dani: this is "bloomberg markets: europe."

happy monday. i am dani burger in london. ukraine, turkey, and the u.n. plan to resume grain shipments. real you -- wheat prices spike. brazil's a dramatic turn -- result's alexion had a dramatic turn. the fed and the boe are expected to boost 75 basis points in the face of stubborn inflation. we starts this monday off the back of a two week rally in this market. it is a strong bear market rally but can it continue in the face of a third fed hike this week? would be the last 75 basis point hike from the fed? the sentiment where getting from goldman sachs is that after we have a higher peak, it might be

around 5% but the pace of getting there is slower. we are seeing weakness when it comes to s&p 500 futures but not surprising to see consolidation after two strong weeks of equity rallies. it is a little weaker in china with some challenging data coming out this morning as well as bad news coming from the real estate sector, a major resignation from one of the top firms there. and you're a stoxx 50 futures up half a percent after the rally on friday. we are seeing yields move back higher. we got back above 4% but for most of the week it was a rally in your u.s. 10 year and the entirety of the bond space. it was the first week in 13 that we saw is lower yields. as goldman sachs, we have a higher peak. that the vergence in yields's ins that we are seeing weakness

coming through the four for the end and wheat prices, russia withdrawing from that safe passage agreement and we have seen wheat prices spike up 5.5%. let's get to all of our reporters from around the world to break down our top stories on the u.k. grain story. he is normally here is the coanchor on "bloomberg daybreak: europe" but manus will join us from the conference at the center of the energy markets. the u.n. and turkiye have agreed to have ukraine wheat exports continue today. for more on this, we are joined by donna because aleuts go and sybilla gross. what does this latest development mean?

can grain shipments keep going or will it be difficult now? >> it is a very good question. nobody knows. yesterday, turkey, the united nations, and ukraine agreed that shipments should still move and today we are expecting ships to come out of ukraine with grain. russia said that it cannot guarantee the safety of passage, so it is a test for the united nations, a test for ukraine, and it is a challenge for russia how to react. dani: and it is also a challenge for the world as we are already seeing higher food prices. have significant business development when it comes to the global grain market and food security -- how significant this development when it comes to the global grain market and purity -- food security? >> it is pretty significant.

ultimately, this is fundamentally telling us the long-term supply prospects out of ukraine are looking poor and this time around, we might not see crop futures jump as much as it did earlier this year. we had no idea the amount of tonnage we would be losing in terms of supply to the market. the countries that do rely on ukraine for that grain will have to source it from elsewhere and that is the real problem, that we do not have much out there. dani: we have heard some news that perhaps turkey, the u.n., ukraine will go ahead with exports. what will that look like today? >> for example, yesterday, already watching ships that were ready to go with 40,000 tons of grain headed to africa. the ukrainian president said yesterday that with the number

of ships that are near ukraine now, 2 million tons of grain can be shipped out of ukraine. mainly the food will go to africa and asia. dani: thank you both for joining us this morning. or reporters on the latest with this wheat story. oil and jazz lower as weak economic data from china fans concerns about energy demand. crude is still up 10% as opec+ makes more sizable cuts. let's get more with manus who is in abu dhabi. tell me about the challenging backdrop for the oil prices at the conference. manus: you have this confidence of impact. it we are talking about price caps from the u.s. on oil.

russian supply coming away from europe, gas prices caps, and at the same time you have a gathering of oil ministers, the saudi's, the nigerians, along with a host of other opec members. we'll opec+ do another cut? is there a part of what will be discussed here at the conference is in abu dhabi? that is on the supply side. we just had a conversation with claudia who made it clear that we have got a temporary sticking guest or on the energy prices in europe and he also sounded skeptical that you are going to get a price cap delivered because it is not a homogenous beast. politics between the u.s. and saudi arabia have fractured the relationship, the supply on the opec side, and the china data that we got this morning fuels the slowdown.

