it's overwhelming. it's everything. >> it is 5:00 a.m.. u.s. markets are closed for the holiday. the u.s. a kateri of state antony blinken is meeting with his chinese counterpart and the president as well. tensions between the two countries may be easing.

subsidies to build a chip factory in eastern germany, this comes after the company announced plans to build a $25 billion plant in israel. credit suisse may be due for a massive downsizing of its business after the takeover by ubs. that's according to the ceo. welcome to bloomberg markets. let's get straight to some the action for you. european markets are starting off on the back foot. we were watching the geopolitics and the possibility more stimulus out from china. volumes will be muted because of the polity in the united states. in terms of the geographic breakdown, it is right across the board on a sector level, looking at chemicals and construction leaving the declines. telco is outperforming,

sartorius slumping. deutsche bank has a note, they see upside of european stocks because of risk sentiment. let slip the board and get to your trade. the greenback is coming off the worst week since january. german bonds open higher. we have a cascade of ecb speakers. equity futures are blair -- below the flat line. this is one of the trades that was a top favorite. that trait is pushing investors to regroup. that is being abandoned is the fed projections signal more hikes and shows the yield curve inversion that is at the turmoil level. this takes us back all the way to the turn-of-the-century. the stakes couldn't be any higher. brent, it really is about the chinese demand story.

we are moving down somewhat. i want to get out to chris who joins us for a closer look at what is driving some of these markets. >> we are looking at what we have seen out of china. a lot of anticipation over what the government could provide in terms of stimulus. this is really not delivering. investors have not been impressed with the chinese stocks, as are they in europe. we have seen some pressure on that you want as well. it is coming to a had an -- in terms of investor expectations as it comes to china. the growth story will start delivering. the expectations were for china to pick up the baton. that story has not delivered.

investors are looking to the government to restart and recharge the economic recovery. youself: what mechanisms could unleash new liquidity? there was quite a bit of debate about this. >> it really will have to do with investor sentiment. our investors feeling confident when it comes to putting more of their money into china. the he's of those trading channels as well, it will matter quite a bit into the sort of dynamic. it is a sentiment thing. if they are feeling confident

the growth will start to deliver. that we will get more support from the government. they are waiting and watching before they start reloading. yousef: thank you for the insights. we want to widen out the conversation and bring in the portfolio manager. you talk about a consumer driven recession and you don't think economic momentum is going to hold up. run us through what is underpinning your thesis. >> it's really interesting, following from what christine was saying. we do see that recession starting in the u.s., in europe. we see some early signs that toward the end of this year and into next year we will have a

much slower economic growth environment. we see something different in china. we don't spend a lot of time monitoring sentiment. we do look at policy. we look at the underlying structural growth followers. we see a clear lead for policy intervention. you look at youth unemployment rates, it is going to be imperative for the leadership to address that. because of that, we see continued stimulus. yousef: here is something i am wondering. i look at the research and you make the point that it is a good time to be a stock picker. if i would have hung out on the indexes, i would have done well. how do you explain that? >> we are looking backwards. you have had a market where

performance was dominated by large tech companies. as we look forward, a very different interest rate environment. it's much weaker economic growth. that is the environment where we expect companies with underlying structural drivers to outperform. we believe those drivers to a large extent will be linked to some of those sustainability themes that we focus on. those are things like regulatory drivers. policy measures like the inflation reduction act which runs for another 10 years. that will support company earnings. consumer preference changing, products that are more aligned

with people's values. yousef: let me flush that out. within the european energy equation, there are quite a few companies that like to claim they are running the ship. you like schneider electric to see the upside. why could this stock rally? >> schnider is a great example of a company that was incredibly early improving its portfolio to address the structural growth trends. in recent months, this will continue to do so as we move into the end of this year. the need for energy efficiency. one of the biggest energy surprises of the last year was how europe managed to survive last winter. we would say 35% of europe's gas

comes from russia. that has disappeared. it is going to be a terrible winter. europe managed to survive that winter. the weather helped a little bit. there has also been massive gas demand reduction. some of that is temporary. quite a bit of it is permanent. that is exactly what schneider has advised. that is going to continue. we see europe is very well-placed for next winter. companies like schneider are the solution providers. they are telling russia that we can survive fine without you. yousef: those are strong conviction views. we love in on this program. thank you for making it. it's get you over to what is to come from george magness.

sandra is going to weigh in on some bank of englund events. this is bloomberg.

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. >> how expensive will it be if

you didn't make these investments? the key piece of technology, cost to leave you vulnerable. which do you want to use? it's not a one-sided question. is it costly? yes. it is also costly to leave yourself completely vulnerable. yousef: the u.s. ambassador to japan speaking with bloomberg on the semiconductor industry. let's give you the update between antony blinken and the chinese president xi jinping. very good progress has been made on u.s. china ties.

rosalynn joins us for more. throughout the last few hours, there was a sense of restraint from the chinese side. this latest comment from the president himself raises the bar quite a bit. >> certainly does. it signals this visit has been quite positive for putting a floor under a tense relationship. we sought marathon talked yesterday, more than seven hours of discussion. today, he met with the top chinese envoy. that would only have happened, that final big meeting the trajectory had been seen as positive throughout his visit. that is signaling a desire on the u.s. and china to keep ties from getting worse. they been very tense. tensions around trade and business, an overarching sense

that they need to stop things getting worse. those discussions have been fruitful in that regard. he made the comment that the relationship has to be based on mutual suspect. that is very much a telling comment from the chinese president. yousef: in debates, we often speculate about one offramp could look like. where would you say is the starting point for an offramp in a tense linkage? >> the starting point is for the two presidents to meet in person and sit down later this year. we see signs that might happen at the group of 20 summit. all of this is designed to pave the way for those two presidents to have a proper meeting and clear the air. in terms of an offramp, it's

about stopping things from getting worse. it's not about a reset in the relationship. there are too many friction points between the more you see competition in the economic space. it is simply an offramp to stop the deterioration. that's what they are trying to achieve today. this has been helpful. thank you for the insight. the associate at oxford university joins us for more. your take on the headline? the very good progress that has been made? >> it's encouraging that the visit has produced this kind of attitude from the chinese hosts. the top diplomat was a little bit less generous in his

comments when we read the read how -- read out and accuse the americans of being to blame for everything. i think as your correspondent said, there are some important issues here. basically, the economy is not in great shape. he wants to be seen as constructive. there are important things coming up. the review of section 301 tariffs in the u.s.. yousef: you mentioned that in your research. one of the likely scenarios on that front?

>> there is always room for compromise. it depends on how much goodwill there is. if you think about two thirds of american trade with china is not that contentious, it is in goods and services that don't enter into the national security, even the wider spectrum. not all of the tariffs that were imposed under the trump administration need to be kept in place for america's interest to be served. you can argue that they are the least potent weapon the administration can deploy. there is scope for compromise there. it is equally important that the redlines over taiwan, technology, --

yousef: do you believe in a zero-sum game? where any improvement needs to come at the expense of china russia? >> i don't think there is much room for compromise there. it's really important from china's point of view that russia not be humiliated or that in the event the ukrainians should have military success. they do not want instability and political turmoil in russia in the event that vladimir putin should be deposed or anything like that. china will stand by russia, regardless until it looks like there are genuine reasons to talk peace. both sides have to want to get

brought to the table. i think china is going to play it tough with russia. yousef: there is a delegation in germany. you begin to speculate whether these efforts to try and move germany away from the united states are going to bear any fruit. is that a realistic scenario? >> it's the objective of the mission. there are at least seven or eight officials going to berlin. they want to talk about ways in which they might lead germany away from the transatlantic alliance, the way they thought macron had been maneuvered that way as well. the germans have a different agenda. they want to talk about climate change and accelerating

renewables and a healthy environment for german businesses. the chinese have different things to talk about. they want to talk about the commission to ban them in the eu. they want to talk about other things that are less sensitive. yousef: it is great to catch up on an important date like today. here's what's coming up. let's get you a snapshot. the largest air show returns to paris. another airport is on a quest to ban private jets. this is bloomberg. ♪ you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star.

so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪

♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ yousef: this is bloomberg

markets. let's talk about the largest aviation showcase. playmakers are gathering the paris air show to announce deals and innovations. despite the return of global travel, one airport is on a quest to ban private jets. >> luxury destinations for the well-heeled jetsetters. perhaps not for long. the airport his plans to ban private jets from its runways

by, setting a precedent for other travel hubs. 17,000 private jets cross the runways last year. the airport argues that they are noisier and generate 20 times more carbon emissions than commercial flights. the plan was announced a few months after climate activist blocked private jets. it comes on top of the governments impose will to cap the number fight -- flights. >> perspective of the residence, of the people that work for the airlines. >> the industry said the van will hit business travel the hardest. >> it's a business tool, especially for amsterdam. they are not really beach destinations and holiday destinations.

>> the question now is could the move accelerate the development of more sustainable alternatives? yousef: that was guy johnson. for more on the paris air show, subscribe to the paris newsletter. this is bloomberg. ♪

yousef: here is what you need to know. the u.s. secretary of state met with the chinese president in beijing. the meeting ended 21 minutes ago. it's a sign the tensions may be easing. a tough week ahead for the u.k. prime minister. a vote on his predecessor and a

rate hike on thursday. credit suisse may be due for an important massive downsizing of its investment banking business. that's according to the ceo. welcome to bloomberg markets. let's get you a check over where we stand. it's the juneteenth holiday in the united states. volumes are lighter than the usual monday. we are lower across the board. investors are weighing more stimulus from china. the chemicals and construction sector are leading in europe. deutsche bank is out with a new note saying they see further gains in european stocks. i want to get to a sense of the other asset classes. the greenback is coming off the worst week since january. the german 10 year yield is 492.

we continue to monitor the geopolitical lines coming through from the u.s. china summit. let's get to an important corporate story. intel is announcing plans to expand in germany and israel. we are joined with more. there was quite a bit of momentum from the weaken. there was a massive deal with israel. now they are moving production out of asia. >> essentially, this deal with israel and these new subsidies coming out of germany today, this is part of an effort to diversified the supply chain away from east asia. on top of that, this coincides with an effort on the part of many governments around the world to do chip production.

or i am sitting, the eu is committed to stepping up chip production. these subsidies are part of that. yousef: there is a track record promising subsidies and when it comes to the execution and delivery part, it takes a long time or it gets shelved. how is it different this time? >> this is also part of a broader european push. this isn't just germany going alone. we have seen intel commit to a factory in poland recently. it's about the eu as a whole committing to building 20% of the semi conductors in europe by

the year 2030. currently, they are at 10%. they need a lot of political will. these subsidies have been stepped up. the original agreement with 6.8 billion. now we see 10 billion euros. this has been a long back and forth. yousef: i really appreciate you scrambling in the light of breaking news. let's go out to sandra. she joins us for more. i'm seeing this commitment around investment in capital expenditures, trying to ramp up the european semiconductor story. what would be the best theme around that? >> this story trying to

diversify supply chains has been the key theme. part of that is the response to the experience during covid. that has something to do with geopolitical risks. all of that means more investment that has to take place, even though interest rates are very high. yousef: away from what intel is going to do, i want to lean into your bread and butter, which is around monetary policy and economic growth. let's zero in the bank of england. that's where the bond market moves and shows nervousness. what is your top line on this? >> nervousness has been

building. the question isn't so much as inflation coming down. we are getting inflation come down. the question is how quickly. the news hasn't been good for the bank of england. the data contributed to this nervousness, showing strong dynamics in terms of weight gross -- wage growth. more tightening will be necessary. yousef: i was looking at a tweet that said lots of views on the trickiest sets of policies. where they going to get around guidance? >> guidance will be very important. markets have gotten ahead of themselves and priced in a lot of further rate hikes.

there is no mix of expectations in the market. we could get a 50 basis point rate hike this time around. we will just get 25, at the same time the bank of england will have little choice. they will take the flight to and for ablation. -- two inflation. clearly, they don't want to go too far. the impact this has on the cost base. yousef: when i was looking through this data, what stood out to me is the leverage punters cut back on some of their sterling longs. does that open the path up for a breach of 130? >> we view that sterling has

been undervalued for some time. some of the risks have receded. the big picture is one we've had for dollar strength. the dollar strength side of things is starting to recede. it's not clear for how long, they are more certain they are near the end of the tightening cycle. the u.k., it has been less clear. there has been some upside for sterling. yousef: the cascade of ecb speakers that are on the list for making appearances over the next few hours. where do you see the european growth position, given the lackluster data over the last two weeks? where is the ecb going to be?

