>> good morning.

this is bloomberg daybreak europe. i'm dani burger in london. european leaders announce kremlin plans to stage annexation votes in eastern ukraine calling it imperialistic aggression. >> such bold referendums don't change the nature of the conflict. dani: the fed is expected to hike by 75 basis points for a third straight meeting. dr. doom sees along an ugly recession. stepping on yields. the bank of japan schedules bond buying. many folks expected to wake up in europe overnight haven't heard from putin. it was touted by russian media and that there would be a speech by him. it was delayed without much

explanation so the risk continues. concerns of an annexation votes. what that means for ukraine, the world and europe. that combined with central banks on deck means the market where no one wants to take a lot of -- you are seeing a flight to the dollar continued throughout yesterday reaching a record high on this bloomberg dollar spot. the euro feeling the pain of the uncertainty around russia, a possible escalation should not annexation vote go ahead. it's being called a sham vote. terminal rates pricing 4.5%. we will get the fed decision. will it exceed the expectation of what the market is pricing.

what we have heard from fed speakers before the blackout period, that hawkish news. despite a 20th straight stronger-than-expected vix, we are looking at a dollar that is strengthening above the yuan. japan 10 year yield moving ahead of their upper bound at .26%. we have unscheduled bond buying from the boj. when comes to equities we are looking at a weaker session in asia this far. some consolidation in the s&p after it declined yesterday. they are reflecting the nervousness in this market. heading into all of the uncertainty of the geopolitical

environment, it's about not getting burned by any sort of decision we might get from the fed. it's an extremely busy day. let's get to reporters from around the world. maria tadeo will be giving us the latest game changing news from russia. let's turn our attention to the ukraine war. the kremlin has just released a prerecorded message from vladimir putin where he is expected to address his military setback in and around the donbass region. let's listen in. ok. we are going to take a pause on that. we will hopefully get to that in a moment. we will hopefully get to this prerecorded message from vladimir putin. the main story is western leaders condemning the kremlin's plans to hold urgent votes on

unification with russia and parts of ukraine that are currently under moscow's control. the u.s. germany and france have said they would never recognize the results of such sham ballots. >> such sham votes referendums do not have any legitimacy and therefore they don't change the nature of the conflict. this remains a war of aggression by russia against an independent sovereign nation in europe, ukraine. this will only further worsen the situation and therefore we need to provide more support to ukraine. dani: let's be very clear, we are possibly expecting a speech from vladimir putin. it would be prerecorded.

expectations from russian media yesterday where that it would air on tuesday. there wasn't media tweeting that it would happen around 6:00 a.m. -- there was russian media tweeting that it would happen around 6:00 a.m. london time. bloomberg's europe correspondent maria tadeo joins us now. we know the annexation vote sent to take place on friday, what has been the response to this referendum? >> we are waiting potentially for the speech but there has been a lot of mystery around whether or not this message would actually hit national television in russia has been delayed now for a number of hours. and the content of it still very unclear. what is the message that vladimir putin will tell the russian people. what is clear is the repudiation from national leaders gathering

in new york for the national assembly. you heard it from the head of nato saying this is a fake, it has no legitimacy. if it goes ahead it really changes nothing other than escalating the conflict. it would put a diplomatic solution out the window. ukrainians will never accept it and they will fight it. emmanuel macron yesterday to me had the highlight speech of a one at the united nations general assembly where he said at this point after the russian war we are entering potentially a new era of colonialism, imperialism and there can only be peace at this stage if ukraine's sovereignty can be guaranteed and security protected in the country liberated. that is also a thinly veiled morning. geopolitical consequences if russia does decide to snatch way more territory from the country. dani: as we have been speaking,

a lot has been made of this speech coming from putin. what kind of things are expected if he does speak? are we expecting a change in how he addresses the war in the language he uses to describe it? >> the language will be key because remember for months now the kremlin has created a very sophisticated message for the russian people saying this is the special operation to liberate the people of the donbass region. it's a nazi government that pushes back against the rights of russian speakers in the east of ukraine and we are only there to liberate those areas. the kremlin does not call this a war and they definitely do not call for -- they have not debated anything about conscription. for a week and out the entire country has been awash by rumors

