>> this is bloomberg "daybreak:

europe." like manus cranny is in dubai with the stories that set your agenda. manus: inflation day, ahead of the u.s. cpi, the dollar edges lower. fomc officials signal divisions over the next policy decision. plus, concerns in europe, a warning the euro zone faces a risk of inflation becoming entrenched. good morning, we are counting down to cpi. is it becoming stickier in the united states relative to the traditional sticky inflation in europe? that is the debate. dani: we also had all of that soft data over the past week. is that just noise, and if cpi comes in hot, you got to change her expectations.

manus: is it fill or kill, to excuse the pun. there ratcheting higher and that is building a case for perhaps a little bit more of an aggressive this by the market. dani: i love this quote from yesterday. i'm going to read it and you will see why. i don't see why we would just continue to go up, up, up, and then go, whoops, and then go down, down, down very quickly. let's sit there. this is the idea, we've got to see what happens from here. manus: when i was young, which was a long time ago, i used to

get little building blocks from lego. if you piled them too high, they topple over. that's called policy mistake. take it away. dani: we used to get any babies for hanukkah. i don't know, that doesn't work. anyway, here is what is happening. the msci asia-pacific index isn't moving that much this morning, it is flat, as our s&p 500 futures. an all-time high led by the luxury good stocks yesterday. chris harvey saying prepare for a 10% correction that will happen in the next 3-6 months, but the losses are not yet over

for american equity. manus: a big draw on u.s. real estate stocks. lots of people saying no matter where everything goes today on cpi, you're going to look at more pressure on this dollar and that is a narrative that is building very strongly. will it be the time for the banks to step up relative to the volatility in the bond market, can we expect an explosive move in equity volatility? price cuts coming through from some of the steel mills. it's a little about softness in china. the two year benchmark is up above 4% at the moment. what will that cpi print really due to the short end of the curve? dani: let's get to that story and other top stories with our

reporters from around the world. we will talk cpi, fed the vergence and u.s. banks still in the spotlight. manus: bowman sees stocks dropping by 2% year over year. let's get to valerie in terms of what we can expect. where should we be more focused, headline or core? >> i say definitely core. broadly they had nine -- headline numbers expected to take down quite a lot from 6% to 5.1% today. our eyes are going to be on the core number, especially month on month. also expected to moderate from .5% last month the .4% today. core is very important for the fed especially when we look at the breakdown between core

goods, core services and the super court metric that powell has spoken very much about, that is core services sex housing. -- x housing. let's remember services inflation is less sensitive to interest rates. it is remaining supported by the consumer savings buffer. a in this course services cpi is really what the fed needs to see, and don't forget we also have the fed minutes tonight. there will be some discussion about the weight given to these economic data, the employment data and the inflation data, weighing that up against the lending standards, surveys that we've gotten. we have gotten two in the last two days that have shown that credit conditions tightening

when it comes to availability for small businesses and consumers. dani: of course janet yellen says there is not a credit crunch coming, the economy is fine. as valerie hinted, there are diverging opinions, especially among fed officials. john williams says more work is needed to tame inflation. the chicago fed president calls for patients and prudence. >> today what i want us to think about is why i think that at moments of financial stress like this, the right monetary policy is really caution and watchfulness and prudence. dani: let's get over to michelle , we've had a lot of fed speak recently, talking about the need to keep combating inflation, but this sounds a little bit different from goolsby.

>> that's right, even just last week we heard another round of fed officials beating the drum on further rate hikes, saying more needs to be done. patrick harker also on tuesday talking about your favorite quote that they need to stay above 5% and sit tight for a while. they need to look at that, definitely not going to cuts in his view. all consistent with the message. tuesday featured something a little different, chicago fed chief austan goolsbee singing a different song from where they've been recently but for several months now i'm really kind of breaking into that consensus that the powell fed has had for so long. goolsby striking a different tone with the words patients and prudence instead of using those taglines about not being yet done and needing to continue the inflation fight. he said given how uncertainty abounds about where the financial headwinds are going, i

think we need to be more cautious. we should be careful about raising rates to aggressively. so really the first fed officials suggesting they might need to pause now instead of further down the line, meaning more hikes before they take a look again. so that was a big part of the debate yesterday. austan goolsbee noting the financial turmoil and sounding a little more pessimistic than his colleagues about the impacts of that going forward. manus: it sounds like at the moment. one former fed official saying it's amazing how your memory is very selective when you step to the other side. she didn't see the federal reserve data showing that lending contracted the most on record two weeks ago. maybe she missed that bit. she is optimistic, she is treasury secretary. >> she is sounding a lot

different from the imf on tuesday. going against the imf message which was making a significant risk that weighs on growth ahead. yellen sounding quite different on that. first let's start with the end of the story, she is still a soft landing believer in the sense that she is not anticipating a downturn. she said the u.s. economy is obviously performing exceptionally well. that doesn't leave much room for debate there. inflation gradually moving down and robust consumer spending. and a big part of that view is this financial turmoil, again striking a different tone. she says the u.s. banking system remains sound, she wasn't concerned globally either. manus: very divergent views.

