>> a very good morning. it's "bloomberg daybreak: europe".

i'm manus cranny in dubai on the stories that set your agenda. u.s. equity futures fall after inflation figures come in hotter than expected. fed officials offer mixed commentary on the outlook for rights. -- rates. the european union plans on forcing banks to disclose russian assets as the bloc prepares for the 10th round of sanctions on moscow. washington pushes allies to boost military aid to ukraine. elon musk tells the dubai summit he aims to appoint a new ceo at twitter by the end of the year, calling the social media giant a startup in reverse. so, elon musk is at the world government summit being

interviewed by the head of the government, he says very clearly that twitter is a startup in reverse. encouraging the audience to speak truthfully, write your own tweets, is what he said. you should be adhering to the laws of the country you live in, but he has the major backing of a number of gulf states. he is encouraging ceos in governments to speak with authority. and there is a risk you create too much -- too much is a risk to create to --i don't know what that headline means, it is perhaps elon speak. what else have we got?

heineken breaking news for you right now. in terms of the booze company, the headlines are in. operating profit, it comes in at around $4.43 billion. we are waiting on some of our other headlines. keep in mind, in terms of any impediment that there are in the russian business, i'll come back to those numbers in a moment. an impairment in the russian business of 88 million euros. organic beer volume rising 6.9%. up from an estimate of 6.81%. talking about organic growth for 2022 of 20.8%.

where do you go from here? they took that hit in russia, and are talking about organic beer volume beating, 6.9% but the market penciled in 6.8%. so, who's listening to the fed? they are, one could say, sensitive souls in the bond market. they are listening to b arkin. the stock market is less attentive to the narrative. you have seen stockmarkets this morning to a little lower. barkin saying you could have resilient growth with higher inflation which is supported for equities on topline pricing. cpi, still one would say, persistent, and it is about the direction of travel, maybe the disinflation narrative mentioned 14 times by powell is not so robust. bank of america, their survey is

in, the biggest tail risk is higher for longer inflation. and in their survey, recession risk has gone from 77% to 24%. so you are seeing global growth expectations the least pessimistic in nearly a year. when it comes to those sensitive souls in the bond market, it is at the short end which is perhaps the most dramatic repricing. we give a little back this morning, but you saw 2-year yield rise 12 basis points, the highest since november last year, rising headline cpi, by .5%, the most in three month. what do you grasp on to if you are a firm believer in disinflation is super core? is that enough to reduce the risk of triple rate hikes to come? june is now alive month for rate hikes. the aussie dollar under pressure, the fx market has woken up to the narrative from

the fed. williams and barkin. more about that and just a moment. we have the team assembled to take us through the top stories. enda curran will give us his latest view on cpi, let's see if he is digging into supercool. the latest on russia with maria tadeo. rebecca choong wilkins will hit the u.s.-china balloon saga, is it deflating? consumer prices 6.4% from january, faster than economists had expected, does the 2% goal matter anymore? certainly not to mohamed el-erian or ken rogoff. what are you clutching at in the cpi narrative? does it and floors -- enforce the disinflation narrative or does it shake of interactive -- shake that narrative? >> 6.4% year on year, still ongoing increases in energy and shelter costs. some cooling in terms of prices

for used cars, and airfares, which might be encouraging. where inflation was heading towards the back end of last year, the whole story was maybe the fed had broken it, but does not appear to be the case now. that's why we had all those fed officials out overnight saying we will have to push harder, we will have to push official interest rates to a point where they really do breakup backup the man in the -- of demand in the economy. so, these strong inflation numbers certainly stoke expectations that the fed's job is far from done. manus: shaken, but the question for the bond markets is, what is this higher for longer? nobody has changed their dot yet.

