dani: good morning.

this is "bloomberg daybreak: europe", i'm dani burger in london with the stories that set your agenda. risk waivers, stocks and futures and mostly lower as fears of recession over shadow steps by hong kong to relax curbs. nuclear threat. vladimir putin thousand to defend russia using all available means, stopping short of pledging not to be the first to use atomic weapons. plus, elon musk weighs margin loans backed by tesla stock to reduce the debt took on by the billionaire to buy twitter. the month of weirdness in the market continues, a month that failed to find a bid for stocks, but a very strong bid for treasuries. the risks are twofold, what is geopolitics, the other is inflationary or lack of inflationary. on the geopolitics side, we will get into this with maria tadeo

in just a moment but the risk of nuclear war is rising. but the inflationary one where growth revised lower yesterday. you get 10-year yield's higher morning, but they slipped to the lowest since september. oil for the first time, we are finally seeing some movement higher albeit not that much higher, we are about .7% higher on nymex. but it has tumbled four consecutive days, the most since march of this year. is it growth concerns instead that is winning out in oil? s&p 500 futures continue to fall, down by only .1%, it is the longest stretch of down days for the s&p 500 since 2011 to start a month. is a down here for stocks, it is a weird end of year, don't forget there is hedging, tax laws, a lot of stuff going on

that makes it difficult to get a clean narrative. hong kong tech is up 20% in the past 10 days. it moves higher yet again this morning, up nearly 5% with report suggesting hong kong may end the outdoor mask rule and shorten its isolation period. so, a strong bid for risk in at least one part of this market. let's get to our top stories and our reporters from around the world. we will discuss what reboot into -- discuss vladimir putin's nuclear warning and discuss elon musk's twitter takeover. president putin has called moscow's nuclear arsenal a deterrent factor during televised comments. he won that the risk of nuclear war in the world is rising. joining us now is maria tadeo, how seriously should we take these comments? >> you always have to take this seriously. the potential for nuclear war, just even the word scares many diplomats in the western world

. it's something you don't trade lightly and we as reporters should not either. i will point to two things, this is not the first time we hear that kind of comment from vladimir putin. this idea that a country with nuclear weapons cannot lose a war because the potential for destruction is so big. we know that when it goes badly on the battlefield for russia, he goes back to this idea of we have big weapons we can use, and we still have not tried, so a lot of this is verbal escalation. that is the one hand, the other is this energy war which continues to weigh not just for continental europe, but also for ukraine. dani, yesterday we spoke to a ceo they are about the very dramatic situation in the country. >> we have mass destruction of our facilities, power generation facilities, transmission lines,

substations, transformers. as of today we have about 30-40% deficit in power supply, for example, kyiv today have about 38% of deficit in power. we have blackouts. >> that was the dtek ceo. and what a dramatic situation, 2022 with no heating, and blackouts are just ongoing. they fix something but russia destroys it again. and we talk about the potential for people to freeze to death. this is something that is incredible, and we have to highlight it. dani: it's important not to lose sight of, and especially important given the weather and how cold it has become. maria helping us highlight all of that, bloomberg's maria tadeo. two other geopolitics we're covering, saudi and chinese

companies have signed 34 investment agreements. that's happening as president xi jinping visits riyadh, let's get more with yousef gamal el-din, this visit, what are they planning to discuss? what might be the outcome when it comes to these deals? >> it's a long list of items in terms of the agenda. we expect quite a few meetings not just between saudis and the chinese, but also they will widen it out to other gulf leaders in the next 24 hours or so. what i would highlight is about $90 billion as of 2021, that is three times with the bilateral trade relationship is with the united states. that being said, the u.s. relationship is important because most of saudi arabia's defense framework is built with u.s. weapons. and it's also maintained by u.s. specialists. saudi arabia is in a bit of a sweet spot, and the conversation i had this morning with experts including from eurasia, is

basically that saudi arabia is getting closer to china and russia in leverage with saudi arabia to get to the united states and ask for more commitments. this is an old playbook, we'd seen this in the past in terms of the cold war, nothing new for diplomacy, but it will raise the stakes for the united states. rumor that awkward fist bump during president joe biden's visit, probably we are not going to see anything like that with the chinese president and the saudi crown prince, but we are waiting for more detail on these investment deals. and how far into the military portion of saudi arabia at chinese investments go. dani: and it does come at a precarious time as you highlight, also a bill is making its way through the house and in the u.s. that would allow weapons sales of up to $10 billion to taiwan, so tensions

