dani: good morning and happy thursday. this is "bloomberg daybreak: europe." i am dani burger in london. hawkish hold. the fed stands pat on rates, as expected, but signals more hikes this year. chair jerome powell warns against expecting a reduction anytime soon. >> it will be appropriate to cut rates at such time inflation is coming down significantly. we are talking a couple years up. i think as anyone can see, not a single person on the company wrote down a rate cut this year. dani: china cuts. the pboc lowers the rate of its one your lungs, ramping up stimulus as the economy deteriorates. the dollar gains. now, frankfurt. attention turns to the ecb, which is seen tightening by quarter-point. guidance on how much further christine lagarde intends to raise borrowing costs will be at

the fore. whatever you want to call it yesterday, don't call it a skip. a skip, actually, i should not call it a skip. we got a hawkish hold, a hawkish pause, i don't know, whatever you want to call it, there was some strong signaling from jay powell that more rate hikes are to come. bloomberg economics because that job a boning of trying to get these hikes priced out of the market. we priced out all of the cuts that were priced in for 2023, and thus, the bond market continues to sell off. u.s. two-year yield, that moves higher by about five basis points. australia, some big moves. it is a global bond market so that fed pressure moving into australia. hot jobs, another country with a really hot labor market, so bond yields in australia, the three year yield moving up 12 basis

points. we are seeing that curved inverted for the first time since the financial crisis. meanwhile, the dollar gets a bid. the hawkish pause from the fed means a stronger dollar, translating into a weaker yen ahead of a boj rate decision tomorrow. let's get to our reporters from around the world and to all of the central bank news. joe d6 is on the fed hitting pause for now and china's central bank ramping up stimulus. maria tadeo is on the ground in frankfurt for decision day on the ecb. on the fed, it is paused following 15 months of rate hikes. they signaled they would resume tightening at some point in order to cool inflation. let's get over to jill on this. how did jerome powell justify pausing now and at the same time say they are going to still be hiking? jill: right, well, it's a bit of a contradictory position. if you are going to keep rate hikes from the table, what is

the sense in doing this pause right now? i think what jerome powell is trying to do is preserve a lot of flexibility in the fed's decisions going forward. i think that we saw -- what we saw out of this press conference was some pretty strong language, we are not thinking about cuts right now, we have to make sure price pressures are under control. we still want to preserve the room the fed has to continue to hike interest rates at some point. as we have been saying all along, this year for the fed is really sort of a wait and see kind of moment. we've had this incredibly aggressive interest rate hiking cycle. but now, they are really trying to negotiate a really good landing. that does mean potentially once we get into july there could be a hike. but again, whatever, as you said, you want to call this, hocker skip, whatever, he wants to preserve that room to

pause. . maybe there's another chance of a hike leader in the year. it's all about that flexibility. dani: are we about to move into this regime where we are going to doubt the dots? they say two more hikes, according to the dot plot, but maybe it's one, or maybe it's cuts. are we saying ok, that's completely off the table as of now? jill: i think at this point, you kind of just have to trust what he is saying. he is saying cuts are two years out. i think bond traders completely wiped out their bets on having any sense of an interest rate cut by the end of this year. the language out of the fed was pretty strong on that front. at least at this point, it does seem like that is off of the table. dani: all those conversations, does the fed still have credibility? ? clearly they do. we reacted strongly to the language and the dots from the fed. we have to talk about the china decision from the pboc. in contrast to the fed, they

have actually started to cut. we've got some economic data today. how bad was the data? what is beijing doing to get things back on track? jill: this data was pretty disappointing today. i do not think there were any major surprises. a slowdown in growth for retail sales in china, a slowdown in growth for industrial output. you cite investment tapering off quite a bit. i think were -- you saw investment tapering off quite a bit. youth unemployment had a fresh record high. we saw property investment decline at a steeper pace than economists were expecting. this is all informing the picture we have been seeing over the last few weeks, which is china's economy, this economic activity is slowing down, and the economy needs some help. that's what you are seeing from the central bank, for example, just earlier today, they cut the rate on their one-year policy loans. that was the first time they had

done so since august. it had been pretty heavily telegraphed earlier this week with some cuts. to some short-term rates. the question is. -- the question is, is that really going to be enough and china to get things going? probably not. there's probably going to have to be some kind of additional stimulus. you are seeing chinese leaders start to meet with the business community to see exactly what needs to be done. there is potentially going to be some other form of stimulus, some other, you know, examination of the how exactly they address things that the property sector's continued weakness and how they get that household and business confidence back on track for the rest of this year. dani: thank you very much, everything from the fed to the pboc. the other central bank which the spotlight turns to today is the ecb. it is poised to raise rates when it meets today with a 25 basis point hike. the expectation.

