dani: this is "bloomberg daybreak: europe," i am in london with manus cranny in dubai with the stories that set your agenda. manus: rapid advances. ukraine forces make swift gains in the kharkiv region as russian defenses crumble. stocks rise. asian stocks build. there could be more ecb hikes. plus, charles iii. the new monarch is officially proclaimed king and queen elizabeth's state funeral set for september 13. the question we ask ourselves is which tail is wedging -- wagging the dog, is it that the equity and risk markets are ready for 4% from the states?

dani: certainly some of forceful buying and the risk market to in the week on friday. the s&p 500 and global s&p able to snap a three week losing streak. let me take you to where -- to what markets are doing this morning. the asia index up. futures up's extensible percent. we were talking about this this morning, the sentiment around europe is very sour. $3.5 billion pulled from european stock funds in the week through september 7, $83 billion the past six months. a bit of a correction from that. s&p 500 futures have been turning more sour the past hour after topping a 100 day moving average. it seems like a lot of these chip stocks are driving us lower. writers has a story that biden is planning to formalize curbs on china when it comes to ai and chipmaking tools. in general, bitcoin is still

above $20,000. manus: no doubt about it, bank of america's line, bonds hate inflation, equities hate recession. how a soft of a landing can the fed deliver if they do another 75 basis points in september? oil tanks, the bond market believes there could be a cause i soft landing. -- quasi-soft landing. demand softness in china. my last guest said it get ready for a squeeze higher if japan reopens. it's about the demand-side driving the will narrative lower. that is a boost for inflationary. dollar-yen, short as can be. as a managers and leveraged funds have boosted a sure bet in the dollar-yen.

euro-dollar, nagel comes out and says get ready to do more, clear steps must follow. a hawkish central bank, it is a natural narrative, avoca higher euro. that ripping of the cord is something we will dig for into pure let's get to our team around the world. dani: we have our europe correspondent taking us through developments in ukraine. enda will break down europe. and juliette saly has the latest on the asian markets. manus: lizzy burden is outside buckingham palace. our top story, ukraine forces continue a rapid advance in the kharkiv region, excluding the extraordinary collapse of russian forces. let's get to our europe reporter, maria tadeo. is this the russians running away or a ukrainian strategic

advance? maria, if you can differentiate for us. good morning. maria: manus, the fact that the russians ran away, you can bet they did on saturday, particularly in the regions of kharkiv. the ukrainian army has been making big gains in the east of the country. very rare for the kremlin, conceding it happened, the retreat, they don't say it is a defeat they say it is a regrouping of forces. nonetheless, momentum is now shifting for the ukrainians. obviously this is a huge boost to morale. the country needed this after eight months of war. president zelenskyy says it has regained more than 2000 square kilometers of land and the operation to liberate the country will continue. the question, and this is really at, the question going forward is how does russia react to this, how does vladimir putin react to what seems like a very

public defeat but also embarrassment for the russian army? remember, he had not declared full war in ukraine, he is saying it is a special operation. will that change? when it comes to the ukrainians, this does validate the theory that heavy weapons make a big difference on the battlefield. will the europeans a step up going forward if they do see they can make gains and stay competitive on the front? dani: maria, to put a finer point on this, is this a turning point in the war? maria: i think it is very early to tell, of course the momentum does seem to be shifting from russia to ukraine. the ukrainian army has been very effective, it has been very effective particularly in the region of kharkiv. yesterday, they were very defiant in a post saying we don't care if we don't have electricity, we don't care if we don't have heat, water, food, we want to be left alone, and of course that is a reference to russia.