feel high. yousef gamal el-din, our anchor in dubai. bloomberg has learned banks which backed elon musk's twitter takeover are providing him with new margin loans backed by tesla stock. new markets correspondent kriti gupta joins us with details, i'm sure tesla shareholders are not thrilled, how would this work? >> they are not, but there is a lot of risk, we are looking at $1.2 billion in annual costs, 13 $2 billion in financing from morgan stanley to socgen, now it is at a point where they cannot advertise to institutional advertisers. so they are taking a lot of risk by themselves, and that is what they are trying to eliminate. they would swap about $12.5 million of twitter debt for those margin loans backed by tesla stock. it would be a pretty precarious for tesla investors and potentially for the s&p 500 given that tesla is a heavy, but something they are considering

to eliminate that twitter risk. dani: i think it is the eighth biggest member in the s&p 500, so how are people looking at this if they are invested in the index? >> we talked a lot about that twitter and tesla inverse correlation, before it was taken private when twitter shares rallied getting close to that $54 20 amount per share, tesla shares would work in reverse. the idea being that elon musk's split attention would not do either company any good, but we have to listen to the pro's. james anderson weighed in, listen to what he had to say. >> it is much more about the worries of the financing structure. his ownership of tesla is truly interesting. how far despite the many departures, it has become a very fine functioning machine well beyond elon's personal attention at anyone moment. >> and that is the game changer

james was talking about, everyone has been following the saga, but at the core is governance. that is why they are trying to weigh options and see if in the new york, he alone is able to show productivity. dani: anderson is famous for buying tesla early, so he probably would no a thing or two. kriti gupta giving us the latest on all things musk. let's look at some key things we're going to be watching out for the rest of today. 1:30 p.m. u.k. time, we have u.s. initial jobless claims. this is a market that is very jittery, vulnerable to any movement, that will be closely watched. in the ecb's villaroy will be speaking at the toulouse school of economics. also today, some 2000 london bus drivers are due to strike, the latest stoppages that have hobbled public transportation in the u.k.

later we will have results from costco, and chipmaker broadcom, important for the retail and chipmaking sector. this is bloomberg. ♪ the only smart bed in the world that actively cools, warms and effortlessly responds to both of you. our smart sleepers get 28 minutes more restful sleep per night. proven quality sleep. only from sleep number.

dani: more incremental news when it comes to covid zero easing, a line breaking that shanghai will be scrapping covid test requirements for dining services. this comes off the back of reports that hong kong would be easing some measures, they might end outdoor masking as well as shorten the isolation period. chinese stocks not moving too much at this moment, but hong kong tech shares continue to soar. amid all the china news, the other big factor this market is

weighing is the recession trade in the u.s. not in itself along with some other impulses has meant this big relief rally on the bond market. you can see over a one-month time horizon, yields plunging to new lows. you are looking at the front end of the curve down 60 basis points, but it is about that duration play. in's the p, 10-year yields are down 100 basis points. your 2-year yield is below 3.5% for the first time since september. joining us to help do that is henrietta pacquement, head of the global fixed income team at allspring global investments. this swoon in yields, has it gone too far? henrietta: it's been quick, and it's an exercise we have already seen before this summer. so i don't think it is meant to be a straight-line, because if

you look at what is happening, there are signals that the economy is slowing down. more so in europe than the u.s., but we are seeing cracks in the system. if you look at the housing market. but you still have employment is very strong. so you do still have tension between the worry about inflation and growth, at the moment, the worry about growth is front of inflation -- about growth is stronger than inflation. dani: do we actually need to see those cracks and the labor market, or does it make sense to get ahead of this trade? henrietta: you need to pick your moments. when there are opportunities to jump in, as we had in autumn this year courtesy of movements we saw in the u.k., and you had rates going up maybe more than they should have at that point, that's a point to jump in. but looking into next year,