and the views from the treasury secretary in terms of the u.s. economy. the biggest u.s. banks are playing to bolster the reserves. the move is tied to their unusual effort to shore up first republic bank last month. russell, why are the big banks doing this now, is it to send a message of reassurance in terms of tijuana capital, after all the debacle? >> basically it's just accounting rules, according to the people that are familiar, they have to put aside losses stemming from money they put into first republic. these big banks deposited billions of dollars to first

republic bank at the peak of the crisis surrounding silicon valley bank. this is a deal brokered by jamie dimon at j.p. morgan basically to give republic bank some breathing room. j.p. morgan and wells fargo, citigroup and bank of america all put in about $5 billion for 120 days. it is not risk-free, so they would have to set aside roughly $100 million each. it's not enough to move the needle on the earnings which they will be reporting over the next week or so. as mentioned earlier on the show, this comes against the backdrop that the banking crisis isn't necessarily open. we have fed officials worried about banks willingness to lend, and within that context, there are outside effects.

dani: bank earnings takeoff on friday and will be interesting to hear any ceo comment on this. the swiss parliament's lower house has voted against approving $120 billion in government guarantees for the ubs takeover of credit suisse. of course this is symbolic, it doesn't make a difference in practice, but it shows popular and political this consent with the deal -- discontent with the deal. >> the coronavirus pandemic to russia's brutal you tack on -- attack on ukraine, the world we think we know has suffered many tremors. it is all the more important to preserve and strengthen the most cherished resources we possess, the trust and stability of our institutions and responsibilities. you will have seen that the situation on the financial markets has calm down but it has

not definitively stabilize. dani: you flagged an interesting note from j.p. morgan this morning talking about what this deal does to ubs. of course it is going through whether that symbolic voting happen or not, but saying it is one of the most attractive business models in global banking, and that the price feed was also extremely attractive. manus: they have these backstops in the guarantees which was causing political and social angst. j.p. morgan well respected on ubs. the pretax profit can hit $7 billion by 2010 is seven. a lot of this is assuming that a large chunk of the wealth management clients within credit suisse jump ky see hurdle into

the ubs world. so this is a very bullish note from j.p. morgan. dani: of course the risk is they are so big and dominant in switzerland that perhaps they need to -- coming up, we will look ahead to today's march cpi print with the fed continuing to weigh holding our hiking. this is bloomberg. ♪

manus: investors are looking at uscp i later today and comes as fed officials make clear inflation was her top priority. our next guest says the central bank should pause its hikes regardless of the cpi numbers.

big, bold call, hit the pause button. the market thinks it's going to be 25 basis points. why should they pause? >> the fed has to look beyond inflation and the jobs number. it is leading to lower lending standards. i think they don't have a choice but they might go for 25 basis points but the tyner financial condition will substitute itself for a rate increase. dani: in that case, you say you are still in risk off mode. what does that look like to you. what are you selling at the moment? >> for a while we are looking bullish on fixed income market.

investment rate names, stick onto the safe lines, something that is very enticing. manus: it's amazing when you become an treasury secretary, she sees no sign of a contraction. we can debate whether some of the transfers went into the fbi see. for you the question is not when will there be a credit crunch but how large and how deep? that is a brutal assessment. >> i think they're totally undermining the whole credit crunch issue and the latest data that caught my attention was credit access which has come at the worst possible numbers in the worst levels.

the household sectors have access to no credit at the moment. the national federation of independent business data which gave an estimate, you know that small businesses are finding it increasingly difficult to have access to credit. so i don't see a reason why this can work later into something bigger. it's too early to say everything is fine and the stresses behind us. we have to watch for bank earnings the later part of this week andek. dani: i saw that survey of the credit availability and his tv magic should have it, we have it up in front of our screens. the fact that we have janet yellen striking a different tone, reasonable people can look at the same data and have different outcomes. at this point in time, how much conviction is it actually possible to have right now? >> i think it's not very hard to

make a strong conviction that everything is behind us. the data were looking at is about inflation, it has its own lag impact. these are the hard, high frequency data and this is something that will be closely watched. that's where the banks earnings make a lot of sense. we got to see where the credit standards are. the loan officer survey will be even more important for us to have more clarity on the situation. manus: the other consequence of all of this is going to be dollar-dollar. i start of show with this, again there is a building consensus view that the dollar roles lower in the market has three rate cuts plowed in at the moment.

