dani: this is "bloomberg

daybreak: europe". i'm dani burger in london, back with manus cranny in dubai. these are the stories that set your agenda. dani: oil surges, stocks dropped, treasury yields jump as opec-plus stuns the markets with a surprise million barrel a day production cut. ubs will cut its workforce by 30% after completing the takeover of credit suisse, both banks face shareholders this week. plus, tesla reports record deliveries in the first quarter but falls short of elon musk's goal of 50% annual growth. dani, good to be back in the seat. this is opec not hitting the panic button, but the deep precautionary move to avoid 2008. good morning and good to be back. dani: here we are stressed out

from banking, neely stressed out from this opec-plus cut, and you are supporting a lovely tan. there is a disconnect here but it is all about the oil market. goldman says oil will go to one hunter $20 a barrel in 2024. manus: prince bin salman wants to get a shock and squeeze those shorts, this is what helima says, partners will further macro selloffs. this is about retaking control of the oil market, which you so often referred to as being disconnected and broken. dani: oil surging 5%, let me take you to the charts. the new threat is inflation,

does this threaten the year of the bond? we had the best back-to-back quarterly gains for the bond market in some time, is that all undone by this exact story? manus: they look at the core. this will be a shock. whatever look at equities. am i richer or poorer, how me more years at my working? dani: you are certainly richer, we had a good market for equities but it is a different town. maybe this morning we're saying manus will have to work for a few more years. it was a good quarter for tech, that is being undone though not completely. the nasdaq reentered bull market, can it last if inflation is picking up and we do not get cuts in these markets. hstech falls 1%, nasdaq futures underperforming. both american and european futures falling this morning. manus: it is interesting how the

swaps market all early -- already itching in terms of rate cuts, will the long variable lag come to bear? we have bank oil to death, let's have a look, the question is does it make to 100%? we just had bob mcnally talking about how it opens up the risk for $120 a barrel later in the year. the narrative is the fed may be stymied from rate cuts the swaps market are so obsessed about. we are a little over our skis. susan collins says more work to be done in terms of raising rates. first losses on the dollar since 2020, but eking out gains. an iron ore down 3.4% as the cost of production is set to

rise on the oil input side. dani: those weaker china pmi's as well. let's get to those stories with reporters from around the world. we will talk oil with elizabeth low. russell ward is on hand for the latest ubs news. bill faries will preview trump's day in court tomorrow. manus: to the oil market, opec+ with a surprising cut of over one million barrels per day to the market. that's what you've got in terms of abandoning previous assurances. joining us now is our oil reporter, elizabeth, good to have you with us. how significant is this cut? is it getting out ahead of a brutal, hard landing in the global economy? >> this news came as a big surprise to the market. it is a strong signal to the oil market this morning. this morning asia time, we're

seeing analysts talking about $100 a barrel in sight. maybe a bit of a backdrop of how this is happening, we're coming off of a soft background where crude prices other worst first quarter drop since 2020, the beginning of the pandemic. the market looking at economic slowdown in recent weeks. before this, brent closed at $80 a barrel. if you look at what opec+ said previously, they want oil around $90 a barrel, so this is a clear move to take back control of the market. the initial impact of the cuts will begin next month and should add up to 1.6 million barrels a day by july on paper. given at a time we're expecting stronger demand from china and is tighter supply in the second half, this could have

significant impact on overall supply and demand fundamentals. dani: that such an important point to keep in mind, we are about to face more demand from china. talk to me about the market response where we see already an 8% gain in oil prices at one point this morning. >> the peak was a percent, it is now 5%. apart from the futures action, the fiscal market is still -- physical market is still digesting this news. it is taking precedence in asian markets. it is quite a surprise for refiners and everyone is looking at how that will affect food pricing in the month ahead. dani: elizabeth, thank you very much. now to the banking sector. ubs will cut as much as 30% of its headcount after completing

its takeover of credit suisse. that move could affect more than 35,000 employees. let's get to our asia investing editor in tokyo. these are large numbers we are talking about here. >> very dramatic numbers. we're talking as many as 11,000 within the borders of switzerland, and 25,000 globally. at the same time, it is not a huge surprise given the scale of this takeover and of the overlaps between the businesses. the banks themselves were warning of significant cuts. take the domestic operation alone. you have two banking behemoths in switzerland that are on every main street in the country, and there is not enough room to have those branches there, so surely we will have dozens of cuts at home and at branches.

