dani: good morning, this is "bloomberg daybreak: europe." staking out positions -- fed

hawk christopher waller favors a quarter-point hike at the next meeting. jp morgan modeling shows odds of an economic downturn are falling across pricings and markets. the dollar drops with stock futures next. plus, closing rings. olaf scholz and emmanuel macron warned european businesses they will boost spending to keep pace with the u.s. and china. we are coming off the back of quite a friday. it was marked by short covering. the most shorted equities rallied 4%. this is perhaps due in part to waller. it is a downshifting from the fed. for today's markets, it is very thin trading and yesterday was

the start of the lunar new year for much of asia so chinese and hong kong markets are closed. japan is open and the rally continues there. the rally also continuing in european futures but it takes every there in the u.s., perhaps not surprising to see consolidation after such a strong rally. also i's turn to tech earnings next in the u.s. and microsoft kicks things off on tuesday. across assets, the dollar slipping against all of its g10 peers. the euro was gaining this morning. you have the hawks from the ecb dominating the conversation while the fed conversation is about the downshift. copper at a seven month high. positivity around the u.s. economy. that gas, it is cold in new york, and natural gas is up about 8%. let's get to other top stories

this morning from our reporters around the world. derek will join us with the latest on joe biden and garfield reynolds on the ecb and the fed. the ecb hawks are out in full force. a governing member called for a 50 basis point hike in february and march, saying the time for tightening is still far away. garfield, talk us through what to expect from the ecb in the coming months. we have heard more of the hawks come into the force, but it is far from consensus, it would seem at this point. garfield: it is not consensus, a very different situation to what we've got in the u.s. and some of the other economies where central banks are further along with what they are trying to do. rates traders are expecting another 1.5 percentage points of hikes from the ecb. that is 350 basis point hikes.

they expect probably a couple of those to be 50 basis point hikes, which lines up reasonably well with some of the ecb members who are seen as being hawkish. the european union is looking at an economy showing a fair bit of resilience and that has been common around the globe. resilient economies plus elevated inflation equals center -- central bankers have the ability and incentive to raise interest rates until they see too much economic pain. dani: you talked about how this differs from the u.s., where christopher waller, another one again to slow rate hikes. take a listen to what he said on friday. >> i currently favor a 25 basis point increase at the meeting at the end of this month. beyond that, we still have a

considerable way to go to our 2% whole and i expect to continue tightening policy past this meeting. dani: i'm curious what you make of the narrative that it is time to downshift, let's see what the economic impact of our tightening has been. at the same time, waller and others saying we have more work to do and we need to keep rates restrictive. garfield: i think a lot of this has to do with the way central bankers are trying to engineer the softest landing they can manage. that means they want to tame inflation and be sure they have done so and they want to try and do the least harm. but they understand there is a chance of harm and they are willing to take that risk because the inflation problem has been so severe. we are coming down from a generational level of high inflation. central bankers have been very severe in efforts to fight that.

now we are getting to the stage where ok, we are in restrictive territory and that is important. rates are expected to slow the economy. the question is are they going to slow it or bring it crashing to a screaming halt? they don't want to do the latt er. it's a difficult message to get through markets, who want to know how much you are going to hike and how soon will you start bringing it back down. dani: to that point, you have a fantastic story out that i recommend to everyone, about the split emerging in markets, where you have hedge funds doing one thing and asset managers doing another. what is that split and what does it tell us? garfield: we've got hedge funds, leveraged accounts, they have the biggest shorts on u.s. 10 year treasury futures since

2019. they are expecting 10 year treasuries to follow, i.e., yields to rise from where they are, now asset managers are taking the other side of the bed. they are long, the longest they've been at least since 2006. we are looking at hedge funds saying ok, when the central bank starts hiking rates, you get a steepening yield curve. that means you bet on long rates , underperforming -- long bonds underperforming short bonds. they have shifted away from the deep shorts they had for two years. that's the calculation hedge funds have got. asset managers are looking at this rally and also looking at some of the highest yields we have had in more than a decade. they are saying we are willing to keep writing this train until