is that compounding the soft dollar or is it the u.s. economic slowdown, whatever you want to call it, soft landing. what is driving the softer dollar, in your view? >> going forward i think we have to take a minute out from the policy movement switches depriving the dollar to the growth expectations. once the dollar normalizes through the year i think the growth factor will come to play. the asian, european, euros on growth which tends to be much higher. i think the long dollar call is over. dani: does that mean american equity, while we are talking about the u.s., is the american equity story over as well? >> in our equity funds we are

underweight u.s. equities. we are overweight on europe and asia. it's incredibly expensive and now we are seeing these kind of valuations outside basically. the growth expectation, the u.s. is going to definitely be much slower compared to the euro zone and asia going forward. i think the full china play is underestimating the reopening of china as well. for now we are underweight u.s. equities. dani: really great to talk to you this morning. coming, megan green is set to become the latest mpc member. we will discuss that next. this is bloomberg. ♪

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dani: the u.k. treasury has announced megan green will join the bank of england's monetary policy committee. she takes of the post in early july and will replace one of the most dovish policymakers on the panel. joining us is lizzy burden. bloomberg uris will certainly recognize megan green. she is on our programs quite frequently. so what do we know about her? >> it's a difficult time for her to join. you've got the doves battling it out against 11 straight rate rises. fortunately as you say she is a regular on bloomberg tv so we do have some insight to her views.

she has warned about her concerns about the impacts of tightening monetary policy on the banking system. it's more in the u.s. context but it does give us a clue to her views. she seems to lean more dovish and she's very aware of the interplay between financial and monetary stability which is important in the context of the turmoil around credit suisse and silicon valley bank and she is from a financial services background so it is at the forefront of her mind. manus: does she tip the balance in that graphic we put up on the mpc? >> it would be hard to be more dovish. she has already talked about cutting rates before she leaves the committee. so it seems likely that this will make the committee more hawkish even if it is slightly.

the reality is she's not going to take her seat until two meetings time. more interestingly perhaps, the u.k. view is her open views on anti-brexit. manus: as you say there's another two meetings to go before she cast her ballot. coming up, lula plans to visit huawei in shanghai. i screwed up. mhm. i got us t-mobile home internet. 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.

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manus: this is bloomberg "daybreak: europe." we have the stories at dani: set

your agenda. dani:inflation day ahead of u.s. cpi. equity and treasury moves are muted, the dollar edges lower. fomc officials signal divisions over the next policy decisions. plus concerns and europe, warning the euro zone faces a risk of inflation becoming entrenched. i really like what our last guest already said, is not a matter of whether a credit crunch will happen it's a matter of how deep and how scoring it is. something that treasury secretary janet yellen perhaps does not agree with. manus: maybe she just didn't get the data on the credit squeeze we had on households late last week. a quick sweep across the board's because we have a guest waiting in the wings. you've got rates inching higher,

i wonder will equity volatility ratchet relative to bond volatility. it's never a good sign in terms of the health of the demand-side in china. dani: goleman's talk about the fact that we could see big equity swings either way depending on how the cpi data comes out. that is the key point, we have to wait for the data. wells fargo says we could see a 10% correction. meanwhile european stocks are softer this morning. manus: the brazilian president and his trip to china will potentially in -- included tour of huawei's innovation center in shanghai.

let's take this story to our china economy and government had, on this trip, what is this meant to signal to the u.s., because lula was with the u.s. president not so long ago. why deliver this now? >> since lula came into office, he has really made a push for trying to create more multilateralism for brazil. the u.s. and china are two of the world's biggest trading partners. it is important for him to signal to both of these countries that they are important. i believe prior to the visit being confirmed, brazil's foreign ministry has said any visit the president makes to other companies while he is in those countries should not be taken as a sign of provocation for the u.s.. it is important for him to maintain that line.

