dani: this is "bloomberg

daybreak: europe". happy friday. i'm dani burger in london. and it's is in dubai with the stories that set your agenda. manus: fear of the raising fed. wall street drops, asian stocks and futures follow after loretta mester and james bullard signal support for steeper fed rate hikes. dollar jobs, deflating the balloon prices. president biden plans to speak with his chinese counterpart xi jinping and a bid to defuse tensions. the munich security conference begins today against a backdrop of russia's war in ukraine and the response by nato and allies. dani, we're knee-deep in a earnings season, this time allianz, operating profit at 13.2 to 15.2. the estimate was around 14.2.

i'm waiting to see is there news on buybacks and dividends, that will be critically important. the dividend per share at 11.4, the market estimating 11.38. as we get more on that, we will bring it to you. we have the cfo with us later on. giulio terzariol will join us. dani, good morning. how are you? i haven't seen you for a while, so i don't know how this will pan out. five days separated, if you are not interested in volatility, i am disappointed. dani: make your case. why are you so into volatility this morning? manus: because colada fitch --k alanovich is worried about vol, a two standard deviation move on

the vix yesterday, and you are not bothered by that. kalanovich is worried. the market is paying large for a fixed-rate of for by may, and because i know you are not bothered, whoever that trader was that is named $.50 made a few bucks a few years ago on volatility. dani: it is interesting. i perhaps was being facetious. spot vol is barely over 20. but it is significant that finally we're pricing risks in this equity market. it is not as resilient as it once is. if we are finally pricing pivots, it is time stocks reflect that. finally, bonds and stocks singing the same tune. manus: we just had steven major, there rates head at hsbc. the fed should be happy, a job done. finally, people are listening,

and that is the most issue -- important issue. the equity market, as you seamlessly groove in front of that screen, take it away. dani: i feel very vanna white with you describing the equity market like this. the msci asia pacific index down 1%. euro stoxx 50 futures, we had a cracking day in europe is today, the cac 40 and ftse 100 hit all-time highs, based off of earnings. the china story helping luxury goods makers. europe is in over the u.s.. but the future session not playing through. s&p continues to decline, nasdaq underperforming it will be interesting to see if tesla continues to under four -- perform -- underperform. they declined 5.7% yesterday, they recalled 300,000 vehicles

over performance issues with beta self driving technology. manus: that is a big punch from the market. across assets, two-year rates up working basis points over five days, quite a big reawakening at the short end. as we debate where we go next. as steven major would say, the trajectory of rates will be lower at the long end. the dollar gets a bid on the fed opening the door to 50 basis points by master. master does not vote. cable rolls down. but also sterling rolling over as huw pill raises the specter that the pace of rate hikes in the united kingdom may slow because of the risk of over tightening. yesterday in riyadh, the deal for more oil, oil is down.

dani: the boe starts to look lonely, slowing while everyone else potentially ramped up. let's get to our orders from around the world -- our reporters from around the world. we will talk to michelle jamrisko. charlie rose will bring us the latest on banking job cuts. and u.s.-china relations with james maynard. manus: so we've spoken about the fed at length. let's get to charlie wells. he is standing by [no audio] manus: the question is this, it is not just a tech under pressure, charlie, it is interesting where these job cuts are coming, they are quite niche in the banks, not a broad sweep, what's going on at bank of

america? >> this is a strategic shift for america's second largest bank. they have been talking about how there was going to be job freezes but not necessarily job cuts, a lot of their peers at wall street have seen thousands of job cuts at places like morgan stanley and goldman sachs, but bank of america was going to institute simply a freeze. so this is a shift. people familiar with the matter have told bloomberg best will affect 200 people globally. not as big as some of its peers on wall street, but still significant. this is a link to declines in revenue in investment banking. in the fourth quarter at bank of america, it was down 54%. that is not looking to improve in the next few months, or perhaps quarters ahead, simply because of this bad dealmaking environment for equity and debt offerings. that is impacting the bottom line at bank of america, and

these staffing positions that looked or positive earlier this year. dani: even if it goes further than poor results, if this is an admission they hired too much during covid? >> this is a return to pre-pandemic normal, which involved culls from time to time. the hope is this is not going to be a widespread cutting of jobs like at other banks. but simply a return to the pre-pandemic normal wear underperformers and units that underperformed are pulled. manus: a lot of companies bloated. goldman is cutting jobs, they added a lot of people as well, it is not just a bank of america story. as we said, we have two fed officials opening the door to up shift rate hikes, as more u.s.