because that expectation is baked in, the focus will likely be on forward guidance. let's get over to maria tadeo in frankfurt. 25 basis points fair, that's the expectation? maria: that's very fair. it is 25 basis points widely expected, as you see another hike from the ecb that should take the deposit rate to 3.5%. you mentioned the fed, obviously central banks, they keep an eye on each other, they try to figure out what they are all doing. . they do so in the neighborhood -- in the name of coordination. that fed pause yesterday will have no implications for the european central bank. madame lagarde has been very clear on this. this is a central bank, as she likes to say, that is on a journey, on a path of its own. it is not fed dependent, it is data dependent. that points to another hike today.

some people will say this meeting today, it is boring because we know exactly what's going to happen, but i would beg to differ actually. this is a meeting that can be very interesting because it really does mark the beginning of the endgame for the european central bank. monetary policy, when you approach the final stage, does the exact moment when the trade-offs become complicated, when maintaining that consensus in the governing council obviously starts to get heated, and you have to get to a point where you feel you have done enough now so that the monetary -- the forces of monetary policy do bring down inflation. today, it is a meeting where there is a lot more that meets the eye. dani: and one of those things that's going to be more important than again just that headline figure is the economic projections from the ecb. what might we get, maria? maria: they are important. this time around, i would say even more so. on the one hand, you have

inflation, and this goes back to the idea of, is the monetary policy now getting to a point where it can bring down inflation on a sustainable rate closer to target? we have seen that the nature of headline inflation has been very volatile because of the energy situation in europe. when you look at gdp, again, we know the euro area is now in a technical recession. there is a possibility does gdp numbers will either stay the same or be revised down, and that speaks to some of the pain that we continue to see, especially when it comes to the manufacturing. we see that in countries like germany. we talk about the panic stage of the energy crisis going away, but the fallout, the scars really continue for some of these european countries. since this is all about the forward-looking guidance, i think one of the key questions in the press conference that would really set the scene and the tone for us in the next few weeks is of course july.

that will be one of the fundamental questions to madame lagarde, is july over, or do you hike again in july, take a breather, and may be reassessed after the summer? dani: thank you so much. in a beautiful, sunny frankfurt. i feel like that's a rare sight. maria tadeo there, who will of course be covering this decision all day. the decision will be announced at 1:15 p.m. u.k. time and will be followed by a news conference from ecb president christine lagarde. catch it all on bloomberg tv. coming up, we are going to discuss all of these further, the fed, the ecb, we even get the boj. there is so much to talk about. we are going to do that with our next guest, riccardo trezzi, founder of underlyinginflation.com, who also use to advise both of fed and ecb on inflation. that is next. this is bloomberg. ♪ an angry rhino. you've never heard an angry rhino. baby i hear one every night... every night.

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>> it is just in the idea that we are trying to get this right and if you think of the two things as separate variables, then i think the skip, i should not call it a skip, the decision makes sense. dani: not the most important part of the press conference maybe, but i really love jerome

powell saying the skip, ooh, actually no, i should not call it a skip. he was responding to a question about why the fomc did not rip off the band-aid and hike? his reply was that speed and level are two separate considerations. let's get to riccardo trezzi, economist at the university of geneva, and founder of underlyinginflation.com. he's an inflation expert and previously advised both the fed and ecb. i kind of want to bring up the question that powell was responding to. why not raise rates now if they know they need to keep moving higher? riccardo: good morning. thank you for having me. it was confusing in a sense. i think there is no rational answer. there is one but i think it is not the one that powell gave yesterday. first of all, we have to remember where we were coming from. we are comparing the new forecast in the s&p to the march 1.