-- riding this train until comes off the rails. the last time was 2018. that was before the hedge funds got what they expected, the top of the yield curve and moving toward zero and above. dani: interesting stuff. we will see if history repeats itself. thank you. let's talk about a different u.s. story, this one politics. president biden's lawyers say the justice department has found six items containing ossified information during a search of the american leaders home in delaware. let's get more with derek. get us up to speed, what do we know? derek: this is another search that was done with biden's

approval, consent, help out i guess you might say, saying you can search this residence. the justice department searches and turns up six documents, some have classified markings, some are close. it's another thing that dropped in this now developing situation where -- situation the white house finds itself and. this white house would take great pains to say this classified documents with this president and of the classified documents with donald trump are separate things and there is some case to that. but this is not the thing the white house wants to be talking about right now, as the president is reportedly thinking about how he wants to announce a reelection bid. this is stepping all over that. additionally, i think it's worth making the point that the white house was really gearing up for the idea that if republicans took control of one or more

houses of congress, they were going to launch a slew of investigations. they were really happy to see some of these committees of oversight get packed with people they consider to be complete bomb throwers. they are basically saying this is really good because no one is going to take this seriously. the problem i have right now is they've been handed a reasonably course of inquiry, which is why are these documents in your post -- in your personal home and things of that nature. whether you think the committee is stacked with yahoos, it is a sensible thing to be pursuing, which is that classified documents should be kept in a certain way and this may not have been. i think the white house is eager to take it on the chin for

whatever this might be and get this behind them as rapidly as possible. that's what you are seeing. dani: in the background, or maybe not so much in the background, biden is doing this aid shuffle, and amid that reshuffle, are expecting biden to announce a new chief of staff. is there any significance to that appointment? derek: it's one of the most powerful positions in washington, this is basically the top administrator in the federal government. it's a really important position. jeff zients i think is a name everybody with the bloomberg terminal probably knows pretty well. extensive economic and business experience, involved in running the u.s. covid response. somebody who is generally seen as a good manager. but someone who is stylistically different from ron klain, his predecessor. ron klain retweets a lot of things and jeff zients doesn't

tweet at all. but when you're talking about the president shifting maybe from a policy-based first two years where both houses of congress were under democratic control, to a more antagonistic position in campaign focused position, i think this appointment is particularly significant. jeff zients also has a ton of economic experience that will come in handy, considering the big fights we talked about on this program before -- debt limit and government funding. you're bringing in somebody who is market fluent with both of those issues and guiding that response. i think that's another significant thing to be talking about. dani: i know biden has spoken about his meeting with mccarthy and essentially saying no changes to the debt limit and what republicans want to push off the table. thank you, derek, getting is caught up on all things d.c.

in europe, germany and france pushing for huge spending increases at european businesses so they can compete with u.s. and chinese competitors. this after the inflation reduction act in the u.s.. those countries revamping their economies to make them more climate friendly. this follows a summit between the two countries over the weekend. >> it is necessary we handled the inflation reduction aid and formulate a european answer. firstly, we have to make sure that as a european union, we are not treated worse than neighboring countries such as canada or mexico, and it cannot accepted that the local content regulations that are in there cause discrimination of european businesses into their activities in the u.s.. dani: the german chancellor

there talking about what the european response needs to be to the american inflation reduction act. what could that response to and its impact be on the economy? we will cover that later with a deutsche bank economist who was among the first to call that germany will be able to avoid a recession this year. why the change of disposition for the country? that interview will be in about 20 minutes time. let's first look at the key things we will watch out for today. we will have a lot of ecb speakers, starting with the ecb, and then we will get eurozone consumer confidence data. it may offer a glimmer of hope. at the same time we will look at the u.s. conference board to get a forecast of future u.s. economic activity. finally, we will hear from christine lagarde.

coming up, how likely are we to avoid a recession this year? a trading model shows the chances are better than last year. we discuss that next. this is bloomberg. ♪

dani: money managers are pulling back on recessionary bets for financial markets. seven out of nine asset classes now show a less than 50% chance of a recession according to jp morgan. those pullbacks include the u.s. junk bond market. at one point was pricing in 833 recessionary ought and now it is about 13. in the u.s., the s&p still showing a more than 50% chance of recession at 73 but at one

point it was at 98%. what does all that mean? joining us now is ellen higgins. i want to start with something we were talking about during the break because jp morgan, the modeling is based on prior recessions, how close are we to the recession then? if we get a recession this time around, can you use the same playbook? alan: that is the question, i've seen a lot of recessions but this is the most anticipated. it is tough, with pricing, those kind of numbers and how tight credit is, we want to lean against this market exuberance. i guess one way we look at it is there is a place to hide, the short end of bond markets, u.s. 4.25%. you are paid to be patient. going back the last 10 years or

