manus: good morning, this is "bloomberg daybreak: europe." selling the deal -- joe biden

and kevin mccarthy step up lobbying in congress to win approval of their debt ceiling agreement. u.s. stock futures and treasuries mostly gain. the spanish prime minister calls early elections after his socialist party suffers a crushing defeat in regional ballots. inflation data this morning. plus, china rebuffs a u.s. request for defense chiefs to meet this week amid strains over issues including taiwan. a very good morning to you, and so the frenzy of phone calls begin between biden and lawmakers, over 60 made. mccarthy talks about the deal being transformational. desantis scathing as you would assume. talks about the country on the road to bankruptcy. but who is showing up for the risk and quit? i would say it is poor the

mild-mannered janitors than the progress mavericks. equity markets are stronger. our chief equity analyst has said there is an extraordinary captivation with large u.s. stocks. this is what we are looking at in terms of the markets this morning. that's where we have to check in first of all. maybe not, we are going to go with a cross asset check. let's rip through the board first of all. you've got this shift in risk at the short end of the curve. one month t-bills imploding dramatically. will there be a flood of money from the shortened -- short end? td waterhouse will vacillate between 360 and 390. there is a risk none of you want to countenance that yields to backup on the risk that the inference of a risk will not pass. two month low on gold and the lire at an all-time record low

again this morning, morgan stanley say another 29% drop to come. 28 to the dollar and wells fargo says 23. to the equity market, the mild-mannered janitors and not the progress mavericks. we have this congressional hurdle. nasdaq continues higher without cathie wood involved in the nvidia trade. we will have a bloomberg economist join us shortly and it is quite a dramatic opinion piece on cathie wood. chinese stocks coming back this morning, profits under pressure. my guest in the last hour said to me japan is under loved and under owned, the earnings yield is strong and continue higher. still about 30% away from the record high of 1989. it was a great year, i graduated and things were good. let's talk about the debt

ceiling vote tomorrow. let's get bruce einhorn into the conversation. paul dobson and james mayger will also join us. let's kick it off with white house and republican leaders putting full lobbying campaigns to work to win support for a deal to raise the debt ceiling and avert default. the question is what progress has a biden and mccarthy made? are they winning hearts, minds and vote? bruce: they say they are. president biden said it feels good as far as where things are going. he said he expects this will pass. kevin mccarthy, speaker of the house, said he expects a majority of republicans to support the deal. the head of the new democrat coalition, the leaders, about

100 members of the house among the democrats, they have expressed support for the deal. add up those numbers and it does seem like they are getting close. however, still a ways to go into the vote will not be at least until wednesday. kevin mccarthy has said house rules require there to be 72 hours for members to read the legislation. the first availability there would be for a vote would be wednesday. it's unclear if it would be then. if it passes the house, it has to go to the senate. chuck schumer, majority leader in the senate, has already told senators they should be prepared to be there over the weekend this coming weekend. manus: it could be a long hall to get this vote passed, maybe it will stumble at the last moment. thank you, bruce einhorn.

let's check on the markets. kicked off the possible debt deal into the impact on the short end of the curve. paul dobson with us. we were at opposite in's of the trade earlier. i was thinking we would have to more rate hikes. you are a little less sure. the shortened of the curve is pricing a deal. if you look at these t-bills, is that a fair assessment? can we agree on .1? paul: i think we can agree on that. listening to bruce, you can see why, the votes are starting to come together. there might be attempts to slow things down or make political points, that it doesn't feel like there is the momentum of a protest to stop this, which should be good news for the bills coming due in the short-term we are seeing some of the rates on those coming down in line with the rest of the curve and where they should be.

that's the short-term argument more or less. out of the way as far as the market is concern. the longer-term arguments will come into play next and one of those most importantly is the need to refill the covers in the u.s. government, which will see a lot of bill issuance coming to the market in the coming months, all the way through to the end of the year. billions and billions, almost a trillion by the end of q1 or even more than that. that will put upwards pressure on those yields, right across the complex. it will raise short-term or owing costs. we are not necessarily done with the fed, even if we don't agree on how much more might be coming. that will keep short-term interest rates low as well. people putting pressure on the dollar, in a supportive way, and tightening financial conditions as well. manus: i started the show by