in march, the committee did not really update the forecast. the question is the fact that the new forecast, the one that released yesterday, is the one they would have put out in march without the banking crisis. in a sense, the forecast is late and the reaction is also late. the only rationale for skipping a rate is the fact that the committee truly thinks that the data in the next few months will finally show some disinflation. so, it was irrational in a sense -- it was irrational in a sense to -- it was rational in a sense to put out a higher terminal rate. of course, the committee, every meeting is live, so they can always hike. but at this point, it would take a very large surprise for the fomc to hike again. dani: you say the fed thinks

they are going to start to see some disinflation. do you think that, riccardo? is there evidence that that's finally going to show through the data. riccardo: first of all, in the last couple of months, it was very hard to convince people around the world that this affects the economy. finally, the last two months that we saw a large surprises. we saw it in canada, spectacularly in the u.k., even norway and australia. we've been going sideways in the u.s. and a question mark in the eu area. still on a very, what i call a minefield. just one single bad report to unwind six months of good data. having said so, it is also true that the global market tightening has started a year and a half ago, and that's a significant amount of time. and so, there is some hope i

think for the united states finally in q3 for technical reasons, and also because of good monetary policy to see some improvements in the data. there is still a question mark aboutq4, and i think that is precisely what is in the minds of the fed staff and investors. dani: i think what -- i wonder what sort of shape it will take. powell has said inflation has not reacted much to rate hikes yet and said the fed will keep at it. when it shows up, is it kind of like the ketchup bottle effect where sort of all dumps out at once and it's too late or are we likely to see slow-moving progress on the data front? riccardo: in terms of headline inflation, that moves pretty quickly. in fact, in some european countries, it's ready close to target, but that doesn't really matter.

its ah better predictor of future inflation -- headline inflation. core inflation is a very persistent process by nature and also by technical assumption, so the way in which we measure it makes it kind of persistent. about 95, 90% to 95%, today's core inflation is tomorrow's core inflation. any vote of going to 5.3%, which is the latest month on month rate,, yes, it can. dani: i think there might have been some sound issues. please continue. riccardo: sorry about this. so, any hope from going from 5.3%, which was the latest core cpi month on month to 2% in a matter two or three months, that is not going to happen. what matters is the direction and the probability of the 2%

target. unfortunately, and this is true not only for the united states, but pretty much everywhere, the probability, the model still suggests the probability of going back to target, core inflation space, is very low. that explains why andy hope of getting -- why any hope of getting a cut anytime soon is simply not there. dani: right. riccardo: the models, they revise it, so may be in the next three to 426 months, we will have different signals -- three to four to six months, we will have different signals. but that's where we are now. dani: if we end up in this higher for longer version, as the market action we have seen in equities keep moving higher, bonds selloff, is that what you would kind of expect if rates are left at a restrictor level? -- restricted level? riccardo: a couple of things

here. two months ago, last time we spoke, markets were pricing several cuts this year and i was pushing back against that view. it is somehow rational that the world is in a bond soft because the markets have realized inflation is more persistent than they thought and rates need to stay higher for longer. the main esg model of the fed staff suggests the probability of having a recession in 2023 is very limited in fact. it's just like flipping a coin. we don't have any statistical power to predict a recession right now. i think that what we have seen on both of the bond markets and the equity market is rational, and the sense that it is a question mark whether we will have a recession, and it was pretty clear at this point that

the fed will have signaled higher for longer, possibly even a higher terminal rate, so some selloff on the bond market was to be expected. dani: the recession that everybody has been waiting for, is it still to come? or is there some sense that we kind of already had it even? riccardo: yeah, so i think the recession is always six months up and never comes -- six months out and it never comes. i think it comes on the fact that the reopening and the cycle is different. forecasting a recession is a very different -- difficult exercise. the nonlinear models, the probability is pretty low. we saw some revising their -- we see also in the euro area that there is a -- in some