my last guest said get ready for something the bond market is not prepared for, something much higher than 5.5%. enda curran in hong kong. the eu is proposing a new round of sanctions against moscow which would include targeting assets held by the russian central bank. let's bring in maria tadeo in brussels. good to have you with us. what is being proposed? we have seen much on the commodity side, oil, and they are cutting production as a result of that some would say. now they are going after the central bank, one of the global risk, what are they targeting? >> a lot of this in preparation for this new round of sanctions could be announced next week. of course, the date is no coincidence, the one-year mark of the russian invasion of ukraine. the message the european authority wants to send to russia is the longer you stay in ukraine, the more painful this

will be for the russian economy. when it comes to the russian central bank, we know that for a year, these assets have been frozen but there is a question of can they be used, seized and confiscated to rebuild ukraine? this is a thorny debate, but nonetheless going on behind the scenes. by reaching out to european banks to figure out the value of assets stored in the eu, the european union is helping to figure out -- hoping to figure out what could potentially be used in the future. but again, this is a thorny debate. can you essentially confiscate a central bank, used the value of those assets to give to another country to rebuild itself? it's a very thorny debate but zelenskiyy asked for it last weekend's doing the rounds in brussels. we have been nato meeting today, we will speak later in the show with the canadian defense

minister on just how they perceive the risk, not just financially from the war, but also on the battlefield with the spring offensive we talk about all the time. manus: and of course, we will have that conversation. you will catch up later on in the show with the canadian defense minister. there is this significant move, one could say, from the allies in terms of delivery of tanks and weaponry, but of course, still no air cover. we look forward to the conversation later on. maria tadeo in brussels. the u.s. now says three flying objects shot down since last friday are not spy craft. washington and beijing aiming to deflate tensions. let's get to our politics correspondent rebecca. if they are not military, not spy objects, what were they?

is this the beginning of an offramp? you help me back last week, so i will give it another go. >> we may finally be here. we have had these latest comments from the biden administration clarifying that there is no evidence these three objects are linked to china or that they are part of any surveillance program, or have capacity. the theory is perhaps they are commercial, privately owned objects. essentially ruling out any geopolitical impacts from those three objects. as you say, now fair to say the u.s. potentially paving away for a constructive, if not more neutral turn. we know that antony blinken and china's top diplomatic envoy wan g yi are both heading to munich for the security conference later this week. lincoln is considering a one-on-one meeting with wang

yi. although it is hard to see anything particularly positive emerging from that, the very fact that a meeting takes place, if it does go through, would certainly be positive and help some of the furor we have seen behind us. u.s. has been outspoken about the global scope of the chinese surveillance program, talking to allies in the u.k. and canada, for example. and canada is saying it will not fund projects affiliated to the chinese military. and of course, the u.k. launching that security review of its surveillance of airspace. if we do see more of this global push, a multilateral effort to respond to china in that way, that could make beijing more defensive, as it goes into what could be this potential meeting towards the end of this week. manus: rebecca, thank you very much. let's see if the meeting actually happens. coming up, the inflation data

matched expectations and split the bond market. small comfort for investors. we'll talk through the higher for longer mantra. on 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.

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>> we are reaching a point where we're done enough. it will be above 5%, the fed funds rate, how much above five it will depend a lot on what we're seeing. >> we may or may not choose to take rates up further if inflation persists, but we will see what happens. if inflation settles, maybe we don't go quite as far, but it persists above our target

we will have to do more. manus: the federal reserve president of richmond and philadelphia giving us their thoughts on the great fight against inflation. the bond market was listening attentively, and trying to get ahead of it, two years exploded higher. at the same time, the equity market wasn't terribly sure what to do in terms of repricing for a no landing scenario, as barkin was saying, resilient growth and higher for longer inflation which should be supported for equities. aneeka gupta is the director of research at wisdomtree, she joins me now. there is a great deal of debate now as to whether cpi dishearten's the disinflation dictat that was growing last week. does it shake your faith in disinflation in any way?