>> the story has been mixed. it's easy to get hung up on stories. that's true in a technical sense. it's not all bad news. what is more encouraging from ecb policy is inflation has started to receded, not just in headline terms. how long-lasting that is, that will be the key question. they don't want to declare victory yet. they don't need to go that much further in hiking. yousef: there were really good talks with the u.s. secretary of state in the last hour. if there is a meaningful breakthrough in the relationship, how much of a windfall is likely to urge the

european economy? >> the clear rise of china over the past decade or two in terms of its ties to the rest of the global economy has been very strong. manufacturing is quite important. any thawing in relations would alleviate the resilience of supply chains. that would be great news for europe. yousef: this has been valuable. thank you for all the analysis. let's get you a preview of what else is coming up. we speak to the ceo of the company whose sole purpose is to create diversity on wall street and in tech. this is bloomberg. ♪

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improving female and minority

yousef: you are trying to make around leading with the data. how do you find a way to standardize the methodology and agree on an approach to doing this? >> there are three areas that companies should be focused on you think about the methodology

and the standard of data. those areas focus on developing and promoting and retaining talent. one of the things we've been having conversations with our companies around is starting with where you are. understanding and knowing who works for you and what level does your talent sit. setting goals and targets to help with sustained success over time. yousef: it's one thing to be adding employees. it's a different challenge when you are downsizing or whatever term you would like to use while still maintaining the broader efforts toward diversity and inclusion. what do you suggest be done there? >> as companies are thinking

about rightsizing or downsizing, they need to ensure that they are maintaining their effort they've been successful at. a couple of things we need to do is be thoughtful around when you are making these decisions. many of these are based around certain roles within an organization. companies need to have a better system of assessing talent. that can start with how you reskill your managers to be able to assess talent and keep the best and brightest talent within the organization. that starts with your leaders. you can implement a diverse review committee to ensure.

yousef: i was going to follow up on that and how it gets integrated into a given organization. where are we talking? mid-level? >> we are talking about top level executives that are making decisions around talent. a review committee can be implemented to assess those roles that are most critical to the organization. when it comes to women in certain roles and that is underrepresented. yousef: would you say there has been a setback on the part of certain segments of corporate america in reaching their suggested goals for diversity and inclusion? >> the research we have based on organizations that are part of

our organization, we have not seen a setback. we have seen an increase in the ability to sustain their goals around women. that progress has not been as steady as we would like, it has been made over time. these companies have been implementing our action plan. there is still a lot of progress to be made in this area. yousef: i am wondering where the government comes in. the government leads the charge as much as the private sector. where is the government in the united states in helping integrate your ideas? >> it is private sector lead. there have been opportunities for us to engage with the current administration around their growth policy.

that is something that government can continue to do. companies are being encouraged to create and implement these strategies to ensure they are creating a more equitable workplace. yousef: this has been very interesting. thank you very much for coming in to discuss some of these themes. just a couple of lines on the discussion between the secretary of state and the president of china. he believes the u.s. and china can overcome difficulties. he is urging the united states to adopt pragmatic attitudes. we will continue to monitor. this is bloomberg. ♪

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markets. global transportation ministers met. we spoke to the u.s. secretary of transportation. >> as we seek to de-risk and diversify our supply chains, we want to make sure these capabilities are not concentrated with anyone country, certainly with a country that may demonstrate willingness to use these in way that are not connected to the best going forward. we want to make sure when we can agree on matters from climate change that we are operating on a basis that can be understood. those are the things we are focused on.

>> are there any other sectors that need de-risking? even the drug sector in china. >> i don't want to wander too far outside my own for leo. what i can say with regard to supply chains is we have seen how if there is not enough diversification, you see extraordinary levels of geopolitical risk. that is because of the extreme variation between three openings in asia and china specifically. there is a great deal of unevenness where our ports were not ready to take in. that is the kind of wake-up call the u.s. has been experiencing, especially in the last three years.

>> set conductors are front and center. we had the investing heavily in their own respective semiconductor sectors. could that lead to overcapacity? >> right now, overcapacity seems to be the least of our problems. we saw how problematic it was. semi conductors are going to be even more important in the future. rather than allow ourselves to be in a situation where we are, in short, we are making sure in terms of our domestic capacity, which as benefited from foreign investment, that is creating jobs while strengthening our partnerships and relationships across the pacific. that can help us cushion some of the risk.

yousef: that was the u.s. secretary of edge -- transportation. let's get you a look at what is happening today. markets are closed in the u.s. for the holiday. there are a couple of speakers from the european central bank on the sidelines. on wednesday, the latest inflation trends out of the united kingdom. we've got a busy day on capitol hill with a fed nomination hearing. the bank of england livers it's decision on thursday. that is all highly anticipated. we want to get back to market action. there is a sense of caution with risk appetite. there is speculation around what is going to come eventually if anything in terms of government stimulus and china. on the s&p 500, many were lower.

the euro-dollar is one hundred 910. brent crude is clawing back a little bit of ground. it is under 7650 per barrel. this is bloomberg. ♪

>> it's 6:00 a.m. in new york. i'm anna edwards welcome to bloomberg markets a rough start to the week. wall street second quarter rally loses steam late last week. chinese president jean being tells a secretary state good

progress was made. the world's largest air sure returns to paris after a four hiatus. we will hear from the ceos largest -- from the largest airlines. new training over stateside normal programming will resume tomorrow. special programming coming out of london this morning. it's a little dark red is in it? it's a little gloomy. let's show you where we are on markets more broadly. a bit of china disappointment coming through in terms of the thing that is driving sentiment this morning. not as much confirmation of fiscal policy over the weekend. that sets us up for disappointment. if there's one thing that seems to be moving higher it is yields. this after last week of the ecb

and u.k. data and the fed arguably there were rate expectations. same disappointment around china. making good progress those are the words from xi there has been moderating of those losses and warm words we are getting from this exchange between xi and when can. we all see that go higher once again. terminal rates could we see that seems to be with the market is pricing and mortgage rates already over 6%. that will be 125 basis points. when we get -- will we get one of those this week? taking a look at some of the highlights this monday. a very good morning to you. in terms of the big macro themes we had a lot of central banking news last week. do you think great assessments have to move higher from here? i think you maybe there are

cracks emerging in these inflations? >> we haven't seen that thus far in the u.s. stock market is clearly slowing but not as fast as they thought it would. i knew my view the fed is more likely done. i think a possible arvin to a quite a long pause. i think it's going to be a similar issue from europe. they start to emphasize wage inflation last week. even though there is pretty good signs that inflation is beginning to moderate. i think in the u.k. you will see something similar too. i have the energy cap is going to have an impact as well. that means real rates are actually rising. real rates in the u.s. are already positive. they will be positive i they know next -- in the next three to four months.

things will look quite different. i find that very unlikely that there will be hikes. anna: hikes unlikely in the u.k.. >> i think things can change very rapidly. you're looking at payrolls, which is the one that's going to stand out. as i say the situation will look quite differently and then central banks will save real rates are already quite restrictive. inflation is coming down. so it doesn't take much for them to point to the environment and say do you know what it's ok to step back a bit. anna: why do you not c5 coming? given the fed is perhaps on pause now but we do so have a tight labor market. and now there is even if not political media pressure. >> i think the issue is the

mortgage market. you're beginning to see the pressure grow. again i'm surprised it hasn't come through more obviously thus far. it's a cumulative impact. incidentally enough it's picking up and because people are i think they have been drawing down their savings, that's cushioned some of the impacts. thanks showing a lot of forbearance and that is also cushioning the impact. i think all this can help the situation a little bit. but again, the economy starts to look a bit worse. the cumulative impact people have these huge rises in their mortgages. i think the bank of england, you know, the political pressure comes to step back. >> it does take a little while does the net? and on other macro themes china a dominant seen.

-- theme. whether he would meet him and they did. this is all sort of warm words i suppose. comforting words perhaps? >> obviously anything in that direction is helpful. i think the real problem is they really did go quite hard in the pandemic. incidentally enough china is the only country if you look at the last three or four years since the beginning of the pandemic that has had consumer deflation. every other country had inflation. china had the combination of didn't support the consumer but they had a lot of stringent lockdowns. there's no way they could support the economy so the economy had to move on and carry on roughly as normal. china had stringent lockdowns

and very little support so you actually had deflation. so, you know, they have a problem now. they have rising unemployment and thais bng constraint. like when unemployment starts to become too much to bear they will begin to stimulate much more broadly. right now it sounds like they are pulling back a little bit area when push comes to shove that is the direction they will have to go in. anna: what happens to those without jobs and how do they voice their concerns? thank you very much for joining us. we have the latest on his thinking around markets. head of multi-asset strategies, joins us here in london. there he nice to have you with us. some similar themes i suppose from our conversation there with simon. in terms of the stock market foots go there first shall be because we saw the s&p and nasdaq for the week of gains for stocks. is this something you are

fearing missing out and buying into or is it something that you're happy to leave for others? >> we are happy to leave it for others. we still stick to our end of year, things will slow down. it's a very narrow stock market. a few names have driven the overall index and as active managers it's difficult for us to keep up with that. we are sticking to our guns and terms of what we expect for the slower economic growth into the -- until the end of the year. we are looking to probably sell more equities into this rally. anna: you're not worrying that the rally will broaden out? not just the ones that talk about ai? >> we've been there before in 2000 is there anything with china in the name and the late 90's anything with internet in the name did well. we have seen a little bit of broadening out but it has more to do with the china stimulus.

