.k. and britain will find out the name of its new prime minister later today when either liz truss or rishi sunak is named conservative party leader. the result of the ballots from party members on who they wish to succeed boris johnson is due at 12:30 p.m.

voting closed on friday. joining us now from downing street is bloomberg's lizzy burden. let's start with the choreography of the next few days. the announcement today and where it takes us from there. >> it has been a better contest so -- it has been a bitter contest so far. this will be the fourth leader in six years and expected to be the third female prime minister in british history. over the weekend, the tone has shifted from what liz truss would do to what she will do when -- if she becomes prime minister. tomorrow we would expect boris johnson on the new leader to go to the queens scottish highland resident and see the queen and then for the new leader to make a speech at downing street either inside or in front of the door to lay out their new priorities.

liz truss expected to emphasized the urgency of the cost-of-living crisis. she talked about it over the weekend and her plans to help within the first week. on wednesday she will run her plan passed her new cabinet before facing prime ministers questions. once she is in the challenge will be staying there because you're going to have rishi sunak and potentially boris johnson on the back benches and all of their allies taking life difficult for her potentially. but then she will also face a general election due in 2024 and it is a different party to deal with to appeal to from the party members she has had to appeal to to get this far. tom: the reporting is making the assumption that liz truss is going to get it rather than rishi sunak. is that the right way to be framing it at this point? and where did it all go wrong

for rishi sunak if he did not win this? >> surprises have happened in british politics and they could happen again but the polling suggests that rishi sunak will not be the winner. where did it go wrong for him? his resignation triggered the wave of resignations that brought boris johnson down and what we have learned is that boris johnson remains popular among the tory party membership. the other thing is that liz truss has presented a message of optimism on the economy, continuation of boris johnson's optimistic message whereas rishi sunak has seen it as his responsibility to deliver hard economic truths which may not have gone down as well. he is expected to remain an mp. his personal financial situation seems to be less pressing than

boris johnson's. if liz truss was to lose the 2024 election, he could make another leadership try then. tom: what can we expect from a prime minister truss if that is what is unveiled later today? >> well, her priorities are going to be dictated by the crisis she finds herself in, the war in ukraine, the cost of living crisis, having to deal with the u.k.'s post-brexit relationship with brussels. on the cost-of-living crisis she is expected to announce an aid package on the scale of the covid furlough program but there are worries about it being on enough but also how will she fund the tax cuts and the subsidy of energy bills, the increased to the defense spending?

and some of those worries even come from her own supporters. it is also in markets. we have had a lot of guests on bloomberg tv that have warned about the crisis in sterling including from charlie being. not just because of the plans but also because she said she blames the bank of england for the u.k.'s inflation problem and she wants to review its mandate though she said she is a firm believer in its independence. you can already see the concerns in the market as you have seen the moves in the pound. tom: the pound is currently trading at 114.48. she also has her own lack of popularity to contend with. only 12% of britons expect liz truss to be a good or great leader. she has the economic challenges,

and the questions from the market as to whether she will put a hole in the finances of the u.k. and she has a popularity contest she is currently losing with the british public. >> it is a huge habit -- pivot to make pure yesterday she said she did think it was right that tax cuts benefit the rich as long as it is helping to grow the economy. it is a difficult pill to swallow if you are one of the poorest households struggling. one thing we know about her is her ability as a politician to change her spots. she has done it throughout her career. she has limited time to do it but she will have to change her messaging if she wants to win the next enron election. tom: you hinted at this but boris johnson, like him or loathe him, what happens to him? >> he is likely to rake in

millions in terms of book deals and on the speaker circuit especially and the u.s. among the republicans. he is thought of as "baby trump." the question is whether he would want to try again in politics. he is also under investigation in -- over his conduct regarding party-gate. if he was found to be in contempt of parliament, he could quit and come back in a safer seat. we will have to see. tom: the preview ahead of that announcement regarding the next leader of the conservative party. italians go to the polls later

this month to choose who they wish to succeed mario draghi. they appear most concerned about rising inflation and the prospect of energy rationing this winter. speaking to blurb -- speaking to bloomberg, the secretary of italy's democratic party -- >> it is a great accomplishment. it is a good step. now we need steps from the european union. september 9 will be a turning point and the european union has to react to putin's challenge as we did two years ago on the pandemic. i think we succeeded two years ago. we have to succeed today also. tom: the former italian prime minister speaking to bloomberg at the forum on europe's looming energy crisis. coming up, we have more on

europe's conundrums around gas and oil as the eu weighs special measures to rein in soaring energy costs. more on that next. this is bloomberg. ♪