looking overseas, ubs has made no secret of his pledge to downsize the investment bank of credit suisse, and adjust its risk profile to fit within the ubs culture. that will involve a lot of cuts of bankers globally as well. manus: let's see how quickly and how brutally they wield that axe. you are seeing swaths of teams already residing within credit suisse, this is what khan was trying to do to save wealth management teams. let's see agm's for credit suisse are tomorrow and ubs on wednesday. trump will plead not guilty when he appears in court tomorrow. after a panel voted to indict him last week in relation to

hush money payments to porn s tar, stormy daniels. bill faries is on the story. how have president trump and his supporters reacted to the news? >> as expected, president trump and his supporters have said this is a great example of the u.s. legal system being weaponized. but they have also saw to take advantage of it. they have raised over $4 million in the day or two after that enticement -- indictment was announced for his 2024 presidential campaign. they will try to rally his core more as this arraignment arrives on tuesday. dani: walk us through that. how does this play out in the coming days? >> his lawyers said he will fly to new york monday in the u.s.

he is expected to appear at the judge's chambers at some point tuesday afternoon. he will be photographed and fingerprinted, and will have to appear in court and address the charges. that will be our first chance to see all the charges he is facing. we also have exclusive reporting that trump's lawyers are trying to have the trial moved from manhattan to staten island were presumably a more conservative jury might be picked. we don't know if there is a good chance of that happening but it is something the lawyers are apparently discussing. dani: thank you so much for this. and all of your coverage last week. let's look at some of the things we will be watching out for to get you set up for your trading day. we will get the latest euro area pmi manufacturing readings today.

tomorrow former u.s. president trump appears in court connected to allegations of payments to a porn star, will he get this moved to staten island? wednesday, manus will be at ubs's agm. thursday we have u.s. initial jobless claims. then the jobs bonanza continues, friday, we have u.s. nonfarm payrolls, while the pace of hiring have moderated? or has the jump in oil prices come to growing the inflation disinflation party? we will speak about that. oil rises, adding to inflation fears. this is bloomberg. ♪ fallen in love with a portable blender. blendjet 2 gives you ice-crushing, big blender power on-the-go. so you can throw in your favorite ingredients and blend up a delicious smoothie anytime, anywhere.

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dani: treasury yields are on the up this morning on the front end as much as eight basis points, rising on concerns that opec-plus cuts will keep inflation elevated, put pressure on the fed to keep hiking rates. at just the time of the market has priced in more cuts. manus: we have gone from 5% to 3.44%, on anchored, -- u nanchored, not talking about my daily mood. sue trinh, global head at manulife. your we are now pricing in rate

cuts. does an 8% ramp in the price of oil matter if it comes to bear? sue: we will talk about the unhinged dynamic later. the developments we have seen underline complacency on this front. with regards to inflation expectation, the mainstream assumption is it is just the demand curve that moves. but the supply curve can move, too. we are seeing deliberate demand to. weaponization of goods, commodities, food, minerals for the green transition and high end manufacturing. this all suggests upside risks for commodity prices and inflation as well. it validates our base case that the first half of this year will

be extremely bumpy, and the risk on price action in january was something to be very cautious about. dani: i want to get to the unhinged nature, not talking about whatever is going on with manus right now, but we see much more volatility to come. how do you handle this type of environment where a two-year yield moving eight basis points is a calm day in retrospect. sue: it says a lot about the macro environment. we have had a macro profile of worse before it gets better for the global cycle, and investors should expect higher for longer volatility through the first half of 2023, we are wondering if it doesn't spillover into the first half of next year given the collapse of svb. even the federal reserve is confused. it all hinges on the extent of the tightening in credit