sectors, generally speaking, between goods and services. we had a recession in goods sector in the u.s. the reopening of the service sector, which we see in countries including italy. to the extent that cycles will continue to be de-synchronized across sectors, it will be very difficult generally to have a recession. dani: ok. fair enough. hey, before we let you go, we also have an ecb decision coming up, we are expecting a half a quarter hike, what are you expecting, not just that, because it's largely baked in, but in terms of the outlook from president christine lagarde? are we going to get some more hawkish sentiment and do we need more hawkish sentiment coming from her? riccardo: yes, i think the answer is yes to both for a simple reason. finally, the ecb staff and the

central bank staff will submit their new forecast. the key ingredient for today i think is that the forecast will show up revisions to core forecast for 20 33. the moment at which you get a new forecast from your staff, that's new. we have to revise our forecast of core inflation because the data have commenced under than expected. then your hands are tied -- data have come in stronger than expected. then your hands are tied. in july, this is basically my opinion, but that's how it works at the ecb, christine lagarde will conduct a meeting without a new forecast, so indeed, the forecast, it will show today, it will influence this meeting and the next, so this rationale of pricing 25 basis points today but i hawkish outlook and

another 25 for july. and of course, will we have in september remains a little bit of a question mark. the data will tell us more in the next couple of months. dani: i am afraid we are going to have to leave it there. thank you for joining us. riccardo trezzi, economist at the university of geneva and founder at underlyinginflation.com. coming up, more on the fed's rate pause. we are going to discuss the jobs picture with becky frankiewicz, cco at manpowergroup. this is bloomberg. ♪

dani: we are still interpreting, basking in yesterday's fed decision but really the hot data from across the globe that's making us rethink their trajectory of policy, it continues to come in.

a hot jobs report in the u.s. and u.k. and now are struggling -- and now australia. you get this bear flattening, the front end gets absolutely smoked, it moves more than 10 basis points, and we get un-inversion in the australian yield curve -- an inversion in the australian yield curve for the first time since 2008. it's the same phenomenon that points to risk that inflation will ramp up again and central-bank have to be more aggressive. last week, we got an rba rate hike surprise and that dovetails with the fed's projections. a lot of this is around the jobs market and we are going to discuss that market. we are going to be speaking to becky frankiewicz, cco at 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)

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dani: good morning. this is "bloomberg daybreak: europe." i am dani burger in london. hawkish hold. the fed stands pat on rates, as expected, but signals more hikes this year. chair jerome powell warns against expecting a reduction anytime soon. chair powell: it will be appropriate to cut rates at such time inflation is coming down really significantly. and again, we are talking a couple years out. i think as anyone can see, not a single person on the committee wrote down a rate cut this year. dani: but china cuts. the pboc lowers the rate of its one year loans, ramping up stimulus as the economy deteriorates. that move propels asia stocks higher while the dollar gains. now, frankfurt. attention turns to the ecb, which is seen tightening by a quarter-point. guidance on how much further president christine lagarde intends to raise borrowing costs will be at the fore. we are live on the ground.

confusing, that was the take away from riccardo trezzi on the decision yesterday. there is some degree to which the fed expects to get a bout of disinflation, perhaps why they are not eager to hike rates. they did some job owning in the dot plot. they don't want markets to price in cuts. what do they do? they showed their best estimation of where rates will go at this time to show two more hikes. mission accomplished. we get a selloff in bond markets that prices out cuts for the rest of the. australia, that jobs data coming in hot. we have the surprise hike last week so you get a move in the front end and a curve inverting for the first time since 2008. stronger dollar all around so you're looking at the euro weakening versus the dollar. the yen breaks through 141. we will get a boj decision tomorrow. not many changes expected. a few folks think there will be some ycc adjustments. the rest of the stock market is

higher. why wouldn't they be higher after a hawkish jerome powell? i don't know. stocks continued to defy gravity. the nikkei gains. s&p 500 futures, little change. goldman sachs and citigroup are said to cut another 35 investment banking jobs across asia this week after revenue from stock sales and mergers slumped further into the latest quarter. joining us now is adam haigh. this has been a continuing story of job cuts and seeing more in asia. what do we know about this latest round of job cuts and the details? adam: at the moment, what we know is that goldman and citi are both going to be embarking this week on kind of a new round of reductions in their headcount. at goldman, there will be around 15 dealmakers that will be affected, about nine from equity capital markets. at citigroup, it is around 20