data hits the tape. you had ppi signaling that the fight against inflation is far from done. let's bring in michelle jamrisko, she has the latest. steven major says they should be quite happy with themselves after what mester and bullard did. >> it was interesting to hear his comments. count me among those grateful that these two are not voters on the fed board this year. you had an aggressive market reaction, that probably was because of what we saw in the data this week. let's get into what they said. loretta mester out of cleveland fed saying she saw a compelling economic case at the last meeting to do a half-point hike, followed by st. louis fed chief james bullard talking about not drilling a-- ruling out

a half-point hike at the next meeting. both coming out with hawkish rhetoric. bullard saying his judgment is it will be a long battle against inflation. they are talking about needing to stretch expectations for how high and long they will go in this fight. that was the summation of fed speak yesterday. but on the heels of a lot of hot inflation data. we had the u.s. cpi report. i would count the u.s. retail sales report in the inflation picture because they are inflation-adjusted. people are talking about that showing high demand, but the other lesson is the way the data are compiled, it may just show there were high volumes coming out of retail sales. then yesterday, the ppi report, wholesale prices showing pressures early in the pipeline. every one of those subgauges, year on year, court, every weight you cut it, they were higher than expectations,

pushing fed officials to get ahead of this fight again. dani: jeffrey gundlach tweeting that -- bloomberg's michelle jamrisko there. president biden says he plans to speak with xi jinping over the downing of an alleged chinese spy balloon. for more, let's get to our editor for greater china, what was your take away from what biden had about his plans to speak with xi? >> the message seems to be that the u.s. government is trying to tamp down on tensions that have blown up last week after the u.s. blew up the chinese balloons, which america claims is a spy balloon, and china claims is a weather balloon. there are signs china is looking to tamp down those tensions. it looks like president biden will do that.

we may hear something next couple of days. the chief diplomat for china wang yi will be in munich for the security conference with blinken. those two could sit down the next couple of days and discuss this. blinken's trip was formally planted 10 days ago for beijing. manus: we saw a little friction with the big u.s. arms names in china. maybe that is for another day. let's take a look at what is on the agenda for today. there are more bank earnings. dani, i'm going to handed over to you. dani: go get some water, manus. natwest due to report 7:00 a.m. in london. 11:30 a.m. u.k. time, the ecb's villa roy commenting on monetary

policy and inflation in paris. richmond fed president b arkin will speak to reporters in virginia. shortly after, michelle bowman will be speaking at a banking conference in nashville. delegates including secretary of state antony blinken will be arriving in germany for the munich security conference which kicks off today. manus? dani: coming up on the program, it is the case for pace. loretta mester and james bullard talk about the chances of a 50 basis point hike in the wake of the fed's inflation fight. this is bloomberg. ♪ 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.

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>> at this juncture, the incoming data have not changed my view we will need to bring the fed funds rate above 5%. at our meetings a few weeks ago, setting aside financial market participants expected us to do, i saw a compelling economic case for a 50 basis point increase, which would've brought the top of the target range to 5%. >> we can lock in this

disinflationary trend by continuing to have policy rate increases during 2023, even though the real economy looks like it will continue to grow. and the labor market across the country remains strong. dani: loretta mester says she would have gone 50 bips last meeting. james bullard urging for more rate hikes. they are nonvoting members. that combined with a similar message is helping sink stocks in the u.s. this morning, and in asia. manus: it's a jolt. as you say, they are nonvoting members. esther reichelt is fx strategist at commerzbank. a jolt to the short end, 50 basis points, dollar's losses this year are gone, what scale of pandora's box has bullard and