aneeka: morning, manus. it does change the strong rhetoric the fed was echoing last week about disinflation now coming into effect. because there are certain sectors within the inflation narrative that are showing more strength than we previously anticipated. that is clearly spooking the bond markets. we have seen rate revisions from two rate hikes -- two rate cuts by be end of 2023. we're now seeing just one rate cut. it is definitely having an impact on bond markets. equities are essentially pricing in -- they still continue to hope that if the economy weakens enough, we will get the fed coming in and saving the economy. that should be lower rates and helping equities bounceback higher. manus: one of my guests just said the equity market seems to have cloth heroes at the moment

in terms of the real rate. therein lies the point. it is these louche financial conditions, but at the same time, real rates will dictate where you want to be in the market. with rising real rates, or the trajectory of rates changing, how does that change the scope for wisdomtree in a higher for longer paradigm? >> well, that is going to have pressure on the equity market if we get that higher for longer narrative. you pointed to your guest mentioning equities being blindfolded in this environment. if you look at valuation since we started the year, european equities wiped out their 35 % discount through is 15-year average in a matter of two and a half months. u.s. valuations trading at a premium to the long-term

average. and yet, equity markets going higher at a time when you are looking at earnings contraction. i think equity markets have gone ahead of themselves. we expect to see a brief pause. that being said, 2023 is going to be tale of two halves, it's going to be quite choppy, and remain volatile. we have seen a strong rebound, and rightfully so, that was based on the china reopening story, alongside europe managing its energy situation quite prudently. as we move into the second quarter of 2023, we are going to see the inflation narrative play out. so far, we have seen it saying quite strong. that will have an impact on policy. manus: would you say that the u.s. is richly valued on a

forward pe of around 17. you look at japan, it is at a 23% discount to its 15-year average. you say europe has done a great deal rallying quite seriously. -- furiously. maybe that is full. the u.s. looks rich. are you tempted to load up on japanese equities in a volatile year with yield curve control coming off and maybe began accelerating towards 120 -- and began accelerating towards 120? aneeka: the west has had its reopening story. we have seen over 2022 and 2021, the west has enjoyed its reopening story. unfortunately, the east has not enjoyed its reopening story. you have not had that china rebound take place. what you are seeing take place

right now. japan also is in the same camp. it has been locked down for most of 2022. what we're seeing now is a big rebound since that are not meant -- since that announcement by the government of easing travel restrictions. you have had a spike of more than 200% in spending by foreign tourists in japan. if you look at forward bookings, hotels and restaurants, they are booked up for weeks ahead. you are seeing that reopening theme playing out in japan. as you mentioned, it is going to be volatile, because japan relies heavily on the global export market. if global growth is slowing, that will impact the japanese economy. but the rebound we're getting internally from the economy is likely to help them sail through this environment in a much more

resilient manner then we're likely to see in the west. manus: the debate is this, and you make it clearly, it is between technology and energy stocks. you saw these pretty hefty buybacks coming through both from the u.s. and european oil majors. oil has yet to test the $100 muscular workout. do you want more oil, traditional fossil fuels in the portfolio? we saw the filings, a lot of people dumped their technology holdings just before christmas and didn't get back in. how do you balance that trajectory between tech and oil majors? aneeka: in our portfolios which tilt towards u.s. and europe, we would like to maintain that value bias. we would still like to hold a greater content of energy in our

portfolio. but if we're looking more east, with china and japan, we would still have a higher allocation to tech. if you look at chinese tech stocks, versus u.s. tech stocks, there is still a massive valuation gap that we identify and continue to focus on, and which still needs to correct. we're now hearing a lot more from the chinese government where they are not putting as much pressure on the regulatory side on the tech sector that we saw come about in the middle of 2021, and the whole of 2022. that tailwind will be let out of the sector. if you are pivoting to e.m., and china, having that high exposure to the technology sector would be beneficial. whereas for the west, as we begin to see slowdowns, rolling recessions, having that higher tilt towards energy and more value-oriented sectors will be

more prudent. manus: i should draw the distinction. family offices have taken the pain and dumped tech stocks. but those fast and furious hedge funders went long. aneeka gupta, my guest this morning on hot cpi and markets. louis vuitton hires pharrell williams as the new menswear creative director. we will have more on the story right here on bloomberg. ♪

manus: fashion and music have always been inextricably linked. louis vuitton is going after one of the top names in music to help them design.