more since the financial crisis, it's been hard to find a return sitting in near cash investments. what makes me nervous is as you said, super anticipated, this recession, but in my experience, every time i have bet against the yield curve, it hasn't worked that well. the inverted yield curve shows pain to come and earnings downgrades to come in particular. what does it mean? probably buy dips rather than wait for a 20% or 30% correction. we've had this kind of rally that the pessimism is priced out. dani: when it comes to the yield curve, there is one academic buy used to follow all the time in my quant today's, i think -- quant days, i think he set duke business school. he said we have this broadcast recession, the yield curve is

flashing red flags but the yield curve is such a well-known indicator that it is different this time around because corporations may be changed their behavior, people changed their behavior because we talk about recession so much. when you look at the corporate side and these companies cutting back on costs and expenses, letting people go, does the corporate world seem more prepared for recession this time, and doesn't give you any confidence in terms of the equity market? alan: i think that's fair, and you could have buy in to corrections. 2000-2003, we had a very mild recession, barely an economic recession you could see on the charts and yet the equity market was devastated. it was ridiculous expensive. there was pain in earnings. that's the point. the corporate sector taking action means pain in earnings. this is not achieved market, at

best you could say maybe fair value. compared the bonds, maybe on the expensive side. i find it hard to go with the u.s. market in particular with it being so expensive. dani: i know you've said you are waiting for a better entry point. what does that look like? alan: because of everything we discussed, it is not a -20, -30 type of event. it's probably -10 -15 -- talking about the equity market. that will drag credit spreads wider as well. everything you show for jp morgan, people month -- you bring up the bloomberg financial conditions, you can see it is on the stimulus side. the fed will not like that. the fed is going to hold tough. they will slow down but they will hold in there. there is so much easing priced in, so a lot of ground for disappointment. it is quite nuanced because it is so predictive. be patient, earned for .25 in

your treasuries or thereabouts, and put some money to work and it will be super pessimistic. dani: how hard is it to take with lions or even peers -- clients or even peers after a very long bull market where you did not need to be patient? how much is investor psychology gear toward the patient story anymore? alan: that is fair. we do own equities and bonds, it is just less than we would normally, you could say. it is relatively straightforward on an advisory basis and clients get that. on a discretionary basis, basically the message is look, on this part of your portfolio, you are earning to -- 4.25%. it's hard to say over here you are earning zero. dani: i would imagine that's not

the easiest conversation. another thing we've been talking a lot about today is the idea that perhaps the european outlook has gotten better, not just the global one, but europe specifically. you said the u.s. was very expensive. is europe more attractive to you? alan: that's the big story, whether it be last year or continuing. last year, value outperformed growth in the u.s. by 75%, white amazing. and we saw better performance in markets like the u.k. the energy issue obviously looks a lot better and yes, earnings will be troubled in europe, but at 10 to 12 times earnings, 10 in the u.k. and 12 in europe. we stood -- stick with value.

we have some exposure to tech, but relative to the investment management industry, we have a fair bit of value in the portfolio and we stick with that. dani: alan, thank you for coming in the studio and telling us the right trades. coming up, the u.s. treasury secretary toured several african nations as chinese influence in the region continues to grow. more on that next. this is bloomberg. ♪

dani: u.s. treasury secretary janet yellen is on a 10 day africa tour this week, meeting his nose leaders and officials. joining us to discuss is our africa correspondent. great to have you doing your visit to london this month. why is janet yellen and africa?

>> what we saw from the administration at the end of 2022 is a re-engagement the continent after years of the u.s. taking a step back. what we are seeing from the biden at nist station is wanting to show the commitment is there. secretary yellen is there on a 10 day trip, going to three countries. she was in senegal, they campaigned to be part of the g20. she will also be in zambia, which has a number of defaults, in particular debts to china, and then she will go to south africa. she is start of the administrations reintroduction to the continent. we will see president biden going there as well. we are really seeing them making that commitment known and taking their words into action. dani: less than a minute, just quickly, what can the u.s. do to counter the chinese influence? jennifer: u.s. officials say is

not about china, we are seeing them doing making more investment. end of last year, we saw 55 billion dollars committed to the continent. we seen secretary yellen talking about a number of projects and initiatives meant to help spur growth in investment. this is what they are trying to do but we still have a number of chinese and russian officials in the area. dani: thank you. great to have you with us this morning. our africa correspondent. coming up the u.k. turns back to coal. it is cold outside. hi, i'm jason and i've lost 202 pounds on golo. being a veteran, the transition from the military into civilian life causes a lot of stress. i ate a lot for stress. golo and release has helped me with managing that stress and allowing me to focus on losing weight. for anyone struggling with weight and stress-related weight gain, i recommend golo to you. this is a real thing. this is not a hoax. you follow the plan, you'll lose weight.