the question is what happens now. some would argue the fact that ukraine is now making gains makes it a volatile part of the war, particularly for vladimir putin, what does he do next if it is bad for the russian army, having such a logistical failure on the ground? dani: definitely an important question as we deal with the energy crisis, curtailed from russia. thank you, maria tadeo. yaqui naugle says the ecb will be continuing to raise rates if the current trend in consumer prices continues. across the atlantic, fed policymakers are throwing support behind a 75 basis point hike, echoing hawkish sentiment. joining us is enda curran. what are we expecting with the ecb, and those all-important

inflation figures in the u.s. on tuesday? enda: we are getting more hawkish signals from the ecb, the president speaking over the weekend making the point that where inflation is right now means that the ecb has a lot more work to do, and that a include more jumbo sized hikes even though he was saying inflation may peak this year, he still sings it's going to stay high and the best thing you can do is to get inflation low. hawkish from the ecb. in the u.s., it's about inflation data on tuesday. the expectation is headline inflation will slow for the second month in a row and reinforce that maybe u.s. inflation is turning a corner. but quarter inflation is expected to be quite sticky. keep an eye on rent and cost-of-living. the fed is expected to go 75 basis points next week. manus: the door is open, jump through it some say.

enda curran there. let's check on the markets for the asia-pacific region. juliette saly in sydney. a frisky looking yen? juliette: indeed, and about the reopening play in japan. probably, gains for the asia-pacific index. basically the longest winning streak and about a month, and a lot of those plays very well supported today, helping out taiwan's main index. you can see dollar-yen is still on the back foot, down about half of 1%. against the greenback with the 143 handle. let's flip the board and look at some of these reopening plays. that week in --weak yen is good for tourism plays and we are hearing from nikkei news and another source that even earl y this week we could have opening of borders in japan. this will see some of the plays coming through for tourism.

it could be a huge benefit for tourism stocks. china's borders are still closed and they accounted for 30% of tourists into japan pre-pandemic, 15% from taiwan, which also has restrictions in place. but we are closely monitoring these headlines that japan will allow foreigners to travel more freely and reduce the daily cap they have on visitor arrivals. we only saw 240 6000 foreign visitors to japan last year, down from nearly 30 23 -- 32 million in 2019. dani: thank you so much, juliette saly. the u.k. remains in a. of morning -- in a period of mourning as the queen was transported yesterday. mourners lined the street and took part in the historic moment. lizzy burden joins us from buckingham palace.

what is the atmosphere like at the moment and what is the plan over the next few weeks, especially as it pertains to politics and their ability to continue to handle with what is being laid out as an energy crisis in the u.k.? lizzy: the sun is just coming up at the king and pallas, but even before it did, people were here having a quiet moment of -- coming up at the king him palace, but even before it did, people were having a quiet moment of reflection here. liz truss pledged allegiance to the new king over the weekend, and she will accompany him on a tour of britain over the next week. tomorrow, the coffin will move here to buckingham palace and stay here through wednesday, when the state funeral will be on the 19th. the coffin will lie in state and

to the public will be able to file past. some newspapers are estimating one million people will pay respects, filing past, creating queues, some say five miles long. that will pose security challenges. joe biden and his wife confirmed they will be attending the funeral. there is an outpouring of grief that the u.k. has never seen before, and as you imply, the business of government will be paralyzed in liz truss's second week as prime minister. manus: indeed and we saw great deal of activity over the weekend, didn't we, with the new prince of wales, new charles iii and the new prison process -- prince and princess of wales and duke and duchess of sussex out on a walk about. thank you, lizzy burden.

let's look at some of the key things markets will be watching today. more ecb talks, we have the executive board member making opening remarks at the central bank's annual research conference tomorrow. it's all about cpi data, expected to come in on the headline, but it is the belly and the core running hot. dani: and on wednesday, it will be the latest u.k. cpi readings, and on friday, from the euro area, we will get inflation from them. coming up, we will have a guest on the markets. manus: indeed, and the swedish prime minister's opposition. we are counting down to a result on the election. this is bloomberg. ♪