signals are difficult, particularly on the good side, maybe more than on the services side. so it make sense to have those kinds of trades there. what's interesting is to look at the short end of the bond markets. they are because you have got more priced in in terms of hikes going forward. you've got yield, some spread as well if you look at the credit markets. so if you're looking for something that may be less volatile, that's a great place at the moment. dani: it's this idea that tina is dead, there is an alternative, it is the yield you can get in the front end of the curve. you mentioned yields can come down, but it will be a straight-line, it might be bumpy, i wonder what you are thinking for the end point. steven major who has had bold calls around this market that have played out, he things the 10-year yield will go to 2.5% by

year-end next year, and by 2024, it will go to 2%, can you see yields falling that low? henrietta: it's a possibility. if we have this slowing of the economy, you're in a situation where fiscal support, central-bank support is likely to come more slowly than it has in the past. as a result, the coming out of the slowdown in momentum next year is likely to be lackluster. that would suggest lower rates going forward. if you do get more of a surprise on the inflation side and it comes down faster than people are expecting now, and central banks are a little slower to react, and governments because of the debt load at the moment are slower on the fiscal side to re-accelerate the economy. you can see rates going down. dani: i'm wondering, when we are

through this rate hike cycle, if we'll actually get back to that low inflation regime. will we go back to that same playbook we were using before covid started to inject these inflationary pressures into the economy? for what will be permanent and what will be scarring? henrietta: i'd be awfully surprised if we go back to the levels we went to around the covid period. that was quite a unique set of circumstances. and if you look at the inflation trend, there are questions about how persistent it's going to be. if you look into next year, the winter of '23 is likely to still be challenging if the conflict in europe is still going. we seem to have done a good job sorting ourselves out this winter. but if it continues next winter

is still going to be a challenge. if you look at some of the interaction between the u.s. and china, if you see -- decoupling is too strong a word -- but tensions continue there, that could also be inflationary going forward. i don't think we're going back to the last 10 years, we had acute financial repression so i think you'll have a more normal interest-rate environment going forward. dani: also within the oddities of this cycle, has been a lack of a default cycle in covid, mostly due to the support many corporates in this economy were getting from the fiscal side, we didn't have that big a default wave. as rates go up, what do you expect people to look like for 2023? henrietta: yes, absolutely, during cover there was a big

push to keep companies afloat regardless of the kind of credit rating, the sector they were in. i think that support has ebbed away. and we're not going to see that. so, we would expect more downgrades and defaults to pick up over the course of next year. that being said, companies have done a good job turning out there debt. so, the sort of maturity war that is more towards 2024-2025, so i do think we have a bit of breathing space, but the direction of travel is more downgrades going forward. dani: what does that mean for how you want to pick and choose in this bond market? how picky do you need to be? henrietta: focus on security selection. do your homework, have a look at the companies you are investing in, that is going to be very important going forward.

you have to be a little cautious as you go down the credit curve as well. and be more attentive at that end of the market. if you look at yields at the moment on the investment grade side, they are pretty attractive. that's a good place to look. the higher end of the yield markets. the deeper you go, the more challenging is going to get. dani: okay, henrietta, thank you for helping us navigate that challenging environment. henrietta pacquement, senior portfolio manager and head of the global fixed income team at allspring global investments u.k. shanghai is pulling back restrictions, scrapping test requirements for dine in services, we are now looking at the csi 300. that is now down just .1%, it was down more dramatically but macau stocks getting a big old boost off the back of that.

what you're looking at is the index for macau, for those casino shares, they have risen as much as 10%, 10.5% i should say. they are now up 11.5%. we heard earlier in the week from goldman sachs saying only 40% of the reopening story is priced in, so more might be to come. coming up, the new york times reports ftx founder sam bankman-fried to face a market manipulation inquiry. we're going to get more on that story next. this is bloomberg. ♪