commodities bounced very strongly last week. it feels like there's more to do with the china stimulus not necessarily what were going to do in europe or indeed in the u.s.. anna: china and ai themes pushing things. what are you seeing in the yield curve right now? we are still in interest territory will kind of messaging are you taking from those? >> if you just look rarely at the yield curve if you look at things like the swap curve it's not such a clear signal the recession is on our doorstep. there are mixed signals coming out of the yield curve here but from our perspective we've been using the strength in high heels from those positions. we've also begun to extend our duration as well just as portfolios assure us that if equity markets start to disappoint then we've got

something else is going to generate returns in our folio. anna: where do you stand in this expectation are you buying that? do you think there's some sort of way of managing our expectations? >> we have been saying that the fed is going to half to stay high for longer. inflation rate is coming down but it's getting to take a bit of time to get to its target. i think the easy author inflation to come down it's harder for inflation to fall. we've always been a little more hawkish and what the fed has to do and you can see markets move from cutting by the end -- by march next year to know cuts this year. the market has come more to that position. i still think the fed is going to have to hike. but they will do -- it is a disappointment that will come when the fed has sick cut or not. anna: you make an interesting

point about it not being just a coincidence. is that part of the argument to you think? >> i think the fed takes a lot of things into consideration. that was one that struck me and jumped up at me. if any time is a good time to to pause, today is probably a good day. anna: so hence the pause in your view. the ecb moving on rates. i just saw a headline across the bloomberg that says yields rise to 5% for the first time since 2008. we've gone past the levels we saw in october last year. that has so much more maxi effect on the market. we are now back to 2000 the comparisons. how much further do you think we have to run with the u.k. rate story? >> if you think of what's the

next couple of moves in the bank of england, 5% might look too low. if you're thinking more out a years time then you should be thinking will actually five percent is too high. you could see rates go higher. well, actually, the market is looking much more interesting if you are taking long-duration. anna: is this going to be an economy where something breaks? or is it going to be a slow realization that actually the higher rates are making it difficult for parts of the consumer at the consumer space? how will this play out to you think? >> the survey saying small businesses are struggling with the man's not with supply of living -- of labor. there's is a demand side of things that's a bit softer so you are seeing some cracks. if this is all we see in the

crisis. in this cycle, then we are probably wrong. but i do have the suspicion that were not there at the end of this. rates really just turn positive. it is likely there is something else coming. don't know what it is, don't know when it will come. but i think the positioning for the medium terms, months of global economic slowdown i think it's the right position for clients. anna: are we will served by an independent bank of england? something that is much talked about during the budget last october where it looked as if something -- the government was moving towards independence. front pages of many newspapers put criticism on the bank of england. >> i think there's been a narrating -- narrowing of the gap.

central banks have been buying treasury bonds across the world. they are in it together if you know what i mean. it was as clear-cut as it was so it's getting closer. i think this is just the story that's going to come to actually, they realize they are in symbiotic relationships and they need to work together. anna: thank you very much for joining us. this monday morning, coming up on the program credit suisse may be due for a massive downsizing of its investment banking business after its takeover. that is according to one enter prepaid cushion -- interpretation. what do we read into his comments in those newspapers? we will get an update. this is bloomberg. ♪

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anna: welcome to bloomberg markets. 6:16 if you are in new york. let's get to the latest news out of china. the lack of fiscal stimulus coming over the weekend. xi jinping says very good progress is very good. after a meeting with the u.s.

secretary of state antony blinken. that's the headline. very good, the progress. dig a little deeper what are these natives -- latest news lines? >> it's been an encouraging visit after months of delay and what it really shows is a safe from the u.s. and china to put a to make sure the relationship doesn't get any worse than it is. were not going to attend it's great anytime soon but let's agree to stop having it deteriorate further and very much you can see from the comment it's very good that progress has been made. so the link which is both sides. certainly it's in their interest to do so. that could bleed through to the rest of the world, certainly to the u.s.. the incentive to stop the tensions at least for a to allow them to focus on fostering

growth. anna: that's interesting is the net? he believes the u.s. and china can overcome difficulties so he references that this -- this all quite positive really coming the president himself the fact that the meeting took place with the president, that was positive. >> they are looking for xi jinping to meet with president joe biden. that is the next step. both leaders can sit down together paving the way for that but that's because right now there is mutual interest to do so. but some framing around the relationship addict below that and you still see an awful lot of trouble going on. tech space, cyberspace, russia's invasion, there are problem areas and none of those addressed in these meetings in a

tangible way. there is no agreement to change around the rules. anna: that spy balloon, the chinese spy balloon over the united states, that was what the u.s. reacted to and the chi -- that china overreacted to. >> if things blow up simply because an alleged survey vince balint flew over u.s. airspace that sort of torpedoed everything for a matter of months. things are still really fragile. there is a lot of tension on a bunch of issues and jeezy and ping talked about the need for mutual respect. that's a clear message when we do talk we need to sit around the table as the world's two biggest economies in a sense from china it doesn't feel like it's being treated that way. on the u.s. side, there's a sense that china has not behaved

well on the economic space. the penalties that have flown from all of that. there is really a quite of since the things are quite delicate even though at least perhaps a trajectory towards a meeting. anna: and you mentioned the two biggest economies. the difficulties the chinese economy is facing right now, bringing these conversations or adding on the chinese site to these -- chinese side that these conversations. >> xi jinping likes to focus very much on things at home and that's not great. he likes to not have the destruction of things around him externally. number one for him is his our base at home. the chinese economy is struggling. talking about the stimulus we are seeing, certainly a sense he needs to knuckle down and focus on that for his own sake. he doesn't like to have a bunch of other problem areas that the same time. so very much a signal for him

that he wants to put this to the floor for now so he can focus on addressing the chinese economy. anna: thanks for bringing us the analysis. the latest on the blinken visit to china. let's pivot to a macro story. ubs sending heads of big cuts of credit suisse. what we got here was writing in a newspaper over the weekend what can we interpret from that? >> we get some of the message. that is something that sounds like we are wanting to make sure that the bank has been run in the same way before ubs that is winding down the risk of credit suisse and the demos like moving into another chapter of risky business, and then causing issues and paying for investors

on the bonsai. so what we're hearing is he wants to kept on the credit suisse investment inc. and that's just so we don't know exactly how big that will be but when the ceo says he wants to get done i will put 50% or more in terms of the headcount so that what credit suisse is facing right now and it's probably not the end of the story right now. anna: so we wait to get the announcement of how drastic the cuts could be but on the culture side of things and the mistaking jv there seems to be something that certainly there's a lot of international interest about whether the culture, the ubs culture can consume the parts of credit suisse it wants without bringing culture influence that it doesn't want. >> that's going to be the biggest challenges for the manager over the next couple of months and even years that they need to create a new bank but

you have certain key people to keep happy. and feel welcome in the new company on the other hand absolutely sure that you don't run into another trap like credit suisse did and investors, taxpayer money at stake again have to make absolutely sure this is not going to happen. these are things on the different ends of the spectrum i would say and that's going to be the big challenge for the executives how are they going to measure this? how are they going to stew the bank going forward and how they split up the different business areas. anna: a still a lot of work to be done let me ask you about the guarantee they achieved how important has that been? >> absolutely. it was part of the deal we saw back-and-forth without the deal was closed how much is going into these guarantees which

instruments and how much taxpayer money is actually going to be at stake here. of course we had ubs saying they are confident they don't need it or they don't need the full amount and that supports the message they want to send but we need to see like how the bank is looking like. they want to keep how much wind down there has to be done over the next couple of weeks and months and how much money is going to cost the bank and if there's something -- some details we don't have yet. it's going to be interesting for investors to see. anna: this will take many months, years perhaps. what's the thinking there? >> i don't think this is something on the short-term in 2025 or 26th we will still speak about it. we know that wine downs can take a very long time. it can be like 10 years that they complete the wind down. it's a good example. the wind down wasn't fully

completed before the bank fell into disgrace this year. this will take years integration is very complex. it's two major banks that they have to figure out a lot of details. technology, split ups, how to allocate funds. we will talk about this for a very long time. anna: i'm sure we will. jp, thank you perp bringing us the conversation. the latest on the combination of the purchase i ubs of credit suisse. we will get into a conversation coming up. lots to discuss we will hear from jerome powell twice this week to testify on what his focus will be there. u.k. to your yields rising this morning to 5% for the first time since 2008. the upward yield story continues this week. this is bloomberg.

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it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. anna: welcome back to bloomberg markets. special edition of programming because of the holiday in the united states i'm anna edwards. hold down some fx pairs are rather the bloomberg dollar index to have a quick check on where we are. the dollar on the rise. 2/10 of 1%. interest rate differentials talked about when you see with the ecb did and with the fed did

not do. the chinese currency in their, we've got some movement there as you can see. 71622 is where we trade. to some degree hitting the currency the pound pretty flat this morning. 1.2 812. lots to talk about there. how many rate hikes will be get in the end and the euro pretty flat although down 2/10 of 1%. one point 0916. both of which add up to keeping our options open but that seems to be the message getting through for ecb officials this morning. going through market thinking. i know you have been writing recently about starlings rally and you're saying it's rising fundamental. it's rise is fundamentally underpinned. it isn't just a function of dollar weakness.

why have you come to that conclusion? >> people talk about something's strength you have to look at relation to something else. i tried to look at you look at the correlation between sterling versus what's of different currencies and if these correlations point in the same direction it tells you the dollars weakness and the starlings strength. 50% of or more than 50% of the rise of cable, sterling versus the dollar since september is being driven by dollar weakness which is in relation to the euro were it's like 80% of the euros rise is done to dollar weakness. in that sense it's kind of interesting that starlings rally so people are obviously looking at the rate expectations you know the bank of england has a lot of hikes penciled in. pushing rates higher so i think that striving a much more fundamentally driven rally at the moment. that's what i think the momentum can carry it further forward. anna: interest rate expectations

rise that pushes the pound higher. comments about the rate environment, other times you see the market -- will you see expectations of higher rates. high inflation and all that kind of data. adding up to inflation -- assumptions of higher rates. people get worried about the economy. which of those environments tends to dominate? >> sterling or cable is a momentum driven pair. it feels like it's one of those periods we were talking about sterling versus the dollar. it's bounced back. and now we are up around 128. it will probably go a little bit further. people will start to look at the fundamentals a little bit more in terms of jobs and stuff like that. you mentioned the economy slowing.

it seems to have this ability and positioning is quite clean as well. it's not particularly extreme. a bit more concerned that everybody -- you look at the reports and the positioning. it's not particularly long. so you really could carry it forward. you have the ctas and these things. they follow momentum so it's clearly got momentum right now. it's rallying against lots of different currencies. if you look at sterling right now it looks very stretched. clearly some of these pairs can see pullback because they are already looking overbought. anna: what would be enough to change the direction on those? >> it's going to start -- i don't think they're going to deliver by the end of the year i think the reason is because leading data is still turning down. it's still fairly negative. it suggests the economy is

slowing. probably not as bad as people thought it would six month ago. you add to that the rising from people coming off their fixed-rate mortgage deals. that impacts anything u.k. it has a tremendous amount of people in fixed deals. that was the right team to do get people on fixed deals. that was fine when rates are going forward but now rates are turning around. the cumulative impact is still building. $100,000 people a month coming off of these fixed-rate deals. people are, you know, they are drawing down their savings. nobody wants to sell their house. the pressure is building in the background. anna: thank you very much, thanks for joining us once again. simon white. chief economist, we will check

other geographies. let's start i think you also share some of the skepticism we will get the five hikes that are currently priced into the gilt market. explain your thinking. >> i think it has been rephrasing of the u.k. premiums and actually a lot of that is the front running the secular story that been talking about. reducing the gilt yield on a secular basis on average over the post-covid cycle. you can't get the all-in-one shift because the real economy just can't keep up with that kind of a shift. what we've seen in the u.k., yes, we have had all of the shocks. we had one printer percent of the negative shock. we had 100% of the supply-side shock on the labor side. some cross currency, cross-country basis. that is reversing. it will linger over the

structural term. but at the margin it is improving. we opened up the demand side over the course of the pandemic we did have one of the larger stimulus out of the countries in developed market space. but that has now reversed and if you look at the legacy of wealth that was generated by that so we've got financial wealth here, it's gone. if you look at it as a percentage of gdp. the cushion is no longer there for the real economy. on top of that we had the maximum anticipation of shock. partially because of the structure of u.k. markets. if you look at the amount that we import it's more difficult to sort of undercut and then there has been until this year the weakness of sterling that still leading to enterprises. margins in the u.k. have actually been expanding buy or have expanded by one of the most across develop markets and have taken longer to -- we are