dani: at the same time you spoke to eni and there will be a lot of oil majors at the conference. what do you expect coming from them? manus: if you read the stories on exxon and chevron, $30 billion terms of office for this quarter, you are looking at record profits. they are trading gas at 2 billion bucks in the space of nine months. there are a number of elements that go into that, but chevron is treating -- trading, bp is trading, the trading desks of these houses feast on volatility. they wrap and roll in terms of rampant markets. their job is to manage the trade of the flow but there is also the accusation that one could put to the ceo, you have the responsibility to bear in terms of the volatility on these

products and otc. the majors are part of the volatility, they are part of these exploding prices and liquidity. to a certain extent, the rampant role in gas prices is delivered by trading desks, not deep constrictions in the markets. otherwise it wouldn't be down 65% from the hike. dani: that is our very own manus cranny. moving to the world of geopolitics, luis ignacio lula da silva has won the brazilian election after narrowly beating jair bolsonaro in a comeback. beat the incumbent with 59% of the vote but bolsonaro has not yet conceded. >> luis exhaust see over lula da silva has made a dramatic comeback. he won the election by a narrow

mark, saying in a speech that the economy must improve everyone's alive. -- everyone's lives. the initial reaction was positive, perhaps a nod to the close election that may move the leftist president to a more economic center. lula says brazil will regain its credibility to learn investors -- lure investors. dani: let's take a look at the market reaction. japanese listed etf that tracks the brazilian index was at one point up 4%, but it is a light volume on this, not the most heavily traded thing, but still indicating a positive than the brazilian equity market.

let's look at other key things we will be watching out for. today we will get euro area cpi at 10:00 a.m. u.k. time. philip lane is also due to speak at an event in copenhagen. on tuesday is china's manufacturing pmi and australia's rates decisions followed by the fed decision on wednesday. we are expecting a 75 basis point hike for a fourth straight meeting, and that is not all when it comes to the rate hikes. he also have the boe decision on thursday and the u.s. data on jobless came -- claims. it is a jobs week. employees are expected to have added 200,000 jobs in the month. coming up next, we will talk about all of it with yves bonzon , julius baer cio. plus, lula da silva nearly wins

a presidential comeback. -- narrowly wins a presidential comeback. this is bloomberg. ♪

>> right now, all central banks are playing tough. >> the message is skittish as the fed pulls away the punch bowl of easy money. >> we want fiscal dominance in this game of chicken between the treasury and the central banks. >> it is a fed driven downturn that we are seeing. it is going to take the fed to correct it. >> may be the fed could make a signal of a smaller increment of rate hikes next week. >> the labor market is still strong but it requires a fed that has a lot more skill and luck. >> that means you need to see

higher unemployment and if that is the goal, they are fairly miserable. dani: some of the guests of the week on bloomberg tv's responding to our bloomberg life pull survey ahead of this week's fed decision. we are joined by yves bonzon, cio of julius baer. thank you for joining us. i want to start with a message that we got from goldman sachs because let's me read it to you. they writes that powell will likely note that the fomc aims to move deliberately but more cautiously now that fund rates artisan and restrictive territory and that the full impact of the economy on the very large tightening and financial conditions to date is not clear. they wrap this up by saying that the peak will be higher at 5%. what do you make of that? will this be a slower but higher

peak fed? yves: i think so, although i am not sure that this is a straightforward manner. the fed wants to tighten. they understand a lag between tightening of the transmission of the tightening to the system. so far the system has been resilient, far more than i ever expected in terms of absorbing such a rapid cost because of capital. i think the fed will deliver what the markets expect as it usually does. the question is what then? then the market is pricing a range of 5% for fund rates. this is a massive tightening cycle, one of the fastest and essentially it is in the prime right now. do not forget that above and beyond federal rates, qt continues. even if the fed polls, the tightening continues.

dani: have we fully digested that? markets might be pricing in 5% but do we truly understand the impact of that plus continue qt? yves: the interest rate move is in the price. the question is how will capital markets in the economy absorb qt? it is a function of bank lending. bank lending has accelerated to below double-digit growth year on year recently. that validates the need for qt and enables the markets and the economy to absorb that. that is the one key step to track in the winter, is actually banking, commercial and industrial loaning. dani: can the world handle more debt? it already feels like a world awash in too many bonds and not