>> we need to regulate crypto at the global level. anyone reading headlines has to be more than cautious about crypto, and that is no bad thing. too many entered the space thinking the only way was up, and we know that what goes up can come down, and in this case,

can crash. dani: the eu financial services commissioner talking about the need to regulate crypto. federal prosecutors are investigating whether sam bankman-fried and his hedge fund orchestrated trades in a way that led to the collapse of two cryptocurrencies in may. i can barely remember yesterday, let alone make, what are the details here? >> okay, this is about the terra luna collapse in may. there was a $60 billion implosion. these prosecutors are now looking at the possibility, according to the new york times, that sam bankman-fried may have manipulated prices of the terraust crypto coin and that luna cryptocurrency two benefit entities he controlled. the new york times says it is a very preliminary investigation.

bankman-fried says he did not knowingly do anything that was manipulation, so we will see where it comes out. but this would be very interesting because you had this happen in may. the cryptocurrency industry never really recovered. the implosion of three arrows after that, you had all these bankruptcies with lenders, and you even had the bankruptcy of ftx at the end of it. it will be very interesting to see what the outcome is, and see whether there is any role here. dani: it's not just this in itself, this just heaps on top of other legal troubles sam bankman-fried is facing. where do we stand into the look into ftx? >> yeah, one of the big developments overnight is the u.s. senate are now looking at getting sam bankman-fried to testify. the senate banking committee has sent him a letter saying they

like his testimony on december 14. we know the house financial services committee is looking at the 13th. neither one has subpoenaed him yet, but both are saying that is a possibility. he hasn't committed to the one on 13th, he says he needs to study more and figure out what happened. but they are now pressing him to appear before those house and senate committees. dani: okay, joanna, thank you very much, bloomberg senior crypto reporter bringing us the latest on ftx. bitcoin is now trading below $17,000. it's hard to digest how much of that is because of crypto troubles. the contagion from ftx, or general unwind of risk trades. i want to mention continue to see asia and china stocks moving higher, the csi 300 raising losses, we have barely seen any down days since we have had this

reopening trade come into the markets. one of the weirdness is it is not playing through crude that much, the third as it is nymex crude, it is down the most for four consecutive days since 2011. it's this unwind despite the fact that china might be bringing a lot of demand into markets. it is one of these errant trades we have been trying to track. dutch officials are planning new controls on exports of chipmaking equipment coming to china. we will have more on that story for you next. this is bloomberg. ♪

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indymac good morning, this is

"bloomberg daybreak: europe". risk waivers, global equities edge mostly over about recession fears overshadowing hong kong steps to relax covid curbs. nuclear risk, vladimir putin warns that the threat of nuclear war is rising and says conflict in ukraine may be prolonged. plus, elon musk's thinkers way margin loans backed by intesa stock. understands that dutch officials are planning new controls on exports of chipmaking equipment to china. these new measures would align the netherlands trade rules with u.s. efforts to restrict beijing's access to high-end technology. joining us now to help us make sense of it is bruce. bruce, we have these controls coming from the u.s., what would be the significance of having the dutch sign on? bruce: the dutch matter, because

the netherlands and japan, along with the u.s. are the major exporters of equipment that makes semiconductors. semiconductor many for equipment. the u.s. imposed additional restrictions on china in october. and so, people familiar with the matter say that the netherlands is now moving toward imposing similar restrictions. those would significantly affect asml. the major dutch company which, last year, got about 15% of its revenue from china. the u.s. has been trying to restrict china's ability to develop into semiconductor industry and this will go a long way toward that. dani: the u.s. itself is also looking at potentially passing even more regulations when it comes to china and make inductors. i know a bill is making its way

through the u.s. congress right now, not just about that, also taiwan related. what is the potential legislation and how would it be received from beijing? bruce: this is legislation that is considered to be must pass legislation. it is the annual defense authorization act. it is something that congress always passes, likely to see action on it within the next few days on the house, i think they are scheduled to vote today. in this must pass legislation, there is going to be additional military assistance to taiwan that could be worth as much as $10 billion. this comes just shortly after news that the u.s. is providing additional patriot missiles, more sophisticated missiles to taiwan. it also comes in a year when u.s. china relations have been strained because of taiwan. of course, house speaker nancy