saying it was the mild-mannered janitors of risk rather than the pro risk mavericks that have arrived. i'm surprised the stock market isn't stronger. maybe they are just holding back from unleashing the hounds of risk. do you think so? paul: exactly. why the caution if it is all good news? part of it is a concern about fiscal tightness and what the fed will do. kind of the longer-term outlook and trajectory. partly just wait and see, make sure the deal is done. if we get too excited on the equities side of things, and there's a lot of other stuff people are worried about as well. it's not a full on endorsement risk on, all the way to the moon or anything, still a lot of caution on the equities front as we move into looking forward to payrolls and the information we

will get going into the next fed meetings. manus: ok. let's see, we are bellying up to that. thank you, all dobson. -- paul dobson. china has denied a u.s. request for the two countries defense chiefs to meet this week, after they raised concerns about sanctions washington proposed. james, good to see you again. what exactly is beijing singing again with this messaging? james: the fundamental thing they are saying is you can't sanction us and expect us to play nice. the defense minister has been sanctioned by the u.s. because he was involved in an honest deal with russia. those sanctions are still in place and the chinese are seeing you cannot sanction him and also demand a meeting. it's insulting to him.

the bigger issue is the two sides have a different -- a fundamental difference in how they see talks. the u.s. wanted to have talks with senior members of the chinese minutes or -- chinese military. secretary alston wants to have confidence building measures. seeing if we have a collision between ships in the east china sea or south china sea, not unthinkable, what will we do to de-escalate? from the chinese perspective, their view on talks, not just with the u.s. military but generally, talks come after results. the chinese are saying we wanted to see better actions, a better relationship with the u.s. and then when problems have been solved, we reward you with talks and we have talks. there's a fundamental disconnect about what the point of talks are. the u.s. wants to talk so we don't have problems and the chinese are saying fix the things we don't like and then we can talk. basically these two sides are on

parallel tracks, not talking to each other and there's no real reason -- no real force making either of them change could -- making either of them change. manus: it doesn't to the world or risk much good. china rejects the claims from the u.s., the u.s. says they are risky instead of decoupling. is there a demonstrable difference? james: there is no demonstrable difference and i think they have a point. you look at the change in rhetoric the past few months from the europeans, from ursula von der leyen, janet yellen, president biden as well. saying we are not decoupling with china, we just want to de-risk our exposure to china. but then you have the continued

actions by the american government and japanese government, other countries, to take actions to decouple from china. from the chinese perspective, a semantic change has been made but the actions of the u.s. and allies continue to be exactly the same. their perspective is, this wording change makes no difference when the actions of the u.s. government continue to be the same. you're not seeing a difference in how the u.s. or japan is acting toward china. if anything they are stepping up actions from china's perspective, why would they respond to this basically semantic change that has no effect in reality? manus: ok. let's see where it goes. thank you, james, our correspondent in beijing. let's look at some of the things we will be watching in markets today. 8:00 a.m. u.k. time, we get the preliminary print of spanish cpi

for april. we got a shock election call. 10:00 a.m., the final reading of the euro conference for may. 2:00 p.m., robert holman will speak on a banking event. 4:45, the ecb will deliver comments. then, you are in the land of said speak, 6:00 p.m., the federal reserve president for richmond will speak on monetary policy at an online event. a quick snapshot of what is going on if we have it on the asian equity market. we have this mliv pulse, biggest risk to stocks. we will talk about that and the topside agenda over the next 12 months. more than 40%. we will have the details next. ♪

>> i think we are in a challenging period right now, an anticipatory period with what will happen with the debt ceiling and the federal reserve on june 13/14, and the potential for recession. longer-term, i am in agreement that we should be deploying our cash. >> with equities near the top of a seven month range, it is difficult to see before this being solved, being the proper time for a genuine breakout. >> we don't expect bear market either. >> i think the markets are pricing in normalization. if we into recession, in our view it will be because of the bank lending standards, as the

consumer savings buffer runs out. >> we expect a recession to begin in the second half and for the equity market that means down first and then likely back up. manus: some of our guests answering the mliv pulse question, what is the biggest risk to stocks in the next 12 months? we will kick this out to our guest. you've come back from holiday so you are zen, the manifestation of zen. [laughter] what's the biggest risk in the next 12 months? good morning. >> inflation. inflation is the biggest risk, not recession. if we get a recession like people expect, we probably won't realize when we are in it and the fed can stop and we can move through it.