dani: good morning, this is "bloomberg daybreak: europe." i am dani burger in london.

staking out positions -- fed hochul christopher waller says he favors a quarter-point hike at the next meeting. there could be 50 more basis point increases for the ecb. olaf scholz and emmanuel macron worn european businesses they will have to dramatically boost spending to keep up with the u.s. and china. and jacob a -- jp morgan analysis shows that chances of recession are dropping. look for a better entry point, that's what we were discussing with alan higgins earlier in the hour. so far it is a rally that started friday in the u.s. and it is continuing. just a caveat to put on all of this, it is the lunar new year in china so trading volume is really thin. even so, we are looking at a japanese market up one into third percent, and s&p futures

index continuing the rally from friday. the most shorted equities gained 4%, it is surprising to see some consolidation. it's about the divide between europe and the u.s. when it comes to central banks. waller says they will downshift to 25 basis point hikes good natural gas is pushing higher it has fallen significantly through the entire year so far, and the last few months of 2022, but it is cold and demand is moving higher. speaking of which, that is a prominent story in the u.k., and u.k.'s grid operator has asked three coal fire power units are to be ready to generate electricity from as early as today as it roosts power supplies during the cold snap. for more, we are joined by lizzy burden. anyone who has been outside knows how cold it has gone. i switched back to my giant park up. how bad has the situation

gotten? lizzy: i must confess, i did not cycle and as i usually do. there is more demand and less supply of energy. this is why you have these three coal powered units fired up just in case of the being needed, as well as russia has cut its gas supplies. it's the first time this winter they've been put on standby. national grid has tweeted it doesn't mean electricity supplies are at risk or people should worry. it is just a backup measure. it sounds extreme because the government has said they will stop using coal powered by next year. dani: how extreme is that? how bad doesn't need to get or is it close to the level where they start telling people you need to cut back on demand? lizzy: there is such a thing as the demand flexibility service and that will also be on standby today. people will be paid to reduce

consumption between 5:00 and 6:00 p.m., peak time. expected a million pounds will be paid out to millions of households, a couple of pounds per household. it is people with smart meters. it's not they want people to sit in the dark, but they want people to spread out consumption through the day. boil your cattle and load your dishwasher but outside the peak hour. it is significant because on one hand you have the supply measure with the coal power units and on the other hand, the demand measure as well, which people have been calling for for a long time. dani: while we are talking about energy, the story in europe is focused on the response to the american inflation reduction act. there has been reaction in the u.k. as well. we had the ci chief, he's expected to call on the government for its own response. lizzy: the u.s. has the inflation reduction act and

brussels has said it will pour unprecedented levels of investment into clean tech. they are saying to britain, pull your socks up, we need a green strategy as well. at davos last week, chancellors of said britain cannot sit on the sidelines and a on what others are doing good this is the cbi saying we need deregulation and state funding. it isn't just the cbi saying this. you have the former conservative energy minister in a report earlier this month saying zero is the growth opportunity of the 21st century but the current and are shy means britain risks losing jobs to elsewhere and investments if it doesn't step up. you've also got cbi research out today showing in the past two years, britain has already lost market share in every production and hydrogen. it will be the equivalent of 4.3

billion pounds by 2030. this is really an arms race for green tech. dani: thank you, that is lizzy burden, staying warm. that is a good economic indicator, does lizzy burden cycle into the office? just to recap germany and france, they are pushing for huge spending increases at european businesses so they can compete with u.s. and chinese competitors. they are trying to revamp their economies, make them more acclimated friendly. there is the inflation reduction act in the u.s.. there was a meeting between the french and german cabinets over the weekend. >> is necessary we handled the inflation reduction eight and formulate a european answer. firstly, we have to make sure as a european union we are not treated worse than neighboring countries such as canada or mexico, and it cannot be accepted that the many local content galatians that are in