pelosi made a visit to taiwan and had a pretty intense reaction to that in china. we just recently had the meeting between the two presidents, president biden and president xi jinping. we try to put u.s. relations on a bit of a different path, an easing of tensions. so we will see how this affects that. one important thing to keep in mind, it could have been much worse from china's perspective earlier this year. there was a proposal from a proposal from senator bob menendez, chairman of the foreign relations committee and lindsey graham, the raking republican, that would upgrade taiwan's status to a non-nato ally. that is not going to be in this legislation. that may be something that alleviates some of the concerns from beijing. dani: thank. bloomberg's bruce einhorn they're from hong kong. joining us now is joyce chan, chair of global research at jp morgan. this is something you closely

study, the relations between u.s. and china, not the geopolitical front but the trade front as well. i love that you flagged that u.s. foreign direct investment into china hit an all-time high last year. what is the threat, if at all, of that decoupling over some of this noise coming from taiwan for example? joyce: great to be with you. right now, deglobalization is not yet a reality. it is a rising risk. at the end of 2021, we saw record u.s. foreign direct investment into china. we have also seen the exports from china increase. you have a massive increase in 2021, it is more keeping those gains right now. we haven't seen deglobalization. u.s. and china tensions still remain very much on the radar. taking a look at what is -- there is actually 802 bills that deal with china right now. there is what we're doing here and with the budget right now, there is still other china

legislation that is going to be debated. i do think you are going to see with a republican led house, with kevin mccarthy, he has said he will form a selected china committee. that will look at the origins of covid, intellectual property rights, and the possibility of more restrictions on inward and outward investment and export controls. this is not over yet. the deglobalization news -- moves very slowly. it is not something you will necessarily register in one year. dani: that is a good point. that is not the only noise around deglobalization we have heard or read a lot of it came from russia when it came to commodities, the idea of reassuring, not just the move out commodities changing, and then of course, as you have been discussing, china, tsmc looking at moving more of their operations to the u.s.. you say deglobalization is a risk, but what is the potential for the world to actually look like? how extreme predicate even as

you say, it is a slow moving story? joyce: we are seeing, if you look at the last u.s. and china business council that surveys all of the u.s. corporations, about 24% of them say they have moved parts of their supply chain. a lot of this was more because of covid zero policies, it wasn't necessarily because of the geopolitics. i do think that there is more of a focus on regional trade and regional partners and we are seeing an increase in foreign direct investment in mexico, which has the u.s. and mexico and canada free trade agreement in place with the u.s.. this is going to be slow-moving, but it is happening. we do see that a lot of this is something where i think there is many different strategies. there is china plus one, there is near shoring, and there is french shoring. there are different aspects of this that we will have to watch

read i think this is a regime change that will stay with us. dani: what does it mean for inflation? i suppose if we are simplifying supply chains, it could help. but the spending in the meantime, how are you looking at it in terms of where the next inflationary regime goes if these are the trends that are happening? joyce: i think three is the new two. i don't think we get back to 2%. we are in a big move right now. headline inflation coming down from double digits to 5%. that is the easier part of it. getting back to target i think is harder. i do think that what we are looking at is a world of higher macro volatility, shorter cycles , higher inflation, and higher deficits, and somewhat lower global growth. the regime change that is coming with the end of the great moderation. i think the deglobalization -- if we are no longer choosing where we do business based on

the lowest cost of production, and we are looking at the circle of medical trust, it does point to higher inflation, not necessarily runaway inflation, being with us to stay. dani: how does labor play into that? the stickiness of a labor market driven by demographic trends and immigration trends? joyce: a lot of the issues we are facing are structural and 2.2 higher inflation. i do think it is very hard to separate some of these supply chain issues from the labor market dynamics and the wage inflation we are seeing. some of this is structural in nature. it is about the demographic, which is making the labor force market very tight. it is also about immigration policy. we have looked at some of these numbers, some of the immigration policy in place before the trump administration, you could have as many as 3 million additional workers in the u.s.. we are also now seeing just the effects of brexit, on labor mobility in the u.k. and europe.