jobs that are mainly at more junior levels. of course, and a lot of this is to do with the fact that revenue from stock sales and also mergers is under real pressure in. . the second quarter and that is kind of the key reason here that they are needing to make the reductions. but of course, wall street banks as a whole have been continued to face this pretty tough environment for some time now. dealmaking has been under pressure across the world. we have seen m&a particularly drop of late, not just in this region, but the rest of the world as well. it's a continuing picture of these banks trying to readjust, sustainable, and trying to just put resources where they need to at this point in the cycle when there are clear kind of opportunities still available, but they need to just reduce in some of these areas. that is what we see really care at goldman and citi. dani: there are short-term costs and we heard that from citigroup's cfo.

what is the dynamic there? adam: really what mark mason was talking about, the cfo at citigroup, at a conference on wednesday was about the expenses associated with having to -- people redundant. he was saying it could lead to expenses climbing by as much as $400 million this quarter, compared to the first three months of the year. clearly, a material number there. most of that, citi is tied to the severance packages that will be related to the departure of about 1600 jobs. so clearly, there is a need to kind of -- for these banks, they're wanting to get ahead, they're wanting to say and be open and transparent with shareholders, but also with staff that these are the numbers around what we are trying to do here, we are trying to position for what's going on ahead.

clearly it's a sign of continued worry about a deterioration in not just of the economy but in the areas of investment banking that have been particularly hit. we talked earlier m&a and equity capital markets particularly under pressure at the moment. dani: thank you very much. that is adam haigh. i want to continue the jobs conversation. joining us now from paris is becky frankiewicz, manpowergroup 's north america president and global chief commercial officer. manpowergroup, of course, one of the largest staffing companies in the world. so great to talk to you. it is great that you are in our time zone. i want to talk to you about tech and vivatech, but i want to start with this theme of job curd about the banking sector. is most of the jobs pain in the banking and tech sectors? becky: yes, so i would say, in fact, jobs filled continues to

defy gravity, to use a term that you used a few months ago, when the u.s. labor market continues to thrive amidst the chaos. headlines on jobs cuts, inflation, gasoline prices, it continues to be a healthy market . when you dig under the headlines, we are starting to see softening. jobs posted versus jobs filled, jobs posted is down 14% month over month. that will flow through into jobs filled so we are starting to see some stopping -- some softening. numbers still show a very robust labor market, which is why the fed has this dilemma, do i hold, to ipods? we both -- do i pause? we believehis is a skip. dani: we are not supposed to call it a skip, that's the word from powell. becky: i know. dani: talking about pausing. that was one of my favorite moments from the press conference yesterday. i think you bring up a really good point because you start to see the first signs, and then it

takes a while to actually filter into jobs filled. what usually is the timeline to? see that filter through? becky: well, what we know first is that from inflation hike, or rate hike, it takes about a year to flow through. we've had about 10 consecutive rate hikes without the time, the year in between to flow through. we see that impact on consumer spending as well as on jobs, which of course is a direct result of consumer demand. it would usually take six months or so, the job market is a leading indicator, particularly temp jobs. my particular industry as a leading indicator of going into a slowdown. and we've seen some ups and downs, as you know, in even the temp job staffing. it's a very unprecedented way to enter a slowdown. it's been, a slow bleed off if you will. the way we come out of it will likely also be unprecedented. dani: do you buy this sort of immaculate disinflation thing?

that we could get disinflation and have jobs stay as hot as they are? becky: it would defy history if that happened. what i would say is that, given the slow down we are seeing underlying in jobs posted, i don't think so. i think we will start to see probably a soft landing versus a hard landing. again, slow decline. there are still some bright spots. we see bright spots in job creation, retail, hospitality and leisure as americans start to travel again, tech notably resilient, even with all the headlines. there is optimism here at vivteach because in the u.s., the unemployment rate in tech is 2.2%, even after 140,000 people lost their jobs since march of last are, 140,000 people, 70% of them had a job within two months. the unemployment rate, 2.2% compared to 3.7 for the overall u.s. economy. tech is still a very hot sector.