that vladimir putin could potentially declare a full war against ukraine. move from special operation to now officially a full war in the country and that carries a lot of repercussions also for the russian society. there's a big difference if you are a russian man 20 years old watching the war in ukraine on tv like it's reality tv to being told to pack your things and now you go and fight in ukraine. that is potentially a very risky move for the russians. dani: in not escalating it to that level, it sort of kept the war away from the major cities. that would certainly be a change. thank you so much, maria tadeo. now all eyes are on jay powell today with traders expecting another rate hike from the central bank. 75 basis points expected. not ruling out a 100 basis point move. let's bring in dan moss.

why not just go 100 basis points and be done with it? >> it would look like the fed is panicking in response to one data set and that would be the recent cpi report. powell has consistently talked about the totality of the data. it's one thing to be data-dependent. it's another thing to be led around by the news by the data. they can't be seen to just be reacting and lurching from statistical report to statistical report. what the world needs is a fed that has conviction but is not panicking. dani: part of the argument of not going 100 perhaps it makes markets price in recession even further.

you get this continued yield curve inversion that gets exacerbated. to that point, does the fed need to get more hawkish? do the dots need to show a higher terminal rate this time around? >> whether they need to or not, they are likely to. here's the big question. the summary of economic projections are part of the forward guidance. this used to be a great tool for the fed and central banks. it has kind of run off the rails this year. guidance tends to be changing from meeting to meeting. the dots will be useful in terms of where people are thinking about the next couple of months, but beyond that, the rate at which things have been moving this year, you would have to be a little skeptical they'd provide much of a guidepost. dani: thanks for setting us up for what is likely to be a volatile day.

asia already seeing its fair share of volatility ahead of the fed today. let's get to juliette saly in singapore. it feels like continued whiplash from the boj. you have a rate check and then today an unscheduled bond buying. what are you looking at? >> absolutely. let's get to the boj story in just a moment. it is just a day of weakness. we are back in the red today, tech stocks lower across the region. you mentioned the pboc setting a stronger-than-expected yuan fix. we are seeing dollar-yen at 143 ahead of the boj decision. take a look at the unscheduled

bond buying operation. jeffries saying perhaps yield curve control has gone too far. if japan remains accommodative to negative policy rates -- meanwhile the former head of the country's currency policy telling bloomberg japan is ready to intervene and currency markets at any moment if needed and doesn't need to wait for a green light from the u.s. to support the yen. dani: thank, juliette saly in singapore. some of the key things we're going to be watching out for today. u.s. housing data is due out. economists forecast existing home sales dropping. big bank ceos including jamie dimon and brian moynihan are scheduled to testify before congress to hearing about

holding banks accountable. we are expecting jamie dimon to warn about the economy should there be more restrictions placed on banks. the big one, 7:00 p.m. u.k. time is the fed's rate decision. investors have fully priced in a third consecutive 75 basis point hike. some traders are betting on a four point hike and it's all about the dots. coming up, it's all about the dots for us. we will continue our coverage looking ahead to the fomc decision later today. stoltenberg sees -- lacking legitimacy and likely will worsen the situation on the battlefield. we will also bring you any updates on whether or not putin will speak whether or not we will get any pretaped remarks. all that to come. this is bloomberg. ♪