i think some of these tight labor market conditions are with us to stay. this is one reason why we do think that central banks are going to have to maintain a hawkish tone. i think the market is getting very overoptimistic about when there could be a pivot. dani: the drivers here aren't central bank policy. if the transmission mechanism from central banks into this labor market, if it is hampered again because of these trends and immigration, and demographics, as well, does the fed have a chance and all central banks have a chance of overdoing it if they are concentrating on a labor market that is driven by very different dynamics at this moment? joyce: thought is just labor market. we have to look at the wage inflation pressures as well as the overall inflationary pressures that are coming on the services side. so, i wouldn't just boil it down to the labor market dynamics. i do think you will see a rise in the unemployment rate, meaning the u.s., we are looking

out over the course of the next year you could shed as much as one million jobs. i think the bias will be to be more on the hawkish side, because i think it will be very hard to get back to the target. dani: what do you make of these recent warnings around inflation from your boss, mr. diamond himself? we heard from jane fraser yesterday. the chorus does feel to be getting louder. are you also expecting a recession to come next year? and how severe might it be? joyce: we have always thought that the fears of a near-term recession are overdone. looking at u.s. growth in the third quarter, close to 3%, still one half percent in the fourth quarter. i do think that the rally we are seeing right now may have a word too quickly. i think that a pause at the end of the first quarter, lower inflation, disinflation trade, all of that has happened very quickly. i worry more about the recession risk in late 2023, when you see

more of the weight of unemployment going up, the weight of 500 basis points. and by u.s. growth is also coming down. we look at this much more as a late 2023 risk, whereas a lot of the good news that is frontloaded for 2023 seems to be happening before year end. -- a lot of the forecast we are looking out almost right now. dani: but, the rally, if the assumption is that the rally is happening because the fed pivots, because things things happen earlier, admirably -- because presumably if the fed's pivoting, it is clearly for a reason. it is not really a reason to be buying risk? joyce: i think it is premature to say there is a fed pivot. we saw the fed tightening to go. then the question is, is it really something i would call a high hold? not a pivot.

i think that is more the scenario that we see with the recessionary risk in the u.s. rising towards the end of 2023. dani: joyce, thank you so much. really wonderful to get your thoughts this morning. joyce chang, chair of global research at jp morgan. coming up, credit suisse is trying to entice rich clients with higher rates. exclusive story next. this is bloomberg. ♪

dani: credit suisse is said to be offering higher rates and higher yield notes in a bid to -- entice rich clients. let's get more on this bloomberg exclusive with swiss banking reporter, marianne, who joins us now. fantastic scoop from you and the team.

so, what has led to credit suisse offering these higher rates now? >> the big driver here is the fact that a couple weeks ago, they announced that there was some 80 to 90 billion in outflows in their wealth management divisions. so that was very problematic for you to so they are now trying to recoup some of those assets by enticing clients to come back on higher rates and deposits and on special notes. those aren't substantially higher rates, but they are a step up. that will certainly be helping some of the efforts of the private bankers to really entice clients to come back to the bank. dani: of course course francine talking to axel lehman who told bloomberg the outflows have mostly stopped, some inflows have been coming in. so, what have they been doing to restore some of that damage and to reduce the outflows? of the main driver here is that

they have been doing this 4 billion capital raise and they have also raised $5 billion in debt. they are really looking at rebuilding trust by rebuilding solidity of the bank. the other thing is, there liquidity ratios have been improving as well. that will bring back the confidence for the client. overall, it will take multiple quarters. it will take time for those assets to come back. trust is lost, but it takes time to rebuild. there are just beginning their restructuring plan right now. dani: thank you so much, our zürich bank banking reporter. let's get to the first word news. thought is simone foxman. simone: good morning. the eu has announced a ninth package of sanctions against russia. including restrictions on act as to drones, chemicals, and military technologies. the measures, which need the

backing of all member states came hours after president putin warned that the threat of nuclear war in the world is rising. the russian leader says his country will defend itself, quote, with all means necessary. vanguard is leaving the world's largest climate finance alliance. the asset management giant says withdrawing from the net zero asset managers initiative was spearheaded by former b.o.e. govern -- governor. that will help provide the clarity are investors desire. the move comes as u.s. republicans continue to step up their threats against firms deemed hostile toward the fossil fuel industry. bloomberg has learned that banks which backed elon musk's twitter take over are considering providing him with new margin loans act by tesla stock. the loans are one of the options being discussed to ease the burden of the $13 billion of debt that twitter took on as part of the deal. social media firm is estimated