mester open for you? good morning, as there. esther: you've already mentioned quite a few times, they are both nonvoters. they are known to be more on the hawkish side of the spectrum. they are saying it is -- what they are saying is not a surprise. it is not evidence of where the fed or dollar is going. i would look more on the speakers today, which are more to the center and more reflecting the consensus in the fomc. but the focus right now is on higher fed rates. and that is supporting the u.s. dollar. dani: it is supporting dollar. what happens though, i guess it is the no landing scenario, by that i mean we don't go into recession but inflation is sticky. maybe we settle in a range of four to 5% for some time.

if that is where we are headed, what happens in that environment? esther: i still believe this would be a u.s. dollar positive environment. we've seen there is a high credibility effect. even when the market is still considering rate cuts later out, that is based on the expectation inflation is coming down, which we can still see in market inflation expectations. however as long as inflation is not coming down, u.s. dollar will benefit. of course, the fed has a dual mandate. this no landing scenario also implies this will not be a concern because the economy will remain strong, inflation will keep overheating and the u.s. labor market will remain strong, which means we might have to go much higher than what is currently priced in fed rate hikes. and will therefore be u.s. dollar positive. that's not what we're seeing,

but that is the risk. manus: you still see a strength to the dollar. i look at the other side of the biggest flows, the euro is in there. nagel says we're not restrictive enough at the moment, 10-year paper at 2.52% in bunds, the market expects 3.6 in rates. do we get there, and does that put a floor in the euro? and how will that play out, not necessarily on euro-dollar, perhaps on euro-yen, sterling and all the crosses. esther: euro is holding up quite well. it is not a hard floor. but definitely, the ecb is keeping up with the pace of the fed. which will, of course, limit the

downside in euro-dollar, we don't see it crashing through 1.05 as long as these no landing scenarios remain risk scenarios. still the ecb has had much more rate hikes priced in, off of that, the ecb is much more hawkish than many might have expected at the beginning of the year. that is supporting the crosses apart from euro-dollar. dani: you have a hawkish ecb, maybe another ramping up of hawkishness from the fed. how lonely does bank of canada look, who is still talking about pausing? how lonely does huw pill look like with huw pill talking about the need perhaps to not keep going at the same pace? what does divergence start to look like as we see again this differing pace of central banks? esther: that's definitely crucial. due to this divergence, the

focus will increasingly be on fx exchange rates. if it emerges that the fed and ecb will do more, it will credibly eye a great pause, then i expect currencies to depreciate substantially. in that case, keep an eye on the inflationary effect of a weaker currency. in both countries, the disinflationary scenario is not that credible that they can actually afford it. in the end, there will quite soon be signals from inflation data that they can't stick to this divergence as long as the inflation picture is still so uncertain. manus: so where is the biggest mispriced currency in that context? if you don't believe in this

disinflation justifying a pause, or something more from huw pill and his cohorts, where is the more mispriced currency trade at the moment? esther: if you really believe bank of england will be much more dovish going forward. this is something that has been indicated all last year. bank of england was always considered rather reluctant. i don't see more upside in euro sterling, or downside for the pound, because this reluctance is more credible than maybe bank of canada due to strong headwinds for the u.k. economy. dani: really great to catch up with you this morning. enjoy the rest of your friday. esther reichelt, fx strategist at commerzbank.