dani: that is so fascinating. if all you did was read the headlines about cuts, you would not expect that. why do you think there has been so much resilience, even amid a stock market selloff the push for profitability? why has tech been so resilient? becky: two things. companies continue to digitize and that's everything being talked about at vivatech today. how quickly can you digitize? in the second position is what i call a hangover from pandemic paranoia. it was so difficult to find tech talent, specifically during the pandemic that employers were a bit cautious about letting more people go then they know that they absolutely will need. those will be the two factors that at least we are seeing from the frontline. dani: what about wage power? are we seeing still folks being able to negotiate for higher pay? becky: great question.

yes, wage power is still strong. we are seeing a little bit of softening. in the u.s., until three months ago, if you are going to leave a job for another job, you would get about a 14% increase in pay for living a job, compared to a little under 6% for staying with their employer. today in the u.s., if you leave your job, you are getting about 13.7% increase, a little softening. and to stay, it is falling in the low five percentage range, so still wage power, again, surprisingly, given the headlines, but a little softening very similar to the job posting softening. dani: i will go back to my favorite tweet ever from cs lombard i fear there is a wage price spiral and i am being left out of it. we got to talk about using tech. we've been talking about

vivatech. there is a lot of hope and optimism about what ai means for jobs. there is ai software being used for recruitment. should we fear about the human biases in these technologies? are you concerned about that? becky: always, always a concern. i would say it's a purdy to make sure -- a priority to make sure, because we have humans programming technology. technology can learn and unlearn much faster than human beings. we can program bias out of ai a lot easier then we can for the human being. there is promise. of course, we have to be very cautious and have to be students of how the technology learns. but there is promise around ai. given the population trends around the world, we are going to need some productivity for ai to fuel economic growth globally. dani: absolutely. does that in turn caused some disinflation?

i wonder what that adds to the overall global picture. becky: i think to be determined, to be determined. chatgpt is being adopted at rates we have never seen historically around the world. this will be another unprecedented adoption at the same time we have quite a bit of turmoil, if you will, in the labor markets around the world. dani: it is so fastening to see just how quickly this has progressed. this technology that has been around for what, 1.5 years, but we got a consumer facing version in chatgpt. i am a friend that's all we have time for. really happy you are able to join us while you are over in paris. that is becky frankiewicz, manpowergroup's north america president. the eu has charged google with abusing its ad tech dominance. we are going to discuss the impact of that, next. this is bloomberg. ♪

>> the worst scenario would be a europe that would invest much less than the united states and china, not be able to create the great champions, but instead a europe that would start with regulation. this scenario is possible. it is not one we stand for and it is not the one i will support. dani: that was french president emmanuel macron warning that europe should not fall behind on ai at the vivatech conference in paris. microsoft is taking the lead in silicon valley's a aires after quietly gaining control of ai's flashiest start up. competitors are trying to play catch-up but it comes at a time when regulators are getting tough on tech. >> we are concerned that google may have illegally distorted competition in the online advertising industry, also known as ad tech. we found that google may have

abused its dominance position by favoring its own ad tech services. dani: that was european commissioner for competition accusing tech chai and google of promoting its own ad exchange program -- tech giant google of promoting its own ad exchange program over others. before we get to some of those antitrust comments, i want to nor about microsoft and their big bet on ai, this of course the subject of today's big take. what does that mean for silicon valley? >> it means a massive race to compete against microsoft, which is not the company you necessarily would have expected to be the leader in ai right now. you think of microsoft, you might think of cliipy on your word documents. through this massive partnership with openai, it is really leapfrogged its competitors, who

have all been quietly working on this technology, but had not deployed it throughout its own products. microsoft made this huge investment in a company to take ownership of this new technology, and it's been rapidly integrating it into all of its products. dani: it is interesting, just completely speeding up the race to deploy this stuff. on the google charges against them, the eu commissioner, we were just hearing from her, what is the latest there? what can the impact of that be? >> it's obviously a big headache for a company that depends on its advertising business for most of its revenue. the potential outcome is that google may have to break up its ad business in europe, but that's a process that would take years. there is various cases that google is dealing with within the eu and most of them have not been resolved so this could drag on for years. dani: it's so interesting because i was talking with the founder of vivatech yesterday and i was kind of joking, but not so much joking, is that