who is it? caroline, good morning. >> morning, manus. when you think pharrell williams , you think celebrity, the music hits, happy, get lucky with daft punk, you think less of the fashion side of pharrell williams. but he has actually already collaborated a lot with fashion. for example, in the early 2000's, he collaborated with a japanese designer. he created a brand called billionaire boys club. neko is now the creative director at lvmh. carol williams had fashion collaborations in the past with adidas and montclair. twice already, he participated in the creation of glasses and jewelry lines for louis vuitton. this choice is really the continuity of the former

creative director, virgil, who tragically died about a year and a half ago. who as you may remember, was considered as one of the most influential, high-profile black figures in luxury fashion history. so, this choice of pharrell williams is really shown as a continuity for the brand. with an exciting new chapter four the new ceo of louis vuitton. manus: we look forward to whatever his first collection

manus: good morning.

welcome to "bloomberg daybreak: europe." u.s. equity futures fall after inflation figures and fed officials offer mixed commentary on rates. china is forced to disclose frozen russia assets after sanctions on moscow. elon musk says he aims to appoint a new ceo by the end of year. stocks are finally listening. they are listening to a narrative from the fed. they are preparing for growth.

what do you clutch onto? is that enough for inflation. the sentiment has shifted. although their survey says -- it is down. the biggest tail risk is inflation. as i have said, they seem to have been listening. we could be near the point of being done. the bond market is forward-looking.

inventory has been built in the u.s. according to stats. supply is what they are worried about versus demand. when it comes to the dollar, they have rounded up on the short end to that end, there is a spike which re-invigorates the dollar. that gives you an aussie rate which falls down as we get more employment data. one of the biggest employers saying that we are not in a wage spiral as they take rates to 10 year highs. this was at the end of 2022. there is pressure to deliver another rate hike as we get inflation data today.

country in recession mired in strikes. it is a tough one for the bank of england. rising inflation and yet the crucifixion of more rate hikes from anybody on the ground. what is the thinking? lizzy: from the date of this morning, we are expecting to see inflation still in double digits, more than five times the double-digit target, even though we are past the peak of inflation. yesterday, wages grew faster than expected. the fastest rate on record outside of the pandemic. that is putting pressure beyond inflation. they are going to be looking to inflation to see how much companies are passing on higher

costs. manus: we will have a whole different narrative going into 2024. what does this mean for the march decision? lizzy: the bank has signaled that they are going to the end of these rate hikes. if you look at the work function , you can see that after the jobs data, investors are even more convinced about the rate hike in march. i was speaking to the official who is very concerned because the supply side cannot meet demand in the economy. they are also concerned that

businesses have bought in savings. the thing that businesses will carry on with high prices until demand falls. in terms of mpc thinking for the marked decision. manus: it obviously has a trickle-down effect. thank you very much. lizzy burden on the coming -- upcoming data. let's get out to sharmila whelan from westbourne research

services. good to see you again. let's start in the u.k.. we have done enough. what is the risk? how much risk does the bank of england face in terms of raising rates? are they in a spiral? sharmila: they are very much focused on inflation. if it is a trade-off, my view is that inflation is coming down and we could see that number stable. it is coming down pretty slowly. there is still a lot of liquidity in the system. i am looking at another 50-70

basis points. -- 50-75 basis points. manus: is 50-75 basis points going to put a floor on australian, or does it have to act as a release bond? sharmila: it has to act as a release valve. industry rates have been very lax. that will come off of the back of bond slowing. you have to not give in to union

demands. that will stoke inflation further which means battling interest rates. this all leads to a longer downturn. manus: what about the united kingdom? sharmila: very good question. it has gotten a little bit less bearish. it is already unfolding. manus: what do you make of the comments? with williams, i listen to him a great deal.

he is very important person at the fed. does that prepare us for a higher sequencing of dots? sharmila: the fed's job is not done. unrelenting price pressures remain. there is core inflation for the fourth month. the fact is there is a lot of liquidity still in the system. if you look at the fed balance sheet, it is 100% larger than pre-pandemic.