there cost us, nation of european businesses and their activities in the u.s. dani: the hopes of a mild winter, at least what we have so far, means economists are increasingly calling for the euro area to avoid a recession and one of the first out of the gate to make this call was deutsche bank. they saw output proving surprisingly resilient at the end of last year. joining us is the economist that made the call of the recession in germany. thank you for joining us this morning. i want to start therapeutic on the 13th of this month, you said germany is no longer going to have a recession. before we go down the path of talking about the bright and sunny outlook, has that view changed at all and are used to

still calling for no recession in germany? stefan: basically the trigger was the release of limitary numbers for 2020 growth and gdp, 1.9%, and the statistical office said they expected that fourth-quarter gdp was flat. according to market expectations, it climbed. it is a fine line, so it could will be that when we get to the end of the month, it might be a modest decline and and we could also see a modest decline in the first quarter. but overall, compared to the expectations we hadi?

what could tip the scales toward the negative? stefan: basically we are discussing margins of error. the two major risks he saw, making the initial call that germany would go into recession was weakness in china's growth coming out of co. it -- of covid, and concerns about energy supply and both have eased considerably. in this respect, i think short-term risk, and less there is a major setback in terms of energy supply, which i currently cannot see, or even if we got a cold spell now for several weeks, the levels in the gas reservoirs should be sufficient. the short-term risks are really diminished and there is no single risk standing out. dani: how bad does the weather

need to be that we actually worry about it? we can say it gets to freezing temperatures in frankfurt right now, when is the switch that we say this isn't an -- this is an issue, and we should worry? stefan: it should be something that goes through let's say the whole month of february and into early march. obviously that is something that by march, temperatures are picking up. it's pretty unlikely. dani: fair enough. to be much worse than it currently is. you mentioned how the brightening chinese outlook is benefiting germany right now. how do you weigh that between potential recession in the u.s. and potential recession elsewhere in europe? had you look at these factors weighing up in terms of german output? stefan: you have to see the timing perspective. the first thing is we predict a

recession in the u.s., it is in the second half of this year. so far it shouldn't have a strong impact on germany. we discussed an improved outlook for the german economy and obviously that is mirrored in our european neighbors. i guess with the decreasing likelihood of a recession in germany, that also holds true for the rest of europe. in this respect, it is another positive that some key markets are looking somewhat better. if you look at the multipliers, what is happening in the rest of europe, is extremely important. china might not be as important as it traditionally is because the rebound is mainly private conception and services, but it is a sentiment that is important. if we look at futures, the business sentiment that tanked in the second half of last year

is now picking up and we think looking at equity markets for example, that will continue and it is very important at this stage. dani: olaf scholz and emmanuel macron have just met and a large part of the discussion was a response to the american inflation reduction act, the concern being that it is favoring and prioritizes american green companies at the expense of european ones. what is at stake if germany and the rest of europe doesn't respond and enact its own legislation to support green technology in the region? dani: it is a little bit between a rock and hard place. first of all, we have already a competitive shock despite the decline in energy and gas price, we've seen the last few weeks they are still substantially higher than 2019. in this respect, especially the energy intensive parts of the

european economy are facing a shock. if this was exacerbated by the u.s., it would make things more difficult. on the other hand, as economists, we know subsidies aren't in debate -- an efficient way of using resources. the last thing we would want the subsidy raise. dani: what does that solution look like? i know and asking a hard question, but is there something able to toe that line? stefan: a solution would be we get some concessions from the u.s. like some of the neighboring countries and it would be much better if the competitive disadvantage could be avoided in the first place rather than an act more legislation and funding on the european side to counteract it. dani: great to have you on the program this morning. the chief german economist from deutsche bank. coming up, europe's earning

season kicks off and the consumer sector reticular late in focus for inflation and recession indications. will we avoid a recession as stefan says? more next. this is bloomberg. ♪

dani: earnings season in europe kicks off this week with the food and retail sectors particularly closely watched for inflation and recession indications. one company is due to report tomorrow, h&m on friday. for more, we are joined by our guests. what are we expecting from these companies? >> one of the things we will be looking out for is whether consumers are trading down a little bit.