>> we are convinced that next year if this initiative will be affected gradually, the level of inflation could be reduced. i'm not saying it is going back to what it was two years ago of course but it will reach a peak and begin to decline possibly next year. >> i think it will be a

challenge. it might take time. but explaining to the 27 member states that if we want to be consistent with the policy of sanctions, there is a need to cap the oil price and that seems to me to be the right direction. tom: european economic commissioner and the french finance minister speaking to bloomberg at the forum over the weekend in italy. europe's energy prices -- europe's energy crisis is deepening. gazprom reversed plans to resume gas flows through the nord stream pipeline. eu energy ministers are preparing for an emergency meeting on friday where a number of special measures to rein in soaring prices will be discussed. for more, we are joined by our energy reporter. let's start with the dramatic news that nord stream will not be reopening after we reported

that it would be carried walk us through what this means for gas supplies in europe. and how well positioned europe is to withstand the shock. >> nord stream is the biggest pipeline to europe for natural gas supplies from russia. it was only operating at 20% capacity but they needed that because germany, france and other countries wanted to refill their inventories to higher levels. without this flow, and it is likely it will not be restarted through winter, without this online, it raises the risk of gas rationing across the region. of course, germany has inventories at 95% but it is not enough to get through the winter. it puts the region in a difficult position. tom: what are the measures that

officials in russells are considering as they lead up to this emergency meeting on friday? >> they are looking at the power market. a lot of natural gas is used for electric regeneration to help lower the price for electricity. at the same time is there anyway we could add more liquidity to the markets? without many folks trading because of the high prices we have seen wild swings in prices. one more measure the commission will be considering is halting the derivatives market for electricity. that would be one of the more extreme measures and it would probably lose a lot of confidence in that market. there is not a lot they can do to reduce prices and get through the winter without some sort of curtailment of gas potentially to industries. it will be a challenging discussion this week. tom: a challenging discussion

indeed. the opec-plus meeting later today with the context that the g7 is going ahead with this price cap on russian oil, what could we expect from the cartel later today in that context? >> that is also a difficult discussion and it is very political. saudi arabia has indicated it would be open to cutting supply as opposed to adding more supply to the market because they think futures prices are not where the physical market truly is. there is not enough oil in the market and prices are falling and because of that they think prices should be higher so cutting the output would increase price. with nord stream shutting, there will be more demand on the oil -- and that could boost demand.

if saudi arabia or opec-plus was to cut and you also have higher oil demand in the power sector, those are bullish signs going forward for brent futures. tom: $95 a barrel. always comprehensive on energy, thank you. germany, most affected by the nord stream cut off, has announced a package to protect consumers. the german chancellor's coalition has unveiled a relief plan worth about 65 million euros. we are joined by our berlin bureau chief. what are the details of the plan? >> there are quite a few details. the plan addresses almost all parts of the society. it is for households, students, and pensioners. it is a feel-good program. people are starting to feel the impact of rising energy prices in their purse and we do see the

chancellor -- the protests are getting louder. he has been promising to help the people through the crisis with some kind of aid that we have to see how this will pan out during the winter when the crisis is going to hit individual households. tom: a lot of measures in the package including handouts to pensioners and students. cash handouts. our berlin bureau chief on the measures from the chancellor who faces protests as he tours the country. lockdown in chengdu and u.s. sino tensions are weighing on hong kong stocks today. this is bloomberg. ♪

tom: good morning and happy monday. this is "bloomberg daybreak:

europe." hong kong stocks have dropped as a widening lockdown in chengdu and a u.s. plan to restrict investments in china's tech firms weighed on sentiment. we are joined by our reporter in beijing. what is the latest on the lockdown in chengdu? >> the lockdown was announced on friday. it was initially for four days and has been extended. the city continues to do mass testing across all of the districts. there is no sign if or when the city will come out of lockdown. similar to shanghai. at the moment, there has not been a lot of cases reported over the weekend. 150 on sunday. at the moment, most of the city is still confined to their homes. tom: what do we know about the reporting around biden and his

team in the white house potentially looking at measures to restrict further investments into chinese technology? >> i think this as a reaction. there has been a lot of pressure on capitol hill to do this. a lot of bills are being tossed around on controlling u.s. investment into china. investment into military technology. it looks like the administration is looking to do something on that. as far as we can tell, this is a plan that is being talked about that has not been finalized. there does seem to be the latest in a long series of efforts i the administration and not just the biden administration but people on capitol hill and in the trump administration to further restrict the ability of chinese companies to buy u.s. tech. i would not be surprised if this

is the next step in that process. tom: thank you, james on the lockdowns in chengdu. ringing your attention back to the pound and the euro. euro-dollar trading at .98, the lowest level in two decades. the single currency dropping 0.7%. don't forget about sterling as we look ahead to possibly prime minister liz truss. currently trading at 1.1448. this is bloomberg. ♪

>> good morning. welcome to "bloomberg markets: europe." i am anna edwards in london. mark