conditions, lending standards. as per powell, he thinks the extent of tightening is worth 25 basis points, maybe more in conventional rate hikes. you look around, today there is concerns about opec cuts, but financial stability concerns look to be very much in the rearview mirror. unfortunately in this case, good news is bad news, and it gives the fed the green light to potentially hike further. there is a huge disconnect between what ois markets are pricing for the extent of the fed's cycle, and what the fed's dots are telling us. somehow that needs to be reconciled and that suggests more volatility. manus: the issue is this. susan collins tells markets it is too early to say whether we have gone too far in terms of

the fed and hiking. he say that disconnect -- you say that disconnect needs to be closed. are we seriously underpricing what the fed has left to do? sue: yes, i would say if you take the fed by its dot plots, the market is underpricing the extent to which the fed can hike. it comes down to how you view the recent financial instability shall we say. we would argue that financial stability is in the eye of the beholder. this is an asset cycle more than a credit cycle, the most aggressive tightening cycle in decades. you would expect to see troubles shall we say, especially in areas where there is speculate ive excess or overleveraged. . arguably, the federal reserve

wants to see this. it suggests it has ring fenced the systemic part of the risk. dani: one of the impacts of ring fencing has been investors running into cash. the most since the onset of the pandemic. u.s. money market funds now have over $5 trillion. janet yellen has called this a potential systematic vulnerability. what could be the outcome of these cash piles? sue: to the extent that smaller interregional banks in the united states are a conduit for consumer credit the question is how that gap is bridged. if you are seeing deposit outflows to larger banks that don't really engage in that kind of banking activity, that is a problem, that is the tightening of lending standards.

economists are trying to estimate just how much that compensates for actual conventional rate hikes and thus, how far the federal reserve might have to lift the general rate. manus: sue trinh, managing director at manulife. tesla hit record levels, but the growth is not quite enough for ceo elon musk. this is bloomberg. ♪

manus: let's get you up to speed this monday morning with your first word news. sarah joins the daybreak team. >> donald trump will plead not

guilty to criminal charges related to payments made to a porn star when he appears in a manhattan court on tuesday. his lawyer told cnn but payments were previously investigated by the election commission and the justice department which found no violations. trump will head to trump tower in new york. an explosion in st. petersburg has killed a military blogger who supported the war in ukraine. a russian news agencies has a improvised explosive device the size of a bar of soap was hidden in a statuette. the explosion also injured 25 people. the finnish prime minister has lost a parliamentary election to a pro business group. her social democrats came in

third behind the national coalition and of the far right party. they will need to work with one of the other blocs to form a government. parisians have banned electric scooters. they called for the factory power devices to be outlawed. the number of people killed or injured in the french capital. critics have raised concerns over the low turnout. global news powered by more than 2700 journalists and analysts in more than 120 countries. i'm sara halls, this is bloomberg. dani: sarah with her daybreak debut. tesla has reported record deliveries in the first quarter, but the carmaker fell short of ceo elon musk's growth goal, despite tesla slashing prices in an attempt to boost demand. for more, let's get to quicktake

correspondent alex webb, how did this match expectations? >> there are two pieces, on the one hand the analyst forecast, it was in line, 422,000 units but then there is elon musk's expectations. he telegraphed 50% growth, this is 36% growth, quite short of that but the market will be disappointed. manus: the surge in production, did they get there through price cuts? do they have the capacity to go further? what are the ramifications of these numbers? >> that is the key question, price cuts were significant last year, what has that done to the margin? the market is forecasting a fairly significant decline of two or three percentage points.

this year, they are looking to ship as many as 2 million units. but had to cut costs quite a lot to get to 423,000, how much more will they need to do to get to 2 million? that is a concern over the next few months. dani: how is elon musk squeeze out more growth if it is not 50%? >> that is one of the reasons there is disappointment about the price point. the model three was supposed to be the very much entry level model. we have now seen volkswagen and others with options that are even cheaper. tesla has not bringing -- been bringing the cadence of new models that carmakers would typically do. that is causing concern -- dani: there was disappointment that they do not have new models. >> they do not give any detail

on what the next models were going to look like. for all these things together, tesla has pulled a rabbit out of the hat on many occasions but it is a little niggle investors have on the back of their heads. manus: alex webb with the latest on tesla, and the trickle-down effect seems limited at the moment. it's going to be interesting in terms of news flow. i'm only here for one day. you thought i was actually coming back. dani: leaving me again, manus.