>> under the present circumstances, when we go from an environment that two and half years ago something like that was zero or even slightly negative after 9% and it continues up, that means that inflation volatility is really beyond what we have observed for the past 20 years. and then that environment increases uncertainty and it makes it harder for us to think about a proper level so to speak . dani: the switch central bank hiked rates by 100 basis points. speaking about volatility and

uncertainty all of which the fed has to contend with. let's contend it now. with us is global strategist and chief economist adm investor services. thanks for joining us. i'm going to do something perhaps controversial. i don't want to start with the fed. i want to jump ahead to thursday because i reporter just sent me this list. be patient with me. here's the central bank decisions forgetting on thursday. boj, taiwan, switzerland, indonesia, boe and turkey. can you take any sort of position heading into today and thursday? that sounds like we are in for a wild ride. >> it is certainly a recipe for further volatility without any shadow of a doubt. the fed decision to a certain extent is perhaps the one with the least uncertainty in many ways. whereas some of the other ones for instance the switch -- swiss

national bank. the swiss national bank once a strong swiss franc. the boj doesn't actually really mind seeing a weekend. you've got all these contradictory flows. with the japanese being huge investors and treasuries, a lot of fund managers are struggling with the cost of hedging, which is enormous. this is a big-time recipe for a lot of volatility. no question about it. dani: of course it's not just the fed as you've been saying. it's riksbank and others changing into this world of hiking interest rates. there were $16 trillion worth of negative yielding debt. now it's just below 2 trillion. can we really go back to the same playbook?

this feels like a vastly different investing environment from here on out. >> we are in a very different investing environment. we are in a very different economic environment. one of the things which central banks are struggling with his they are using models about the economy, particularly the legal -- labor market. because of covid, people don't want to do a lot of the old jobs so the labor market structures very different. we are now an environment where so-called faith whether if you have been investing government bonds this year they don't feel like that, assets are offering a decent nominal return even if the real returns are obviously deeply negative and it is about as real returns in the longer run that people will be focusing on. the old playbook was reach for

yield, reach for risk because i need better returns. now you're getting better returns in nominal terms. so you really need to adjust your whole playbook there. and the bubble where a lot of recessionary signals around the world. the relative value of credit and equities is changing structurally. dani: what leads this market? it used to be things like profitless tech, things like bitcoin, ipo's even. if that's going in this world where do we turn to for market leadership? >> i would focus on credit spreads because we are going into an environment where earnings are going to be hurt by the downturn of higher interest rates and ask how far those

credit spreads either risk premiums have to go to account for a weaker economy, to account for a adverse economic environment and that's really what is going to dictate everything above all risk appetite because the further those spreads move out, the more we get into a situation where aggressive central-bank policies are going to become very difficult to justify because it will be constricting the economy perhaps at a much faster rate than the central banks expect. dani: we are also expecting when it comes to ukraine potential escalation, there is of course this annexation vote which russia has announced for some of the eastern territories come friday. how are you viewing a potential escalation of the war as it relates to europe, already grappling with an energy crisis, supply chain issues?

would it send a chill through investing in europe even further? >> this is a very debatable point at the moment because when one looks at relative value of european equities to u.s. equities, they look cheap and every time someone says they are so cheap you've got to buy them now, what's the next thing that's got to come along. it could be that event which makes people say, i told you so. i didn't want to get involved with europe. the headwinds are too much. i think in the longer run, europe still needs to show a great deal more unity and sense of purpose to deal with the energy crisis. it's all these measures that governments are nationally announcing at the moment and happens on the 30th of september at the eu energy crisis music which will actually show how europe can actually withstand all of this. at the moment it all looks very

piecemeal and that's not encouraging for businesses because at the end of the day they need a much more stable energy price environment to actually be able to compete on the global stage. and that's really where europe's biggest problem is. dani: i'm afraid we are going to have to leave it there. great catching up this morning. bubble strategist and chief economist adm investor services. coming up, stoltenberg condemns the kremlin's war plans in ukraine as lacking legitimacy unlikely to worsen the situation on the battlefield good we will bring you our interview later this hour. this is bloomberg. ♪

