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dani: good morning. this is "bloomberg daybreak: europe." i have dani burger and these are the stories that set your agenda. a selloff in the pound and s&p 500 after confirming the end of u.k. market support. president biden believes a downturn is possible and believe saudi arabia will face consequences with the opec-plus cut. germany and the netherlands will propose joint gas purchases. it is not just liquidity on the line, it is credibility on the line as well. a bombshell this morning, reporting that andrew bailey told bankers that he will continue to -- and at a speech

says he has three days left to figure out your liquidity position. this seems like a backtrack. let me show you what happened with sterling. a very soggy day yesterday. still, it is a confusing time for these markets and is rare when we have the u.k. saying the same thing. we also saw the u.s. stock selloff as well. we are seeing weakness continuing in the u.k. and european stocks as they play

catch up with the u.s.. we are on a high from the futures after that report from andrew bailey potentially backtracking on the bond buying program. even so, we are on the log and that got smoked yesterday. hong kong tech is a separate story here. it is the intel at bloomberg saying they are cutting staff. i want to dig deeper into the story.

we have bank of england governor andrew bailey morning yesterday that they cannot maintain market support. >> we think a rebalancing must be done. we believe it is clearly temporary. dani: they did not just rattle sterling, they rattled broad markets. then, the bombshell this morning, they reported that it was probably told to bankers that they might hold bond

purchases. let's bring in endocrine. enda: on the one hand, they are telling them to clean up your conditions. market participants are responding by saying -- the bank of england lost by saying who is going to blink first. this is the market story. if they don't get this right, it

will not do a lot for the credibility. dani: they might want to heed the warning about sorting out their positions by friday. thank you so much. that drama and the u.k. market adds to already brewing angst about the global economy. we heard that the worst is yet to come. even the u.s. president said that a sledge recession is possible. pres. biden: i don't think there will be a recession and if there is there will be a slight recession. think about what is happening. written a better position than any of the major companies in the world. dani: let's bring in bloomberg's david. and how something you expect, even when we have recession

warning. is this just u.k. tail wagging the dog? >> they need to be realistic. this is obviously an aggregate in the growth market. it should be heavily washed. if that comes in height, inflation really definite -- inflation deafly exists and they will need to hike higher. we will see more pressure and yields. u.k. is adding to the turmoil. dani: i wonder how trite is.

is this what we are witnessing right now? >> i'm sure there are some fire cells going on. see a lot more in the bond market. i would not call it general. question is about what is going on in the u.k.. then you might see more fire cells. dani: thank you very much. bloomberg's david finnerty. breaking, they will be recording a non-cash charge in the third quarter of 1.3 billion euros. they're also saying they will see a worsening macro.

the third quarter revenue beat estimates. the estimate was for 4.5 billion euros, it was 4.3 billion euros. juliette saly is in singapore with the latest. >> failing to move the yen, that was last month. love speculation.

-- yen, they are back at levels that sparked speculation last month. a spokesperson is telling reporters that they are watching the moves in the fx market with a sense of urgency. we are still seeing weakness filtered through the asia-pacific through these april 2020 lows. the exports are really adding to woes for the supply chain. number watching an uptick in the korean won. let's look at the jumbo hike we saw. the fact that you have got this as a reason why they would for the jumbo move. this is only the second time we have seen a 50 basis point hike

and history. we are echoing what we heard from mario draghi. they said they are going to do whatever they can do to tame inflation, even if it means sacrificing the economy. dani: thank you very much. juliette saly in singapore. we will get u.k. gdp numbers along with industrial production data. will that change anything for the boe, are they all on financial stability watch? that 10:00 a.m., we will get more figures leaked. then at 7:00 p.m., the fomc minutes. every fed official we have heard from has said we will continue to hike. later, we will have central-bank speakers. coming up on the program, we will be discussing the energy crisis with the deutsche bank chief economist.

they believe the rules will come in handily -- in handy. plus, lvmh sales soared. we will dive deeper into the luxury sector. this is bloomberg. ♪

dani: germany and the netherlands will put forward a multipronged approach to bring energy costs down. the plan includes focusing on joint purchases of gas to prevent countries from joining together.