enough buyers? yves: that is precisely the reason why there is a limit to that prime rate cycle and everyone, starting with the s&p 500, understands this. there is no way we can endlessly tighten policy without something to break in the system. dani: what does that break look like? yves: we do not have any evidence of something breaking it. but we have evidence of a system that is resilient and has adjusted to this rapid adjustment in the course of capital. we have accelerated extreme financial repression, i financial repression of the momentary time that will continue for years to come because of the record amounts of debt. dani: speaking of that resilience, looking at what the equity has done the past few weeks have felt remarkable given the risks that lay ahead, the

tightening cycle, the earnings season that. has been inconsistent. what do you make of this rally? yves: we think 3490 on the s&p 500 at the opening after the september cpi was published was probably the low for the year. we think unlike the bear market rally of the summer, the rally has legs and we carry this willingly into 2023. if you look at earnings, and the market digested this last week, it would be a mistake to make a read across from the results of the digital platforms for the broader market. to a large extent, what happens to the leading u.s. -- is self-inflicted. this year, capital expenditure on the s&p 500 has increased to 25%, more than double the basis

of rate increases, and the digital of those forms have been responsive to a large extent for a big chunk of that capital expenditure increase. this is starting to pressure their historically unmatched ability to produce free cash flow. if you look at the broader market, it is a season of earnings disclosure. you have some very good results, which are hardly making the headlines, and you have some disappointment. the boot -- mood is bearish. i think there is a bias towards negativity. but it is more nuanced than that in terms of corporate profits. dani: looking at someone like amazon saying that our holiday season will be the weakest on record, they have overspent when it comes to their distribution

channels, but can you not extrapolate something from the american consumer if you are looking at someone like amazon that is a big powerhouse when it comes to consumer goods seeing a slower peak holiday season? yves: we had in the wake of all of this distortion produced by the ups and downs during the pandemic, we had it during the reopening phase of the economy, a bubble in goods consumption. we are in the phase where that excess of goods consumed is in the process of normalizing. of course, leading retailers and amazon is one of them are at the forefront of that adjustment. if you add to this the capex issue that i just mentioned, it is here that the company faces significant headwinds. dani: can i take you through this four day time span and get

your take on what lays ahead is the biggest risk? we have the fed decision, then the bank of england decision. two days later, we get a jobs report, and then we have the midterm elections in the u.s. followed by the cpi release. that feels like a challenging calendar. is there anything on there that you would say is a big risk event? julius baer the biggest -- yves: the biggest risk is clearly the cpi for october because the market has been able so far to absorb the cpi disappointments including the latest in september. from october onwards, there is expectation that inflation starts to behave much better. if we have again a disappointment on this for reasons that we have not expected, that could be a trigger. dani: thank you so much for joining us this morning. yves bonzon, cio at julius baer.

coming up, we get an update on what is moving asia markets today. this is bloomberg. ♪

dani: welcome back to "bloomberg markets: europe."

let's get to the first word news with simone foxman's and ohana -- simone foxman in doha. >> we to exports have surged after russia exits a packed for the trade route along the sea. ukraine, turkey, and the u.n. have agreed that vessels carrying food from craney imports should sale on monday, pushing back against russia's decision. south korea's president has visited an altar set up to mourn the 150 people killed in a crowd crush on saturday. tragedy happened in a narrow alley as tens of thousands celebrated halloween, the first such festivities since covid restrictions were lifted last month. nearly 100 of those killed were

women and at least 26 were foreigners. reports now say more than 140 people were killed when a pedestrian bridge collapsed in the western indian state of gujarat. hundreds were said to be on the suspension bridge when it gave way with many still missing. no immediate cause has been given for the collapse but local reports say the colonial era bridge had just reopened after renovations. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani. dani: thank you so much. simone foxman in doha. we are looking at futures slightly weaker when it comes to the u.s. but this comes off the back of a two week rally. we were just talking to yves bonzon who said that this bear market rally does not look like the past one.

this one actually has legs paid he says that october low of 3490 was likely the low for this market. it is a difficult week. he said that we might see getting near those lows but in general, we are looking at this idea of a step down from the fed that perhaps they go 75 basis points, but after that the pace will be slower. it is an equity market that is resilient. coming up, we will talk about brazil and lula da silva narrowly winning the presidential election in a narrow come back. we will discuss what that means for

dani: good morning and happy monday.

