manus: very good morning

"daybreak: europe." i am manus cranny in dubai. these are the stories that set your agenda. the new prime minister of england names her cabinet and pledges action this week among soaring energy bills. we will get testimony from the bank of england under today. china with mounting discomfort with the yuan weakness. the yen selloff accelerates. the bears gain control, stocks and futures climbed along with commodities as fears of it aggressive fed tightening, the dollar hits another all-time high. it is so low driving today, we're looking at equity markets and cross asset with pressure because of the rapid rising real rate. in terms of the equity markets,

we'll rates are at 2%. let's have a look at some of the asset classes that we have for you. a little bit of breaking news for you, we have crude down by 1.77%. the dollar strength is the pervasive narrative, adding to monday's. dollar-yen continues to bound lower. when does the intervention,? the last time was 1998. the last major intervention, tenure yields dropped ever so slightly in the united states of america. is liz trust -- liz truss a move

in terms of the energy money she's putting to work, or is it recklessness? will debate the impact on starting assets. let's see what's going on in the equity market. taking a bite sized chunk out of the equity narrative. the dax is down by 1%, if you intervene in these markets and try to disavow those hedges, what do you do for systemic risk for brokers and institutions? down to the seventh day in a row for the russell 2000, we have not seen that since 2018. but it does is perhaps enable

the fed to jump through a 75 basis point hike. 1% versus the dollar this morning. the team is set up around the world, what the challenges are for liz truss as she's seeks -- takes power at number 10 downing street. we will head over to singapore, juliette is covering the market as ever. the prime minister has appointed her cabinet, the chancellor of the exchequer, a major package of relief tackled the soaring energy prices and cost-of-living prices. we have the speculated numbers

of 200 million pounds, and a new cabinet. the headwinds are massive payment issue going to be machiavelli and? >> it looks as though she is pivoting from what she was doing when she was running for victoria leadership which was very much about small government, tax cuts, and that's it. now are seeing possibly a massive tax cut of 200 billion pounds of a for households and businesses going into winter with the spiraling energy crisis in the u.k., and that could add up to 10%, very much in the opposite direction to which she was running when she tried to become prime minister. so it is a moment or she can't really afford not to be helping households and businesses, but equally it goes against what she was campaigning for and her credentials within the far right of the tory party.

within the ranks of the lawmakers who may say how is this going to play out, pre-much getting toward the packages we had in terms of pandemic a for the economy and of course that's creating difficulty ahead. manus: the new have this whole suede talking about -- my inbox saying it is a load of old tosh, but we can debate that. let's talk about andrew bailey, he's going to testify before parliament today. the energy bills might give him of reading from inflation. >> we've seen some officials warning that the bank of england actually means to speed up its actions to contain inflation, even 75 basis points on the table, but equally, while

creating the fiscal danger may do some magic in terms of helping cap inflation and may be pinned off inflation into next year. given what we've seen already about interest rate moves, we can expect bailey to say there's questions about that and decide the future rate move. manus: thank you very much with the latest on what's going to happen at downing street. china has since the most powerful signal yet, and the nation has had the strongest bounce on record. our china economy editor, how

important is this redline to defend the yuan? >> seven to the dollar has been an important time, it is really important for china to defend this line. what we've seen recently is that the central bank wants to have something of an orderly depreciation and kind of control what's happening here and reassure everybody that there's not going to be a big sharp move. the danger of moving past seven is, psychologically, having some panic and it becomes sort of a self-fulfilling event. it's always in the back of peoples minds with that seven

model. so it's about from the central bank's perspective, keeping order and making sure business appreciation is happening slowly. manus: the export data out just a few hours ago, that was a red headline, it just had not got the velocity we were expecting. what did the data tell you? it expanded 7.1% last month from a year earlier, far short of what economist were expecting, more in the neighborhood of 13% growth. that's indicating the total lockdown mentality going on in china is continue to weigh on manufacturing and disrupting production. we're seeing all of these

different factors kind of come together and it certain going to be something we will be looking at in the coming months, especially as china is very much expected to keep the covid zero policy that is weighing on manufacturing. manus: absolutely. 65 million people more or less shut down in the chinese economy. our china economy editor there. it's not just the yuan, but a basket of asian currencies. juliette saly is in singapore with the big moves. take it away. juliette: as you mention, we have not been able to get to this since 1998. still being the currency decline against the greenback, what is it going to take to stop this, and have a change in quality and open borders to allow tourists

in. we know it's a lot about foreign investment, and we're hearing there could be some moves to try and intervene, particularly looking at that 1400. all this currency pain no doubt weighing into asian equities as well so let show what that means for potential valuation. we got asian equities trading below 12 times forward earnings, and more earnings downgrades as well, although where do you look in terms of value when it continues to outperform the rest of the asian region.

manus: thank you very much, juliette saly in singapore on the markets. let me set you up for the day ahead, 10:00 a.m. u.k. time we will have some data from the euro area including gdp figures which are largely backward looking, given energy prices were facing right now. 10:00 a.m. we also have the bank of england governor andrew bailey appearing, that will be pivotal. to that the fed releases -- pmi data yesterday rising higher than the market had anticipated. will this embolden the fed into a 75 basis point move? more fed speak to come.

coming up, liz truss has promised to tackled soaring energy bills. will it rain in soaring prices and have a sweet impact on the u.k. economy? that is up next. plus european governments fear big companies could buckle under the weight of the energy crisis. we will discuss the size and scale of margin calls in the european market. this is bloomberg. ♪

>> i do think sally tory reminder for the new prime minister on her first day in office that the markets are watching. and probably more so since any time since the referendum in

when he 17. the markets are looking very, very closely at political pronouncements and the u.k. does face some serious headwinds. we've got a big balance payments challenge, it's been a pretty tough time of the last six months. i think there is a very strong need for the government to provide not only reassurance to the citizens but short-term help to get through this winter and the market does get the fact that it can keep on printing money to bail people out from these challenges. manus: a warning from philip hammond, and that headwinds for the new uk prime minister, liz truss, one of which is this. overseas owners and buyers, from

any fiscal largess. this is the ownership, of -- 25% of the market is owned by overseas holders and the biggest sellers of british government bonds in four years as the currency collapsed and faith in an independent written shifted. good morning, beautiful backdrop. you are in berlin, did you give up on? ? british guilt are you so concerned that you pull the cord on holding in the united kingdom? >> good morning, we haven't gone as to suggest, the big views, government will take action to deal with energy prices, that

will have a big impact on inflation, if it goes to 15% next year, nate could suggest this is good news and could mean lower yields, we think there is new fiscal policy in the u.k., there should be tighter monetary policy, where it 1.75% and now it should go up to more than 3%. manus: you've given me a rich plate to play with. first of all, inflation peaks at 15, drops to 11%, do you think that will slow the pace for the bank of england?

you're still penciling in 50 basis points for september. do you think they slow at all, first of all, let's break it up. >> we previously thought it would peak at 15%. now it seems more likely to peak at 11% because of the impact of the support package and the support for households, so that in itself is good news. but we still expect the bank of england to continue with its pace of hiking rates. we don't see any slow down there. manus: it's also sterling is under pressure. >> very good point. the prospect of slightly lower inflation -- were not ready to go along yet, but it could help

stabilize the currency. manus: in terms of the rest of the risk, i started in the headlines talking about the risk of a 1.5 trillion margin call every day in the energy markets. half the german government last night -- do they believe that price caps in germany are really the fix that we need, or do we need something much more dramatic? >> the situation here in germany is really quite dramatic, when it comes to energy prices, the impact on households, people tend to pay around 150 euros per month for their energy bill. this could go up to 500, 600 euros per month.

the government has started to move against that, there will be subsidies to households of around 300 euros, so that's not going to really help it, and there will also be supports for the energy prices. overall the pressure on household finances, there is likely to be a recession in germany and households will have to curb their spending on other goods. so it's rather bleak, i would say, we are in for a recession in germany. manus: that's pretty bleak, does that disavow the possibility of 75 basis points from the ecb? >> actually, i don't think so. whether they raise the rates by 50 basis points or 75 basis

points, from the speech given at the jackson hole summit, it also has to do with some very high-level military surprises here. it's a tenfold increase from before the ukraine war started. that's had a big impact on inflation rates in your area. we actually inspect -- expect inflation your area to rise to 11% and to peak at around 12% in germany in the winter. this is a dramatic increase in inflation and continues to migrate in order to prevent and an tethering of inflation expectations. manus: 75 basis points coming down the pike from the ecb, the

safest assets are becoming scarcer. people are paying a record premium to get hold of to your paper for lots of reasons. where do you hide in the rates market, given the short end of to your paper? to avoid the calamity of an fx risk, where do i go? >> we are not that negative on german fixed income anymore. a lot of those rights are already priced into the car. we see north of 2%. we think it will become increasingly difficult to continue the rate hike in the face of the recession that's coming appear in germany. so we are not that negative on

buns after what's happened the first half of the year. they are starting to have a place to hide in the face of the recession which will most likely hit us this year. we see the dollar getting stronger every day, we have a problem with energy supply. is looking slightly more likely. manus: 163 on the yield on 10 year paper, does the euro collapse? >> our view is probably 96, so i don't see a collapse. next year i think it will be different ballgame and terms of the euro starting to appreciate

again. manus: i'm going to put on my tin hat and hide out in the 10 year paper. christian, beautiful backdrop, whatever it is. coming up on the show, a new gallup poll says about half of u.s. workers think the how will your business adapt to change? you could hire an office full of peyton mannings. what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha! or you could use workday. omaha. the finance, hr and planning system used by over half of the fortune 500.

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manus: this is "daybreak: europe." there is an unbridled -- begin

down by over 1% this morning at one juncture. we've given back a little bit there. the 200 million pound energy emergency, dollar-yen down 19%, the largest annual drawdown on record. i want to show you the bond market, and this is the risk in the jgb market. we're seeing intervention again in the bond buying by the bank of japan. this market is going to test the yield curve control narrative an xfinity rewards special offer. xfinity customers join xfinity rewards and get an early access code to play the open beta.

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manus: good morning from the middle east headquarters. it is "bloomberg daybreak: europe." these are the stories that set your agenda. they number 10, the new prime minister names her candidate. this week, soaring energy bills. record fixed, china signals interest rate with the strongest buyback ever. plus, stocks and futures slide, along with commodities. dollar hits another all-time high. good morning.

there is a sense of breathlessness in the markets. speed of repricing in the united states of america. that is risk globally. the equity markets still say lower to go on profits. chinese export data was weaker. you are looking at the dax this morning. the breath of the selloff in the u.s. is disconcerting. the longest losing streak in years. 3400 on the snp 500. -- on the s&p 500. it enables the fed through walk-through -- to walk through

the hike. searching the most on record. oil is lower. main customers in asia and europe. dollar-yen, career is lower. dollar is higher in the yen is lower. what would force into intervention? we have not seen that since 1998. 114.81. let's ask. down one third of 1%.

they are trying to fight the good fight. sterling is down six or sex on the month. guilds have been lit up, is that the -- good morning. >> good morning. that is a good opening shot. i would still be a little bit careful. the outlook for the economy is challenging. we are not quite there yet. the truth is that even though it is quite oversold in terms of valuation, equities can go a bit lower because of differentials in the u.s.. better, less exposed.

we are not quite there yet. we are holding off and still focused on maintaining deposition on the high-yield front, on the equity front and on the courtesy front. manus: see you still think the dollar is in no way exhausted? wouter: there is the point that i has been pushed quite far and even overbought. if you look at the differential in growth or monetary policy is pointing, there could still be gas in the tank. risk is elevated and we do think it is from whatever is happening in china and europe. the still think the dollar is the place to be, even with that sentiment. manus: i have the official

answer. 1998, "the boy is mine" by brandy and monica. i know the tune but i will not sing it. i did it once, i will not do that again. that puts a riptide in those assets. the real yield is surging. it is the biggest move in real yield on record. talk me through what that means to you. you have come to me today with a more holistic view. position yourself for a new paradigm. wouter: it means a lot of different things. caches become a different type of asset.

fixed income has become more attractive. if you want that risk, if you want to get paid for it. because of those rising real yield, the threshold has gotten higher. from all different aspects, is also very significant. we are looking at this as something we have to take into consideration. we are looking at the profit outlook, from a margin perspective and we need to look at it from a relative placement perspective because of the risk that it has. from all of those angles, it is a challenging environment. it is something that is keeping our expectations down.

that is relative to where we have been your today. manus: i'm more constrained views, where will i get paid sufficiently to warrant a less than moderate risk? wouter: we still like the high-yield sector. we are underweight on equities even though we are relative to em in europe. we still like from a 5-10 year, the private aspect. it is total -- those areas that we point to as being more attractive. core fixed income, the higher starting yields before have turned that into a more attractive asset. that loc to lower your risk without too much return.

manus: we are only beginning to understand what that really means. real rates and quantitive tightening. it was a very different get call. where do you want to be positioned in five years time? do you want more renewables? how do i position for an energy crisis and inflation narrative? wouter: one of the important -- lower growth. that over inc.'s to a higher

inflationary environment, that is a difficult environment. one of the aspects that comes with the are that real assets are becoming more attractive. we are focusing on that to boost our risk profile. that is infrastructure and natural resources as well as real estate. all of those components have become more attractive. at the same time, the tensions between china and the u.s. are likely to increase. we also believe that transition will accelerate. that is some extent from china. we have the goods that we need to do that. certainly the real asset side and the private assay sides are

jumping in with us. manus: who is your biggest hedge? wouter: that is still very simply in that dollar and cash fixed income trade. it is making sure that we have that dollar exposure we do not need to take as much risk meaning to pick up a little bit more on the cash side than you could previously. manus: good luck. i hope we are all sitting around in five years time to see the outlook. wouter sturkenboom, chief investment strategist at northern trust. let's get back to juliette saly with the first word news. >> in the u.k., the new prime minister has announced two jobs in her cabinet. it is the first time these

stages are not held by any white man. sulla is home secretary. u.s. says russia is turning to north korea for weapons against ukraine. officials say russia wants to buy millions of rockets. the state department says it is the latest sign that russia continues to suffer from severe supply shortages. the latest on former president donald trump's that the washington post were found by the fbi at mar-a-lago. they say that some were so top-secret that even national security officials were kept in the dark. about half of u.s. workers could be described as quitters. that means they fulfill their

job restriction. they found that people actively engaged this 22%. a big drop in engagement has come from gen z and younger millennials. global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. manus: i love what you said earlier which was that there is nothing quiet about you and me. this is about culture and demographics. i find this to be more interesting. the more in the u.s. is fair based. saith the office, get back to the office. this really brings a life wet quiet quitting is. perhaps those people who suffer the most other cohort who are

not substantially disengaged. you are not, are you? >> no. it is a changing of the culture. to get ahead, you did everything that you could. he volunteered to do every single job but is there anything wrong with what it says? everybody one everybody back. it is about trying to give employees the opportunity to have more choice. i picked up a lot of dry cleaning. you all right.

the producer tells me that apparently i still look young. i leave it there. juliette saly. coming up, as the leaders scramble to fix the energy crisis, what would it look like in the energy markets 2022? this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i am manus cranny. moscow switches to a pipeline.

supporting utilities amid dire warnings of what finland is calling and industry -- calling and energy industry --. let's get to enter james. lehman's, we did not know the size of the risk in 2008, talking through the energy market, scale of margin and risk. >> hello. these moves increase the amount of collateral to maintain. we are talking about potentially trillion dollars.

this has spurred the talk around the environment. that finland and sweden talking about over 30 billion euros. germany is talking about 6 billion euros. that is on top of 100 billion. they are also talking about credit lines. also spending with trading. there is a whole big risk in things that have been talked about in the last few days. there is some minor clarity on friday. manus: i think the question that

went through my mind. you're dealing with an open market and hedges. that is what you're dealing with. if you step into cut prices and take off hedges, that is maybe when the risk comes. talk about gas and look for rice's, are the dangers? it rolled down because storage is filling up. there are number of elements at play here. would you think will drive these prices? caps? which does not deal with that dumb i -- the demand side. or something more radical? >> they will have to look at a combination of both.

it did go down and reaction to what has been taken. of course, peak demand season is in the winter. we are starting the run up to winter now. his -- it is with utilities. we suggested that russia may have come out too soon. you really want to create maximum dislocation and panic at the market. maybe they should have talked about that and being already in winter. manus: perhaps that is where putin will be. thank you very much. our editing team leader there. coming up, a major package to

support. economists think the package will have a sweeping economic impact. we talk fiscal policy, next. ♪

manus: it is "bloomberg daybreak: europe." i am manus cranny into by. let's take a look at what you need to pay attention to. we're getting into that euro area. that is retrospective even the state of crisis we are in. the bank of england governor, what does he have to say about inflation. will the energy cap cap out

inflation? also, the fed releases a book later on. then, cleveland fed president speaks about market news in a webcast. list trust, the new british prime minister has promised support intact -- and energy bills. >> i will deal hands on with the energy crisis caused by putin's war. i will take action to deal with energy bills and secure our future energy supply. manus: resolute and spending. our executive editor is with me. i want to talk about the new cabinet.

it is the first with no white man in the biggest jobs. ? ? who do we trust -- who is we trust? >> it is very diverse. no white men in senior roles. a female british prime minister. there is an interesting mix. she has stacked her cabinet with those who have been faithful to her for many years. they go way back. they wrote a book together about a decade ago. they are very aligned on policy. if you look at the lineup, these are people who all think similarly with her. they are on the right path. they will endorse her policies. the flipside is that they might

question her about the policy decision -- they don't have people who might question her about the policy decision. all the people around her will agree with what she has to say. manus: splitting images, puppets. they're all nodding along to various ministers. they give. up early, extra schoolwork. i leave you with a quick snapshot of the pound. more to come in the bond and currency markets.