>> the fed actually wants dollar to be relatively firm because a stronger dollar restrains economic activity and reduces inflation, because it reduces the cost of imports into the united states. so the fed is not unhappy with dollar strength, it is part and parcel, and as that of how to tighten financial conditions. manus: bill dudley speaking about the fed and dollar strength and the impact on the u.s. economy. something the fed won't dissuade the market from continuing with. dani: exactly. the past few days, we have a sense of the dollar starting to wane. how much is that dictating risk appetite coming back into the

market? let me show you 10 days, the bloomberg dollar spot hit the high on wednesday but in decline ever since. some of the biggest rivals to the dollar, be at the ecb, boj, they are continuing to jawbone. the peak of the u.s. dollar, let's take that to our guest, and investment officer. tatyana come is the strengthen the dollar, is the story starting to reach its end? >> no, i think the dollar is very transitory. it's technical due to all of the announcements central banks have made. but if you look from a -- first of all the fed will continue to deliver rate hikes and they are willing to take the risk of

recession in the u.s., and the risk of a strong dollar. also, something we have seen in previous recessions and crisis, the u.s. economy does much better to compensate the recessionary environment and a dollar that remains strong. manus: good morning. what scale of recession are you preparing for? larry summers says we need 6% on 10% unemployment -- 1% unemployment. what are the markets preparing for? tatijana: markets are preparing for very little of a recession. they are partially buying into the soft landing story. also the fed -- today. we should be ready for a sharp ending, it will increase unemployment more so real income

available to households, meaning spending is going to be in depression and company earnings will be impacted. we should be ready for a significant impact on the economy. from where we are today, i can see markets going down by another 20%. dani: is that stocks you see going down another 20%? tatijana: yes, in particular stocks because i see in the bond market, there is a correction that has already been done. they should be nervous about the economic outlook more than equity market. -- there may still be some and markets for correction.

in the government bond market and investment grade type of security, you can see may be a correction that -- in equity markets. bond markets seem to be more realistic. manus: 20% lower on u.s. equity markets, just to qualify that, and looking at european equities at the start of the show, 30 weeks of outflows, 3.4 billion dollars last week from european stocks, the past six months, $83 billion. if you are culling american stocks down by 20%, you must have something -- calling american stocks down by 20%, you must have something much more catastrophic for europe. tatijana: yes and no, because europe is affected by the ukraine crisis. this problem is not the case for the u.s..

if you look at u.s. stocks and what has pulled u.s. stocks up over the last 60 years actually, already tech companies that have market concentration. this is what makes people respect the euro, it has as much correction as a european market. except for future growth of these companies, investors realize spending is turning south. major corrections are then needed in various economies and will have a big impact on u.s. markets. dani: i do wonder how the contours of the war in ukraine change your thinking. you just said it was one of the big issues at stake when you're looking at european investments. we have some news coming through that perhaps russia has been retreating in key areas. how much do you use that in evaluating european equities?

does it change your case at all for the region and assets therein? tatijana: i would be very careful acting on such news and changing anything in a portfolio. at the end of the day, it is so unpredictable what will happen next. what putin is going to plan for his next direction, or how long ukrainian troops can keep going, trying to win back some of the lost territory. it is extremely difficult to say that, and anyone could go on better forces. manus: a lot of the people that instruct our portfolios do bet on the horses, from my experience. the tolerance for risk is somewhat staggering. last week everyone told us the backorder isn't about intervention and they were wrong. you've got intervention in the

yen and the euro. mr. nagel's intervention, is that enough to put a floor on the euro or is the demise not well flagged enough? tatijana: i don't think it is enough. maybe in the shorter term. in the longer term, the ecb has much less room for rate hikes than the fed because there is much more pressure on the ecb coming when the euro rose higher and higher and becomes more visible. and the dovish part of the ecb comes stronger again. i also think europe has managed to do their homework the last 20 years and they have a lot of problems in terms of economic policy, and this is longer-term and it will continue to weigh on

the euro. i don't see any case for the euro becoming much stronger than the dollar again. i am very bearish and i continue to be very bearish on the euro. manus: ok. hourglass is definitely not half-full at the end of this conversation. but that is the way you see it. tatijana puhan, our guest this morning on the markets. the swedish opposition to the prime minister, the results too close to call. what is next? we give it to you right here on bloomberg. ♪

juliette: i am juliette saly with first word news.

queen elizabeth's coffin has been driven slowly through the cottage -- scottish countryside with mourners lining the street. the hearse arrived with the crowd breaking out into applause after it disappeared from view. next monday will be a public holiday. sweden's right-wing opposition has nearly overtaken the prime minister's camp in an early count after this weekend's elections. the bloc that includes the national sweeting democrats is likely to gain 175 places. the party was previously shunned as extremists. the biden administration is reportedly planning to broaden curbs on the export of semiconductors used for artificial intelligence and ship making. reuters cites unidentified sources saying there are plans

to publish new regulations next month. the rules were codified instructions already communicated to companies. japan reported to allow foreign visitors to book trips directly and travel freely within the country, according to a broadcaster. officials are also set to remove the arrival cap. the rules apply to travelers that have had three shots were can provide negative test results. 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. coming up on "bloomberg daybreak: europe," ukraine advances and russia retreats, but does it mark a turning point

manus: this is "bloomberg daybreak: europe," i am manus cranny in london and the stories that set your agenda. dani: rapid advances. ukraine forces take the kharkiv reason -- region as russian forces crumble. wall street gains, the euro higher amid support for ecb hikes. plus, charles iii, the new u.k. monarch officially declared king. the queen's funeral set for september 19. the gains in the dollar seem to be running out of steam with the yen and euro higher the next few days. we were talking to tatyana, who says the gains in the dollar are not over yet. manus: she's got another 20% dump of equities in the u.s. and further demise in the euro.

get it into the fx column, the pound up to a quarter of 1%, nothing compared. the euro up fortunes of 1%. -- 4/10 of 1%. a hawkish narrative, more clear steps to follow if needed. you've got progress with the ukrainians against the russians. go the euro. dani: let's dive into that story. ukraine's forces continuing rapid advance in the kharkiv region, exploiting the collapse of russian forces. for more, we are joined by our europe reporter, maria tadeo. what are the latest developments? maria: what we see is a very quick but also effective advance from the ukrainian army in the east of the country. you mentioned the kharkiv

region, but the pushback is still on the move. president zelenskyy yesterday was very clear -- "the liberation of our territory will continue." he says since the start of september, more than 10,000 square kilometers has been liberated in east ukraine for the ukrainians. this is a huge boost to morale the of really needed, and it validates the theory that heavier weapons do make a huge difference on the battlefield. wars are won on the battlefield, that's what they repeat. for the russians, it is an embarrassment and logistical failure. the question going forward, what does vladimir putin do next? until now, no conscription, no declaration of war. he says this is a special operation going according to plan. the reality on the ground is a very different picture. manus: certainly, the

communications and the pr disaster at home for him, and then you have the narrative about the support. let's talk about the eu independence. nord stream is closed, europe was 40% dependent on russia for gas. are we ready for zero? maria: nord stream 1 is politically dead, on practical terms also shut for the europeans. you mentioned 40% as inflows of the new data from the european commission says that figure has now dropped to 9%. in many ways, this is the end for that partnership between the russian federation and the european union when it comes to gas. i think the big question is what happens with the storage and can europe weather the storm? energy ministers met in brussels

and i asked that question to the german economy minister and this is what he said. >> we have sent a clear signal we will use the gas in storage to give it back to the markets. after saying that two weeks ago, the price has gone down from 350 euros a megawatt to about 200, and it has been up and down. this is still a price that is too high, but this is a price similar to the asian markets. both are too high, and there is some speculation in the markets, but we know that we are prepared to stand the winter with precautions we have made and room for speculation will get smaller and smaller. maria: that is the german economy minister, who told me, do not that against germany. america has taken another view.

briefly, another question is what happens with the cap on russian gas. the g7 wants it but europeans cannot agree on the format. that is something to keep an eye on. manus: yep, they are trying to get some kind of a unanimous coalition around how to deal with this and it is proving allusive. -- proving ellusive. great to have you back. the oil market this morning, we have mounting speculation that global demand is set to weaken further. investors are a session -- assessing whether a bold u.s. plan to cap the price of russian crude will change the direction of the oil market. we have a head of commodity strategy. i scratched around for details and it is a bit vague. we don't have a level at which the g7 would cap the price of

russian oil. tell me in the world this morning, what is the bandwidth of a cap that demonstrably changes the direction of the oil market? >> that is a very good question. good morning. i think at this moment in time it is difficult to speculate. as you said, the details are quite thin so far. also, we need to see whether it can be carried out. what we know is russia is already selling oil at a discount to the market. it is in this kind of order they would like to see put down in regulations as such. we are seeing in discounts between 25 all the way up to $40. at the same time, oil prices below $100 and it is round to her. dani: there has been a reaction

in the oil market. two weeks ago, $100 a barrel on brent and now $91. we seem concerned about whether the value reflected in the futures market is accurate. a hedge fund manager saying the oil's future market is completely broken, yet saudi talking about the lack of duty. ole: where are we otherwise left in terms of price discovery? it has come down primarily due to what is happening in china. it is the world's biggest importer and the combating of viruses and continue lockdowns is not good for demand. we have iea and opec outlooks on tap this week. in terms of demand, looking relatively good.

not showing the demand drop. manus: we are not trying to throw the impossible questions to you, but our heads are stuck on the left-hand side of the price risk. $91.37 right now. we are all convinced zero covid will last forever, and that is not true, we will return to japan, we will fly more increasingly as long as we are not stuffed up i recession. are we under pricing the renormalization of chinese demand? ole: a small yes to that question. -- the impact will be a strong downswing.

seeing small signs of that in the industrial metals market last week. it was heard by -- hurt by supply worries. i think the iranian deal is not coming anytime soon, at least not the midterm elections. i still see the risk of an upside move bigger than a downside move. maybe mid 80's in brent. dani: if the bias is to the upside, we are still in this market where perhaps liquidity is lower. we have support for brent around $90 a barrel. we are getting very close to that. in the meantime, before we see the break for higher, how much lower could we get if we reach

that level of support around $90? ole: speculative interest continues for several months. it's not as if a massive -- needs to be taken out. i think it will be a slow move. i don't see any kind of panic situation unfolding. i think the panic situation could be if this offensive we are seeing in ukraine, if this leads to a change in the kremlin , that is not something we can speculate on. but a change in that direction would give us a war premium or discount when it comes to oil. manus: we are not here to speculate and we are far from it, but take me on what a cessation of hostilities, if we could call it that, could lead -- $20 down on the price of oil

if and when it comes? ole: we are already below when it started. we have relieved some of the worries we've seen, and probably mostly impact the gas. trying to get rid of russian gas, and if we have normalization, i'm sure we would like to take some gas in the short-term. and russia cannot get rid of the gas. they don't have the export facilities. the impact will probably be felt hardest in the gas pipe. but oil as well initially. dani: in the initial aftermath, what level of gas prices to receive -- do we see? ole: i'd like to see a drop down to the $100, $150 level.

that would be relief in the market. there was talk about speculation and clearly i am excited by movements in the market and liquidity. we are using a german power contract as a benchmark, trading less than 400 losses a day, and it costs almost 200 euros maintenance to establish one contract, so only for the big boys to get involved. some of the big moves i am somewhat worried about, if they are justified. i would like to see it potentially down to $100-$150 area. manus: the difficulty for intervention. sorry, i talked over you. dani: no, i was just going to say it is a fantastic wine and part of why we are having -- why we -- it is a fantastic white

and why we are having this debate. thank you ole. coming up, u.k. politics on hold. that is our focus of next. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe," i am manus cranny into by with dani burger in london. this a level from ubs, calling a december brent forecast on $15 in lockdown. $110 on brent and wti on your screen. brent at $91.