this is "bloomberg daybreak: europe." i am dani burger. ukraine, turkey, and the u.n. plan to resume great -- grain shipments after washer -- russia withdraws from a safety plan. plus, a week of jumbo hikes. the fed and the boe are expected to boost rates by 75 basis points, defying mounting recession risks in the face of stubborn recession. despite that expectation for 75 basis points, we have goldman sachs saying that after that, the pace will slow. this is backed up by yves bonzon , cio of julius baer. we had two weeks of rallying for u.s. equities. it is gains when it comes to

europe and the msci asia pacific index. we will get more from annabelle droulers in a moment. yields are moving higher in the u.s., bringing back above 4% for the u.s. 10 year yield, but yesterday was the first day of lower yields in 13 weeks. it is that step down there that is taking hold. this also means there is a weaker yen looking at the interest-rate differential. finally, wheat prices are surging after russia backed out of the safe passage deal and we are still expecting weeds to be moving through out of ukraine thanks to the u.n. and turkey. they are starting the week on the front foot, rising for a fourth session out of the past. annabel, walk us through those moves. >> in the session today, we are fairly risk on across the board. you can see that every single equity market is in the green, a

picture of how much traders are still focused on those corporate earnings out of the u.s., the likes of apple, caterpillar, hoping to avoid that. in terms of the lagger, the csi 300 extending its losses into the afternoon trade and also reflected in what we are seeing in the yuan as well. not just the story of dollar strength, but also what is happening in the fundamentals of china's economy because we got pmi data out earlier. we saw the services and manufacturing gauge, both slipping below 50, so an indication of just how much impact this covid zero policy is continuing to have. in terms of the reaction from economist, hsbc says you will need to see more policy easing to try to shore up growth. mizuho is also another saying that it shows just how much industrial demand is slowing not

only is in the country but offshore as well and also the impact of covid curbs because this was a period where we saw more covid lockdowns across the country. and also ing saying that if you look at the numbers, wait for november because worse is to come. dani: it is not just covid. we have also seen distress in china's property sector. annabelle: this has been a big corporate story for us. this stock at the top is the 10th biggest developer in china. their chairperson stepped down today, so it was an unexpected move for the markets and we saw other selling off as well. there are a lot of question marks around why she stepped it down given this is a sector in crisis. we are also seeing the metals space declining for developers and pmi data. dani: thank you.

let's turn to brazil where luis not seo -- luis exhaust see a lula da silva has narrowly won the election in a dramatic comeback. he had a comeback with 59% of the votes but bolsonaro has not yet conceded. let's speak to bloomberg's roderigo. what does this win mean for south america's largest economy? >> this is an amazing comeback from a political point of view. he was imprisoned for 580 days, and one thing that is clear from this election is that both candidates had a huge level of rejection from voters. the thing that supported lula was that he thought to build a very wide support base with people who were not his traditional supporters as well. to put that into context, his

vice president is someone who was his main rival when he was president many years ago. he tried during the election campaign to reach out and get over that rejection she had. -- he had. will this continue in his government? will he try to govern with only his people in his party or will he try to amplify his support and try to support himself on the center-right as well as on his traditional base? dani: you are a tv professional, quick acting to get that back in parade a what happens next with bolsonaro because we have not heard from the present yet? >> that is the million-dollar question. he has locked himself up with very close and tight group of people. in the build-up to the election,

there has been a lot of noise about how he is going to behave. there have been times -- claims from his camp that there was fraud and the mandatory advertising space for candidates. there was noise about how certain personal security forces were going to react if he did not win because he has a strong base in those forces, so what is next? will he come out and say, i concede, or will he try to fight this either on the street, in court, or in some other way? someone who worked with him in parliament said already that they had to concede victory to lula. will he do the same? he has always established himself as an antiestablishment person. dani: thank you.