857% would be pre-q1 in those days. prices rise by 0.2% every month through the end of the year. manus: let's see where we get to. great to have you back. sharmila whelan from westbourne research. now, to turkiye. this is on their currency.

we will keep and i on that. what we understand is that turkiye will extend billions of euros to prop up the stock. there will be tax waivers and share buybacks. this is about taking action to try and shore up the stemple equity. it will potentially offer tax waivers. we understand that there are a number of measures and this was as equity markets and currency markets try to uncover in the aftermath. that will lead to another record low. let's see how turkey reopens a little bit later on. maria is getting ready to talk

to the defense minister in ukraine. plus, the objects shot down over china -- over canada, was it a spy balloon? the interview, coming up. ♪

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manus: ministers are wrapping up a to date meeting in brussels as ukraine calls for more military assistance. president putin is not seeking peace and is looking for more war. let's get to maria tadeo. she is now joined by a very special guest period maria: yes -- guest. maria: yes. you saw those words yesterday.

vladimir putin does not want peace, he wants more war. we are joined by the canada defense minister, anita anand. thank you for joining us. we know it has been a busy day for you. we have to ask you about the question that has transfixed the world. do you even know what this is and you have any more information? >> it is a great question. they are trying to locate the debris in the wreckage. i will say that the area is rugged. it is very cold there.

once that occurs, there will be an analysis of the debris and the wreckage so that we can provide further details so that we can provide further details. maria: you say the area is difficult to navigate. when the elected for it to be shut down, it was because there was a security concern. do you believe that there are reasons that the chinese may be involved in this? min. defense anand: we are not speculating on the origins of the object at this point. prime minister richard oh did

order the object to be shut down in order to protect canadians and their workspace. that is exactly what they are trying to do to control the airspace. this was the first shoot down over north america. it was a successful one which we are continuing to work to modernize. i never thought i would have to ask this question but there has been a debate around, is this alien perhaps come outside of earth material? is that any grounds to be the case? min. defense anand: it is imprudent to speculate that this point. we need to make sure we locate

the debris and analyze the debris and the wreckage. then we can make decisions about its origins. that is my focus. we have cruise on the ground and in the air. there are other aircraft because of the necessity to keep working on the wreckage. maria: now let's talk about ukraine. there is really palpable tension about this. yesterday the attorney general said it may be underway already. based on the information that you have come how critical is it on the battlefield -- that you have, how critical is it on the battlefield? min. defense anand: we need to make sure that we are doing whatever we can to put military

aid on the table for ukraine. for the part of canada, we have arrived in poland where training is occurring with ukrainians and we are making sure that ammunition is an all-out effort. a number of countries are committing tanks and other artillery as well. we are standing strong of ukraine and their instability. maria: you mentioned ukraine. they did say they are burning through reserves and the attacks have intensified. that means they are constantly engaged. is there any kind of agreement or do you believe you are closer to an agreement of ammunition to

make sure you don't get into a situation were there are soldiers and you have a need? min. defense anand: some and you -- some ammunition has been on the table as a need. they are categories that are prominent that have already been committed aid towards. we will make sure we are procuring the aid necessary or ukraine to fight and win the war. the allies are united in this. we are willing to coordinate for as long as it takes. this is putin's war with russia and we need to stand in support of ukraine as well as the order which has kept us safe. maria: just to wrap it up.

there is a lot of concern about what may be to come. what is the worst case scenario and potential escalation

brussels. we will stand united with ukraine for as long as it takes. if they want this war to end, all putin has to do is leave you rain. that is the fact of the matter. until that occurs, we will stand strongly with our ukrainian counterparts. maria: thank you so much. we look forward to seeing you again next time. manus, the big question is what will happen in the next few weeks? especially with that february 24 date approaching? manus: thank you very much. great interview. great first take from those

meetings in brussels. coming up on the show, we have a number of things to get through. we also have some breaking news. we will return to the stories in just a moment. this is bloomberg. ♪

manus: some stocks that are going to be on the move a little bit, i can tell you that is a lot more than the market expected. they are under pressure. gucci collapsed 14%. that was for a drop of just under 10%. as for the fourth quarter.

the blame game go straight to the tips. they did not blame them for the performance. they are talking about balenciaga at the start of the year. keep an eye on some read headlines. there are some breaches at xml -- asml. they are looking at restricting chips to china because they say there is a misappropriation of chip data in china. ♪

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anna: good morning. welcome to "blor