in brazil, huawei has existed there for two decades or more. so this visit does make sense, but it is hard to divorce that the fact that the u.s. has made incredibly aggressive moves to accuse while way of being a national security threat. dani: so it was lula yesterday, it was emmanuel macron last week. what does this say about beijing recent diplomatic push? >> i think xi jinping has really been on a big push to present this image to the world that china is here to build more alliances. it is incredibly important right now because the u.s. is becoming more and more aggressive on china. accusing companies like while way of being national security threats. xi jinping is out there trying to convince the rest of the

world that they need to play nice and be cooperative with china as well. dani: thank you very much, jill. joining us is the former deputy chief of missions at the u.s. embassy in london. great to have you this morning. 20 comes to lula and china, it should be noticed that rebuild those twice as much trade with china as does with the u.s., so it makes sense in that context. >> it doesn't help relations but the u.s. administration recognizes the reality that countries are having to choose -- trying to balance both of them. there is abuse out there that why should i have to choose between the u.s. and china not have relations with both? i think the u.s. acknowledges that, doesn't love it, but has to accept the reality of it. manus: certainly it is a big

issue here in the middle east. let's get your take in terms of the speaker of the house meeting with the president. the reaction was a little less severe than when nancy pelosi -- because or than a proverbial storm in a teacup. what is your assessment of the chinese reaction to the speakers meeting? it was more muted. china feels like it has to put down these markers and express its discontent with these meetings in a very public in concrete way. the military action they took around taiwan last week was reflective of china basically saying to the united states, we don't love this and we will have to react very publicly when this

happens. dani: how likely is a taiwan-china conflict, and what might that conflict look like if it is likely? >> i think next year is a real window of opportunity for president xi. the u.s. will be distracted by elections. what it looks like is sort of a naval blockade of taiwan plus some internal movement, a political coup maybe or some political unrest in taiwan that is stoked by the chinese. china does not want to destroy taiwan the way russia has destroyed ukraine. they need the economic infrastructure. we feel there is a strong chance of this happening for the next 18 months-two years. manus: if that is a 35%

possibility, this has a consequence for infrastructure and production. tim cook is in india. elon musk is entrenched in shanghai building another factory. what goes through my mind is how quickly if there is conflict or unrest would you see an extraction of investment from china by u.s. corporate's? >> this is the challenge. the u.s. is already trying to decouple from china, especially on the technology front and is helping its allies will do the same thing. u.s. is going to take years to fully decouple from china. if something like this happens in the next 18 months, the u.s. will not get in a position where it turns its back on china and walks away without any economic scars. the u.s. would like to see a

global coalition to put sanctions on china if and when this happens. that will be more difficult than what we saw the u.s. accomplish after the russian invasion of ukraine. there are strong messages that they are not interested in broad sanctions against china. dani: there are so many questions. does this mean that companies are hesitant to look at long-term cap explants in china? >> most companies are hesitant. they are still trying to figure out the trajectory of the next couple of years. some are taken a strong position that china is not going to invade and this is the time to get in there. we would caution against that. we think there's a stronger chance that something does happen. manus: tell me something good, something that could bring me just a wee bit of cheer. we spend a lot of time talking

about china and taiwan, but what are we missing? what are our global investment audience missing either to the upside or the downside? >> specifically around china and taiwan, not sure there is a lot to be optimistic about. the u.s. and the steps the biden administration is taking to make the united states an attractive destination in the coming decade , and europe is also in a strong position. as far as china and its role in the far east and what it might do with taiwan, i don't have a lot of optimism there, sorry to say. manus: as russia tests some missiles this morning, you feel we -- fill me with more dread and peer than i started the show with. there's only so much we can do.

here's the first word news from hong kong. >> u.k. police say they are investigating following allegations of sexual harassment and rape among staff. it is britain's biggest business lobby group after allegations made by more than a dozen women. the cbi says it is liaising with police and will cooperate fully with any inquiries. this was parliament's lower house has symbolically voted against approving government guarantees for the ubs-credit suisse deal. they're still likely to push the government and pursue legal action against credit suisse business management. a pair of michael jordan

trainers has sold for $2.2 million at a sotheby's auction. that makes them the most expensive sneakers ever sold, topping the previous record of $1.8 million for a pair of nike jordan shoes. global news, powered by more than 2700 journalists and enters -- analysts in more than 100 20 countries. this is bloomberg. dani: coming up, the ecb's friends while villa roy says there is a risk of entrenched inflation. that is next on bloomberg. ♪

>> it is hungary also has the

highest effective rate at 18%. the government in budapest has been calling for interest rate cuts to try to stimulate an economy already in recession. but monetary policy makers have been pushing back, citing the need to attack inflation. the charges are political and geopolitical as well as economic. the country depends on energy imports from russia and is facing a high bill. that is men a dramatic weakening of the country's currency last year. the prime minister's government is in talks with the to try to access 37 billion euros of funds that are currently frozen over alleged violations of fundamental rights and pulley -- believed politicization. policymakers are left with a tricky tug-of-war as the latest policy decision looms later this month, on april 25.