joining us now to get more into this is eimear daly, emerging-market macro strategist at natwest. i want to start with where roderigo left off. tell me about the swing factor of potentially a contested election if bolsonaro does go that route. eimear: that is a real risk for this. we think there is a little economic diversions between the two candidates even they face significant hardship in terms of economic realities. the risk is will we have an easy transition of power? markets right now are focused on what bolsonaro actually does. his silence at the moment is deafening. some media reports say that he will not contest this. we had reports on friday effectively saying that he would respect that one vote off the majority would see a handoff to

his rival. definitely, a contested election would be the most negative for brazil. dani: this is interesting in terms of how a different president will change things because we have seen the rial, one of the best-performing currencies to date. is this bigger than the political story? eimear: these are very unorthodox candidates for different reasons, but in this -- there is a lot happening in the global economic divine meant -- environment. as a rates strategist, you are looking at, what is the real interest rate? brazil is offering investors the highest real interest rate in emerging markets. it has got a resilient trade position. it has got a positive balance of payments and that is improving. we think the ability of any new candidate who may stumble that is limited.

i think both candidates do not have the federal ability to enact policy. they have to answer to a congress and they are capped by a significant spending cap. dani: and latin america in general has the benefit of being some of the countries to start the rate hike cycle, but what about the political risk of a fiscal government who wants to do more spending? we have seen it in other nations where in a cost-of-living crisis, you want to spend more. does this question of funding of potentially acting differently from the monetary authorities, is that a risk at all? eimear: in this environment, that is the key risk, if you are running a current account deficit and then you want to run a fiscal deficit, the investors will want to run for the borders. we did season his investment -- acceptance speech that we want to boast the -- he campaigned on

a very leftist and fiscal expansionary campaign trail. he was much more pragmatic when he came to power and he is building a broad coalition of bolsonaro's opponents. his running mate is someone who was formerly an opponent of his and has a lot more credibility, so the real signs that are coming through from lula our pragmatic and it is one of the countries where we do not see much risk. dani: want to take you to the other side of the world in ukraine and wheat. russia is pulling out of the safe passage agreement. we have seen wheat prices spike a new. when we get continued price pressure in wheat, what nations are the most vulnerable? eimear: this is the key risk going into 2023.

the big risk is a food prices and especially in terms of fertilizer prices which are higher. we will see global central banks pivot away from to just keep hiking endlessly. that risk is higher food prices and it is in the space that is most at risk because they have higher current account deficits and there is that risk of fiscal service. dani: how do you square the two with more inflation coming from food prices but central banks starts to back off the aggressive rate hike cycle? eimear: it is aggressive in terms of the real rate you are offering to investors and that is most pronounced in seen the outlook. if you look at hiking over 1000 basis points, real interest rates are still negative. what we are most concerned about is poland.

we think we are coming into an election year where the ruling party is campaigning on, we are going to do increased outlays, increased military spending. they have not indicated anything that will fund that. we look at increasing all of the bond issuance next year and their current account is significantly wide because of the higher food and energy costs. we have enacted -- by the bond market. we also think there is value in terms of along euro starting position. test traded down recently because of speculation that the central bank has intervened to make it expensive to shorten the currency. we think it is just a happy coincidence and it is a great entry-level position for that. dani: thank you for joining us this morning. eimear daly, emerging markets

macro strategist at natwest markets. coming up on the program, energy ministers are all at adipec this week. we are live from the conference in abu dhabi next. this is bloomberg. ♪ and it's easier than ever to■ get your projects done right. inside, outside, big or small, angi helps you find the right so for whatever you need done. with angi, you can connect with and see ratings and reviews. just search or scroll to see upf on hundreds of projects. and when you book and pay throug you're covered by our happiness it's easy to make your home an a check out angi.com today. angi... and done.

>> free market is always the best solution and if you're trying to fix the market against all of the anti-competition laws that the europeans put on buyers and sellers, they are now doing it themselves. >> so you are saying it is hypocritical? >> it is a bit hypocritical. dani: that was qatar's energy

ministers speaking exclusively to bloomberg. he told us it may be challenging for europe to meet next year's energy demand. for more, let's bring in manus cranny who is at the adipec energy summit. it is a contentious time in these markets, a difficult time looking at opec+ cuts. how tight is the market at this moment? manus: take it from an oil man, not from a former broker. they are very tight. they are expecting to million barrels a day to come off the european market as a result of the next set of sanctions, which will come into play on december 5. when you look at the issues at play, it is a symphony of voices. on the supply side is opec+ who have already cut by 2 million barrels. we are talking about price caps