instead of going for midrange brands for apparel, we are going to see whether they go for cheaper brands like h&m. also, how they fared over the holiday season. we've heard perhaps it wasn't as bad as expected but that will be something we will be crucially looking out for. and we will also be seeing whether those price increases have managed to offset the increases in cost and whether that will have any impact on margin. it is going to be the state of the european consumer, how are they holding up? dani: speaking of the consumer, airlines also in focus this week. in the u.s., united shares fell even though they had a strong outlook. how are we thinking about european reports for airlines? charles: the airlines we will be looking at this week is easyjet and wizz air. they are relatively cheap. the thing i'm interested in, are

people trading down alike in clothing and apparel, or just cutting out international holidays? if they are cutting out, that could potentially affect those airlines, but those airlines could do really well from people trading down from the more premium characters, maybe trying to spend less on travel, enjoying their holiday a little more. with wizz air, nothing to keep in mind is the middle east expansion. easyjet, it's how they fared over the winter, and that snow in the alps kept people from booking holidays. dani: i did want to ask about the u.s. tax story, they got earnings this week. we learned on friday that alphabet, googles parent company, is slashing odds. has the outlook changed for american tech for their earnings? charles: for american tech, it is more tricky. microsoft has also said they are looking at cutting jobs, about 10,000 jobs. that will give them an

impairment charge of about $.2 billion and it will also adjust their eps. we also want to look at intel, perhaps people are buying fewer mobile phones and computers, they are spending less on big tech purchases, will that affect the top line or volume impact? dani: charles, thank you, eating us set up for the week in earnings. let's get to some of our other top stories with the first word news. an activist investor elliott management, says it's made a substantial investment in salesforce. we understand the stake is a multibillion-dollar some. investors known for seeking board representation and seeking strategic changes.

citadel made a record $16 billion in profit for clients last year, the largest return ever for hedge fund. according to estimates, the top 20 hedge fund firms generated $22.4 billion in profit after fees. citadels again -- gains past that after ken griffin's bet on subprime mortgages. france and germany are warning european investors they will need to keep up with u.s. and china. they discussed how to respond to the u.s. inflation reduction act and speculate that it unfairly favors u.s. companies. police say a man who killed 10 people east of last -- at a ballroom east of los angeles killed himself. 10 other people were ended following a lunar new year

celebration. armed officials surrounded a white van about 50 kilometers from the scene of the attack before the suspect shot himself inside the vehicle. that your first word news update. coming up on the program, morgan stanley cut their ceo pay for 2022. we will have more on that shortly. this is bloomberg. ♪

dani: let's look at some of the events we will be following through the week. today, the ecb's christine lagarde is due to speak at an event. tomorrow we will have pma -- pmi data for the u.s., and earnings from microsoft. wednesday, it is canada's rate decision, followed by asml and

tesla earnings, and thursday a lot of data from the u.s., including fourth quarter gdp, initial jobless claims, durable goods and wholesale inventories. on friday, it is u.s. pce deflator and chevron results. we've gotten the results from the big american banks and as a result, morgan stanley has cut their ceos compensation by 10%, it will now be 31 point $5 million for 2022. the bank said it had been a challenging economic and market environment. joining us to discuss is our investing editor in asia. russell, it is interesting because j.p. morgan left dimon's pay untouched. what we make of the pay cut? russell: quite a contrast in

approaches from j.p. morgan and morgan stanley. in morgan stanley's case, dave decided he will have a 10% pay cut based on the banks performance even though it performed well in a challenging environment. their profit fell from the previous year and shares went down 13%. the board has decided james gorman should be paid a little less than the previous year. in contrast to that, we had a day earlier, jp morgan's board saying jamie dimon should keep his pay unchanged at $34.5 million. that reflected his ability to keep clients served in the challenging environment. quite contrasting approaches, remembering a couple of years ago, dames gorman overtook jamie dimon to be the highest paid ceo on wall street. quite a change in fortunes for those two.

dani: i was going to say, he still was one of the most highly paid and you mentioned it was a small pay cut, he still getting paid $31.5 million for 2022. how does this compare to the overall story when it comes to renumeration and staffing? there have been conversations about pulling back on pay when it comes to bankers and pay in general. russell: morgan stanley i think a bracing themselves for the economic downturn, inflation is sticking around and rates are going up. morgan stanley is cutting 1600 positions this year and also trying to keep a lid on cost. this is sending a signal that these sorts of belt-tightening is going right up to the top. dani: russell, thank you for

joining us. as you can see on the board next to him, it has been a tough year for the banking sector, the likes of city raising junior banker pay, so it is not a clerestory across-the-board. there you go. ouch, citi down 19.25%. next is bloomberg markets: europe. a quiet morning given that most of traders in the asia -- in asia are the lunar new year holiday. this is bloomberg. ♪

anna: cap trade is less than an hour away. here are your top headlines.