dani: we will get that data at 7:30 a.m. u.k. time. staying on inflation, central banks on both sides of the atlantic are attempting to combat inflation. we will get more clues of the u.s. picture today with the cpi print. jamie, what are you expecting from the u.s. cpi today? jamie: we are going to get some good news on headline inflation, that's going to drop quite sharply. its core inflation the fed's most focused on. for the first time since january 2021 we think core inflation will be running higher. we think this going to be one more hike this year and then an extended hold until early 2024 which is a bit different from what the market see.

they expect inflation rates will allow the fed to cut. that's going to keep the fed on hold for the rest of the year. manus: this is where the sticky argument comes in. pivoting to do euro area, the risk becomes more entrenched, this is what villa roy is suggesting. what veracity is there to his suggestion? >> so the core inflation has boxed itself into a corner. core inflation is going to stay pretty high through the summer.

they are going to feel compelled to hike probably in june as well. it's very unlikely that core inflation falls. is it really a risk that inflation comes entrenched? yes, it is, but it is a smaller risk than elsewhere. so yes, eurozone faces and inflation problem that could be entrenched. the ecb needs to balance and focus a little more carefully than it has thus far. manus: everybody is debating the risk of these policy areas. thank you very much, jamie rush from bloomberg economics. coming up, twitter ceased to

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manus: this is "daybreak: europe." i am manus cranny in dubai. the reverberations could be quite profound private we will get a little bit more from the fed minutes. a quick snapshot on what is going on with risk. i got drawn into the iron or story, it was a bit left field to go with on cpi data but i think it tells more about the malevolence and the risk of stimulus in china. iron ore and commodities down, 11 of the big steel mills or cutting prices. dani: i like that a lot.

it is the rally in china bonds, they have barely moved. but they have been rallying at the moment those yields are the lowest since november. it's a story of, we don't know it's going to happen in the u.s. and europe on monetary policy but china sure looks like it's going to keep the easy policy. manus: harker says do we need to keep going on and on and then go w,hoops, we will little too far, too fast. when is it appropriate to pause? the consequence of all of that is if we going to pause mode and fed speak versus what's happening in the market, which is three rate cuts by the end of the year. the aussie is outcome the euro is up. there is a divorce between the

fed and the market. dani: as you pointed out, the euro is strong against most currencies. shall we switch gears and talk a little about twitter? i guess you call it merge, elon musk has formed a new company that twitter is now absorbed into. the social media company has stopped being an independent company. he has suggested that buying twitter would be an accelerant for creating what he has dubbed the everything app. tim, what does this move say about the future of twitter? >> in many ways it's just paper shuffling. elon musk owns the company outright so it doesn't matter what he calls it or which of

these show companies he puts it into. it reminds us of his obsession with the letter x. ex.com was later merged with the company that was running a company we now know as paypal. so x has been an important letter in his brand for the past quarter century so it makes sense that he would merge with the company to create this x app. no plans have been announced but we know he is thinking about it, so let's see what happens. manus: that's what i call judicious. what is next for the company? last year he brought a sink into the office.

he has fired a lot of people, downsized the footprint. is there anybody left at twitter? >> well, he is left. a response you get is the poopy emoji. he said he does have a ceo, it's his dog. so whether or not a human ceo will be appointed sometime in the future, we will find out. it is his claim that the near breakeven, he says a lot of advertisers are's that supposedly left the platform are back. we have no way of verifying that claim but he is talking the story that twitter is back on an even keel. manus: who needs a press department if you can drum up this amount of global attention. get us all to expound on the

letter x. the intellectual links we go to. tim there with the latest on elon musk. always welcome, we love twitter and spacex story. there's a lot of this merge on display here including a pair of jordan sneakers that went for it -- what is the price? dani: $2 million. manus: that's a lot of money for a pair of sneakers, isn't it? dani: i'm just saying, whoever bought this needs to be able to put these on and do dunks like jordan. that's the only way i would pay $2 million for a of trainers if they would somehow make me athletic. manus: they may not reduce the

residual value of the asset by running on the basketball court. get ready because there's going to be a great piece out later on today on quicktake. it's going to be done by the producer of the previous show and it is on jordan. there were a pair of nike yeezy, so standby for that story later today. dani: bloomberg markets europe is up next. ♪

anna: good morning and welcome to "bloomberg markets: europe." mark cudmore joins us from singapore to take us thh