manus: this is "bloomberg daybreak: europe".

i'm manus cranny in dubai with dani burger in london on the stories that set your agenda. dani: oil searches, stocks drop and treasury yields jump as opec-plus stuns with a surprise million barrels per day production cut. ubs will cut its workforce by up to 30% after completing the takeover of credit suisse. both banks face shareholders this week. plus, tesla reports record deliveries in the first quarter but fall short of elon musk's goal of 50% annual growth. you are back maybe just for one day on daybreak, but it is oil markets and ubs, it is literally your two beats coming to disrupt any hope you had of a calm returned from holiday. manus: his royal highness has a message, he is welcome on the bloomberg airwaves any day of the week. mcnally talking about $120 a

barrel oil. quick snapshot. oil market coming back, two-year yield spiking higher, nervousness about inflation, the dollar first losses since 2020, better bid as we go risk off on the equity side. dani: completely different equity environment and friday, we ended the day with a rally, stocks gained for the month to .5%, everything is falling but it is led by tech. that has to do with fears around oil. manus: absolutely, as i said, oil surged at the start of trade last night in asia after opec+ group blindsided markets with an unexpected crude output cut threatening to tighten markets and deliver a fresh inflationary jolt. that is the speculation. was good to our asia energy team leader. good to have you with this.

why do you think -- people are calling this a precautionary move, but it was a hell of a surprise. >> good morning, absolutely what a surprise. as recently as friday, we were expecting opec and its allies to stick with the policy in place, to potentially increase production and here was that surprise cut of a million barrels a day. the market is looking for answers. there are a couple different pots, opec and allies are looking for higher price. also, opec members feel that they ought to be driving the market, in charge of it, rather than as we have seen, things like fed policy being the key determinant of the oil price. there is a sense of them

reclaiming control. and the price has certainly reacted, certainly in asian trading through the day here. dani: they have reclaimed control, as you were saying, to what effect? what is the impact on of the oil market into beyond so far? >> we saw quite a dramatic rise at the open, as much as 8%, the biggest intraday move in a year. things have come off a little. it will be interesting to see what happens through their european day and into the u.s. we have seen higher trading volumes in asia as well, indicating that on a usual monday in asia, there is higher volumes as people position. it's going to be interesting to see what the reaction is from here. we haven't heard too much yet

from big consumer nations. we have heard from the biden administration, they have expressed displeasure. they said this move was not advisable in the current market conditions. manus: certainly, there jawboning has not proven effective in the past. let's see if they go for the spr, which has been much depleted. how do relations stand between the u.s. and saudi, they are not exactly warm and cuddly. >> that is absolutely right. this will only further antagonize relations. things have not been good. and certainly have not been improving, not least since saudi arabia seemed to shun joe biden's efforts to encourage

more oil production. around the midterms, his key focus was trying to get those palm prices down. but coming up to the summer months in the u.s., we're coming up to what is described as the peak driving season. there will be more gasoline demand. could that put more pressure? i don't think this will do anything at all to help improve geopolitical relations. dani: especially as we get closer to election campaigning time. david, thanks so much for joining us. what will be the impact on the macroenvironment? let's bring in the ceo and founder of underlyinginflation.com, and economist at the university of geneva. you used to sit on the inflation desk of both the fed and ecb, if you are still in that position, what would you still be advising central banks off the back of this 1.1 million barrel cut from opec+?

