>> good morning. it is "bloomberg daybreak: europe." deal done. president biden and speaker mccarthy agree on a debt ceiling package and expressed confidence that congress will back it in time to avert a devastating u.s. default. >> it prevents the worst possible crisis. an economic recession and millions of jobs lost. >> muted market optimism. equity and treasury futures along with asian stocks make modest gains. a cautious welcome to the unfinished business in washington. president erdogan extends his rule.

ceiling a reelection victory that appear doubtful weeks ago. are you brave enough to move from cash to equities. citi has moved to a pro-american stance and the question for you is the negative tail risk removed sufficiently? morgan stanley warning you are being chipped or sucked into bear market rally. money has flooded into the equity indices especially in the nasdaq. let's look at some of the equity indices. semiconductors taking in over 800 million dollars on thursday alone. equity inflows this year are flat year to date. you have this modest risk on. tech flew high last week and if you were not in the top seven

stocks you are not in the trade. i'm talking about nvidia, apple and facebook. without those seven stocks the s&p 500 would be up 1%. 17 out of the 23 analysts we speak to believe it will be a rollover. oil up 1% this morning. futures trading on bonds. you are seeing futures dropped and yields rise. you're looking at two-year paper above 4.5%. the market now issued a 25 basis point hike in june. but hsbc says it does not matter. soggy bottom dollar is what is coming towards you and that will have an impact on the trade in the euro and in sterling. and bitcoin, she is up there, 1.4%.

we have a muted response one could say to the debt ceiling. let's get to the top stories. we have the latest. joe biden and the house speaker have expressed confidence that the debt deal will pass congress in time to avert a catastrophic default. for more let's get to our senior editor, bill. what is the most contentious components of the debt deal? what have they got to sell to the house that is the most palatable? and what is the least palatable part? bill: for kevin mccarthy, he is going to have to justify some of the changes to working requirements for people who want to stay on government aid.

it is far less than what some far right republicans were looking for. some of the spending caps are probably higher than what they were comfortable with. and on president biden's side he is going to have to sell parts of this to his progressive coalition and they are not going to be happy about any of the changes to the work work armen's for the government aid. they will be happy that defense gets a little higher of the cap then domestic spending does. in the end there is probably more for the bed -- the middle of both sides to agree on then the fringes of both parties to disagree on. manus: when it came to expanding the working requirements for those food stamps, that has been pushed higher as well. do we expect drama? i would say it has not been as dramatic as some of their previous ones i have lived through. spoiler alert? bill: yes.

i think we are past the peak of the drama but i don't think this will sail through the house and the senate without last-minute hiccups. i think kevin mccarthy will look closely at how many republicans are going to be peeling off and voting no or present instead of supporting the deal. he has his speakership at risk if too many leave the agreement. on the senate side you will have democrats and republicans, is single senator can put a hold on this legislation. i think there is still on the buffer room ahead of the june date to get there but you will certainly have some people on both sides delaying the process more than what the president or speaker mccarthy would like. manus: there is a lot at play. who would you say won?

both sides have to come out and sell a victory of some sort. are the republicans not getting the defense spending they want -- we are waiting to hear some of the responses from some veteran politicians. who do you think won, briefly? bill: both sides won by kicking the next debt ceiling debate until january 2025 at the earliest. both sides will be happy to be done with that. president biden did pretty well in terms of minimizing some of the changes that progressives were opposed to. republicans will say we are capping spending for almost two years. it is a win even in -- even if in the long run that won't make a big change to the deficit. manus: interested to see what

desantis and others make on the republican side bill, thank you very much. let's turn our attention to turkey where the president has sealed his election bid. raising the prospect of more friction with western governments and more uncertainty for investors. my cohost for daybreak middle east yousef gamal el-din is with us. as you look at the results, they are closer than expected. what stood out to you in terms of the reaction coming from turkey this morning? yousef: i think a tale of two narratives. you have incredible scenes of joy within the ranks of the supporters of the incumbent president erdogan. waves of turkish flags. late in the night you had an impromptu appearance by the