it's not such a big problem. of course there may come a time to reduce risk. but the biggest risk is inflation manus: the consequence is if the inflation remains sticky, perhaps the biggest underpriced risk is rates? mads: yes, i am afraid i agree with you. they will err on the side of killing the economy. that's where the risk remains. it's a little boring because it's been with us for a year now. manus: let's move on in terms of the narrative, biden is on the phone, trying to get a debt ceiling deal done. let's perhaps assume that gets done. you from what i can see are

pro-risk and overrate -- overweight equities. but you have a max allocation to growth and i want to understand how you are funding that or hedging such a maxed out allocation to growth first of all. mads: we are doing it two ways. we have less bonds of deepening on our strategies be we have 100% equities or close to. it is out of bounds. on the bonds side, fixed income only, the risk in loan duration bonds is still high, especially in this narrative where we say ok, even if growth is still low, the central banks make mistakes. we just saw a rates moved up dramatically and that could happen again. manus: ok, so that could change.

why do you, on high-yield, various people coming in and talking about the risk and high-yield. talk me through your thesis in that. we have sticky inflation, perhaps higher rates from the federal reserve and bank of england then perhaps we are anticipating at the moment. mads: if we look at the core risk, people are afraid of defaults. but defaults are low historically and we expect them to move up in the coming year. we see the default risk, let's say we get to 4% as some of the big institutes are looking at, we still have recovery rates. the risk is about 7.5% to about

8% in europe. duration is anywhere, on the indices we use, between 2.7 and 3.5 and the duration risk means we have much less volatility. do we get a long recession come along inflation? it is a problem. but some inflation is hinging on the revenues. the depth has come down. it is still normal prizes, not supertight. so it is attractive but a bit controversial. manus: one story, one stock that's literally taking the oxygen away from everybody else, it is nvidia. we have our opinion columnist coming on to talk about cathie

wood's folly in dumping the stock last week. or dumping the stock earlier this year. talk to me about how you from a strategy point of view, i know you have this max growth strategy, you are long on equity. what is your interpretation of the nvidia story? this is an evangelist sucking the oxygen out of the media and the market, and liquidity out of the growth market. what is the risk and reward with nvidia and how does it play into your portfolio? mads: first of all, it has been lifting, so in the u.s. they've benefited from it. people are concerned about the concentration but for me it represents both a tangible potential bull market or even a bubble and a risk. individual stock trades are very high --

what we are seeing is the biggest clients are tentatively increasing orders, increasing demand and these companies are very well-funded because they are the largest in the world. we saw the reporting, revenue is coming in. this is what bull markets are based off. the dream of artificial intelligence in the future and that orders are coming. it could become say cisco systems in 2003. one needs to be ready, but for the time being, it lifts optimism in the number of areas, not least in technology. manus: ok, it is certainly

raising all boats across the spectrum, isn't it? mads, we will delve into your strategies when we catch up with you next month, see whether you are still full bull on growth. my guest this morning on the markets. numbing up, we dig into european gas prices. they plunged to 2021 lows, undermining one of president putin's biggest bargaining chips. we have the story on bloomberg. ♪

manus: european gas prices have fallen to levels just before russia invaded ukraine. our energy reporter joins us. these natural gas prices have

imploded and it looks as if they are going lower for now. is this a supply story, what is it? good morning. stephen: good morning. a bit of both. from the demand side, we had a warmer than normal winter, which reduced fears of acute supply crunch. that also allowed europe and asia to have higher than normal inventories when spring began and now we are going into summer, isn't quite as much need for gas across europe and most of the asian countries because inventories are already quite full. that means refilling for winter might not be as much of a stress as last year. meanwhile, china has also been in focus. there was a big thought or expectation that chinese demand would rebound quite a bit now that they were over with their covid policies and the economy would revive.

instead, chinese demand for liquefied natural gas has been pretty subdued, which reduces competition in the market and allows for more supplies to go to japan, korea, europe. all of those things together, coupled with quite a bit of export growth in the united states. lng prices are going down. manus: they are. let's see what the winter brings and if we endure another winter at work. stephen we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch.