we have deutsche bank chief economist stefan schneider. can you break this down? >> if they are trying to prevent them from getting together, we are looking for ways to have them avoid what other countries are looking to do which is a price cap. they are skeptical that it will supply to the region and want there to be joint purchases with all the countries. the hard part is to get everyone to agree on these purchases. how can you get folks to agree to not outbid each other. they are looking at making binding agreements towards reducing demand. now they are looking at other

ways for them to avoid a hard price cap by suggesting these. they do not want to set measures actually decrease demand. there is a fear is that if you put a hard cap on the import of natural gas. there is a fear that asia will be willing to pay for a higher price that way. overall, there is also a fear of causing chaos in the futures market. if you put it cap on prices even

temporary, they may lose faith with those who depend on it. dani: price discovery is really important on this market. thank you always, stephen stapczynski. now joining us is stefan schneider, chief economist at deutsche bank. what do you make of a plan for joint purchases from the eu, will this help relieve stress? stefan: we are talking about lng contracts. they have come to the party very late. there only a few contracts available. other buys like for asian countries, it was difficult to get lng. there will be some competition with european partners. they could argue that if there were joint purchases that would

reduce this element of outbidding each other. if you have joint purchases, you have payment and distribution. dani: does that mean that this is unlikely, that we would get joint purchases again because figuring out the nuances will be so difficult between member states? stefan: if you look at various proposals, i think that is the most likely one compared to price cap. that is one where germany and other countries are more skeptical and rightly so because it is a market. you have to be acceptable, you cannot have your cake and eat it but reducing the price will help it for you at the lower price. dani: as we talked about during

the break, someone has to pay for this, who would end up holding the bag? stefan: it has to be the governments. we would have a proposal with the energy break. we just saw a proposal a few days ago. roughly 100 billion of this fund will be sent to subsidize gas prices and have a fixed price for domestic consumers. dani: want to read you something that the imf put in their outlook yesterday and get your take. they wrote that in the wake of russia's war against ukraine, -- is a broad and permanent. winter 2022 will be challenging. winter 2023 will likely be worse. what you make of this idea that winter next year will be the challenge? stefan: absolutely.

that is the fact that this year during summer, we had a limited amount of russian oil but it was still in the stored centers. we will be around 10% but there will be no gas to fill up the levels to where we are right now. the problem will be that during summer, we will have a hard time to fill out the storage levels so then we can hope that's next winter it will be similar to the current one. let's hope that the research we see will be from a few months ago. winter will be even more difficult than this winter.

dani: this problem is not going away. what does it mean for the business model that was dedicated on cheap energy to fuel their exports, if that is broken, what happens? stefan: obviously, cheap russian gas that was very important for the industry, this will not come back. there is the hope that he to set up a new supply come over time we get energy costs down from the current high levels. i think there is no way around it. see energy bills -- the energy bills will not go back to the level we saw in 2021.

neutrality over time phased out carbon emitting sources. it all -- the german business model has to change. the low hanging fruits have been harvested here. they have not been able to face the current costs and this will be a relocation that will

continue. dani: we talk about permanent scars of the economy, things like that, it rings true. thank you so much for joining. stefan schneider, chief economist at deutsche bank. coming up, insight at intel, cutting thousands of jobs. we will bring you the story on pc slumping next. this is bloomberg. ♪

dani: it is "bloomberg daybreak: europe." looking at intel which is said to be planning thousands of job cuts amidst a sputtering pc market. it could be announced this month with the chipmaker facing a steep decline in processors. let's bring in our bloomberg opinion nest tim culpan.

tim: we are going into what looks like to be a recession. we have come out of two years of growth. we have had eight shortage of chips. we are getting into the end of those growth times. we are seeing demands like pc's and service. it will all slow down if not fall. it looks to me as if intel is bracing for that kind of impact. it is about wind and how much. eventually we will hear of a chip companies also cutting their stuff. the cuts that intel will most likely be in sales and marketing roles rather than product marketing. -- product making.

it slows down the amount of people trying to sell the product they make. dani: i spoke to an analyst who told me i was treating all chip makers alike but there is a difference from those who are consumer facing, it is -- is it all to makers -- is it all chip makers? >> investors and analysts will be trying to sort out which companies are going to do better and which will do worse. broadly speaking, i think we can say the chip industry is facing some struggles and will for the next 6-12 months. dani: the struggle is compounded by potential u.s. curve. lori seen by the reaction, this -- what are we seeing by the reaction? >> they were not met with

cheers. i think the market overreacted. if you look closely at the documents and everything in there, there are some specific provisions in there. generally in, taking china out as a possible market for chip equipment, manufacturing, materials or software. that is not good. this announcement comes on the back of other issues they are facing with the industry. hi, i'm jason and i've lost 202 pounds on golo. so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds,