where europe leads tech is with regulation. is there frustration among these tech companies, we want to innovate, grow in europe, but we cannot if all you are focusing on is regulation? >> that is what you are hearing the but you are seeing the u.s. import a lot of that regulation, particularly in california. the justice department had already filed a case against google that is almost exactly the same over this competition issue in its advertising business. dani: i guess the same holds true for microsoft and its acquisition of activision, that the ftc has suited to block that, too. we also have london tech week. what about from the uk's side on this regulation question? >> post-brexit, it's been a bit of a mishmash, but they certainly have been looking at kind of following in the eu's footsteps for many of these issues. dani: quickly on the google question, has actually been any reaction in share price or have

people been brushing this off? >> not yesterday there wasn't. this is a process that could take years so it's unlikely to have any immediate impact. dani: basically, we would be waiting for something concrete to come out, is that fair? >> i would say so, yes. dani: coming up, a dovish press conference overshadows the fed's hawkish dot plot. how did that leave equity markets? we will be discussing that, next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." it's been all about central banks this week. we had the fed yesterday, there hawkish dot plot was perhaps overshadowed by a more dovish press conference. riccardo trezzi called it confusing. it was a mixed message that left u.s. equity markets roughly unchanged on the, because of course they would end on the green. it's always remarkable to see the resilience of this market. let's go to valerie tytel. i love this. some are calling the higher dots aspirational. what does the market think about this? >> when i saw that written on bloomberg yesterday, i left. the fed's dots are aspirational because no one believed they might actually be used. the market did reflect that yesterday after this dovish press conference. this blue line is showing you where the median dot is on that fed forecast, coming in a 5.6

yesterday. they raised it by two hikes. sounds like a hawkish message, completely unexpected. the market did not believe it. the market price terminal rate did not move up that height and to year yields did not move up that much higher either. it just goes to show that this press conference had a very muddled message, this uncertainty, this almost ambivalence to wendy's these hikes are going to be used. you combine that with these other comments that risks to inflation are still on the upside. don't take our forecast too seriously because much is uncertain. . it was a completely messy, muddled message. two-year yields did not react too much to this dot plot. if you take the fed at their word, we have two more hikes to go before the cycle is over. dani: i did see a lot of commentary saying that the fed does not want to hike two times more but it's really the only way to stop markets from pricing in eminent rate cuts.

is that a fair assessment? valerie: quite possibly. but still, that's not the way central banks usually communicate. they don't promise two hikes but then become almost so ambivalent as to when they are going to be used or even to what nature they are going to be used. he was asked directly, what kind of data do you need to see in order to use these hikes? he just said, we will know it when we see it. there are risks for other central banks, one of which being the boj we know is the standout, keeping with its easy monetary policy. this yield the differential between the u.s. and japan has widened overnight, causing though yen to weaken past this 141 barrier. government ministers sing excessive movements are undesirable in the fx market but the yen still hit a seven month low. dani: what a tough time, not

just for japanese markets, but also for australian bond markets. it did not help that they got hot jobs data in. that move on the front end in the aussie, it's pretty breathtaking. >> another day, another over 10 basins point move in this aussie three year yield. it all came back to this unexpectedly hot jobs data. you take that into account that cpi is still running hot, even with this surprise hike by australia just last week. and just goes to show if the fed is doing more, there is going to be more pressure on global central banks to do more, and i think australia is a very vulnerable central bank to the narrative. dani: that is bloomberg's valerie tytel. what a week. we are going to get the boj tomorrow. get ready with your charts to come back at that. one thing valerie did not mention, of course, was the pboc. the pboc, of course, cutting their longer-term rate, their

mlf. this is the reaction we have seen in china equity markets. being short china was among the more crowded trades in the latest bank of america survey, so perhaps we might see a little bit of short covering in this market. what we are seeing is a gain in china markets. the csi 300 up 1.3%. hong kong tech stocks up 2% this morning. elsewhere, we are looking at a gain in oil, may be some support again to bring back more demand. but the china data was ugly today, and that just really underscores the efforts that chinese officials are trying to do in order to support the economy. that's it for me. that's it for daybreak as i slowly move away. up next, it is "bloomberg markets: europe." this is bloomberg. ♪

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