starting to see the likes being more worried about that. we are now starting to see the feedthrough of that tightened policy so far. anna: so that story times into the inflation dynamics. talking about what's happening we the expectations around the u.k., you say the gilt's not do recovery. we see it falling and the yields continuing to rise. rising to 5% for the first time since 2008. when do we get any kind of turn in the gilt market? >> we had this succession of upside surprises more so than anywhere else. it kind of shifted downwards elsewhere. that goes back to the discussion we were just having in terms of the u.k. having all of the shocks and the worst but that doesn't mean to say that honest cynical -- cyclical basis we are likely to see the slowdown or

turning point coming. it's taking longer for the snake to digest the pig in the k case and when we think about the gilt market and the financial flows here something very underappreciated is the extent to which there's been this kind of monetary policy drug monetary fiscal policy drug on the gilt market as you are getting this major shift from huge qe to qt at the same time the deficit has done expansion over the latest data. the balance between what the bank of england balance sheet is doing at the deficit is doing as well correlated with yields and explains a lot of the increase that we've had. the good news there is that that swing from qe to qt has already passed on is already in the throes. anna: vivid to get your thoughts on china. i know that is when you follow very closely. evidence by weaker stocks and we

currency in china disappointments around the lack of detail or fiscal stimulus. accelerating of a chukar, charging facilities i'm sure the market was waiting for more what do we look for next on china and the extent to which they are willing to stimulate fiscally? >> the policy so far this year has been very much to sort of rely on the release of aunt up demand which we've always said was going to be disappointing because the chinese household does not have the accumulation of savings that the rest of the world, that developed market stood. they had this great loss of wealth. they haven't actually had this firepower behind them. it would be a behavioral thing. that happens quickly. we can talk about stimulus and whether it's going to come through. they are very constrained in that. if they had wanted to have a stronger h2 they needed to be

doing more stimulus last year because that's the amount of time it takes to feedthrough. instead what we saw was the pboc started to loosen around the end of last year. we have now seen the actual rate cut coming through but that's not really showing up in parts of the economy that you need to get more comfortable about seeing faster real gdp growth. we are not saying a turnaround in one growth and on top of that as you sing the scope kind of stimulus that is coming through very much the most important part of fiscal stimulus in china is with happening with the infrastructure laws and that's been frontloaded this year more so than ever before. that leaves very little for the rest of the year. everything else is coming through looks a lot like tinkering around the edges. anna: we do have anthony blinken, u.s. secretary of state in china right now we are waiting for a press conference from him we will try to bring

that to you do you take positive sides of the almost warmongering between the two progress being made the chinese message this morning >> it's comforting to hear those words i think the bigger picture is it's hard to turn this ship around once it's sailed. the reality situation is we have a slowdown, instructional slowdown in china and historically when that kind of -- when you see that kind of a trend when you see that kind of a turning point being bridged, the action is brought. where can we place the blame for that? they would have to be bucking the historical trend if were going to see them kind of reaching out and being more constructive on a longer-term basis. that's a large part where we do see higher inflation on a

secular basis because of this deconstruction of the supply chain. that's not out right deglobalization but it is decoupling between china and the u.s. and euro area and developed markets. that reintroduces friction into the global economy. you get part of the reason why we are saying there is fester inflation. anna: one of the questions is how extreme does that become? how significant is that become? you say it's not full deglobalization but it is some kind of decoupling. how substantial? >> i think even without the political layering on top the geopolitical deterioration on top you've already got the fact that the people of undervalued chinese labor, the end of the global economy in 2001 has become less and less competitive. you're never again going to see

such a large pool of undervalued labor coming into the global economy just because there isn't this go for that to happen again. i think this was a huge determinant in the secular stagnation that we've had over the 2010s. even without the decoupling and the deglobalization there is no kind of drag anymore from hyper globalization on wage growth in the rest of the world. on top of that you got decoupling. anna: thank you so much for your time. there is no other china you can move to. there are other countries with lower labor costs. thank you so much. joining us the ceo of carter airways. this is bloomberg. ♪

anna: welcome back to a special edition of bloomberg markets. special programming coming london. the large aviation showcase returns. playmakers are uniting at the paris air show. guy johnson is at the event and he spoke with the ceo of carter airways. >> we already have a large amount of orders placed with boeing and airbus. we are just waiting for the supply chain to ramp up. in order for us -- i know everybody is really excited. you can always get the orders and supply them. that is the big question. >> how many are you expecting to get on time? >> none.

all deliveries are delayed. i don't blame the manufacturers. it's the supply chain that was really decimated during covid. people didn't realize. the governments didn't realize they should compensate the industry to keep everybody on the jobs. for when there is a turnaround. nobody paid attention, except qatar airways. that is why we were the highest growth airline during 2021 and 2022. >> as you say, you bounced back, the industry is bouncing back as well. >> we are back to 2019 levels. >> is the kind of growth sustainable? >> yes. for the foreseeable future yes area >> which is the foreseeable future me? >> for a few years because of the shortage of capacity there are no airplanes available.

the manufacturers are struggling to deliver the aircraft. and once they are they are on the ground because of engine problems. they cannot live up to the supply requirement of the manufacturers. >> the industry's strength and therefore are you not worried about if you don't get -- you won't be able to get the aircraft you want in the future? >> that's my biggest problem it's going to block the expansion plans. each year until the end of this year. >> now would be a good time to place the orders? >> first of all i don't need to place orders because already have substantial orders. the problem is that even if you order today, you are not going to see those airplanes for the next five years. >> how long is it going to take to slow?

>> the economic conference, the supply chain will not come to the 2019 level for at least the next couple of years or even more. >> is the industry going to be supply constrained during that period? does that mean the fares are going to remain high for the foreseeable future? ask it's all supply and demand. there is less supply and double demands. you're going to have to ask the price you need because people want to travel. >> so fears are going to stay high? >> i think there's are going to stay high. we are not being pushed to get -- which again is exorbitantly expensive. all this is a factor that is increasing the cost of the value that you have to pay to travel. >> is going to be inflationary,

you think? >> you are paying four times the price to have stuff. what do you expect? >> and do you think the 2050 targets are looking achievable at this moment? >> no, i don't think so. please explain to me one manufacturer undertaking that they will be able to fill the demand of 2050. let's not fool ourselves. first, let us see from the. show, exxon mobil, total energies, all these people. ask them what is the volume and they will never give you an answer. >> you're going to see some competition. expecting to place a new big order for -- how much competition are they going to be providing for you? are you worried about that kind

of competition? >> i love competition. >> ok. how strenuous do you think the competition will be? >> it will be tough but it will be the survival of the fittest. >> and why do you think that qatar will be the fittest? >> i didn't say i would be the fittest. anna: that was bloomberg's guy johnson talking about growth, sustainable aviation fuel. the film a home of aviation air-conditioning in the background. there will be more on their on the aviation site. the gold rush spreads across silicon valley. one of the companies that sparked the boom is openai, chatgpt. sitting down with the chief

technology officer. >> we did not set out to dominate search. what we offer is a different way to understand information. you can be searching but researching and a much more intuitive way versus keywords. i think the whole world is sort of moving in this direction. >> the era of confidence sometimes delivers in answer with not sometimes just saying i don't know? >> the goal is not to predict the next word reliably. when you have such general it's difficult to handle some of the limitations. such as what is correct. >> some of these texts and data is biased. some of it may be incorrect. isn't this going to accelerate

the misinformation problem? we haven't been able to crack it on social media for a couple of decades. >> it's a complex problem. one of the things i'm most worried about is the ability to make up things. we refer to this as hallucinations. they will convincingly make up things. and it requires being aware and just really knowing that you cannot fully blindly rely on what the technology is providing. >> i want to talk about this term he loosen nation because it's such a human term. why use such a human term for ai making mistakes? >> the capabilities are quite humanlike. sometimes when we don't know the answer to things we will just make up an answer. we will clearly say i don't know.

-- we will rarely say i don't know. sometimes we don't do it on purpose. >> should we be worried about ai that feels more and more human? should ai have to identify itself is artificial when interacting with this? >> it's important to distinguish output that's been provided by machine versus another human. but we are moving towards a world where we are collaborating with these machines more and more. output will be hybrid. anna: emily chang speaking with the openai ceo. reflections there on the use of very human language to talk about what is artificial intelligence. let's get to the markets. european stocks, this is bloomberg markets special edition coming from london. we are without the u.s. and in that context we are done by 7/10

of 1%. losses on the way one sector doing pretty well is the banking sector. rates go higher. we have seen that as part of the narrative today. might there be something in it for the banks at least in the short term? down by seven tents of 1%, the big macro story of the morning handed to us. a bit of disappointment about a lack of concrete fiscal measures being announced ahead of the weekend and over the weekend. and to support the chinese economy, there has been expectations building. we saw some of the stocks sold off in china onshore and over in hong kong. monitoring the u.k. rates during the highest level since 2008. you want to see that just moments ago. about 5% for the first time since -- will levels we haven't

seen since 2008. coming up in the next hour of bloomberg markets, investment director of aberdeen investments to discuss from china to the u.k. to what to expect from the fed. this is bloomberg. ♪ e who teach us and rescue us, the people on our team and in our family. it can happen to the people who serve us and the people who served. the people we work late with and stay out late with. it can even happen to the person in the mirror. opioid use disorder is a disease that can happen to any of us. it's possible recovery can happen to any of us, too. my name is shannon knight, and i own little knights daycare. carolina sports incorporated. a paradise for parents. lomita feed, current caretaker and owner. we did not know anything about the employee retention credit.

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>> this is bloomberg markets, here's what you need to know. antony blinken is meeting with chinese president xi jinping in beijing to continue the silent

tensions between the two countries maybe using. plus, a tough week ahead for the u.k. it vote on boris johnson and a rate hike once again on thursday. plus, credit suisse may be due for a massive downsizing of investment banking business after it is taken over by ups. because we are without the u.s. equity markets and bond markets, u.s. secretary of state antony blinken is speaking after his meeting with the chinese president over in beijing. let's just dip into this press conference. >> -- the challenges posed by the p.r.c.. the united states will advance a vision for the future that we share with so many others -- a free, open, stable and prosperous world. upholding the order that it has for years safeguarded peace and security globally.

to shape that future, we start with diplomacy including with china. i came to beijing to strengthen high-level communication, to make clear our positions and intentions in areas of disagreement and areas where we might work together. where interests align, and we did all of that. here in beijing, i had an important conversation with president xi jinping and i had constructive discussions with mike counterparts. i appreciate the hospitality extended by our hosts. in every meeting, i stressed that direct engagement and sustain communication at senior levels is the best way to responsibly manage our differences and ensure the competition does not veer into conflict.