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dani: good morning. i am dani burger in london with the stories that set your agenda. the bank of england triggers a selloff in the pound and sep 500 after confirming the end of u.k. market support, but a recent report could suggest otherwise. president biden admits a downturn is possible. he also says saudi arabia will face consequences for the opec output cut. plus, a 10 point plan. germany and netherlands will propose joint gas purchases to contain prices. sterling sells off yesterday but now it is unchanged with a bombshell coming from andrew bailey. privately telling banks he might extend the bond buying program, according to sources familiar. it comes 10 hours after andrew bailey told the market you have three days left until the bond purchasing program ends. interesting to see what sterling

has done ever since. it did spike up initially on the support, up as much as .3% but it is basically flat now. a lot of skepticism about where we go from here. the u.s. 30 year yield is holding tight after nearing its 2013 high. the u.s. 10 year yield being fueled by what's happening in the u.k. market. when andrew bailey said three days left, markets closed. cross asset correlation, it shows. if it has the potential to turn around u.s. bond market but the equity market as well. s&p 500 futures coming back a little bit this morning. hong kong tech stocks are getting smoked, down more than 3.2%. it comes with these tensions in the chipmaking sector. let's focus on the boe. the governor andrew bailey warning pension funds they have until the end of the week to wind up positions they cannot

maintain before the central bank pulls support. temporary intervention will end on friday despite calls to extend the program. >> we have announced we will be out by the end of the week. the rebalancing must be done i all the funds. you have three days left. you've got to get this done. again, part of the essence of the financial stability intervention is that it is purely temporary. dani: those comments did rattle broad markets. triggering a cell in not only the pound but u.s. stocks as well. we get a report this morning that the boe properly told bankers there may be long bond purchases beyond friday. joining us is the ubs global wealth management global head of investment communications. crazy times. thank you for joining us. i do wonder which is the more worse, more people of scenarios?

the boe ending support friday before tensions have finished cleaning up their liquidity buffers or having a credibility issue with andrew bailey backtracking? >> the bank of england is in a difficult position. it is hard to say which of those will be the worst scenario. i think that is why you were getting these mixed messages coming out from the bank of england. broadly, what they will be trying to do is ensure that pension funds have got necessary liquidity on an ongoing basis to make sure we don't have a financial accident happening in the u.k. at the same time, the bank of england is trying to raise interest rates in the economy across the curve to tighten financial conditions broadly and reduce inflation which is what sparked all of this. two objectives could be in conflict if governor bailey says this will be open-ended. that is part of why giving these comments to say this is temporary, while in reality

probably going to extend liquidity provisions on a non-determined basis if pension funds continue to have liquidity challenges. dani: can they really do both? can he attempted to tighten financial conditions at the same time he is trying to ensure that financial stability remains in check? the two work in opposition to each other. kiran: the ideal world is what happens after the initially announced. while they s aid they would be willing to come in but did not have to buy that much because it is a buyer of last resort. i think that is probably what they will be trying to achieve with some of this. the fact that they are there, the markets will function more normally. that is what they will be trying to do. on a longer-term basis, they cannot continue to buy bonds while talk about tightening because they are clearly in opposition. it is clearly a challenge for the bank of england, but trying to maintain liquidity in the market but not trying to affect

the market pricing mechanism. kiran: anyone who watches this show and here's my accent knows that i have a pretty clear american bias. dani: to me, it is incredible to see the u.k. market concerns would trigger a selloff in u.s. bonds, stocks, global risk assets. when process at correlation is so high and fragile, how do you invest around it when things that are moving fundamentally does not quite make sense? kiran: we clearly have very high correlations across asset classes when you look at bonds and internationally. the u.k. is a relatively small economy but it is well-connected in the global financial system so it can have a bigger impact if we start to see concerns at the systemic level as the bank of england is talking about. what we are talking about with investors is how to diversify across equities, bonds, but also into alternatives as well to try to find some sources of positive

return in a very difficult market. this year, discretionary macro funds have performed very well. one of the very few asset classes that have delivered positive performance so far this year. dani: if you are looking for opportunities, i've got some pretty cheap assets in the u.k. to sell you. freshly off the balance sheet of pension funds. i'm being a little facetious, but we have seen apollo snapping up clo's. aries yesterday has done the same thing. goldman sachs also by newly cheapened runoffs from these pension funds. do those interest you at all? would you be tempted to dabble into these assets that have gone off on a fire sale? kiran: for the u.k. generally, we still see downside in the pound in the near term. i think that will be depending on where investors are seeing concerns if the pound weakens further. on a longer-term view, we see