president who stepped on a bus and grabbed the microphone giving a speech to his supporters when the initial final result came in. in any case you have positive energy and jubilation on the one side. the other side is a sense of loss and real devastation because there was hope on the opposition side that now that they at least theoretically had pulled together a you not -- a united front that it would be close enough to prevent another five years of erdogan. it was close. it is a sign they need to regroup and maybe mount another channel -- challenge if the economy takes another step back. manus: speaking of the economy, what do you think this means? everyone hoped we would have a return to ortho the --

orthodoxy. yousef: there are two components . the first is a continuation of the policies of erdogan. basically going against main street orthodox economic thinking where you force a central bank to keep things slow though you have a cost-of-living crisis. if you look at the notes from morgan stanley. the other component is the economic team. based on the conversations i have had with experts, we might get an answer to who will lead the team in the next 2-3 days. whether it will be a return to semi friendly voices has yet to be determined. the biggest point to make is

that there is not a realistic representation of investor sentiment in the current situation. the turkish lira is low. maybe opportunity in the equity market as well. manus: we will see you through the morning. yousef gamal el-din in istanbul. let's look at some key flashpoints for the market. memorial day in the united states. equity and treasury futures are the only ones trading. cash markets are closed. u.k. markets are also closed. tomorrow, cpi in spain.

inflation should ease after climbing the previous month. wednesday, china pmi's. service recovery slows. thursday you will get the euro area cpi. friday is nonfarm payrolls. we are looking for a sub 200 number. consensus is around 190. that could set the store for the fed in june. the u.s. debt link deal between joe biden and kevin mccarthy -- how will investors relax -- react? we will speak with maurice gravier. that is next on bloomberg. ♪

manus: president biden and kevin mccarthy have expressed confidence that the debt deal will pass congress and that will over what would be a historic u.s. default. cash markets are closed. we are just trading on the futures at the moment. let's review with that. the short end of the curve up.

the debt ceiling is the most important. maurice gravier. good morning. in theory we have a debt ceiling framework which will go to the houses and in theory will pass. what will that do to risk in your mind because the specs are short as heck? does it change the dial for you? maurice: it does not really change the big picture for us. we avoid a catastrophic risk. this is good news. manus: breathe a sigh of relief that you got to the other side of the road. maurice: there is a high probability that it will pass

and we are in the same -- with the same backdrop. manus: you are i would say still fundamentally defensive agro pro. do you go into the camp that it is a bear market trap and that it will get tougher from here or are you still glass half-full? maurice: frankly we do not project as scenario with a high level of confidence. we said this year it is about adopting to credibility. we look closely at the returns you have. we are now on the way to equities for two weeks and it was the first time this year. we think equities from western

markets in particular are priced for perfection. there are better alternatives. manus: if you take the top seven stocks, the s&p 500 is up 1%. the magic seven, nvidia, apple, facebook are up 40 odd percent. how long of tech are you in this scenario? do you have any nvidia? i am duty-bound to push you. talk me through that proclivity for attack even in this slightly underweight scenario that you have raised. maurice: we don't take huge bets at this level.

having said that, with regards to technology we are very selective but nvidia is on our list. when you paid two hundred times earnings and 50 times earnings projected in 2025, it may be a bit hot. if you exclude the top seven we consider it a huge rally. manus: why -- everyone is scratching their heads. i'm curious to get your view why we don't have a bigger backlash against 5% rates going from zero to 500 basis points. why are wages still so tight? there has been little impact --

the long variable lag has not arrived. are you surprised? maurice: frankly, yes. we were all predicting an imminent recession which may have technically started in germany. the fact is we have had some tailwinds in the first half of 2023. we look -- we have been surprised. it is good news. the bad news is that we have persistent inflation. manus: do you think europe -- i was looking at the gas futures this morning and we have gone from 350 euros per kilowatt hour to just over 20.

this was the big panic and concern through 2022. it dropped. is your priced to perfection -- is europe christ to perfection? -- priced to perfection? do you lean more towards age of her return relevant to -- do you lean more towards asia maurice: we are overweight in emerging markets. we are also overweight in japan. in europe you had some valuation . the good health of the european economy -- the markets are strong.

the debt situation is also a concern there. manus: i look at the yuan breaking seven. to what extent is currency part of your thinking when you look at the equity allocation into china? is there a spillover effect? maurice: it is difficult to make any forecast on currencies. they would like to have some devaluation. we believe the china story is about internal demand. we believe the government is giving positive signs to the business community.

manus: good to get you in and get your view. my guest this morning on first reaction to the debt ceiling discussion. coming up, nvidia, artificial intelligence frenzy. we will hear from the u.s. chipmaker shortly. the ceo on bloomberg. ♪

manus: nvidia ceo unveiled a new batch of products and services tied to ai looking to further capitalize on the frenzy that has made his company one of the world's most valuable chipmakers. up includes an ai supercomputer

platform which will help tech companies create successes to chatgpt. he spoke in taipei earlier on monday. he believes the next leap in chipmaking will be giant. >> every two years we take giant leaps forward and i expect the next leap to be giant as well. this is the new computer industry. software is no longer program just by computer engineers. it is programmed by computer engineers working with ai supercomputer is. these ai supercomputers are a new type of factory in the future. every single major company will also have ai factories. and you will build and produce your company's intelligence. manus: that was the ceo

evangelizing about ai. i wanted to show you a demo amascene moment. it added $184 billion. intel was valued at $114 billion. nvidia is now worth $939 billion, eight times the size of intel. it is the explosion you had. and some people sold their position with their big chunks of nvidia like cathie wood. we are setting up for a week of political risk in both the houses in congress in terms of joe biden and mccarthys work of the floors. will they have the vote? i want to show you something

which is manifest for the fed. the jobs report. the issue here is do we get a sub 200,000 reading? bloomberg is 185,000. what will the wages be? the swaps market right now is batting that you will get a 25 basis point hike in june and possibly one in july. all eyes on the jobs report. as the report -- but the debt ceiling will be the pervasive topic. it is the moment for congress to act and deliver. we will talk when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets.

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manus: good morning from daybreak middle east headquarters in the middle east. these are the stories to set your agenda. the deal is done. now the vote. president biden and speaker maccarthy agree on a package and express confidence that congress will back it in time to avert a devastating u.s. default. >> the agreement prevents the worst possible crisis, a default for the first time in our nations history. an economic recession with retirement accounts devastated. manus: you did market optimism. u.s. equity and treasury futures along with asia markets make modest gains. a cautious welcome to the unfinished -- unfinished business in washington. president erdogan extends his 20 year rule ceiling a victory that was doubtful weeks ago.

president biden and speaker mccarthy believe congress will have enough time to pass the debt ceiling for the u.s. defaults. a tentative agreement which was struck over the weekend will suspend the debt ceiling until january the first, 2025 which likely puts off another fight until the federal borrowing authority through to the next election. >> the agreement prevents the worst possible crisis, he default for the first time in our nations history. an economic recession, retirement accounts devastated and millions of jobs lost. i strongly urge both chambers to pass the agreement. let's keep moving forward on meeting our obligations. manus: that is until after the next election. my guest this morning is alfonso

peccatiello. good to have you with us. here we are. the debate will be on both sides . for the market, i'm interested in the fiscal stance. people worry this will be a huge fiscal drag on the u.s. your first response to the framework of the deal. good morning. alfonso: i think the deal is not majorly contractionary from a fiscal perspective. there will be fiscal drag. student loan repayments are going to start from august onwards. that adds to the contractionary impulse for the economy because students so far have been in a grace period. when you repay your debt you are deleveraging the economy and

acting as a drive towards growth. the truth is that many expected a u.s. recession to hit already. it hasn't. the reality is the u.s. economy is growing below trend and cooling down. the fiscal drag will further move the economy to weaker growth but it is all about the labor market in the second half of the year. manus: we get a jobs report on friday. how important is a sub 200? the consensus is 190. how important is that number as a curtain raiser to something of a slowdown? alfonso: i would say it is important though i would advise investors to take a look at the broader picture. one number can be volatile.

it is better to look at averages. growth has been slowing. and it is a model rather than jobs data which has been extremely volatile supporting the headline figures we are seeing. look at the guts of the job market or cyclical sectors like manufacturing, trade, housing and construction. they have been slowing down already. look at the internals of the job market. if they continue to signal a weakening of the internals or not. manus: we need to pick it a part. i want to finish with the u.s. there is a line the treasury will have to issue a trillion dollars of t-bills. if you parked in the short and

you are doing well. how do you see the impact of the issuance? will there be a plentiful demand? do you see it being a drain on liquidity? alfonso: if the treasury department has to replenish the treasury general account without spending the money, it drains liquidity from markets. the first thing to say is it is different if the government issues bonds or t-bills. t-bills have no duration and they are also cheaper. and the private sector, there are trillions part. -- trillions parked.

it is not as easy that issuing t-bills will drain liquidity from the market and be terrible. it depends on who absorbs the treasury bills, how many treasury bills do we issue, how many bonds do we issue? manus: we always like a headline. we have to look at the guts of the jobs report. we have to be cautious and see what structure the treasury issues. when it comes to looking at credit, a number of people in various ways are worried about credit. the ceo of accor is taking a hold of huge buildings and countries around the world and putting in pop-up box hotel

rooms. bank of america is saying it is a boa constrictor around the american economy. what are the red flags and credit for you? alfonso: one thing i have noticed lately is that if you were to draw a chart of high-yield credit spreads in the u.s. and equal weight s&p 500 you would see a close correlation both pointing towards market breadth being pretty report. generally in a healthy market you have cyclical asset class doing pretty well. instead it is narrow and credit spreads are signaling that they are not rising any meaningful

recessionary risks but they are also -- manus: a flash in the pan. i cannot let you go without talking about nvidia. you sent me a beautiful quote from the ceo. a 10 times revenue i have to pay you 100% of revenues for 10 straight years in dividends which assumes i get that by my shareholders and that assumes i have zero cost sold which is very hard for a computer company. what are we missing in the exultation and almost godlike moment for nvidia? i hope it is in my pension fund. i will be very upset if it is not. what is the risk from nvidia?

alfonso: this passive investing story with everyone buying, you have nvidia in your 401(k) most likely. it is hard to draw comparisons between micros systems and nvidia. i find that when we are in the midst of animal spirits in general and how do you do find -- defined animal spirits? it is literally -- it is always hard to take a step back and look at the big picture. when you look at the valuations you have to ask yourself a couple times whether they really make sense or not.

manus: it is good to quote someone from the past. let's hope the past performance is no indication of future performance. thank you for being with me this morning. the founder and ceo over at the macro compass. a good read on a sunday afternoon. adrian wong will set you up for the week with business flash headlines from around the world. >> the u.k. government is seeking an agreement with supermarkets to voluntarily limit prices on basic food items like bread and milk to help tackle inflation. the prime minister has made reducing consumer price rises a centerpiece of government policy and has pledged to get inflation to 5% by the end of the year. the u.k. inflation rate has come in hotter than forecast.

european gas prices have plunged to the lowest level in two years helping rivers a surge in inflation and bring relief to households. benchmark futures has fallen for eight straight weeks. europe's gas stockpiles are above average for this time of year. boeing is said to be and talks to sell at least 150 of its 737 max jetliners. the new carrier owned by saudi arabia sovereign wealth fund is looking to buy 300-400 jets. if confirmed it would be the second major deal and saudi this year. that is your bloomberg business flash. manus: coming up on the show, turkeys erdogan has won his reelection raising prospects have more friction with the west.

and more uncertainty for investors. we discussed right here on bloomberg. ♪ you know doug, ever since switching to workday you've been a real rock star. rock star? what do you know about rock stars? billy idol?