riccardo: first of all, thank you for having me. it doesn't change the macro outlook for a couple of reasons. first of all, what happens with crude will affect headline inflation. but current headline inflation is not a good indicator of future headline inflation. what matters is core inflation. the move specifically in oil, in the u.s. from crew to core inflation, is small. this type of move in the oil market won't have an impact on core inflation itself. therefore it will not result in any monetary action. having said so, there are other reasons it doesn't change the macro outlook. because i more pessimistic in

terms of future development of core inflation. markets finally realized in the next few months that core inflation in the euro area and u.s. will be more sticky than what markets have priced directly. manus: so, with sticky inflation, we don't know how much more sticky it is in europe relative to the united states of america. you see that in swaps pricing for the states relative to europe. you look at core data sets, core inflation in the whole of europe again at 5.7%, again very sticky. my question to you is this, does the ecb continue on averted 0-- unaverted in his trajectory? is there a risk of a july 2008-style policy mistake?

riccardo: the risks are on both sides. there is a difference between this environment and 2008. we are running at 5.7% core inflation in the euro area, the sequential is 6.1%. there is a risk of doing too much and of doing too little. it is fairly restrictive territory in the euro area. fiscal policy is not cooperating in some countries. in italy, leverage is still a large part of gdp. there are not many collapses which central banks have been

successful, starting with 7% core inflation. so i am worried about both sides. i'm worried about a mistake in doing too little but also about doing too much because of financially stressed conditions. dani: what is the right balance to strike? money markets pricing a 3.6% peak in ecb policy, is that enough? riccardo: i don't think it is enough. all the models tell us if that is the case, core inflation will not converge back to 2% by the end of 2025. the reason is simple, there is robust evidence that core inflation in the euro area is pretty similar to the united states. it is not driven only by negative supply shocks, it is also driven by robust demand shocks.

it really depends on how fast we want to disinflation the euro area. if you want to be at 2% by the end of 2025, then a peak of 3.5% is not enough. there is not a single model in which this is enough. you have to go well above 4% in order to be there. manus: what is that politically acceptable? would 4-4.5% -- and thank you for reminding me that it is not 2008 --but we have a banking crisis, it is real. we have the threat of a hard landing, cost-of-living crisis, it is real. a war, it is very real. politically, can they afford 4.5%? that is a darn hard landing. riccardo: it will depend on the data.

if we keep getting sequential core inflation, headline will go back to 6-7% a year from now. nominal wages continuing to grow as they are now, then political tensions only increase. finding the right balance will be extremely complicated for the ecb. but we have to be aware. if they do not want to distance like this economy, i don't want to say we are at risk of the 70's, core inflation will not be at 15% a year or two from now, but it is possible they will not land back to 2% and we will stay in an environment in which inflation runs persistently above that. it will have consequences for long-term savers and of bond markets.

dani: if this inflationary environment is as pernicious as you say, does it go beyond just monetary policy? to governments also need to adopt policies to reign in inflation? riccardo: that is the key in getting out of this inflation. we did not get in this mess only because of monetary stimulus. we had a sequence of shocks. shocks on the labor market, the oil and energy markets, monetary shocks and fiscal shocks. if we want to go back to the pre-covid environment, we have to rollback each of these shocks which requires statutory reforms for the labor market, it requires fiscal intervention.

let me make an example, which is italy. italy used to run 2% fiscal debt before covid, now it is 4% fiscal deficit. is there a good reason why the country is running 8% fiscal deficit with 10% inflation growing 4% gdp, no there is not. the policymakers have to understand the role to play. fiscal shocks is part of this. if we rely on monetary policy alone, central banks don't have the tools to address inflation. they will peel it down, but if

the past is any guidance, they will do it with something else, as we have seen in u.s. already. we start with one hand and undo with the other. fiscal and monetary policy should cooperate and do the job together. manus: thank you very much. let's see what the next series of prints delivers. and the reality check the ecb may need to make. riccardo trezzi, economist at the university of geneva. the banking fallout continues as ubs is reported to be considering major job cuts. we have the details on bloomberg. ♪

dani: let's get your bloomberg business flash. sarah halls has that in dubai.