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dani: good morning. this is "bloomberg daybreak: europe." european leaders it announced plans to stage annexation both in eastern ukraine, calling it imperialistic aggression. >> the votes do not change the nature of the conflict. dani: the fed is expected to hike by 75 basis points for a third straight meeting and forecast more to come. they see a long and ugly recession. japan announces unscheduled bond buying ahead of the policy decision, maintaining

rock-bottom interest rates. from wall street and beyond, big concerns of geopolitical risk of aggression continuing in ukraine with the possible annexation vote expected to take place on friday. for the most -- for those in the most eastern parts of russia, will there be a message from putin? until then, the market transfixed. central bank decisions we are expected to get today and tomorrow. from taiwan, to egypt to norway. it is the only strong position and direction we are getting at this moment. we were just describing this different regime we are in where market leaders are no longer leaders. bloomberg dollar hits another record high after closing with a

record high yesterday. expectations for a continued hawkish fed. we heard from many who continued this messaging of needing to press on with rate hikes. we are looking at that you on above seven dollars. the 10 year yield is still at .26. world leaders have been gathering in new york the general assembly. the first in-person meeting for 10 years. western leaders line up as an act of imperialism. >> [speaking foreign language] >> those keeping silent are in line with imperialism and a new order over the order. there is no peace possible here. >> the return of imperialism is not only a disaster or europe but for the global peace order,

the and this is this of imperialism. >> the ideals it represents are in jeopardy. we have a duty to act and yet there is global dysfunction. dani: fed presidents and u.n. secretary condemning russia's imperialism. let's stay with this topic. russia's plan to hold elections and formally annex them does not have any legitimacy. they spoke in new york. >> these votes do not have any legitimacy and do not change the nature of the conflict period this remains a war of regression in a sovereign nation in europe, ukraine.

this will only further worsen the situation. annmarie: we are already seeing impacts on the war and societies across the world. food security, energy. how sustainable is this? for how long are nato allies prepared to send support? >> we have to support ukraine as long as it takes. we have to understand, this goes beyond ukraine. we have a moral obligation to support. if putin wins in ukraine, it is a lesson learned period they can use military power and achieve political goals. that makes us more vulnerable in

the world more dangerous. it is in our interest to help ukraine. dani: the nato general condemning plans to hold that referendum. for more, let's get to europe's respondent maria tadeo. >> it is obvious they proceeded as clearly escalation. if you thought we are near a diplomatic resolution, russia may decide to snap away territory, you heard it right there. this is pointing to escalation and shows that ukraine will probably need more support and

more weapons on their allies their speech, the language where they told the general assembly there were only be peace in europe but we have to be crystal clear about this. the country security can be protected and guaranteed. this morning, we are still waiting as we have been for an hour to see whether a speech, there is nothing going on here. dani: thank you very much. let's visit with samir puri from king's college london. thank you for visiting with us.

the assumption yesterday and some reporting that it may happen at 6:00 a.m. london time. there we are in the most western -- the most eastern part, what do you make of it? samir: it is a very ominous sign. the television -- televised messages kicked it off. i think there is a real sense of anticipation because everyone knows russian law enforcement met with difficulty but they do hold 20% of territories at the moment. they may change any potential negotiation or whenever it happens.

it is leading to a dispute with the ukrainians. dani: how would that change with how the end of this wart looks -- the end of the war looks? samir: there are all kinds of twist and turns. saloons he is saying that every inch of occupied territory, the russians will say it is russian sovereign territory. this is a test of what would happen to bring this war to an end. dani: how does it change the reality on the ground for russians?

if putin changes tone, what will the reaction likely be for those who have been shielded from the reality in ukraine? samir: we still do not know if putin will announce any additional tools or widen scope. this does not seem so likely. the threats of mobilization have been scripted as a whole. even if you say we are going to draft russians, how much months of training? we wait on the military side. dani: there have been some

comments about an implicit threat of weapons. do you think that is fair? the -- does this seem like a way of russia saying that this is a possibility, upsetting the legal basis for using nuclear weapons? samir: i think it is a big threat and scare. it is still hard to see the gain for using a tactical weapon. ukrainians are not concentrating in big world war ii style formations, necessarily.