a consortium led by secretary royals is said to be -- qatari royls is considering a takeover of man united. ♪

dani: let's talk football. sources have told bloomberg a consortium led by qatari royals is preparing a 5 billion pound opening bid for manchester united football club. in doha, simone foxman has been covering this. last i saw, this was 4 billion, with an additional one billion, is it likely the qatari will win this bid? >> the number going up and up as we have heard more reporting

about this. this seems like the strongest offer we know about that will be represented. billionaire jim radcliffe is also in the running working with goldman sachs to raise money to make a bid. but this is a really strong number. frankly, it is as strong as we understand the glazer family was originally looking for. they were looking for $6 billion. again, this is the most valuable english premier league team. if you talk to analysts that do these valuations, roughly $6 billion. but we have to acknowledge there are challenges with respect to qatar already owning psg, whether these two teams can play against each other. manus: it's going to be an interesting one to see the glazers and the qataris go head to head. we have gotten the news that

mubadala and be qataris could be chasing an nba team. what do we now? >> what happened was the nba board of governors is allowing sovereign wealth funds to buy up to 20% states. qia and mubadala even more interested in these teams. manus: the time has run against us. we will keep an eye on the nba and breaking news stories across the terminal. the rest of the day is about the munich security conference. as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to 60% a year.

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but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works. manus: it's your friday edition of "daybreak: europe", with me,

manus cranny in dubai. dani burger in london hq on the stories setting the agenda. dani: wall street drops, asian stocks and futures follow after loretta mester and bullard signal support for super rate hikes. the dollar jumps. u.s. president joe biden plans to speak with his counterpart xi jinping and a bid to disabuse -- diffuse tensions. the munich security conference begins today amidst the backdrop of the war in ukraine. we got breaking news on earnings. manus: we have indeed. i've got mercedes, the ebit is slightly below prior years' gui dance. they are in the middle of a 4 billion dollars buyback. adjustedros of 12 to 15%.

a dividend above the estimate of 4.9. sales in the fourth quarter of $41 billion. prices are rising on new cars. it is a tight market. the estimate was 37.2, but they had unveiled a share buyback, $4.3 billion as recently as the 16th. they had guided that they expected lighter sales on these numbers. we will keep an eye on mercedes and see how they open. dani: i also have some earnings. sorry, i got to excited. manus: note, jump in. we've got ola kallenius of mercedes-benz. it is all about dancing together. dani: it's friday. you have to excuse me.

i have uniper earnings. the big line is uniper says it will overcome the russia gas issue in 2024. the problem is uniper has been suffering greatly with the german energy giant being cut off from russia. it confirms net loss of 19 billion euros for the year. 2023 adjusted ebitda and net above the year earlier level, but they also see a high possibility of volatility for adjusted ebitda in 2023. one of the world's leading forums for geopolitical debate, the munich security conference, kicks off today. the war in ukraine is expected to dominate discussions a week ahead of the one-year anniversary of russia's invasion. really in focus with that is the economy in ukraine. joining us to discuss that is

oleksandr gryban, deputy minister of the economy of ukraine. thank you so much for joining. let's start with the big picture. we will get into specific investments. to start this year, how has the economy in ukraine held up so far? oleksandr: the economy suffered a lot because it is obvious the challenges we're facing are not coming without consequences. we must admit the economy shrank 31% of gdp. the forecasts before were much worse, around 35%. we still anticipate moderate growth should the battlefront and the war continue. we anticipate growth in the margin of 2% at the end of 2023.

dani: part of the problem is there are two separate things you are looking at. the wider public economy, the rebuilding that needs to be done. and private investment, just getting business up and running again in ukraine, how are those two things being balanced when rebuilding and military spending is so important right now? oleksandr: we rely on the support of dollars. it is the g7 consortium that has set up the multicolor platform coronation recently. first, there is the bridging of the budget deficit that lets us survive. we have the amount we need is roughly $38 billion. we think the final negotiations

with imf will be the biggest picture. the second basket will be recovery. we submitted a level of 6 billion that we needed for ukraine. the third basket once the economy is taking care of is setting up fund programs to blading business and growth, and foreign direct investment in ukraine. we did estimation that up to 4 billion dollars might be required, but those instruments are more sophisticated because you have prearranged multiples. we are talking about for instance, war risk insurance. credit agencies ensure short-term trade deals and longer-term capital

expenditures. the war risk insurance is ensuring the damage of facilities that will be set up in ukraine. manus: you talked a lot about where the funding may come from, multilateral agencies. many have said the cost of financing from multilateral agencies may be onerous. do you think you will be treated fairly in terms of the funds that are offered to you? oleksandr: since the refinancing sources --it looks like the majority of them are offering the cheapest financial instruments. we understand the problem is not in the pricing, but the amount

they have already offered at this point. it is obvious at the moment that we will have to do a blend of financing. we must mobilize the private sector. there is no way to mobilize private money until you have concessional money in the blend. that is why we work with asset management institutions that are advising us how to set it up. how to set up the platform where you can mix different sources of the fund. dani: to that point, j.p. morgan had a meeting in kyiv not that long ago. what was disgust? -- discussed? any new projects you are taking on? oleksandr: that's what i am talking about. jp morgan seems to be one of the most reliable partners in

financial markets for us. they did a really good job in the restructuring of the ministry of finance. now we saw it not only the debt providers, but also asset management wind, this goes as a logical continuation with our cooperation with blackrock, who designated a special advisory team for us. they are working closely to set up this vehicle which will potentially demand concessional and private money. we see jp morgan as one of the pillars of this corporation, being one of the biggest investment banks and working with the biggest asset management partner from the other side. we want that credibility to the platform and to mobilize as much private money as we can. the logic is first you mix concessional money and private funds.

then you've managed to lever this, and the amount of leverage with every sublayer can multiply those funds which would never have happened before using just the ifi money. here you can really get big multiples, that is the implication. manus: obviously, youre getting advice from blackrock and jp morgan, you are getting $6 billion to rebuild this year. when the pe --ace dividend comes, what will be needed in the medium-term, do you get the sense that truly private enterprise are interested in coming to ukraine? our sovereign wealth funds coming to you, what do you need medium-term, who will plug that cap? -- gap?

oleksandr: i think they can. that is where we need to create due conditions for them to enter and work on the pipeline of projects. with private sector recovery, there are two ways money can flow. first, participation of state to mobilize the private budget instrument. that's what i see at the moment, they are preparing studies for the most relevant projects. and for the private sector, funds will be rolling in for ukrainian partners, aimed at creating the new industrialization in ukraine because the war has damaged a lot of outdated, not efficient, for energy, primarily

infrastructure. we see a triggering big opportunity in ukraine becoming one of the big providers of renewable energy to europe. you want to focus on agriculture, being one of the biggest agri producers. we want to work on information technology, transportation and logistics. i cannot give exact numbers but these will be maybe $100 billion, or more. we are starting from scratch, but also not from scratch because we still have a good infrastructure. a good labor force. we are quite skilled in many objectives. we already know how to work with capital markets. [indiscernible] manus: thank you very much for joining jenny and myself, that is oleksandr gryban, deputy

minister for the economy of ukraine. maria tadeo will be speaking with the u.k. prime minister, rishi sunak, and a panel at the munich security conference, at 1:00 p.m. central european time. dani: before that, coming up, we will speak with allianz cfo giulio terzariol about the latest earnings from the insurer after the company reported record operating profit. that's next. this is bloomberg. ♪ introducing the new sleep number climate360 smart bed. 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.

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manus: allianz has raised its dividend after reporting record operating profit last year. let's take in to the numbers. we have the cfo giulio terzariol , from munich, always great to

get to you on this show. a great set of numbers, raising the dividend, the question the market will be asking themselves is where is the growth in your business going to come from this year? you have given the guidance, where is going to be the alpha for allianz? giulio: good morning. yes, very good results in 2022. not just record profit, but after a record profit in 2021. very nice trajectory. in 2023, we expect to see growth in property-casualty. in 2022, we had a growth rate of 9%. we expect again to see a good growth rate in property-casualty. we believe we have some

opportunity in commercial. we will see the opportunity in investment management. if the markets will be stable and positive, i'm sure we will benefit from the strength of our franchises. if the markets will be more choppy, for resilient as we showed in 2022.on the light side, i think conditions are actually good. rates are higher, so from that point of view, on the margin side, we have strong margins, so we can also focus on disciplined growth. dani: on pimco and allianz both seeing third-party net outflows for the third quarter. for pimco, this was 17 billion euros, what has the first few months of the year looked like? continued outflows? giulio: we saw inflows in january. pimco had about 10 billion

euros, tgi will also see inflows, this is confirming our expectation. we always said if markets are more stable, we will see inflows coming back. that's what we're seeing right now. we cannot call it a trend, we have to see how the situation develops. but it is just a matter of time before continuous growth will come in, and demand has definitely been on the positive side. manus: we all hope for a less volatile year overall. where are the flows coming in? very much at the short end? we have seen rates the highest since 2007. markets now exploding higher in terms of the view on rates. where do you see u.s. rates going to, and the flow of money coming in at the start of the year, where has that come in the most at pimco?

giulio: the flows of money is pretty much across different strategies. there is a strategy that has performed significantly better than others. also fixed income, considering where rates are, this makes a lot of sense. with respect to where rates will go in 2023, i am not good at making predictions, but rates will not be significantly higher. on the others, i don't expect inflation to go down quickly. i would expect an environment with more stability compared to 2022, but still we need to be ready that there is some uncertainty. so, my position will be that rates are more relaxed at this

level, and inflation will be more or less at this level for at least the next six to nine months. dani: if it makes you feel better, even the fed i feel is not 100% sure where things go from here. pimco at its core is overwhelmingly a bond fund. it was a tough year last year. there is still volatility, as we have learned just in the past week. do you think there needs to be any structural changes at pimco? to asset management at allianz? giulio: it's true that pimco is pretty much on fixed income. but think about fixed income as a very wide space where there are a lot of strategies. just yesterday i was looking at the numbers. i was looking at the numbers for agi and pimco together. in 2020, we had $46 billion of

alternative investments. as of 2022, we are now at $82 billion. there was a huge increase in alternative investment. from that point of view, i would say there is a lot of diversification we can achieve that pimco even if we are focused more on the fixed income space. also, we are investing significant in real estate. from that point, the franchise of pimco is totally fine. the thing they can do best is the right strategy. change in the set of pimco, the operating model is working nicely. with the right focus and diversification at pimco we can be sure we can be resilient also in a tough environment. if you look at operating profit at pimco in euro terms, it has a very good result. manus: just before we let you

go, the world is trying to grapple with everything in turkey. with the ramifications on a human level. but from a financial level, what exposure do you have to turkey at allianz? giulio: first of all, it is a great tragedy. from a pure financial point of view, it is not an issue for us. the expectation of a loss between 50 to 100 billion, in our business model, we expect this to happen. it is not difficult from a financial point of view, but our hearts go out to the people in turkiye. in germany, we have a lot of people from turkish origin. from that point of view, we are

emotionally very close to what is happening on the situation. the financial aspects are not that significant compared to the human tragedy. dani: our thoughts go out there. giulio, thank you so much for joining us today. that is the allianz cfo. natwest's ceo will be joining later at around 7:30 a.m. london time. this is bloomberg. ♪

manus: let's check on how markets are faring. dani, you are a volatility denier, that is what is wrong with you. the short end of the curve has blown up by 17 basis points at its worst point this week, the dollar went bid on the back of

bullard's comments yesterday. steven major was with me over an hour ago, and he was talking about job well done at the fed. but they are probably going to be late when it comes to actually cutting. dani: mm. yeah. perhaps my hesitation with volatility is i am trying to avoid talking about zero day expiries for options. but finally, equities falling as yields go higher. it feels like it has been a while that equities have been fighting this trend. have they finally had their come to jesus moment as the bond market finally start to price out a ticket? -- pivot? [laughter] manus: you are right. don't worry about it. look, i know you lambaste these

options. cannot just say that a greater mind i, he is focused on them, that is the only reason i bring them up. i put my tie collection on ebay. dani: c'mon. i could make a lot of profit. i think we have a few viewers who would 50 or ties -- buy your ties. a little pocket change, manus. manus: you can ib me your bid.

anna: good morning everyone and welcome to bloombe