>> tesla has delivered almost 423,000 cars in the first quarter, ahead of analyst expectations. the electric carmaker had slashed prices early this year to appeal to consumers affected by rising interest rates, but the pace of deliveries fell short of elon musk's goal of 50% in will group. and ever group is nearing a deal to acquire world. wwe's executive chairman was looking to get $9 billion for the company. wwe shares have gained 33% this year. mitsubishi ufj is delaying a planned sale of at1 bonds following write-downs at credit suisse. it will go ahead with a two-part at1 offering in mid-may.

the decision comes after another japanese bank started sounding out investors for its at1 sale. manus: thank you very much. ubs will cut as much as 30% of headcount after completing the takeover of credit squeeze. the move could affect 35,000 employees globally. j.p. barnert is in frankfurt covering this. looking at this, these headline numbers are pretty gargantuan, topic a hit will that be inside switzerland? and how big will that be on a global basis? >> it was expected that ubs has to take drastic measures if they want to make this merger, which wasn't their own choice so to speak. and the timeline is short so they have to present some ideas rather quickly. cutting staff where there is

some overhang makes sense. it is pretty big for this was financial sector given the banks are the two major employers in switzerland. this will have an effect on the market there. the effect on the overall swiss economy is not too dramatic, but if you have two financial institutions laying off thousands, you will see this in the overall numbers for sure. dani: do we know anything about swiss prosecutors reportedly taking a look at a criminal investigation into the deal? >> that was a bit of a strange story to me because it didn't give much detail what they are looking for. from the statement we received, it sounds like a pre-cautious investigation they are taking, we just want to make sure there is no wrongdoing on the side of management or officials. keep in mind, a lot of taxpayer

money is involved, the thing was done in hasty style and there is some public pressure on the merger, so prosecutors want to make sure they do their job properly, and make sure they are not overlooking anything, because that would really look bad on them. manus: there is a number of things that play. we have agm's this week, one tomorrow, one on wednesday. norgesbank voting against the reelection of a number of people, axel lehman being one, shareholders have the right to seek changes to the board, but shareholders did not have any right of recourse to this deal. they wiped out at1's to force a gunshot marriage, so there is a bit of irony.

how important is this? >> it is important to have discussion in general because this event was unprecedented and raises major questions about how bank investors will be treated going forward. the question is, can shareholders do a lot given that they changed the law and used emergency proceedings to push the deal through? it is important to have this discussion because it raises questions. it makes sense that governments can merge banks and a swift manner if there is danger. their lifeline was very short and they had to act in this hasty manner. this will always be bad for shareholders. the question going forward, could the government intervene at an earlier stage so the effects on the shareholders will not be as bad?

that discussion is needed. dani: if you are a headhunter, especially an investment banking headhunter in europe your phone is probably ringing off the hook, what does this mean for talent? it is such an onshore time at the newly enlargened ubs, how difficult will it be to persuade to u -- top brass to stick around. >> there will be opportunities. if ubs pulls this off and a decent way, the opportunities for this new lender arguments. they are basically the only wealth management firm left in europe. even globally. it will be difficult to find a new spot. the banking system in europe has

not been hiring a lot of people over the past decade. on the contrary, every bank is looking to reduce headcount, so it is not going to be easy. even if you are a headhunter, it would be easy to find new opportunities for those clients, so fingers crossed for everybody losing their job here, that's a sad thing. dani: thank you so much. that is j.p. barnert in frankfurt. coming up, it is a really busy week. we have that ubs agm. there is also trump's indictment and it is jobs week. we will tell you everything you need to know next. this is bloomberg. ♪

dani: let's get you set up for the week. today we get the latest euro area pmi manufacturing readings.

we also have u.s. ism manufacturing. tomorrow former u.s. president donald trump will appear in court connected to allegations of payments to a porn star. plus, credit suisse will hold its agm. wednesday we have u.s. ism services data. the big one for you, ubs will be holding its agm. dani: all of her will be at credit suisse tomorrow. i am heading off to zurich this afternoon. we're leaving it in capable hands. you will do the china services, then it is all eyes on the jobs number and wages on friday. ♪ with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply.

i screwed up. -mhm. home trial today. i got us t-mobile home internet. ah! now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! -woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck.

dani: good morning