during those meetings, we had a robust conversation about regional and global challenges. that includes russia's war of against -- aggression against ukraine. i reiterated that we would welcome china planning a constructive role along with other nations to work toward a just peace based on the principles of the united this -- nations charter. all members of the international community have an interest in encouraging the dprk to act responsibly, to stop launching missiles, to start engaging on its nuclear program. china is in a unique position to press pyongyang to engage in dialogue and to end its dangerous behavior. i raise concerns shared by a growing number of countries about the p.r.c.'s provocative actions in the taiwan strait as well as in the south and east china sea. on taiwan, i reiterated the

long-standing policy that has not changed. we do not support taiwan independence, we remain opposed to any unilateral changes to the status quo by either side. we continue to expect the peaceful resolution of differences. we remain committed to meeting their responsibilities under the taiwan relations act, including making sure that taiwan had the ability to defend themselves we also spoke about a range of bilateral issues included -- including continuing -- to guide a relationship. these on our respective economic policies including our concerns about china's unfair treatment. i heard about the problems

including recent punitive actions against american firms. i also heard that u.s. companies want to continue, and indeed, grow their businesses here. in my meetings i sought to clarify any misunderstandings or misperceptions about our approach. there is a profound difference for the united states and for many other countries between de-risking and decoupling. our countries traded more over the last year, more than ever over the last year. the secretary ellen testified before congress last week it would be, as she put it, disastrous for us to decouple. that means investing in our own capacities and in secure, resilient supply chains, pushing

for level playing field, and protecting your critical technologies so that they are used against us. i made clear that we will continue to take targeted actions necessary to protect u.s. national security. i also discussed human rights. the united states and the international community remain deeply concerned about p.r.c. human rights violations including in tibet and hong kong. i also specifically raised wrongfully detained u.s. citizens and those facing exit bans. there is no higher priority for me than the safety and well-being of u.s. citizens overseas and i will continue to work intensively to secure their release and safe return home. as we were to address our differences, the united states is prepared to cooperate with china and areas where we have mutual interest including climate, macro economic stability, public health, food

security. on food security, we believe china can play a key role in alleviating global food insecurity. i underscore the importance of supporting a long-term expansion of the black sea grain initiative with approximately 18 million tons going to developing countries. long-term expansion is critical for avoiding food shortages in some of the poorest, most food-insecure countries in the world as well as price surges. i raised as a priority the issue of synthetic opioids and fentanyl. a crisis in the united states. fentanyl is the number one killer of americans aged 18 to 49. i made clear that we need much greater cooperation to address this critical issue. we agreed to explore setting up a working group or joint effort so that we can shut off the flow of recursive chemicals which

helped fuel this crisis and a growing number of deaths. finally, people to people exchanges between students, scholars and business scholars the benefits are citizens, economies and relationship. and we committed to work to increase direct flights between our countries. to continue dialogue on these and other important issues, i would advise -- visits over the coming weeks. and we welcome further business by chinese officials -- visits by chinese officials to the united states. to that end, i invited him to visit washington and he agreed to come at a mutually suitable time. a little later this evening, i leave for london to attend the ukraine recovery conference and

i will also have an opportunity to brief allies and partners on this visit and to continue to strengthen our alignment. we have no illusions about the challenges of managing this relationship. there are many issues on which we profoundly, even vehemently disagree. we will always take the best course of action to advance the interests the american people. but the united states has a long history of successfully managing complicated, consequential relationships through diplomacy. it's the responsibility of both countries to find the best way forward and in both our interest and the interest of the world. >> the first question goes to ian marlowe with bloomberg. anna: that was antony blinken at the press conference taking place in beijing after his meetings with senior chinese

diplomats and indeed, the chinese president. we will leave that press conference there. interestingly, started out assessing how they are clear eyed about the challenges and the relationship and they had stood -- substantive conversations but they have both come to the agreement that they need to stabilize their relationship. i suppose at its core, that is a positive message. > it is interesting in talking about the need for neutralization, but also laying out some clear markets where the u.s. side deauville -- does feel that china has stepped out of bounds on a number of things including supply of opioids into the u.s. for example, the question of taiwan saying these are issues, but at the same time, same we need to have mutual engagement on a broader array of stuff. it is really a balancing act that the u.s. is going through china, and china in turn, making

the overarching relationship. you got a bunch of serious problems you're dealing with. anna: he referenced the u.s. having a history of dealing with these complicated relationships. provocative actions by china into the taiwan strait. they don't support the independence movement, they want the status quo. >> that's probably agreement. the understanding was that he was going to publicly restate the u.s. stance on. there's been a bit of questioning about it. clearly, we respect the current position. we don't want to upset the apple

cart on any of that. we certainly don't want any kind of move toward a conflict over taiwan. sort of reassuring china on that front. but equally in the longer term there are still tensions. anna: interesting that he talked about trade, and making the point on the bloomberg, the value of trade between nations. he talked about how the two countries actually traded more than ever with each other last year. these numbers tend to grow, but it is worth making that point that despite all of the talking, decoupling or de-risking, deglobalization, all of these phrases that we had to explore and examine, but at the end of the day, these two massive economies are still trading more with each other than they had in the past. > and that's why the hell of the chinese economy is so important in the u.s. we are seeing china start to step of stimulus to protect its

economy and of course, the effect is enormous because if china goes down, so does the rest of the world. it is in our interest to have that economic relationship on the even keel. all this talk about reassuring industrialization with the u.s., bringing businesses back to the u.s., europe bringing them back to invest in europe. in the end, the relationship is still so interconnected and interdependent. the idea of derailing the supply chains is very complex and not something you can do overnight. anna: he makes the point you are making in the q&a session that just follow that press conference. china's broad economic success is also in america's interest to underscore their relationship between the two. he did say toward the end of the press conference he expects additional senior visits with u.s. officials. so perhaps suggesting that we might see a meeting of xi and biden that has been talked about

for a long time. >> that certainly seems to be the hope on both sides. the chinese foreign minister may not go to the u.s. for a visit, so we get that level of meeting going on, but the idea is to pave the way for the u.s. president and chinese president to sit down in person and not just have a meet and greet, but a proper sit down meeting that goes for several hours and really talk through some of these issues that happened. perhaps in india, the g20 might happen. in the u.s., it would be interesting if xi jinping was going to the white house to have a public visit. that would be quite telling. we are looking for signs that we can move toward that kind of meeting. >> worth mentioning there is an important visit of senior chinese officials to europe. thank you very much for joining us with analysis of antony blinken's visit to china. coming up, james athey joins us. we will get back to the markets shortly. this is bloomberg.

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anna: welcome to bloomberg markets, a special edition of the program. u.s. public holiday today, so no bond or equity trading. let's get the investor perspective this monday. a james athey joins us. there are nice to have you with us. i want to talk to you about bond markets and the things that are your bread-and-butter, but i suppose it is interesting to think about what we've seen in the rates market, how that sits with enthusiasm for stocks which has seen a five-week run higher on>' >> i'm very much scratching my head. we can always make somewhat convincing arguments to rationalize these moves, but on the face of it, you look at 2022 and really kryptonite for the

market was expectations around tighter policies and higher yields, particularly flashy yield curves. the last eight weeks or so, we've seen a really, really unusual-looking macro dynamics battening not just in the treasury curve, but across the world. we'd seen the dollar subtract betwixt and between, but we've seen risk markets really shrugging off just about anything being thrown at them. it's all going to make parabolic as it does increasingly look if it technical and probably a bit unsustainable. anna: a bit unsustainable. and what breaks then, james? do we see stocks dropped or do we see the rates sort of frenzy that we are seeing with higher yields? what are you expecting to see change? >> that's a good question, and it becomes quite difficult to answer in a credible fashion.

i definitely think that what we know is that rates have a direct impact on the economy. that is why central banks are impacting the way that they are. they are trying to slow the economy. and so higher rates will do that, whereas higher equity prices are a tailwind to the economy. markets at the moment are to some degree fighting each other in a way that the u.k. government and the bank of england have seemingly been fighting each other. i expect that the recession is the answer to all of these questions and therefore currently i look very wrong because we are absolutely not in recession and anything, certainly labor market data has been surprisingly on the upside. but i do think that we are seeing just the sort of last legs of policy that we know exists and is probably long gone from what we like to admit. they will win out in the end and we will see economic data coming

off more significantly. anna: so economic data comes off more significantly, we do end up in a recession. where seems most likely to feel that most? recession expectations have sort of ebbed and flowed all over western markets. >> you're absolutely right, that has been one of the most pronounced features of the market, it has been quietly reverting the stories that have ebbed and flowed along what has been very volatile data. you go back to the back end of last year, europe and the u.k. stood out as the most pessimistic regions because of the cost of living, the energy shock and what that was going to do both the consumers and to businesses. we saw natural gas prices moderating, the narrative flipped and suddenly europe and the k could cross because they weren't having any headwinds. ultimately i think we are all headed to a recession but i think the anglo-saxon economies,

those with housing markets which have done particularly well, floating rate mortgage markets and the feedthrough from monetary tightening into the consumer's pocket is a bit more direct, a bit more severe. and of course, westerns tend to be more heavily reliant. anna: where does that leave the u.k., the situation you described? it is open, of course, to some variable rates in the mortgage market that the people have fixed, and it is those fixes that delayed the impact of the higher rates we've seen already. to come through and be felt in the months and year ahead? >> it is like a delayed fuse on the bomb going off. we know that the housing market has flipped 33%, so you got 33% who are owners, 33% with a

mortgage and 33% are renters. it's short mortgages which of them taken it in the last few years. the bank of england talked about this, last we heard. he thought that only around one third of monetary tightening to that point was actually active in the economy and it seems likely that the bank has been dragged back to the table to possibly even accelerate their tightening again. how quickly and exactly it plays out in terms of the economic data is always difficult to say, but i do expect us to be on a downward path through the summer and into the ottoman terms of the economic data.

anna: what will the political pressure on the bank of england at up to, do you think? >> you see the testimony in front of the tsc and whether it is questions coming from the right of the left, lou or read, everybody is can read about what these hikes and interest rates are doing. we know that they are going to be having a particularly nasty effect on those on the lower end of the income spectrum. we also know that unfortunately, not just in the u.k., but everywhere. that's what we have inflation targeting central banks, spending hours about how we are going to find ourselves here. what the government needs to do is hold the line. we've seen headlines talking

about price controls and about mortgage relief. if you learn any lessons in the 70's, what we need to do unfortunately is take the medicine. i don't expect them to become as aggressive as the markets are currently pricing, but they do need to continue to tighten monetary policy. anna: thanks so much for your time, we appreciate it. the world's largest aviation showcase has returned. playmakers are gathering at the paris air show to announce new deals and innovations in the post and i make world. but despite the return of global travel, one airport is on a quest to ban private jets. guy johnson reports. >> luxury destinations for

amsterdam. perhaps though, not for long. plans to ban private jets from its runaways by 2026, setting a huge precedent for other travel hubs and generating plenty of controversy. as many as 17,000 private jets crossed the runways last year, and the airport argued they are noisier and generate 20 times more carbon emissions per passenger and commercial flights. the plan was announced a few months after climate activists stormed the tarmac to block private jets and comes on top of the dutch government's proposal to cap the total number of flights to and from the airport. >> perspective for the airlines, and for skip all itself. >> the unexpected ban will hit business travel hardest. >> private aviation is a

business tool, especially for amsterdam with the top three destinations are london, switzerland and france. so they are not really beach destinations and holiday destinations. >> for now, the fate of amsterdam private jets remains unclear. the question now is the move accelerate the development of more sustainable alternatives? anna: that was guy johnson reporting. for more on the paris air show, subscribed to the official bloomberg paris newsletter. a quick word on what we heard from antony blinken, he was talking over in beijing. he says the u.s. is clear eyed about the challenges posed by china and it underline and reiterate the u.s. can into the one china policy. he also said that he is concerned about china may be providing russia with new technology. plenty more coming through from that press conference. we will talk about the macro economy next. this is bloomberg.

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exclusively to pete buttigieg, the u.s. secretary of transportation. >> as we seek to de-risk and diversified our economic relationships, we do want to make sure that these capabilities are not concentrated with any one country. certainly, with a country that may demonstrate a willingness to use these in ways that are not connected to what is the best going forward, either commercially or in terms of that rules-based international order. we want to make sure that at least one we can agree on matters from climate change to public health, that we are operating on a basis that can be understood to be for the benefit of all. those are the kinds of things we are focused on here. >> you talk about de-risking. are there any other sectors that need de-risking, even the drug sector in china? the world's reliant on basic drugs when it comes to china. >> i want to make sure not to wander too far outside of my own

portfolio. i know that these are active conversations both by and multilaterally. what i can say with regard to supply chains is that we have seen how if there is not enough diversification, you see extraordinary levels of geopolitical risk or even just logistical risk in the u.s. because of the extreme variation and the closures and the openings in asia and china specifically. there is a great deal in terms of goods. i think that is one example of the kind of wake of calls that the u.s. and the global community in general and the experiencing, especially in the last two or three years. dark out since we are talking about supply chains, we had u.s., japan, korea, taiwan investing heavily in their own respective semiconductor sectors. could that lead to overcapacity?

>> right now, overcapacity seems to be the least of our problems when he comes to the race for semiconductors. what we know that semiconductors are going to be even more important in the future. so rather than allow ourselves to again be in a situation where we are coming up short, we are making sure that both in terms of our relationships with friends and trading partners and in terms of our gymnastic capacity -- which by the way, is also benefited from a foreign direct investment while strengthening at and relationships, it is something that makes sense and can help us to cushion some of the geopolitical risk. anna: that was pete buttigieg speaking about -- at that g7 event. in beijing we just heard from antony blinken, giving a press conference following his really high-level meeting over in

china. he met with chinese officials and president xi himself which is being seen as a sort of comforting signed in terms of the dynamic between the two countries. some of those lines coming through toward the end of the press conference, he reiterated once again that the u.s. is committed to one china policy. he also went on to say progress with china is hard, it takes time. china and the u.s. to positive steps during this beijing trip. let's get a markets perspective on always heard here. very nice to speak to you this monday morning. we have these comforting news lines, i suppose, from the u.s. administration and from china as well. progress being made on the relation the so that is all fine. what about the chinese economic story, fundamentally? some disappointment that we didn't see further support announced over the weekend.

>> obviously, we have seen disappointing data and what is interesting, as one of the reasons why we don't think we are going to see a very forceful, big stimulus, is that the recovery is uneven. you actually have some strength in the services sector as we continue seeing that post-covid rebound in consumer confidence in some sectors and in some places. so when the authorities look at the data and they look at the official data that they see every month, they are probably not so worried because there are patches of strength and patches of weakness. that's why we think the stimulus is likely to continue being more targeted rather than very broad. anna: so we already saw the monetary policy response, the near term lending rate and medium-term lending facility. we saw great cuts on both of those horizons.

so what is next, what kind of stimulus are we watching her? more on the monetary side, or will there be targeting fiscal measures? >> for fiscal side, i think we need to wait for that meeting later in july because these other meetings after which we tend to have the policy shifts. it is unlikely be will see something before that. after that, the focus is on consumer and on the property market. the property market stimulus, if it is more broad, that is going to be a game changer. anna: what happens has a big impact on european markets. you just have to see the response of luxury goods stocks to understand that dynamic. so let me take that conversation and move toward europe. we are hearing from the chief economist of the ecb, giving a speech over in madrid. he is saying september is so far away, let's see in september.

this of course in reference to whether we get a second rate hike. it seems july is very much the expectation. let's not prejudge. what do you expect to see, how much more hiking can the ecb do now that the fed is seemingly on course? >> it is clear that the ecb is data-dependent, and are watching where they are going, and it is likely that we will see the hike in july, as you said. and september will depend. but i think it is clear that they are close to the end of the cycle. it is clear in the case of the fed or in the case of the doe, because it seems like the inflation is less changed, even though they are becoming a bit worried about wages, about negotiated wages. but it seemed that we are close to the peak. perhaps risk upside to the

terminal rate from here, but we think it is probably the base case. anna: clearly the debate is whether we get more hikes in the very short term. i wonder what it is that the fed would need to see to enable them to take a real dovish pivot to cut rates. what kind of weakness would justify that? even though you make progress on inflation and progress on loosing the labor market, inflation is still way above target and labor markets are still tight. >> is important to understand the progress of inflation towards target is going to be nonlinear. it's one thing to get from six to 54, but that is completely a different let down when you try to get inflation from four to two. it is going to be harder, going

to be stickier. as you look ahead, the fed needs to see the labor market turning. not just increasing by 20%, 30, but 1500 basis and up, and inflation starting to fall toward target more forcefully, more reliably. anna: so the rates stay at this level for a long time. two years, or not quite that long? >> first of all, we think that we look into the terminal rate. it depends on where the data goes. and then obviously, how the economy reacts. a resilient party due to those huge implications, those

tailwinds are still there, but they are fading. we will start seeing economic weakness. it depends when and how quick it manifests itself. but for the time being, it is not on the horizon. anna: the rates conversation clearly of interest over in the u.s. two year yields have risen for the first time in 2008 ahead of a week of asian data and the bank of england rate decision. i'm joined on-site year in london to go through the analysis. what are we expecting with the inflation print? what is the expectation? >> on thursday we are expecting the 13th street rate rise from the bank of england after that inflation on wednesday. traders are actually seeing a 6% peak rate for the bank of england. we had the governor speaking over the weekend who says he

would not rule that out even if it isn't his base case. as you say, -- has risen to the highest level since 2008. lavrov, invesco, asset management saying that this is the moment by because you might not see yields at this moment for much longer. you've got the risk of high rate creating a recession in the u.k. they are saying the moment is now but if we get another upside inflation to rise on wednesday, -- says he doesn't have the conviction to make a call about that now. anna: we will be maybe ragging on that inflation print. we've heard a lot of creative talk from the u.k. government about things they might want to do at the margin to try to either reduce pressure on shopping bills or on mortgage payments.

economists might question whether those things would be wise to do, flying in the opposite direction of monetary policy right now. what kind of pressure is rishi sunak under? >> -- plus the levels that we saw in the aftermath of the budget. resolution foundation think tank, bills are going to go up 3000 pounds per year because of the mortgage cost if you have a mortgage. but of course, it is his number one priority to halve inflation by year-end. he's also got a target of growing the economy this year, one of his top five priorities. we may not make another one of his priorities, either. there are creative solutions being floated around, because

her support with mortgages to avoid repossessions. the treasury has said that that would be at odds completely with the bank of england is doing, not a position the treasury wants to be in. anna: and as tempting as it might be if you put any policies in place that go against monetary policy that reduces the price signals in the market, and there we go. there is another politics story brewing here in the u.k. all around boris johnson. the longtail of boris johnson's leadership lives on because u.k. lawmakers are debating his legacy today. >> there has been this report by lawmakers, boris johnson's involvement, but also whether or not he misled parliament over then. that vote is now expected in 4:30 p.m. this afternoon. it is going to be a free vote but it could be hugely embarrassing for richie sunak. what we are expecting is that

many conservative mps actually abstained because what richie sunak doesn't the divisions within his be exposed we know that boris johnson has already stepped down. the question now is whether he can maintain access to the westminster parliamentary estate. it's called office attack dogs so it looks like it is not going to be as errors he an might have been for richie sunak. anna: thanks very much. indeed, the political narrative as it continues to rumble on. boris johnson still a feature of that, it would seem. coming up, credit suisse may be due for a massive downsizing after its takeover by ubs. writing about this in a newspaper of the weekend, what does that add up to? what kind of massive downsizing of the se -- expecting to see? more on that next. this is bloomberg.

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anna: welcome to a special edition of bloomberg markets. let's get over to one of our corporate story that we are exploring today. a hint at big cuts at the former credit suisse workforce in investment banking. let's get to bloomberg miriam for more details. miriam, take us through what we know about plans around that. miriam: in terms of numbers, we can expect big cuts at the investment bank. they've been very clear about downsizing credit suisse's investment bank. he was even talking about putting employees through a culture filter, because there's been legacy -- at the credit suisse's businesses and ubs is keen on not taking on board

some of these hetero issues. nesbitt -- now there is a question around the job cuts. we've already seen about 10% of credit suisse's employees that have left, so that is a number that we expect to see increasing. but they have been very clear that ubs's decision to just shrink the investment bank quite quickly. anna: what other concerns around culture -- what are the concerns around the risk-taking appetite we saw at credit suisse and not letting that perhaps embed in a new workforce at the combined group? how is that being talked about where you are? myriam: this is actually the main kind of task at hand, and that is the reason why it has been taking a while and it is going to take it is going to take a while going forward. credit suisse has had 45,000

employees, so we are going to see that number shrink. there has been a lot of issues at credit suisse's investment bank, although it has performed relatively well in terms of deals and so on. we see issues related to investment banks, so ubs is taking a very cautious approach to ensure that some of these more reckless habits don't transpire with the new group. anna: it's going to be a very long-term process, this integration. are we talking years to put together these two businesses? what is the scale of this? myriam: it will, absolutely. it is a massive task at hand. we've seen a bit of the reshuffle at the executive level earlier this month, so that is

kind of the first big step to establish who is going to be at the helm, who is going to be responsible for what part. we've got business executives fully dedicated to this big integration. we are talking three or four years at best. so we will see. time will tell whether that is a process that can be sped up or not. anna: thanks for bringing us the story. myriam from switzerland with the latest on pulling together ubs and credit suisse. the world's largest aviation showcase has returned. -- has been speaking to guy johnson from on board qatar airways plane at the paris air show. >> we already have a large amount of orders already placed with boeing and airbus in the past and we are just waiting for their supply chain to ramp up. i know that that is very exciting.

both manufacturers want huge orders, but you can always get the orders. when we can supply them is the big question. guy: how many planes that you are currently expecting will get here on time? >> none. all of the orders are delayed. i don't blame the two manufacturers, it is the supply chain really decimated during covid. people didn't realize. and the governments didn't realize that they should compensate the industry to keep everybody on jobs for when there is a turnaround. and nobody paid attention except qatar airways the this is why we were the highest growth airline during the 2020, 2020 1-22. guy: as you say, you bounced back. the industry is bouncing back as

well. is this sustainable? >> yes. for the foreseeable future, yes. guy: what does the for future mean? >> a few years. there is a shortage of capacity. there's no airplanes available. both manufacturers are struggling to deliver aircrafts because they have engine problems and the engine manufacturers cannot live up to the supply requirement. guy: but as you say, the industry capacity is constrained at the moment. are you worried you won't be able to get the aircraft that you want in the future? >> this might be a problem and this is going to block the expansion plans before 29 teen -- 2019. each year we are prompting the end of the second. guy: you don't think now would be a good time to place those orders? >> first of all, i don't need to place orders because i already

have substantial orders. the problem is that even if you order today, you're not going to see those airplanes for the next five years. guy: how long do you think this is going to take to sort out? >> i agree during your economic conference in doha, we mentioned the supply chain will not come to the 2019 level for at least the next couple of years, or even more. guy: so is the industry going to be supply-constrained? does that mean that fares are going to remain-the foreseeable future? >> it's also pliant demand. there is less supply and double demand. people want to travel. guy: so high fares are going to stay high? >> i think they are going to stay high. also keep in mind that oil prices are high. we are now being pushed to get

-- in place which is exorbitantly expensive and unavailable. all of this is a factor that is increasing the cost of the value that you have to pay to travel. guy: the move is going to be inflationary, you think? >> absolutely. you are paying four times the price to have, what do you expect? guy: do you think of the 2050 target are looking achievable at this point? >> knows, i don't think so. please explain to me one staff manufacturer undertaking that they will be able to fill in the demand of 2050. i don't think so. let us not full ourselves. -- fool ourselves. first, let us see from exxon mobil, total energies, all these people. ask them, what do they produce, and they will never give you an

answer. guy: you're going to see significant competition in the gulf. -- expected to place a new, big order. we now have riyadh air. how much competition are they going to be providing for you? are you worried about that type of competition? >> i love competition. guy: how strenuous do you think the competition is going to be? >> it will be tough, but at the end of the day, it will be survival of the fittest. guy: and why do you think that qatar is going to be the fittest? >> i didn't say i would be the fittest, but i love competition, so let's say. -- let's see. anna: speaking to guy johnson from aboard a plane at the air show, talking about a host of subjects. sustainable aviation, that is certainly one of the things they were discussing. let's take a look at some of the

events happening in the week ahead. today, u.s. markets are closed, so no trading stateside. on wednesday, we will get the latest inflation print out of the u.k., really interesting to watch because it comes just before a central bank meeting. plus, a busy day on capitol hill on wednesday with fed nomination hearings taking place. finally on thursday, we get that bank of england rate decision. will it come down substantially enough from 8.7% to allow the market to work out or get rid of some of those expectations? the market currently pricing in five hikes from the bank of england. interesting in that context to tell you that we just got update from one of the bellwether companies in the u.k., and they say the trading over the last seven weeks has been materially better than has been expected. that's an interesting read on the u.k. consumer as we head into a busy week of data on the u.k. as they say, inflation data at

the next share price. 3% over the last two days. up today on the back of that news flow. we will get back to the macro shortly. central banks fighting inflation. that continues this week. this is 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? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers? that thing! billy, rock star is just how doug feels when he uses workday.

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anna: this is bloomberg markets. a tough week ahead for u.k. prime minister rishi sunak as a parliamentary vote on his predecessor orest johnson today and likely a bank of england rate hike thursday. intel will receive $11 billion in subsidies to build a chip factory in east germany this is after they announced a $25 billion plant in israel. the world's largest air show returns to paris after a four year hiatus. we will hear from some of the ceos of the world largest airlines. welcome back to the program. this is a special edition of bloomberg markets. there is no trading in stocks or bonds in the united states because of the holiday. we are down by 0.7% on european stocks. banks stand out to the upside,

benefiting with rates going higher and the u.k. narrative this morning's been about short in interest rates with two-year yields at levels we have not seen since 2008. u.k. two year yield is up. some clear disappointments on the close of the session in asia. what will we hear from the chinese government? will we hear more stimulation? let's get analysis now. let me ask you about the china story. it has created some disappointment in markets around fiscal stimulus.

what are we expecting to hear? >> it really is all about specifics and all of the details in which the chinese government could potentially rejuvenate the chinese economy. it has been flagging ever since it emerged from that covid zero era. it has been a disappointment and china was the big positive story this year but we have not seen it happen yet. they are using rates as a tool to stimulate the economy but it hasn't worked. investors in particular are looking for the chinese government to be more specific and more detailed in terms of the stimulus they can provide. perhaps they will use a broader set of measures. anna: we are waiting on that so that will be continued. we heard about the monetary policy response.

that is china so let's talk about the u.s. stocks with the s&p in the nasdaq with five weeks of gains for the market. is this something we think continues. are we hearing investors say they will jump on this? do we still here voices saying this is not for real? >> i think we have had a lot of naysayers saying it's too good to be true. the rally steals -- still keeps going anyway. one of the criticisms of the current equity rally in the u.s. is that it's too narrow, it's not broad-based enough and it's not sustainable. that could well be true but it's not stopping the rally necessarily from continuing. what we have seen is a more encouraging mix in terms of the economic data in the u.s. and how that plays into the fed's calculus. the pause in june helps to shore

up some of that sentiment in the equity markets. at the same time, we have seen a slow down and some of the u.s. data, particularly when it comes to the balance between the strength of the labor market and the cost of labor, that's been more of a goldilocks situation. we've seen the cost of labor being in check while the labor market itself still remains very resilient. that is combined with a pause from the fed at least for june. it's quite a benign environment for stocks here. anna: so far, so good can a tight labor market in the u.k. could be a headache for the bank of england. we have resilient inflation here. inflation is not coming down as fast as some other markets, eight 17% is where we -- 8.7% is where we are. >> as you mentioned, 5% to year

yield, we have not seen that in 15 years, 6% on mortgage rates in the market. it feels like both investors and consumers are bracing for more pain from the bank of england when it comes to rate hikes. that's the expectation ever since last week when we got the employment data that showed wage growth bigger than expected. the inflation report this week continues to surprise to the upside even if there is a big chance it will mechanically come down but of it doesn't, it won't come down enough and that's what we will be watching. it could stake more elevated than anyone is expecting that will be the headache for the bankers. anna: we will keep an eye on the u.k. assets as a result. thanks for joining us. joining us now on this special edition of bloomberg meeting -- bloomberg markets is our next

guest. we were talking about the u.k.. we had inflation in the u.k. running at eight point 7% last time and it's expected to drop down to 8.4% which is not a huge drop. what is the link between that inflation print and what we get from the bank of england in the months ahead? >> i think this inflation print will not be all that important because it's almost a done deal. almost certainly, they will go next time. we need to look not just at this inflation print to get an idea of whether the bank of england will deliver new rate hikes or will deliver a rate hike the market is now pricing in. this report on inflation, the core is the core measure. core inflation is still very

high. it would be easier to argue that the bank of england is going for right way. much of the rate hike impact is on a fine line so they say let's not overdo it. anna: we are focused on the long and variable lags. how much is that creating delays as far as the hiking thus far? from an economist perspective, what do we need to see in the labor market to provide looseness? is this something that's in the government purview? the tight labor market and the inflation story are clearly front and center. >> there is not that much the government can do. the u.k. would have needed more

scaled immigration that's easier to put in the u.k. it typically comes from europe but with brexit, it's not an opportunity. there is not all that much u.k. government can do. labor market can try to keep public-sector pay which is difficult. they want to send a signal to the overall labor market that wage inflation is too high but its limited for the government. fiscal policy will not turn expansionary but in the u.k., it might contract. it would help the bank of england controlling demand. anna: let me ask you about the ecb and where you stand on that conversation. we saw a rate hike expected in july.

you make the point in your notes the way the ecb is focused on the way story and the importance of that. what do you see in wages in the euro zone? what is the key takeaway there? >> unfortunately for the ecb, wage of near-term let's set let -- looks set to accelerate. it might go in germany to 7%. the ecb has to form an opinion whether this is a one time thing and they are trying to make up for the losses thanks to lower energy prices last year and this year or whether this is the start of a dangerous wage price spiral. christine lagarde at the ecb said correctly last thursday it is not a spiral. i expect this wage development to be a factor and we have germany were we already know inflation will be back to 4%.

it's less the current wage data put more willingness of the ecb to look through what likely would just be a temporary hike in wage inflation to the upside for it normalizes. anna: there is a buzzword going around markets, greedflation. it adds up to where businesses are allowed to maintain margins they just seem to have that kind of power. christine lagarde weighed into that politically, talking about this. does this have to do with the inflation we see in europe? >> no, i think it's the wrong word. with a lot of companies raising prices, other companies took

that is signal to raise prices well but they can only raise prices if there is demand. the central bank will start talking about responsibility for inflation for the central bank. this is the debate the european central bank can have instead of getting into that. anna: i wonder if they are listening. let me go stateside with our conversation. what is your expectation there? the pause narrative has been solidified but now we have these dots that suggest further hikes. do we get a couple of more hikes from the fed? >> if we get one more rather than two, the dot plots make

forecasting as a signal of intent. they want to do more to get inflation under control but if we continue to see maybe that u.s. wage inflation continues to recede to where it's tolerable, that means the fed does not need to do more than one more hike. anna: maybe only one more so how long do we stay at these elevated levels? >> i would say roughly to the end of the year. with an election approaching, the fed does not want to risk too much of a rise in unemployment. as the economy is decelerating, hopefully it will not lead to read -- hopefully it will not lead to recession. labor market will probably soft

and it makes good sense for the fed to not risk a serious rise in unemployment. with inflation coming down, i think by the end of the year, they will strictly new balance between unemployment and their inflation objective and start returning to a more neutral, normal fed funds rate which roughly speaking could be around 3.5%. anna: it's a complicated dynamic between election cycles and fed policy. thank you for joining us. coming up, the paris air show has returned. guy johnson has sat down with the avalon ceo and we will bring in more of that conversation coming to you shortly from paris. this is bloomberg. ♪

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anna: welcome to bloomberg markets. this is a u.s. public holidays and no trading in equities in the u.s. but european markets are trading at a lower level. the world's largest aviation show gets underway as people gather in paris. guy johnson is live from the event with the avalon ceo. thank you very much indeed. it is a busy show if the first time we are back in paris in four years. the last show wasn't 2019. since then, the industry has been through difficult times and it's now bouncing back with significant vigor. demand is off the charts right now and is that demand sustainable and is this a new model? it's a great environment to be a leasing company of which avalon is one of the largest. this is the company ceo and joints me now.

>> great to see you, thanks for having me. demand is superstrong so is it sustainable? >> absolutely, we published our own forecast about a week ago within that, we highlighted about 3300 aircraft that were not produced during covid. that accounts for about 15% of the global fleet. there is no recovery plan for that capacity over the medium term. but we have seen is demand spring back to pre-covid trends, demand has caught up with growth trends but supply will take a number of years to catch up with that demand. zz we are having this conversation with the actual air show was taking place. if you hear aircraft flying around the background, that's the reason why. in terms of what is driving that , demand is clearly there but there is also the issue of sustainability.

how much of the demand is being driven by a need to include more sustainable aircraft? >> the bulk of the demand growth is for the growth of the emerging middle class around asia. in terms of replacements, we see that broadly speaking, one in every two aircraft will be produced over the next 20 years and it will be for replacement of technology aircraft. at its core, the bigger areas of growth we have identified are india, asia, china and latin america. that's in line with economic activity. the bulk of deliveries will be going there. well passenger demand has bounced back strongly, the ability of the industry to satisfy that demand is not. guy: boeing is having problems, airbus is having problems, the engine manufacturers are having problems. you cannot get the overhead bins or seeds or landing gear. it goes on and on. why has this industry struggled

so much? >> i think there were general supply chain issues around the world from lots of things. if you wanted to order a new car, you had to wait longer over the last couple of years. it has gone a long way back to normality. the issue specific to aviation is that during covid, supply chains went to nearly zero. all of the subsupplier's are actually having trouble and they are waiting to have the demand resilient and allocating resources with the help of manufacturers to accelerate the deep down supply chain. guy: you say within the supply chain, there is the caution the demand is sustainable. they're not willing yet to commit to solving the problem? >> the smallest scale suppliers of struggled to have the best capacity in maintaining the

production capacity. it will have a rapid snapback for recovery. guy: you talk about the ability of financing. capital matters so what impact is it having? >> from her perspective, it's got minimal impact on the day to day business. all of our debt is long-term and the vast majority is hedged over the long-term. we see interest rates go up because there is a strong inflationary environment. that is good for demand for aircraft and inflation is good for asset owners. in terms of cost of capital, the cost of capital is going up or leasing companies like any other business. avalon's own ratings for fitch were put on positive last week. we believe they're easy access to capital but it's a different price point. with their business model where we provide capital to airlines and aircraft to airlines, that allows us to reprice that capital. guy: are airlines hanging onto

their aircraft longer? are we going to be seen fleets being two or three years longer than they normally would be? >> unquestionably, we see a huge trend from around the world airlines trying to extend. they would typically extend months in advance but now they are moving out to two or three years in advance. they want to ensure they have what they need. as you mentioned, there is the uncertainty in aircraft. guy: one of the biggest problems the industry faces is with engines. there is a new generation which i assume are more fuel-efficient. they're also more fragile and less durable. are we seeing a situation where they are more fuel-efficient but once you balance that against the cost of having to shop more often, those two things cancel out? >> we are seeing the trend.