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manus: let's get back to turkey where president erdogan has sealed his election victory which appeared unlikely weeks ago. let's talk to yousef gamal el-din. the results were closer than expected. what stood out in terms of the reaction from turkey this morning? yousef: it has been slow going in terms of morning activity. a lot of people recovering from the long night. we saw a close race to the finish.

it is clear the incumbent president was able to capitalize on the momentum from the first round. he defied the opinion polls and he was able to bring it home. 52-48. a narrow work conclusion -- a narrower conclusion. his opponent came in much stronger on paper in terms of providing a united front. for many of the people that supported that side of the equation there is a prospect -- the prospect of another five years with erdogan which for many is too much to handle. manus: what does it mean for the turkish economy already struggling with inflation, hyperinflation, unorthodox economic policy?

yousef: this is one of the largest emerging markets. $900 billion. it will be first and foremost about the sustainability of president erdogan's policies. the idea of unorthodox monetary policy, basically going against main street theory where you have low interest rates and a high inflation environment. that is likely to continue according to morgan stanley. we saw notes from a few other houses as well. it will come down to the economic. that decision is likely to be made soon. they don't want to wait. foreign invaders -- foreign investors are on edge. who will lead the economic team? that is the billion dollar question. there is speculation.

one is well known to many investors. whether he will make the comeback given the tension on a few policy issues is what needs to be figured out in the coming hours. manus: how can president erdogan convince the markets? how does he calm the situation? yousef: it does look like that is the top priority. if anything he will feel emboldened by the thought that his policies are working. with that being said, credit swaps -- that tells you the story of nervousness among foreign investors. the equity market, a lot left and have not come back in forest. -- in forcce.

our fee back from investors has been that there is not going to be a major repricing in the stock market though there may be some weakness in the bond market. if president erdogan can continue his policies without breaking the policy that is the most likely scenario. manus: good work. her porch -- full coverage throughout the day. 25 years of the ecb. we take a look at how the european has changed the region's economic landscape. this is bloomberg. ♪

>> when the euro was born a

quarter-century ago many thought it would not succeed. among the detractors there were probably few more prominent than milton friedman. he was appointed to the ecb and among all of the congratulations and he got a different kind arrived from friedman. >> i opened it and it said, congratulations on an impossible job. i am convinced that euro will fail. i was convinced in the end the continent should have a common currency. >> with a staff of only 400 they got to work. make or break, it was down to execution. >> it was a unique event in history.

there was no sign of terror. >> now, 25 years later what began as the biggest monetary experiment is the world's second reserve currency. >> not all germans believe in god but all germans believe in the bundesbank. it was a deep break in germany. >> the ecb has weathered many storms, crises, the pandemic. >> behind it in italy, increasing debt and france, this has to be solved. manus: that was our very own

oliver. looking at the start of the ecb and the euro ahead of this week's anniversary. 25 years in the making. the voice of the euro. there you go. 25 years ago on cnbc. another emerging market -- the next president of africa's most populous country will be sworn into nigeria. he won with 37% of the vote. let's bring in our own bloomberg african correspondent. you were there for the election. the inauguration is now. what is the state of the country? >> as you mentioned, 37% of the vote is what he secured which means he will be the first

president in this country's history to secure the presidency with under 50%. when we talk about the state of the country you look at how divided it is and we are still seeing opposition parties in the courts trying to challenge the presidency. despite this he is still going to be and argue rated today as the 16th president of nigeria. a lot of people are pointing to the fact that because of the low voter turnout and how little he secured for the presidency, he has a lot to do to not just repair their fragmented economy and the fragmented parties and communities in nigeria but also on the global stage. investors are waiting to see nigeria become a global economic powerhouse. it should be as africa's top three oil producer. he is going to have to instill the sense of security and stability in his speech today and try to convince people he is

ready to unify the country and put it on a path to growth. manus: if we word or look at the biggest challenges, a lot of it is currency. where are the biggest challenges for this president as he steps into the role? >> biggest challenges from what we heard especially during the campaign, he knows the economy is number one especially when you think about this being africa's biggest economy. inflation is north of 20%. they have high unemployment. they have seen a number of young people leaving the country to go to other continents in what they are calling brain drain. he will have to come in and show he can put the country back on a path to stability. but from the imf specifically,

it wants to see the new president reduce expenditure and increase revenues and diversify the economy and do a lot of the things that we did not see the outgoing president tackle and bring in more foreign direct investment which has been decreasing in the country for the last few years. manus: thank you very much. a great celebration in nigeria as he takes to the seats but will he deliver. a good snapshot of risk. a soggy bottom dollar is the call from hsbc. the dollar is down. that haven dissipates as a debt ceiling is done. ♪

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