the pound as being undervalued and diversify under a range of those assets which may offer yield may make sense in the context of a diversified portfolio. there is some concern into the balance, but people are looking at a longer-term basis and value starting to arrive. dani: it is interesting you say trying to invest based on where valuation stand because david einhorn and green talked about this idea, saying value investing will never come back. he says it is because nobody knows what anything is worth and there is an enormous number of companies overvalued. is he being dramatic that value investing will never come back? kiran: it has already come back to some extent this year. we are seeing a more significant growth. investors are becoming more discerning about what they are

paying for in assets rather than just listening to stories which is very much the trend in 2021. we think it has made somewhat of a comeback and value is the preferred strategy for us. broadly, what will it take to turn this market around? i think it will need to be more certainty on inflation rates and growth before we see that more broad-based rally coming back. dani: broad-based rally. how much pain will there be until we see that rally here and what was the turning point? kiran: the inflation data tomorrow will be a very important measure. the consensus is for core inflation to increase so that is likely to lead to further volatility. we will have to start thinking about the fed hiking rates. when we look back historically, most of the time when you see a turning book and markets, it has required the fed to cut interest rates. that is clearly a very different environment than what we are in

today. our base case is that volatility is to continue until we start to see clear signs of the fed is in a position to cut interest rates. we start to see us moving onto the other side of this economic slowdown we are experiencing today. dani: with that in mind, i've got to bring things back around to the boe again. just to be clear, saying that the boe has properly spoken to bankers about extending the bond purchasing program. that recording coming out over one hour ago. is the fed likely to face the same pressure? this idea of it is not going to be because they tighten enough, that inflation is conquered, but rather it's financial stability at stake which makes the fed reverse course and backtrack? kiran: i think that's part of what markets are concerned about at the moment. if you listen to the commentary from the fed speakers, they do

seem very focused on inflation. back in 2018, there was the autopilot comment that led to a very steep selloff in markets at the end of 2018. there's a feeling in markets that the fed is somewhat on autopilot with the increasing interest rates to tackle inflation. in reality, the significant increase in interest rates will have an effect on different parts of the financial system. i think some acknowledgment for that the fed is aware of those could be the market fears. at the moment, does not look like the fed will continue increasing interest rates. dani: i also was really interested by this story that there had to be hauled withdrawals of a property fund. it is something we've seen from the like of blackrock, schroders. what are you seeing a near end? are you concerned that investors are getting skittish? kiran: there have been some outflows from these areas that people have been invested in,

like real estate. we have seen technology is a popular area in 2021 which has seen outflows as well. from the systemic level where the central banks will be looking out his do we have instances where we have these liquidity mismatches and investors are pulling out of funds and forcing those funds to sell illiquid assets in a market where there are not that many buyers. that dynamic is something central banks will be looking at very closely and as the potential to create negative feedback loops. it is another risk factor to watch out for. this general picture of raising interest rates, having very significant inclinations across the whole system. dani: kiran, we will have to end it there. kiran ganesh, ubs global head of investment communications. let's turn to france where the government is looking to reposition key staff at some petrol depots.

i always want to say gas -- american bias -- and refineries trying to resolve to fuel shortages that have been caused by strikes. long lines have been forming across the country with about one third of gas stations running dry. caroline joins us. how bad is this fuel storage -- shortage? >> it is pretty bad. it has been a struggle for many french car drivers since last friday. you have 31% of gas stations, according to the latest number last night, across the country that are running dry and the situation is even worse than the paris region or the north of france where 45% of gas stations are missing at least one type of fuel. people have been lining up at 3:00 in the morning for hours and hours in order to fuel their tanks.

some regions have had to ration to limit the amount of fuel you can actually get when you managed to find some. some regions have put priority for emergency vehicles. very difficult situation. a lot of anger and frustration across the country at the moment. the strike at three out of six refineries in france has been going on for about two weeks now. today, a fourth refinery in western france, which was not on strike until now, is joining the movement. the more radical union is asking for a 10% pay rise. in fact, some unions have already been negotiating with exxon mobil already. they've managed to get a 6% pay rise, but they say it is not enough. dani: how has the government responded to all of this?

how difficult is this situation for president macron? caroline: the government first responded by relieving this strategy reserves of oil. this can last for up to 19 days, one month and a half. last night, the prime minister went a step forward -- further by acquiring some refineries. this is a legal mechanism that the government can use to ensure continued to eat of public service when there is a serious disruption. this is a very rare legal action from the government. the last time was in 2010 for the same refineries, workers. france was paralyzed by previous pension reform. this is the last thing president

macron writes now at the time of energy crisis. dani: thank you so much. caroline connan in paris. coming up, president biden admits a very slight u.s. recession is possible. but says the u.s. economy is resilient enough to ride out the turbulence. that is next. this is bloomberg. ♪