manus: good morning, this is "bloomberg daybreak: europe." joe biden and kevin mccarthy step up lobbying efforts in

congress to win approval of the debt ceiling agreement. futures and treasuries advance. the spanish prime minister called early elections after his socialist party suffers a crushing defeat in regional ballots. inflation data hits the tape this morning. and china rebuffs a u.s. request for the nations's defense chiefs to meet this week amid strains of issues including taiwan. restraint is the name of the game. mild-mannered janitors of risk rather than the pro-risk mavericks that have turned up to the equity market this morning. we see some liquidity come back into u.s. equities. s&p 500 up a quarter of 1%. that obsession with alpha tech continues, up 4/10 of 1%.

we were sub at 4200 for nine straight months. are we about to break higher? my guest this morning is full max bowl on tech allocation. -- bull on tech allocation. the topics flat but another 30% to go before you get to the 1989 high. i want to show you a bear market, hang seng and hang seng tech both brutalized as industrial profits come under pressure in china. this is not the reopening in china we had expected. china enterprises index down come on the cusp of a bear market. because assets this morning, relief palpable in the one-month t-bill as we see this that ceiling deal, the lobbying by biden and mccarthy to get it through continuing. we've come off lows in terms of

yield. tenure paper and a range of 3.6 to 3.9 because yields are likely to be bought in the near term. and the lira cascades through another new record low. down to 28 per dollar. wells fargo says it will probably trade to 23 by the dollar -- of the dollar by the end of the first quarter. that your risk assessment as we start trading day. welcome bank from your bank holiday if you're in the united kingdom. spain goes into campaign mode after a surprise early election announced by the prime minister. that was yesterday. he said the local election results made it necessary for spanish voters to give a clear mandate in a general election set july 23. to debrief us, we get to maria tadeo, she will walk us through

this pretty shocking news. good to see you this morning. pretty much everybody was expecting a vote at the end of the year. is it a maverick, machiavelli move to change strategy? maria: it is, that is the short answer. i think it goes back to the idea that when you are in politics and you don't like what is being said about you, you try to change the conversation. that's what the prime minister did yesterday, unexpectedly. we knew an election was due this year but the question was the date. the idea that he would direct this until december and he's not doing that anymore. i think what he's trying to do fundamentally is two things. one is on vesely damage control from the regional election, which was obviously a defeat for his party. it was a win for the conservatives. he's trying to move on from that but also continue this idea that

the country has entered a new election cycle, that the country is shifting from left to right. there is a sense of urgency, those were the words yesterday from the spanish prime minister, the idea that in two months of there could be a new government altogether and everyone who wants him to stay in office needs to vote. but this is a risky strategy because if you look at the numbers, the socialist party is trailing the conservatives by almost one million votes. the idea he has floated in the past that the far right could get into government in a coalition, this is a fear factor that used to work very well in politics but it works less and less in real life. of course time is short so it is risky but he has done this before. he has survived many times, can he do it again? we will see it in two months. manus: interestingly, an opinion piece this morning, the turkish election makes a mockery of everything.

your home economy is on fire. will that bolster his voting chances? will the economy, stupid, help the prime minister or will people move through that? maria: one of the big issues he hasn't -- and you are right to point out the timer, spain is a big service of economy and it is the holidays and a lot of people go into the country. you see a lot of job creation. also inflation numbers are due out this morning. my bloomberg terminal says headline and core inflation will cool. in principle this would be good news for any government who wanted to campaign on those lines. the issue is this is fundamental -- if you understand the psyche of the country, this will not be a vote fought on the economy, this is entirely apolitical vote. when you look at the conservatives in spain, they have been very smart in making this almost a moral test for the

country. they say sanchez may be on his own. he may be good in some ways but he is hostage of the far left and the nationalists. he is betting everything on his progressive credentials. this is fundamentally a political fight. for the prime minister, maybe good numbers over all but i'm not sure he can move the needle. manus: all right, thank you. maria tadeo in brussels. let's dig deeper into the spanish situation. our analyst joins us. thank you for joining me. is this a machiavelli move or just prudent timing -- go early and at the height of summer? >> sanchez is not new to these type of bold moves. i think the outcome of the

election was a surprise, calling a snap election was an even bigger surprise but it makes a bit of sense. as was pointing out, he regains attention and steals the show from conservatives after their landslide election over the weekend. staying on as a defect a lame-duck, having to work with a host of new conservative regional governments is not particularly appealing to sanchez. i also think he is hoping to leverage concerns, the fear factor, as maria put it, about a right-wing government coming to power, which would probably include the far right, to mobilize the left-wing voters. and also on a tactical level, given the way the situation works in spain, i think sanchez can hope to capitalize on the weakness of left-wing allies to improve its position, particularly in the way seats are distributed in parliament