with the u.s. and g7 that are trying to implement that on oil, and there has been much for verification for the european context. they have been talking about price caps on gas for some six months. it is a fractious conversation without a coherent answer. in terms of the price cap, they are still talking about those. the issue is the supply. we have got a plaster across the supply issue for this winter. but 2023 could be tricky. >> it is a temporary situation one because we were able in europe to figure out storage. with all of the storage now ready to face the wintertime, the price has come down. we have a problem in 2023 because we do not have russian gas. manus: you might have a cup that

runs over in 2022, but going into 2023, there will be the same scramble. europe has essentially reduced its overall dependence on russian gas and that has fallen considerably and prices have crashed. the question is, does that endure? omv had signed a deal for an lng shipment. everyone is pushing for more access on the qatari's are talking about the hypocrisy of price caps. there is a lot of discussion at play here. politics take a feature as well. dani: that is exactly where i wanted to go next because we had antony blinken last week talking about recalibrating saudi ties and the way that better reflected our own interest. what is the mood music when it

comes to this u.s.-saudi relationship and its effect on the oil markets? yves: -- manus: the mood music is sour, fractious. the question is, where is the offramp? if the trip biden made was not all about oil, why are we suddenly considering recalibrating the u.s. relationship with saudi arabia as a direct result of opec+ cutting production? so it wasn't about oil, it is a strange reaction, isn't it? that relationship -- they will repair, rebuild. having this commentary about saudi first, that nuance is about where your country, urination nation, your people, the government wants to be -- your country, your nation, your

people, the government wants to be is in the future. we are at a pivotal movement in u.s.-saudi relations, a pivotal movement in terms of geopolitical dani: relations what conversations you have on the docket? manus: one of saudi arabia's biggest customers is india. the indian oil minister joins me at 8:30 u.k. time, 12:30 this time. we will have the consumer conversation from india, where they fit in. we will also have a most hochstein who will join me tomorrow if he is still in town. and shipping and spreads,

whether they're crack spreads or anything else, we will have a conversation with the vitol ceo later on today in terms of oil and gas and in terms of his view of how tight this market is. we are in a penthouse position here. this is a penthouse position, a thoroughfare of busy oil executives and staff entertaining the coffee. i have got the best pitch at adipec. dani: you deserve nothing less with all of the work that you do. manus cranny live at the adipec summit. coming up on the program, we will talk about credit suisse who is said to have 20 banks for a rates rise issue. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i am dani burger in london. bloomberg has learned that credit suisse has invited 20 banks to take part in its $4 billion rights issue. jp morgan is among those being courted. saudi national bank has already committed to roughly one third of the offer, becoming a big shareholder in the bank. the snb in speaking to bloomberg did say that, we are optimistic if they deliver on the turnaround plan, this will make an interesting accretion on standalone basis. they also turned -- told bloomberg that they are ruling out raising their stake for now. they are optimistic on the turnaround plan, there are 9.9%, but at this age, quotes, we are not interested in moving from a technical shareholder to a different category in terms of

our relationship with credit suisse. credit suisse trying to promote more backers, more equities with a capital increase, but for now the saudi national bank staying put at their 9.9% holding. let's look at other key things we are watching out for throughout the week. today, we get euro area cpi. philip lane is also due to speak at an event in copenhagen later. on tuesday is china's manufacturing pmi and the australian rates decision. we will also get the fed decision on wednesday. they are expected to raise rates by 75 basis points but now the talk is, is this the last 75 basis point meeting? then on thursday, it is the boe rates decision and we also get u.s. data on initial jobless claims. rounding all of that busy week

off is u.s. nonfarm payrolls. we are expecting to see employers adding 200,000 jobs in october. i want to lead on this point because something to mention when it comes to the 75 basis points, yields move higher at the moment, but goldman sachs now expects the fed to raise interest rates 5% by march -- to 5% in march, i should say. we will get you a 5% peak but the pace of that will be smaller. they will move more deliberately and cautiously now that they are already in a restrictive rates territory. he said that is the reason that we have seen this bottom in the market so that the equities can continue. this is bloomberg. ♪

>> good morning and welcome "bloomber markets: