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>> good morning. this is bloomberg daybreak europe. i am dani burger in london. awaiting powell as traders anticipate today's testimony on policy from the fed chair. asia stocks and futures climbed. jamie dimon says inflation is not beaten yet. >> a mild recession is possible, a harder recession as possible. i think there's a good chance inflation will come down but not enough by the fourth quarter. the fed may have to do more. dani: beijing's warning. china's new foreign minister says china's problems with the u.s. are entrenching. meta is set to be planning thousands more job cuts on top of the 13% reduction in november as the social media giant races to become more efficient. the divergence between central banks as expectations for more hikes from the ecb, from the fed

as we await jay powell's testimony. the rba says it may be time for a pause. that is what governor lowe was hinting at, assessing by how much they will hike rates. perhaps april is not the next rate hike so what are we getting this morning? a stronger aussie dollar. -- weaker, i should say, definitely not stronger. as we look at the three year yield, down 14 basis points. what's happening in the rest of the world? the ecb saying they would endorse four consecutive 50 basis point hikes. we're pricing in just above 4% at this moment. we saw german two-year yields of the front end of the curve, the highest since 2008. not a lot of traction in the euro. basically flat versus the dollar. the 10 year yield and doing much today. it is all about powell today,

what he says in front of congress. that could shake things up but we have to wait for that to happen. equities are climbing after a negative session from more growth stocks yesterday. chinese enterprises are moving -- they were moving the lead. now down .2%. this is a big reversal we have to dig into because we have the shanghai exchange head saying there needs to be better funding access for state owned enterprises in china. that lifted equities over 2% at one point, but now down a quarter of 1%. futures are basically flat as the s&p climbs .2%. let's talk to our reporters from around the world. we will talk about the fed with michelle, while james mcintyre will bring us the latest on the rba decision. james will break down where we stand in china so far. kicking it off with fed chair jay powell, set to testify before congress today.

economists and markets will be watching for commentary on how high rates can go in the u.s. let's bring in michelle. what might we get from powell today? michelle: real must-see tv. we had the usual string of fed speak last week into the weekend which helped rally the markets last friday as they felt like they understood where the policy is going. powell could throw that all four rate whirle. number one, we have to watch what he will say for inflation. we are expecting a hawkish tone, the inflation fight not being overpaid we heard them say that many times over, but we expect to hear that message again. powell will have to square this summer outlook with high inflation, tight labor markets. he's really going to have to come out with this message of tighter for longer. that could jolt markets a little bit. now, the other thing we would

warn is that bloomberg u.s. chief economist and along said they may have to go more hawkish, talk about being restrictive into next year. a lot of areas that could jolt the markets. already, long-term treasuries have indicated the higher expectations could become embedded. that is something powell will have to try to fight back against and try to position the fed to be more certain against tighter for longer and finishing the inflation fight. dani: it really is what you are talking about. such a different tone that he gave from after his last press conference and the fed's last decision. thank you for setting us up for the day. to china now were president xi jinping supportively rallying china's private sector to establish technology independence and help overcome "containment" by the u.s. and other countries. joining us is bloomberg economics editor for china,

james mayger. what do we make of his comments? james: this idea of china developing self-reliance has been a theme for the last couple of years. since the trade war under former president donald trump, where the u.s. has been increasingly putting economic sanctions, trade sanctions onto chinese companies. stopping chinese companies from buying computer chips. also now increasing machinery to build and design those computer chips, which china sees itself as needing for them to develop its economy. china sees that the international environment is getting more and more complex, in that more and more countries are joining the u.s. and start -- in stopping the export of the very high technology products that they used to make computer chips. from china's perspective, they

see that as basically the u.s. is trying to contain the economic rise. stop the development of china into these new high-technology spheres which will impact the development of a.i., 5g, and phone networks, and various other technologies which has multiple and military applications. xi is saying the world is against us. you are seeing other countries lining up with the u.s. to stop our rise. we have to work together, the government and private companies, and state owned enterprises have to work together to overcome this and continue development of the country. dani: yeah, and it comes off the back of the senator from virginia unveiling the tiktok ban bill in the senate today as well. we also have some data out of china, that exports dropped in the first two months of the year. china is trying to grow coming out of a covid lockdown, but perhaps the rest of the world is

not really aiding in that growth. james: right. you saw exports falling at the end of last year as well. looking at the u.s. economy or european economy and all the countries they export to, like south korea, japan, and taiwan, you are seeing -- you have been seeing slumping demand for about half a year. as jay powell and the fed continue to raise rates, as the ecb continues to raise rates, as australia and other places continue to raise rates, they are trying to stifle demand. part of the demand they are trying to stifle are the goods china exports. those policies are not working in tandem. china would like to sell more, but demand is falling for what it exports now, so the government's will have to rely on the domestic economy to pick up the slack that you are seeing in overseas demand right now. dani: ok, thank you very much. bloomberg's economic editor for greater china. australia's central bank has

raised its key interest rate for a 10th street meeting, but at the same time, they did signal future tightening will be dependent on incoming economic data, signaling pauses ahead. let's get to james mcintyre on this. when it comes to the rba, the language was when and how much further for rates. that when catching a lot of people's attention. james: that is right. the rba did shift. it is really an almost about-face. we had a very hawkish tilt at the february meeting with the rba signaling, they saw further interest rates hikes. now they have a dovish tilt following that dataflow. what i have said instead is they see further tightening in monetary policy and when and how they deliver the tiny will be dependent on the inflow of data we will see. dani: quickly, we do have the china reopening story at play.

is that not going to feed into inflation in australia? is it too soon to talk about causing at the rba -- pausing at the rba? james: not necessarily. the china reopening will be positive for the australia's economy. the of the reopening continues to see a strong flow of goods into the economy, we know we will be getting chinese ppi data coming up. the factory prices continuing to fall. we import a lot of our goods from china. that goods deflation is one of the things rba signaled going through. we should see the reopening giving us a bit of a boost, but maybe not the type of boost we might have seen from previous cycles that are accompanied by infrastructure stimulus. that is not happening with the chinese reopening story this time. it might be beneficial for the services and education sector with the students coming in. they also bring some workflow with them as well. there's a bit of hit and miss,

but not exactly the same type, and not one the rba could possibly derail the rba given what's happening here for households of those rate hikes thus far. dani: thank you very much, james mcintyre. sources have told bloomberg that facebook and instagram parent company meta is pending a fresh round of layoffs. su keenan has more. su: this would be the second round of layoffs for meta in four months and it is driven by an efficiency push according to people close to the matter. this is what mark zuckerberg, the ceo, has dubbed the year of efficiency. sources close to the matter are telling bloomberg that thousands of employees could be cut as soon as this week, and that this latest phase could be finalized by next week. so, it is a fast-moving development. the layoff is on top of a 13% reduction last november, and another round of layoffs pending

widely anticipated. bloomberg reported in february the company has also been working to flatten its organization by not giving buyout packages to managers and cutting whole teams it deemed non-essential. we are being told by sources currently that the imminent round of cuts is being driven by financial targets and is separate from the move to flatten. big picture, meta stock has gone they bounce from the layoffs and efficiency moves and is up some 54% year-to-date. su keenan, bloomberg, new york. dani: we will wait and see how meta starts to trade in the premarket trade in about three hours but let's take a look at other things we will be watching out for today. 9:00 a.m. u.k. time, the ecb will be publishing its new consumer expectation survey. 11:30 a.m., chile releases its copper export figures. u.s. inventory data at 3:00 p.m.

also at 3:00 p.m., all eyes on congress. jay powell will be presenting his semiannual monetary policy report to the senate banking committee. coming up first on this program, jamie dimon says his top concerns are ukraine and china. but come on, it is all about jay powell today. everybody will be tuning into his testimony. we will discuss all of that next. later today, catherine mann will be joining the team. don't miss that conversation at 9:30 a.m. this is bloomberg. ♪

>> the consumer still has a lot more money in their checking accounts than before covid. they are spending 10% more than last year pre-covid. it looks like they will have

access money to spend roughly until the end of the year. at that point, a little bit of a cliff, a soft landing. qt has not started to bite. that will happen at one point probably later this year and that is when you know what these things do. we can still have a soft landing. the other thing about all this economic forecasting is russia-ukraine. that can change dramatically and very quickly. >> do you think absent russia-ukraine, we will have a soft landing? >> i think it is still possible. possible. a mild recession as possible. a harder recession as possible. there's a good chance inflation will come down but not enough by the fourth quarter. the fed may have to do more. i think a lot of things happening in the world -- bigger trends are inflationary. infrastructure spending, the ira act, lessening trade with certain parts of the world. bringing trade back into

america. those things -- the green transition will take a lot of capital. all of those things have inflation attributes that a very different than the last 20 years. >> going to come back to the consumer point in a second but last year, you talked about this confluence of major factors -- qt, america rebounding from a post-covid economy fairly strongly, and obviously the war as well. leading us into an unprecedented period. how do we get out of that period? >> it's diplomacy. we always talk about uncertainty in the economy. i call it normal uncertainty. we know what the weather is like. that is why these things are different, qt, coming out of covid, the war in ukraine. i think it has been pushed out a little further. i thought we would be dealing with this sooner but it looks like some of that stuff is coming to for ration at the end of the year. russia-ukraine, we simply don't know. if you look at the history of

wars, they have been pretty much unpredictable at how they play out and which ones affect the global economy. they didn't affect the global economy, but they were a very smart of the economy. this is not a small part of the economy. this is a european nation. it's russia and it's major oil and gas supply, and food supply around the world. this is a whole different attribute to it. >> why does the consumer in the u.s. remain fairly bullish? >> for over a period of time, the home prices have been going up. wage prices have been going up at the lower end which is a good thing. they have a lot of money in their checking account. stocks have gone up for 10 or 15 years. the consumer is in great shape. i'm telling you that will end at one point. dani: jp morgan ceo jamie dimon and his thoughts on inflation in

an exclusive interview with bloomberg. let's get to our other top stories with simone foxman in dubai. simone: good morning. china's new foreign minister has warned about growing tensions in the relationship with the u.s. in his first news briefing since taking office last year, he called washington's approach towards beijing "a reckless gamble." >> the u.s. claims it seeks to outcompete china but does not seek conflict. yet in reality, it is so-called competition which aims to suppress china in all respects and get the two countries locked in a zero-sum game. simone: strikes across france are set to severely disrupt transport today. only one in five high-speed trains running and a third of euro star services cut. the paris subway and commuter trains will also be severely affected. the industrial action as part of an ongoing effort against president macron's plan to raise

the minimum retirement age. turkish politicians have picked the head of the main opposition party to challenge president erdogan in elections in two months. a 74-year-old has led the republican people's party for 13 years. the opposition grouping almost collapsed last week due to infighting. global news powered by more than 2700 journalists and analysts in over 120 countries. i'm simone foxman and this is bloomberg. dani: thank you very much, simone foxman. i want to bring you a quick and strange reversal that has happened in this market. i cannot explain why i am not seeing anything that explains it, but the hstech index was up over 2% to start this morning. it is now down 1.7%. it was down near 2% at one point. it had originally gotten a boost thanks to the shanghai executive

that said state-owned enterprises need more access to funding, but that has completely dissipated. if you know why this has reversed, please write into us. coming up, we will look ahead to the u.s. session. jay powell has his testimony in front of the senate. this is bloomberg. ♪ i know the markets have gone up and down, but you're right on track to reach your goals. my ameriprise advisor helps me feel confident about my financial future. he knows me and my goals. it's not the first uncertain environment he's helped me navigate. probably won't be the last. but with his advice, i know i'm on track. the plan we created can withstand uncertainty. no wonder clients rate us 4.9 out of 5

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dani: it is a very rare occurrence. inflation swaps are now showing traders believe the fed will be better at taming inflation than the ecb, or at least that inflation in europe will be more persistent. the measure of eurozone long-term inflation expectations has exceeded that of the u.s. for the first time since 2009, based on five-year forward inflation swaps. let's get to adam cole from

rcb capital markets. inflation in europe clearly a problem for a large swath of this market, but i am looking at a euro that is stuck. it is trading at 1.06 versus the dollar. what do you make of that? adam: what were your seeing is at the moment, the principal transmission mechanism for inflation expectations, rate expectations, bond market direction is the co-movement of bond and equity prices. what we find, when markets are in this kind of environment where bond and equity prices tend to move together is that markets become very, what i call, doll the directional. -- dollar directional. the overall direction of the dollar tends to drive everything. we're not clear where the peaking inflation is going to be, where the peaking bond yields and policy rates is. that is tending to play out

through weak bonds and weaker equities. a stronger dollar is kind of overwhelming the relative movements in inflation expectations or growth expectations, policy expectations, and tending to dominate direction of markets. dani: what breaks that? adam: i think it is the uncertainty -- i think what breaks that is clear evidence that we are past the peak in inflation. and in january, it felt very much like we reached that point until we saw the january payrolls, the january deflator, and the evidence: that conclusion into -- evidence calling that conclusion into question. when we are clearly on a downward trend for backward looking inflation, we can see the peak in policy rates around

the world. we can see the peak in bond yields and that becomes more constructive background for equities, and then i think the dollar turns. it is not clear to me we have reached that point yet. dani:dani: this is the big debate. we thought we were headed to that point at the start of the year and the january data had another surprise coming for us. this is the new york fed's global supply chain pressure index. it's negative which in other words means it is normalizing. it is back to the pre-covid levels for the first time since august 2019. supply chain issues because inflation to rise extremely quickly. does it fall with the same speed on the other side, if this is what supply chain pressures look like? adam: the critical question for the fed and for other central banks is the degree to which as those pressures these, inflation has already fed back into the labor markets. what the fed and the ecb and

other central banks are looking at are labor markets that are still very tight and the danger, the rise in inflation that was led by supply chain's through supply issues feeds back into inflation expectations and higher wage growth. the need for labor markets to soften to ensure that supply chain, initial rise in inflation does not feedback into higher wage growth and higher inflation expectations. dani: adam -- adam: they are at best ambiguous. dani: i have to jump in because we are almost out of time and i need to ask you this before we let you go. i know you are a boj washer. are you expecting any surprises from kuroda come friday? adam: no, i don't. we are clearly on the road to the end of yield curve control, but i think this week would be

difficult timing for that. boj still has an inflation forecast which is significantly below its own target and it would be difficult to tighten policy domestically when you don't have the domestic cook to hang that on. no, i think policy won't change at this week's meeting and many analysts, we are thinking june or july is the timing for the next move away from yield control. dani: the absence of inflation is no longer a given in japan, but to your point, it does not mean it has to happen at this moment. thank you so much for joining us this morning, adam cole. coming up, the hawks and the doves circle the ecb as decision time looms. everything's changing so quickly. before the xfinity 10g network, we didn't have internet that let us play all at once. every device? in every room? why are you up here? when i was your age, we couldn't stream a movie when the power went out. you're only a year older than me.

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dani: good morning. this is "bloomberg daybreak: europe." i am dani burger in london. awaiting powell as traders await testimony from the fed chair. jamie dimon says inflation is not beaten yet. >> a mild recession as possible, a hard recession as possible. there is a good chance inflation will come down, but not enough by the fourth quarter. the fed may have to do more. dani: china's new foreign minister signals tensions with the u.s. are threatening to entrance -- entrenched divisions between the two largest economies. plus, meta is considering a job cuts of 13% in november. the market is waiting for powell and that is all we are doing today. we are hanging tight when it

comes to u.s. equities and the bond market, but elsewhere we are pricing change at the rba. that change is a pause. in the language of the decision today, lowe was talking about when and how much rates will rise bit it is not a given that april will get the next hike. we have a three year yield coming in. the diverting tree that is not happening in the euro despite the fact we have goldsmith talking about a 4.5% terminal rate, four basis point hikes to come. we will be talking with valerie tytel about this, but adam pull over at rbc says that the market only cares about the dollar, not the rate differentials. a quick look at equities. no one has given me answers yet as to why china had the massive reversal. we were up nearly 2% in the

china a shares. euro stock 50 futures pretty much unchanged. let's talk about the ecb and battle lines are forming for the central bank decision next week. . one called for a campaign of tightening and others are looking at caution. joining us now is bloomberg markets reporter valerie tytel. the hawks, doves, the birds continue to squabble. valerie: these comments from holtzman yesterday were surprising. he called for not just two but four more 50 basis point hikes. that implies a terminal rate of 4.5%, a lot higher than what the market is pricing right now, and interestingly enough, he does not see the ecb hitting a neutral policy rate until they get to 4%. that is a high number from him. he also commented on qt saying there is a case for increasing the qt pace come the fall.

we also heard from the doves yesterday, one of the main doves being lane. he is warning against putting this policy on autopilot. he does not want to promise too many supersized 50 basis point hikes after the next one in march. he is also a warning we need to look at the cumulative tightening effects. we also hear from another key dove on wednesday, panetta. does he mirror the comments that lane said yesterday? dani: you did a great job at the last decision of lagarde herself saying that 50 basis points was colored by the doves. how do the markets handle the divide? valerie: the markets listened to the hawks yesterday. we had a brutal bare flattening of the curve. german two year yield jumping 10 basis points. this move was surprising yesterday because treasuries

moved in the opposite direction. we saw a strengthening move in the euro as well, but let me dig into this german two year yield. it is hitting highs's 2008 and has sky refuted -- skyrocketed recently. the last move was driven by the fed and the last leap higher has been driven by hawkish comments we heard from holtzman. banks across the street are raising their forecast. several of them raised them last friday to an ecb terminal rate of 7.4%. we also had nomura raising their terminal rate to 4.25 for the ecb. dani: valerie tytel staying on top of the bond yields for us. let's stay on top of the conversation and bond yields have moved half a trillion euros since the start of the year, the fastest in the year. let's talk to priscilla. a fantastic story. i thought this was a time to be

tepid. why are governments and corporate selling bonds like never before? >> it is exactly because of that, there are so many calls out to the street. the rates will remain higher for longer, and companies are afraid. they need to get bond sales out there before it's becomes even more expensive, so that is the narrative. on the one side, you have a market where fund managers are full of money, they're willing to buy new bonds, but you have the trend ahead of you that the only thing we know so far is interest rates will become higher for longer. dani: but at the same time, companies are selling bonds when rates are going higher, so what is in it for them? >> for companies, you look at now and what can happen tomorrow. if today you are paying four, maybe that can become six or 71 the ecb raises rates. the all out cost of issuing debt is cheaper than it would have

been if they had waited to come to the party. on the other side, you have fund managers very receptive to new debt. dani: get into that because the supply is there. what does the demand side of the equation look like? priscila: some managers are more selective than before, but january and march are busy months for bond sales, so there is cash in the system. that does not mean they are buying everything out there, but if you are a money manager, come to the market and for the past five years, you will be buying new issues at 0%. now you have the likes of mcdonald's, siemens, big european names selling bonds at 4%. so why not now compared to before? dani: great reporting. that is our very own priscila azevedo rocha joining us on european bond sales. let's get to your bloomberg business flash with simone foxman. simone: goldman sachs is losing

star stock trader joe montesano. bloomberg understands the 46-year-old recently told the firm he is stepping down as head of equities training for the americas, but he has yet to line up another job. he has been key in goldman's sent to the number one spot in equities the past two years. bloomberg has learned that meta is planning a fresh round of layoffs and will cut thousands of employees as soon as this week. the world's largest social networking company is aimed to become a more efficient organization. the plans come on top of november's losses, which saw the facebook and instagram owner cut 11,000 workers in its first ever major layoff. australia's central bank has signaled a pause in its 10 month tightening cycle could be in the cards. the rba lifted its cash rate to 3.6%. that is the highest level since

2012. governor philip lowe says the right path is dependent on incoming economic data. that is your bloomberg business flash. dani: thanks very much. simone foxman in dubai. coming up, the national people's congress in full swing. we will talk all things china reopening with commerzbank head of commodity research. this is bloomberg. ♪

>> i didn't like the experience i had with them, so i find that if they want the gas, they will bite on the market. that is sufficient for me. i do not need to have long-term agreements with people i do not have confidence in. dani: the chairman of tellurian on why he is not negotiating with chinese buyers, but the focus is on chinese buyers as the chinese economy reopens, despite a lower growth target set by the npc. joining us for more is commerzbank's head of commodity research, thu lan nguyen. how much more can commodities rally? is the trade still to chase china growth? thu lan: i think so.

so far we have seen an impact on the chinese reopening on commodities markets. for example at the beginning of the year, we already saw some trades among chinese optimism, so there is a huge run for commodities. at the moments, market seems to concentrate on the good supply situation. oil markets, energy markets, base metals markets, agricultural markets. that is going to change the supply situation with china reopening, china demand accelerating, and as soon as we see signs of this, we will see a more significant move on the markets. dani: where do you see the most tightness? thu lan: we are quite bullish on energy markets because in china we are coming off a long base.

crude oil demand as well as energy demand from last year dampened by zero covid policies and demand actually declined in these sectors. here already, the normalization from china's demand already shows a significant pickup in demand, which will resolve supply off of the markets, which will lead to a move in prices. dani: when do we see that play through? the story in europe is that they were able to build reserves quickly, perhaps because they did not have as much competition from china, and the weather was mild in europe. at what point do we get to a place where that changes? is it next winter when you finally have that issue of china coming back online and renewed competition? thu lan: i think we will see

competition from china already probably by the summer. we are waiting now for some hard data to see how strong this pickup in demand from china is. biggest uncertainty point. we are sure there will be a rebound, but we are not sure how strong. looking at different analyses, there could be a pickup in demand somewhere between 10% to 35% year on year in china, so that is a wide range. timing wise, we could already see this by the summer, and that is already the timing in which your past increase at supplies as well. -- europe has to increase supplies as well. that is where we will see the competition. dani: you see brent at $100 a

barrel at the end of the year. what gets us there? thu lan: it is a combination of the competition from the chinese economy. we are already seeing signs of this mobility that has returned to more normal levels. travel activity has rebounded. you saw that during the chinese lunar festivals, and other factors. obviously we are expecting supply to decrease, particularly russian oil supply, because of western sanctions which will eventually have an impact on the russian capability of using that oil. these are the two factors which will lead to significant tightening of supply. in all honesty, the russian supply is the biggest uncertainty point because we do not know a lot right now about

it. dani: i was going to say, because it seems like we have seen some resilience coming from russia when it comes to flows. is there anything that suggests that will change? that the route of flows are going to shift instead of completely stopping? thu lan: i think one significant factor will be the fact that russian oil producers are dependent on western services for maintenance, the technological factors. these things take a little time to impact production. but we already heard from some base producers in russia and they are already expecting an impact on their production this year already. i would assume this would also impact oil producers. this is the big uncertainty factor timing wise. in my view, real impact on

production will happen eventually. the uncertain factor is whether it will happen this year. dani: the other big driver of oil is monetary policy. if we do get a fed and an ecb who are committed to continuing raise rates until something breaks potentially, until a recession hits economies, what will win out as being more important? the tightness in the oil market or a bigger recession for the u.s. and european economies? thu lan: i would consider this as another big downside in this respect of our forecast. but looking at the last couple of months, economic activity, particularly in the u.s. but also europe, have fared much

better than anticipated. so the recent trend has been for a stronger economy. right now i am relatively optimistic that this is a risk scenario and not one of the more -- scenarios. dani: thank you so much for joining us. commerzbank's head of commodity research, thu lan nguyen. the world's third-biggest oil services provider is gearing up for expansion to make up for underinvestment from clients. the ceo spoke to us at the s&p global conference in houston. >> if you look at china, the big item that has changed is the aspects of post-pandemic. as you look at the energy demand and also the desire for energy, it is increasing and going back

to the historical highs, which means you are going to see more being consumed in china. a 5% gdp growth means there will also be more consumption, and you look at natural gas and lng. china last year reduced some of the lng cargoes. we see that going back to china now, so overall china is constructed from a demand perspective this year. >> will we see china compete with europe for the lng cargoes, or will it go around at higher prices? >> luckily we are seeing more capacity coming on stream and we have got a variety of projects paid a five said last year during the course of two years we would have up to 150 million tons of sib, and as we go through next year, there will still be an installed capacity for 8 million tons, so there will be some competing going on for lng cargoes, but over time

that will balance out and lng is going positive. >> and when you are able to get the projects done, we will get to that in a moment. if all of a sudden someone said that i need this much lng capacity, can you deliver it, or does it need to be a higher price? do you have the stuff to deliver or do you have to charge more to do it? >> we have the stuff to deliver. lng is not just any one type. there are different models which can be a stick built, a modular build, and what we are seeing a theme on right now is modular builds. we have got our sites in italy that have become module exports -- experts. we have tweaked the module to provide lng took >> within 26 months. >> talk about the inflationary part of that. how much are you going to charge for your services?

you are in a lot of different businesses. how sticky are these prices? >> we are seeing a constructive price environment and when there is demand for the equipment and services, it makes the outlook constructive. we are competitive and we play in a competitive landscape, so we will be there with her customers and make sure the projects go forward. dani: baker hughes ceo lorenzo simonelli speaking to bloomberg's alix steel. coming up again, volatility 2.0. the craze of the zero day expiring options and a lot of folks are not buying it. we will bring you the latest next. this is bloomberg. ♪

dani: let's talk about the risk of another volmageddon.

jp morgan says the zero day options volume could end up in a 20% loss in the worst case scenario, but lots of people do not agree. thank of america says the warning is overblown, but jp morgan with a new paper out today defending their position. let's bring in kristine aquino about this. what is jp morgan saying? kristine: that is exactly what they are saying, that this is a worst case scenario situation they are looking at, so this is one thing to remember, the extreme case. essentially they are saying that because there is so much money poured into these options at the moment, the net national value is standing at $1 trillion, comprising about 40% of the trading volume daily on the s&p 500, so is it -- so it is a

sizable amount. jp morgan laid out what would be an extreme day move so they can gain at a 5% decline? they found because of the presence of these options, that could easily spiral into a 20% decline. a big difference between 5% and 20%. this is the extreme jp morgan is trying to highlight and i understand why some people are saying that is too extreme. never say never in these markets. dani: it is the extreme example, but you mentioned the size. used to associate this with wall street that's, but we have institutions now using these types of options. kristine: it shows how much the equity market has changed the last few years and the sorts of risks people are trying to hedge against. this is ultimately -- the purpose of these options is a way to hedge your bets if you are positioned for one-way in

this market. institutional clients getting into this as well shows you there are risks that people are pricing for right now. dani: i also like the idea we monitor this instead of the vix to figure out what is happening because 30 day options are out. thank you so much for joining us. that is bloomberg's kristine aquino. perhaps today is one of the days you might want to use a zero day expiry option if you have some sort of bet on the table about powell. they are cheap and a way to hedge, but as jp morgan warns, will it cause worse? we are just waiting for the testimony. plus we will be speaking to catherine mann of the boe in programming later. this is bloomberg. ♪

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