compared to the results of the election. there are a lot of tactical reasons for him to do this. manus: so it is more tactical than perhaps maverick. when you look at those regional elections, he hasn't done well, and you would make the point that the far right did do well. what is the risk that spain shifts dramatically to the right? is that a real risk? are we suffering that brexit, bourgeoisie, something has changed in the country? that's essentially what happened in brexit. what is the risk that there is an underpriced shift to the right in spain? federico: it's an interesting question. the far right did well, but the big winner over the weekend was the moderate right, the center-right. the leader of the popular party,

likely new prime minister is a fairly moderate politician. he has a much more radical wing in the party but generally seen as a consensus politician. you see this across the board in europe, whereby incumbents are feeling the heat from the high inflation environment as you would expect, but the main beneficiaries more often than not have been moderate opposition as opposed to radical, anti-eu populist parties as some might have expected heading into the energy crisis and that's the case for spain. manus: you would say the probability of a right-wing government taking over in july is 75%? that is pretty high. federico: it is pretty high. but for the reasons i mentioned earlier, sanchez, the bold move to bring elections forward i think gives him a fighting chance. it's quite likely the election will produce a right-wing government led by the popular party, but i would not say it is a shoe in. manus: what is it due to the eu

priorities? spain takes over the rotating presidency. does it materially impact the legislative process of the eu? federico: not fundamentally. i think there are many other factors at play, but the rotating presidency of the eu does play a coordination role in terms of building consensus and spain i think it is safe to say would be distracted. there would be a two or three month adjustment period before the new government takes over. finds its footing. i think some important european files will probably suffer as a result, be delayed. like the reform of fiscal rules, which has been negotiated in the background, state aid, the eu sovereignty fund, electricity markets reform which is particular top of mind for spain. i think it is a concern.

manus: ok, thank you so much for being with us. coming up on the show, cathie wood built a reputation making tech trends. now she is defending selling nvidia stake earlier this year. we discussed on bloomberg. ♪ i need it cool at night. you trying to ice me out of the bed? baby, only on game nights.

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manus: cathie wood is once again defending her decision to dump nvidia shares. on twitter she said since 2014, ark investments has believed in nvidia. it's all the ai future before most other chip companies. now we believe it will continue to power the a ih. at 25 times the expected revenue

for this year, however, nvidia is priced ahead of the curve. this is her defense amid criticism she offloaded the stock before a blistering rally. look at that over the past 30 days. our opinion columnist has been scribing this morning and she says it is a ding to her reputation. she says cathie wood cannot spot the next bull market and her defense of selling nvidia is lacking in your opinion. why? >> it's absolutely lacking. if you identify nvidia as an ai player as early as 2014, why don't you capitalize on that? that's what happened to softbank. they sat on alibaba shares for over a decade. it gets to be what it is today because of that investment. and cathie wood was complaining about nvidia's valuation.

it's not high given that she famously have a $3000 price hike for tesla, 75 times tesla sales. and she thinks bitcoin can hit $1 million in the next decade. so high valuation is not something she should complain about. i think if she stays quiet it might not be that bad but not if she comes out with her defense, it just numbs across very weak. manus: you're also quite skeptical. you talk about the valuations, 25 times sales, and you would say in her defense she's interested in the next nvidia. you are quite scathing on that, you say it is nothing more than an afterthought in the ai battle. that's quite brutal. shuli: i tried not to be, but unfortunately the macro conditions have changed. arc funds did very well when the

fed was pumping a lot of liquidity into the market. nowadays, things have changed. we have a recession looming, the fed is done with rate hike -- the fed is not quite done with rate hikes. investors have come around to the potential of ai but they want to play it safe as well. that's where big tech comes from. we heard from the nvidia ceo, he was very aggressive about it. he said we have a new slew of products coming out to serve the ai crowd. smaller companies with borrowing costs so high and a recession looming, they can catch up. manus: if you are on the phone to her now, would you say she should step back in at 25 times sales? do you believe it is worth stepping in at that level? shuli: perhaps. but i think her talking of tesla is the way to go.