to face annual interest costs of about $1.2 billion under the current debt structure. that is more than a measure of twitter's earnings for the whole of last year. 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: thanks so much. coming up, treasury signal growing concern about recession next year. with aggressively tight fed policies ticking around. we will discuss bonds ahead of the next fed decision, this is bloomberg. ♪

dani: they recession calls are building up. jane fraser of citibank joining

the choir. investors really focusing on those recession signals. they worry about them emanating from the bond market as the treasury curve further inverts. we were just talking to henrietta earlier who said she was surprised by the speed of that. let's get more with our markets reporter, valerie. when it comes to that, you are pointing that out this morning, it is pretty breathtaking how fast this market has moved. valerie: 10 year yields and 30 year yields have rallied over 100 basis points. since their peak in october. 80.210 scarves has been -- that is the steepest inversion since the 1980's. you can look at other markets like oil. it has plunged 10% this week. thought you -- you can think about things like open interest, fall into a low not seen since 20 15. a lot of those are completely now over. then time spreads are now flipped in the contango, showing there will be a glut of oil

supply. that is a completely different narrative than we have seen. all this is happening when we have this china reopening. i think if i would have stared at the china headlines i would've thought the oil market would be 10% and 10% down. dani: i should say, oil is up 10.6% this morning. it is nowhere close to where you think it would be. valerie: the one thing i want to point out about the market this week that i think is confusing is that stocks are down. when we have seen bond rallies like this in the past, the shark bond rallies we have had, we normally get stock lloyd. dani: hi yields meme stocks -- here we are the opposite. valerie: i think that narrative has put it down to the tax loss harvesting. we have had a year where stocks are probably down, especially tech stock. people are looking to close the books, thinking how can i offset the capital gains tax?

if i sell my lossmaking positions, i can use that to offset my tax liabilities. perhaps maybe this week that selling flow we have been seeing in tech stocks, they have underperformed as well. maybe that is waiting to this tax loss harvesting dynamic going on. cameron crise wrote a great piece, saying that the santa rally only appears when we have had a year of stocks higher. years when stocks were lower, it was prominent. dani: it is easy to forget, it is easy to think it is every december, is the market happens. part of the reason we are talking about that, yields did come down, some of the easing inflationary pressures, especially when it comes to labor costs. we have some more data on deck read ppi, cpi, and of course, the fed. will this dynamic continuing to year end? valerie: i think the price action yesterday was quite eye-opening. we had a very substantial

revision down lower in the unit labor costs. the field the bond rally, tens and 30's rallied almost 11 basis points yesterday. stocks were lower. we really do try to rally. you could see it in the price action. it is old. that is one thing, even if we get a soft cpi printed next week, before, in the october cpi print, that lead to a massive stock rally and a huge easing of financial conditions. if we don't see that happening in a soft cpi print, maybe that will embolden the fed to do a bit more, given there is no more baked in financial conditions easing, because there is no stock rally that reacts. it will be interesting, these weeks in december are always weird as year-end approaches, we also do get some funky price action happening. maybe people are stepping back from the market and not willing to trade it and close the books. dani: perhaps they are ready to

take an early holiday season. maybe we didn't even make it into december, we just sold everything before thanksgiving. a, it is a lot of confusing crosscurrents, but one story that is playing out strong is the continued china reopening trade read we get this drip feed of changes coming into china and hong kong this morning. reports digesting the things like mass outdoors, those restrictions would be removed. you can see some of the various impulses here. you are looking at hstech, that is up 6% this morning. some of these individual one, the china casino ones, we had a headline this morning about shanghai specific the over some easing measures, scrubbing test requirements for dining and services. these are very incremental. we talked about the fact that this might be a bumpy recovery, it might not be the smooth. if we continue to get these various news items coming out,

making things easier, it is giving folks an opportunity to by goldman sachs earlier this week saying that only 40% of the reopening trade is priced in into equity markets. that is why we can still rally despite the big comeback we have had. the one had structure we were just talking about is the fact that oil has responded more. it is up 1.7%, but it is still at $73. that is lower on the year. coming up, we will be speaking to the u.k. shadow chief secretary to the treasury. that is ahead.

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anna: good morning and welcome to "bloomberg markets: europe"