down this morning. dani: let's switch focus to the u.k. queen elizabeth's coffin was driven slowly from balmoral edinburgh as the country continues a period of mourning. people lined the streets, taking part in the historic farewell. joining us is lizzy burden, at buckingham palace. what is the plan over the next week? lizzy: crucially for our audience, the bank of england has firmed its decision to mark a mourning period. in the interim, we will still get a raft of economic data. today at 7:00 a.m., gdp figures, expected to show a 0.3% growth

in economic output. a bounceback from the technical claim from the bank holiday in june, 0.6% that was. a sad reminder that only three months ago, britans were celebrating the platinum jubilee at a can him palace. -- looking him palace. the funeral is likely to slightly depressed economic output, and deutsche bank says there could be a technical depression as a result. the labor market is still tight and wednesday we will get inflation data showing a price growth is accelerating again. friday, we get retail sales figures expected to show the cost-of-living crisis is still taking a bite out of consumer spending. all of that will give the bank of england officials plenty to mull over ahead of the september decision.

the treasury hasn't confirmed a date. our economists are expecting a half-point hike at the september meeting. manus: it seems there are some quite radical decisions being made by people that liz truss should be leaning on, top civil servants at the treasury have been pushed out. who is this person, why do we care and why do markets care? lizzy: apart from the massive first move for liz truss, the energy bailout, the other move was to dismiss the top civil servant at the treasury. she had promised she was going to take on the economic orthodoxy at the treasury, but civil servants are meant to be apolitical creatures.

we heard from the former top civil servant over the weekend, and he said it risks undermining the u.k. at this moment of fundamental change in our history. he says it could open the door for yet more unconventional policy. however you look at it, it leaves a vacuum at the top of the treasury at a time when we have double-digit inflation and the pound flirting with lows not seen since the early days of margaret thatcher. dani: ok. [crosstalk] thank you so much, lizzy burden. manus, yeah, this is coming at a time when you have the boe actively selling gilt. it is certainly a trying time with yields already at 3%. manus: as was just said, we will have a delay in terms of the bank of england, but various people have come on the show and

said there is even the possibility sterling rakes down even further, which delivers a bigger headache in terms of the inflation narrative for the bank of england. the dollar strengthened, the fed bonus plan, and sterling's demise is kind of an injury for the bank of england. dani: the fear of this toxic mix of a weaker pound. it is something the boe is having to contend with. manus: let's hope there is no housing crash. coming up, the incumbent party of sweden long to in a close du el and looks to be ahead as the country tallies the final votes. we bring you the latest from sweden. this is bloomberg. ♪

manus: it is your monday addition of "daybreak: europe." in sweden, the right-wing opposition has narrowly overtaken the prime minister's camp in early count after the weekends election. the bloc includes the nationalist sweden democrats. they have one more than the alliance led by the social. this could mean the ascent of a party previously shunned as extremist. to the right there has been a lien. for more, let's get to stockholm and our bureau chief, who joins us now. great to have you with us. this is a new era that sweden wakens up to. is it going to be a shock?

nicholas: it is definitely a new era. i am not sure is a shock because it has been coming for some time. all of the polls ahead of the election showed he was going to be of every tight race basically the prime minister's side and the loose right-wing coalition in a dead heat ahead of the election. the way things look now, the right-wing coalition is ahead narrowly. dani: is this surprising that we have the right-wing coalition coming up ahead? niclas: it is not a surprise if you look at the recent polls. if you look at it from a longer perspective, it is a huge surprise to see a party that was once shunned from left to right as extremist, racist, now being

the biggest party in what appears to become the ruling bloc. manus: tell us what does this mean for sweden's membership to nato, if we have this move to a right-wing -- a more right-wing narrative in the government? does it risk the membership? niclas: it really doesn't. because as of this spring, there is fraud bipartisan support for the nato membership. parties from the right to the left, with the exception of a few minor parties, support sweden becoming a nato member. this outcome will really change that process. manus: ok, thank you so much.

the very latest from sweden on the elections. we have to go back to where we started, the depth of the dollar dip. got a little bit of alliteration. it is were affected in dollar-yen operably more so than anywhere. dani: i wonder how long it can last, the dip in the yen, given the verbal intervention. everyone is waiting to see if we get anything more substantial that could continue to hit the dollar. manus: we are setting up for the third jumbo rate hike in the u.s., 75 basis points on the table.

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