investors are not going to buy end of that. manus: she still got tesla and zuma. if you go onto her ark, you can see the biggest is tesla and zoom, and coinbase as well on the privacy of $1 million for bitcoin. let's see. shuli, great opinion piece. one of the most read, it popped like fire this morning on the bloomberg terminal. that is our opinion columnist on the latest on nvidia and cathie wood. from farmers to governments, many emerging markets are falling into what the pakistani prime minister calls a climate debt trap, extreme events with the events. a toxic, nation. let's bring in our reporter. rising rates, disproportionately

hitting countries in the global south and this is the debate as we go to cop 28 about the differentiation between the global north and global south. climate change is hitting hard, isn't it? good morning. >> good morning. yes it is. a lot of the countries in the global south are already fairly indebted and at the same time they are being hit by climate change. there are a lot of floods, droughts, cyclones in southeast africa and south east asia. it's putting countries in a difficult position because they need to spend money to bolster infrastructure and prepare for the next climate disaster but they don't have the cash. borrowing costs have more than doubled from damage over the last decade and they are finding it very difficult. manus: what is the likely end result for these climate vulnerable nations?

antony: the end result is they don't have the money. there's not enough money in terms of climate finance, in the form of grants or concessional loans. what needs to be done in terms of building stronger bridges and roads, irrigation schemes, it's not gonna happen because the money won't be spent. that means we are in a vicious circle. basically the next time we have another climate disaster it will be even worse and it will carry on and on. until there is a change and more climate finance available, we are unlikely to see an improvement and will make these nations more indebted and more and more vulnerable to adverse weather events. manus: a great piece, and i would encourage everybody to have a read, it sets the tone to begin to understand as we get close to cop 28, our senior south africa reporter. coming up, u.k. shop inflation hits a new high as the cost of living crisis shows little sign of easing.

we have details on rishi's plan. ♪

manus: let's take a quick look at some of the things the markets will be focused on today. 10:00 a.m., the final euro area consumer confidence from may. 2:00 p.m., the european central bank verbiage begins be at -- begins. at 4:45, comments at the paris fintech summit. and then at 6:00 p.m., the federal reserve of richmond president will speak on monetary policy at an online event. we are all focused on the central bank narrative. to the u.k., new figures show

prices in shops are continuing to rise at a record pace. what is the prime minister going to do about that? lizzy, how bad were the figures and what does it say? lizzy: the data show shop price inflation's of the highest level since 2005. 9%. the good news, food inflation ticks down slightly but that is 15% and in the official data it is 19%. a third of that according to the london school of economics comes down to brexit. in the most recent official data, core inflation was expected to hold steady but it rose. that speaks to the stickiness of this price growth problem in the u.k. that's why we've had a raft of policymakers saying rates need to go above 6%.

that sends off alarm bells because only in july we had the deputy bank of england governor saying 5% is the level where you have the risk of that distress for mortgage borrowers and companies be at that comes down to the comments from the chancellor jeremy hunt last week, controversially saying he would be prepared to accept recession if that's what it takes to get inflation down. that's why the prospect of higher interest rates is not giving the pound a boost you might normally expect because we are at the tipping point where the higher rates may mean recession. manus: yeah, and that is the real risk. our guest earlier today talked about perhaps the most underpriced risk in markets is that rates around the world will continue to go higher. i mentioned rishi sunak at the start. the competition committee sued the super markets 10 years ago and find them for collusion, but

what does he want them to do? he wants them to agree about prices. lizzy: exactly. jeremy hunt has been meeting with supermarkets. the competition watchdogs has been looking at food and fuel prices. the bank of england governor spoke about potentially food producers and supermarkets trying to protect margins. the chief economist at the bank of england got in hot water for talking about inflation becoming embedded in the terms of a game of pass the parcel. this is the government trying to make the music stopped. it's number one priority by year-end is to half inflation. when inflation is on the upside month after month, the margin to achieve that narrows. the supermarket perspective, marks & spencer for example says it is looking for opportunities to pass on deflation in the same way it had to pass on prices at

one point. the question for economists, is it passing on those opportunities at the same rate? manus: indeed. this is the conundrum, nicely put, pass the parcel, from policymakers to supermarkets and supermarkets to the consumer. but there's really we one person that loses in the end, the consumer. thank you very much. we will see you tomorrow. bloomberg markets: europe is next. good morning. ♪

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>> good welcome to bloomberg markets europe live in london, the cash trade just less than 60 minutes away here are your top headlines.