>> there will be some consequences for what they have done. >> what kind of consequences? suspend all arms sales? >> i will not get into what i consider and what i have in mind, but there will be consequences. dani: u.s. president joe biden lashing out at saudi arabia over

opec-plus oil production cuts. accusing the kingdom of aligning itself with russia. president biden also downplayed the risk of recession in the u.s., saying it is possible any downturn would be very slight. he was asked of american should prepare for a recession and replied, no. for more, let's bring in enda. it is pretty amazing to see biden saying a recession could be on the horizon. there are midterm elections near on the horizon. enda: the first role for any official is to talk of economic competence. nobody in a leadership role wants to mention the r-word. to refer to president biden, he seemed to go out of his way to say why there wouldn't be a recession. it is not forecasting one himself, per se, but did acknowledge the possibility of one and that is enough politically for his credits and enough to feed the economic concerns over the u.s., too.

that story is not just isolated to the political sphere. the u.s. growth forecast was downgraded this week. there's a broad view it will be tricky for the u.s. to pull off a soft landing given the pace of interest rate hikes. president biden is not the only one being asked. in most of the analyst community, you can hear people saying next year, there's the possibility of 30% of a risk of recession. dani: we have the imf yesterday saying that the worst is yet to come. we have debated all year essentially if we get a recession, what will that recession look like? are we seeing banks coalesce around a deep recession or a shallow one as president biden believes it will be? enda: it is a tricky one because broadly speaking, the fed might

be easing up on its rate hikes by now and stepping back to see where things stand but that is not the case. the markets are looking for another 75 basis hike move at the november meeting. fed officials making the point that inflation is not yet what they want it, and it is better to do more with rate hikes. it is no coming down the pipe. the imf interestingly did mention the u.s. liquor market. even though it -- u.s. labor market. even though it is very strong, but the imf is saying those rate hikes will take a while to impact the jobs market. when all of that comes some months from now, that is when you will get a gauge of how much pressure there will be on the u.s. economy. that is that a mystic story. globally, there is a lot of headwinds. china being where it is. europe with the gas prices. there's not much of a global growth driver. there's a lot of pressure on whether or not the fed or other

officials can pull off a soft landing. whether it will be a deep or shallow recession, that is one i will not pretend i have the insight for now. dani: if you and i could figure that out, we would probably have different jobs. enda, thank you. coming up, lvmh sales soared despite the talks of a global recession. we will break that down next. this is bloomberg.

dani: lvmh sales have jumped despite fears of a global recession thanks to wealthy american tourists shopping in europe. sales of the fashion and leather soared 22% in the third quarter, beating analyst expectations. let's get one analyst who nailed

this call from bloomberg intelligence. use all this junk coming in lvmh -- jump jump coming in lvmh's earnings. what allow them to outperform despite expectations? >> 22% growth in the organic side, as you say. that is very much the highest profit area, we expected a big pickup in europe which came on the back of tourism and domestic. some transition from the u.s. over to europe but underlying come of the u.s. is strong and those numbers need to be taken into context. and asia, 6% of the q3. even though we know china is still flat. dani: we were talking to enda about these calls for global recession are stepping up you'd do we have any read across on whether they continue have -- to have the strength if we do get a

recession and generally into 2023? deborah: i think if we are heading towards deep recession, of course, there will be impacts on every part of the economy, including luxury goods. but where we are at the moment, the high spenders are spending. we are not seeing a slowdown. there are some questions on the call on tiffany. tiffany has big u.s. exposure. we saw growth there. the u.s. going from 26% down to 22% down to 11% by q3. that is partly about the u.s. moving to europe to spend. there is a slowdown in silverware for tiffany. but gold is phenomenal. dani: that is lvmh. what sort of reader cross does this give for the luxury sector as a whole? deborah: most of the luxury

sector being based in europe, we've definitely got fx benefits. the lvmh sales saw 800 bits of benefits. that will help with reinvestment into 2023. big pickup in market spend, more social media events. so, it is positive into the third half -- third quarter. they carry most of the fx further into the first half. china reopening more into q4 in the first half of next year. dani: thank you so much for joining us. deborah aitken. that is it for daybreak. ♪ ♪ - if you're thinking about going back to school this is for you. ♪ ♪ - i ended up spending less money my entire time at snhu than i did in just one year at my other university. - my time at snhu has given me more confidence. now i can go for that promotion.

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