event tentative's support what putin has is there still buying russian energy. i think there is more to gain. dani: wonderful to get your thoughts. thank you so much. dr. samir puri. coming up, investors from europe have ignored to hide with increased volatility. an energy crisis reduces the risk appetite. we will get more from that the reaction from private capital, next. this is bloomberg. ♪

dani: welcome back to

"bloomberg daybreak: europe." risk appetite is in short supply as increased volatility and and increased recession with energy crisis leaves little on the continent. june political -- geopolitical risks continue to grow. what is this macro environment mean for the micro? joining us now is mathieu chabran from tikehau capital. joining us now from the capital market. -- capital market conference. what is the atmosphere right now with the potential escalation coming from russia? is there a fear that this could send -- where there has already been supply and energy crises?

mathieu: good morning. thank you for joining us. the headline is already in an uncertain market. investors hate uncertainty. we have been navigating in a headwind market on many fronts. as always, the threat is creating many opportunities on the others. investors are discussing this. dani: what sort of opportunities are you looking at. mathieu: as we have been saying, but will be happening with central banks and the fed more recently, we see that banks are

struggling. all of that is adding real pressure because it is no longer there. the bank market should be the topic for investors as a great opportunity. dani: we have seen this around, looking at big banks. you have to take a big concession on this. how is that on the outside to gain financing? mathieu: it is a big deal.

all of it is stepping back and being more shy in taking additional risk. that is on top of the steepening curve. going from that minus onto 2% today. you are referring to this deal. we have been talking about the banks and these big buyouts are struggling to get the credit funding.

investors do not have a transaction to get returns. they will provide minority capital to help strengthen it. dani: that is one side of it. the other side is for floating rates and portfolio companies. is there a level of rates that you start to worry about the ability to pay debt obligations? mathieu: unfortunately, on the one hand, companies are refinancing. there is not a massive wall of refinancing right now.

a buyout would be even worse. there would be a much higher leverage stack. the incremental price you have to pay has pressure on markets. if not declining, not talking about your gross marketing. it is obviously a significant pressure on the bottom line. that is how companies are valued. that is moving forward. dani: we have spent these past few minutes talking about all the headwinds that exist out there. what do you expect the impact to be on deal flow?

is there any degree that you start to see those cracks emerge on reduced flow? mathieu: i don't think it will be reduced, it will be much more discriminating. i think it is great news for investors. in past years, they have been way too accommodating. there is a free cost of financing. investors are giving capital to asset managers to be discriminating and i think we are entering the space. there may be a huge difference in the return. we are looking for to making a difference in this environment. dani: there was once an environment where i'm sure you could not talk about it without stats. i have to bring it up again.

we saw social capital abandoned his, unable to find a deal. are they finally done? is the environment of spacs finally over? mathieu: definitely. i think that they can now offer a solution to the market. the market has shut down. having them ready to merge with a private company as we have done a few months ago which is now publicly traded with more to come -- we are managing three spacs -- i believe the current market is a great opportunity.

they will be the only opportunity for the market. dani: you just set us up for another year of asking you about spacs foot for now days all we have time for. thank you very much. mathieu chabran, cofounder of tikehau capital. coming up, the energy crisis and now rising rates. european equity is bracing for a sharp rate hike by the fed. more on that, next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i am dani burger in london. breaking news, germany will buy all of for tom -- of fortum's

shares in unipart. the goal is to rescue the country's largest gas importer. uniper has been under pressure with stalled flows from gas. this will be about 8 billion euros that will inject a capital boost. when it comes to the equity market, it is not just russia's war. it is also the fed's rate decision, future trajectory and what that means for european central banks. let's get straight to the head of bloomberg intelligence, tim. earnings season is coming up. we were just talking about evaluations falling a bit. to our expectations need to change for what earnings season will look like? tim: from our perspective, the

market is much more about earnings than evaluation. we think european markets largely discount -- a slow economy. dani: what about currencies. ? -- what about currencies? tim: it is a big boost. this is compared to where we have suffered to the last reporting. it is a ship that has yet to fall. that is a tailwind. dani: tim craig, head of bloomberg intelligence. coming up next, bloomberg markets europe. more to come. this is bloomberg. ♪

anna: good morning and