it's not just theory they are delivering. they are delivering fuel efficiency and ongoing reliability. there are no in-flight shutdowns or safety issues. because of diagnostics, they have to get removed earlier than anticipated and that increases maintenance costs. for the overall ecosystem, that is swallowing up the financial benefit of the more fuel-efficient aircraft but we are seeing positive trends. we are seeing the manufacturers mapping out a path toward a longer, more durable engine but it's taking longer than anyone anticipated. guy: you said your targeting places like india where these engines are struggling at the moment. is that having a meaningful impact on engine choices? you go with the pratt & whitney? dtf has struggled but our people

making active decisions based on where they are base because of the durability issues? >> airlines in the region have been operating with both engine types and their clearly making their fleet decisions based on the durability issue and consistency of operations. that's been a huge driver for airlines. guy: do you think the big manufacturers should embark on new projects or fix the current issues? >> i think they need to get these engines to get what they were advertised to do with durability and consistence. guy: what about the airbus is an boeings? should they make sure their supply chains are solid and everything is working fine be where they purchase? >> deliver what it says on the tin in the manufacturers have learned is of other stakeholders

that the risks associated with large-scale innovation and aircraft from introduction of new technology, it takes time. if you look at any of the aircraft brokers, all have suffered problems in different sizes, shapes and forms but the consistent point is his introduction of new technology in a an industry that's regulated and requires written levels of reliability takes a long time and huge capital investment. guy: how many aircraft are filling up at the time? >> very few. guy: so this is an industry that has work to do? >> absolutely and all the right people are here to do it the great thing about the industries we have reinforced the reliability of demand. guy: good to see you and thanks for stopping by. back to you. anna: thanks very much. the paris air show, it's been a

few years since we been here. they are carrying on in the background of that conversation. you can subscribe to their official newsletter and you can do that on the bloomberg website. still ahead, global central banks are tightening to control inflation but are they really? we will talk to our next guest about a prospective them the global rates environment coming up shortly. this is bloomberg. ♪

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when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. we have been able to reach over 100 million people impacted and affected, and at risk of hiv. the rocket fund takes all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them.

the idea that we have saved five million people's lives, it's overwhelming. it's everything. anna: welcome to bloomberg markets, a special edition because of the u.s. public holiday. big week for u.k. watchers with inflation data due out midweek in a bank of england decision to thursday. very good to have you with me. i have been reading your essay and it has a depressing title.

it's full of mortgage misery. take us through what kind of misery we are seeing in the mortgage market. >> mortgage rates, the average is going up to 6%. that's a big story because many people are coming off the fixed rate. they said it would add the equivalent of 300 pounds per month per household. it will cause a lot of people pain's the bank of england is under a lot of pressure. market expectations of interest rates have shot up because inflation has been stronger than people expected. on the other hand, the mortgage rate points to a recession because people could get crushed

by the price of the mortgages going up area they are between a rock and a hard place. anna: talk us through the lags in the mortgage market in the u.k. how much hiking we have seen from the bank of england and how much is still yet to be felt in the mortgage market? we are fixed over two years you might not have seeming interest rate hikes to date and yet we will have more to come. >> unlike the u.s., with long-term loans and they go faster in the u.k.. this is more extreme that it was during the last housing bubble. mortgage lending had collapsed

and there were lots of mortgages that people couldn't effectively afford. that point the housing market was more vulnerable. the mortgage market is much less var in a bowl than it was. -- vulnerable than it was. it means the bank of england has to take that into account. they cannot see the effect of that. one bank estimate said it's being felt by the economy. inflation at the moment has been seriously affected by the way the energy prices are kill -- are calculated in the u.k. and

elsewhere. we don't get the inflation reading until august of this year and by that point, it might take a longer time to raise rates. the bank has to maybe prop rates back up. till -- it's until we get the july data in august. anna: it may be more of a dovish hike from the bank of england. we will see whether we get that so thank you for joining us. thank you very much for joining us. let's get a global perspective on markets. nice to have you with us. thank you for joining us.

we were talking about the view that the u.k. is between a rock and a hard place. similar words might apply to the u.s. economy. we are awaiting data on the u.s. in terms of whether we need further tightening from the fed. we are talking about lags and what has been done in terms of rate hikes. >> i think we will be waiting 18 months. how do you clock that. we talked to investors about the fact that when you adjust the thermostat in your living room, the temperature doesn't change immediately, it takes time for that to float to the market we are actually awaiting jobs data and nonfarm payrolls and trying to guess if they've done enough. why we are waiting and guessing, they have halted hikes and added further discomfort into the markets. anna: do you think it's a mistake for the fed to be on pause? >> i don't think they have any choice. they been on pause to that into

the market and introduce that discomfort. they cannot then go raise rates again because they will put shock into the market. the market will get scared that they didn't do enough and there will be the whipsaw. they are between a rock and a hard place with just because of being paused and if they wait for more data, and if they reignite interest rates, the market will panic. it will be interesting to see how consumers react this summer. the numbers are pretty bad. the market is a little overbought and we could have a scary fall. anna: do we have to interpret this so negatively? is there were an argument that maybe the economy needs short rate rises but at whiter intervals than we had seen previously?

is that a justifiable argument on the part of the fed or other central banks? >> the fed has to operate within the calendar they been operating in. the market is trying to predict if the fed will continue its path. they cannot operate out of those bands in quarters and months. as part of their issue is that they have later dated than they are able to adjust to. they are forced to operate within an old legacy system that is not as agile as it needs to be. anna: what do you make of stocks right now. we have seen stocks rise despite the bed coming through yesterday. it was a slightly hawkish dove. we saw stocks continuing to rise through all of that. does that look sustainable to you? >> it does not.

i'm concerned with how these markets will mature through the summer into the fall. the real data under the hood is ugly. i think the markets have been game of five with all the free money being pumped into the system. in the tide goes out, we will see u.s. shorts anna will not be a pretty wall. anna: what do you do with stocks at the moment? are you interested in any? >> we have positioned our portfolio into commodities. we own 75% copper in almost 15% lithium. a lot of government monte -- money is being pumped into the electrification of her energy grid it demands for those metals continues to rise. our nyse traded charge manages those commodities and there's a flight to wally when it comes to markets we from equities with a lot of execution risk and a lot of rate exposure. it's harder and harder for companies to get debt and harder

for companies to raise capital in the markets. the underlying commodities that rise without execution risk is how we choose to play it. anna: i was interested in your thoughts on china and commodities in the car sector. china is targeting complete charging units by 2030. is there opportunity in that kind of statement? >> no doubt, china has been early and committed to this for a long time. janet zooms out and things in 100 year plans were the u.s. thanks into an four year increments which is horrifying. china is ahead of the curve not only an electrifying there grid in their vehicle fleets but they have secured over 50% of the global supply of copper, lithium, nickel emma coble all processing of electric asian is coming through china which is why i think you see secretary

blinken sitting over there and playing nice with china because we are forcing -- we are forced into business with them and we have to play nice and without them, choosing to send us the metals we need for our green energy future, we have a very scary environment for what the price of those underlying metals should rise to. anna: we heard some nice words, to use your phrase, from both sides after those meetings in beijing. thank you very much for being with us. intel announcing plans to expand in germany and in israel. we heard from then about expansion in poland as well. let's start with germany, story you have followed closely. what is the deal with germany? >> essentially for intel, their

removal of some of the production from east asia as they are looking to other places to put some of their production to do you risk from the geopolitical situation in east asia. that is coinciding with an effort on the part of the europeans and the americans to unsure a lot of their chip production. the intel role has been established a couple of years ago that they were going to put this plan in effect and it has come to fruition but with a much your commitment on the side of the german government when it comes to those subsidies. germany itself is also looking to build out its own chip production. this intel plant, we're looking at 6.8 billion dollars in subsidies and now we are looking at 10 billion euros in subsidies of that's a massive step up in a massive commitment to intel on the part of the german government that's what we were hearing today in berlin. anna: intel is also expanding in

other places. chipmakers are moving beyond east asia and this seems to be a trend we are seeing from micron to intel to other chipmakers, trying to friend sure a lot of their production facilities. >> absolutely, there is a huge chipmaking production that's happening in korea and taiwan -- and taiwan and japan. there is a concern that a lot of the chip business is dependent on the world where the geopolitical risk still an open question. there has been a lot of effort from the u.s. with the chips and science act and from the eu. there is a big commitment they want to bring this into a realm they feel they can control because it's a crucial part of their supply chain and manufacturing. within europe, we are seeing a bigger commitment to subsidizing the chip industry and this target of of 20% of the chip

production being done in europe by the year 2030 which is a huge commitment for a block which is currently only doing 10% of the worlds chip manufacturing. anna: so this is a real step up. europe has ambitions in this particular sector. >> yes, that is the commitment is this target of 20%. that's been a commitment for a while and since the war in ukraine and since germany and the rest of europe has been talking about the supply chains, that original commitment is only become more pertinent to this story. during the pandemic, there was a big focus on chip manufacturing and even now, there is a massive commitment on the side of the germans and the rest of europe to build up that chip manufacturing. the big concern is berlin is what that means for local production. a lot of the chip manufacturing that was already in europe was about power supplies the automotive industry.

what they are concerned about is making sure they are attracting companies like intel and tsmc, the big taiwanese semiconductor industry company to build these very high tech chips in europe. it's not just about being able to secure part of the supply chain. it's also about building out the supply chain for the much more high tech chips we are seeing that are being built in east asia. anna: thank you very much. it's interesting how this is about rivalry with tsmc. coming up, we will be back to paris for the airshow. . guy johnson will sit down to talk about the leasing market. we will get the conversation from paris. this is bloomberg. ♪

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anna: welcome back to bloomberg markets, a special edition for the u.s. public holiday. no trading stateside but european markets are losing a little bit of ground this monday morning. world's largest aviation showcase has returned to paris with playmakers returning to announce new deals and innovations. guy johnson is there live with a special guest. guy: thank you very much indeed. we were just joking -- is at the godfather of the leasing industry or the grandfather of the leasing industry? >> 50 years since i've formed the company. guy: how much is the industry change since then? >> a little bit, back then, the leasing community was nonexistent but by 1975, 1% of the aircraft in the airline world released.

today, we are at 55%. guy: this is a perfect environment to be aleaser. >> it's close to optimal. you guys have good credit ratings. therefore, you will get bettel -- better deals on capital and rates in that advantages the airlines when they come to you. >> we have two significant advantages. we biden folks a we order hundreds of aircraft, almost 400 aircraft in the pump line -- in the pipeline yet to deliver. we negotiate reasonably good pricing on the whole line of airbus products. secondly, we enjoyed lower cost of capital than most of the airlines. that gives us a significant advantage. we have aircraft deliveries in 2024 and so on that are not

available now to a new buyer whether it's an air wine or not just airline or not. we have the product, tract of financing and airline traffic demand growing much faster than any was projected. guy: let's talk about the sustainability in a moment but going back to the aircraft you got any were expecting, are you going to get those airplanes? >> we will get them but we will get them late. right now, both are struggling with production issues. they are trying to raise production rates. at the same time, they are struggling to get the avionics and engines to work. where building that into a business case that delays are there. we will get compensation for those delays and airlines will have to make do with what they have.

we are also extending a lot of leases. some are set to expire this year and next year because airlines are being defensive and want to make sure they have enough lift. almost every lease we have that is coming up for expiration is getting extended. guy: you talked about the strong demand for travel right now. do you think that's sustainable? >> yes, during the pandemic, there was this psychology that business travel will not recover -- that business will travel will not recover. what we are getting from the airlines is the business class and first class are running at high levels. guy: it sort of premium leisure travel. >> it's hard to tell but business travel is recovering. and leisure traffic has recovered much faster. guy: is there a danger the airlines are over ordering now? >> yes.

guy: how significant is that danger? >> there is a mentality ordering just to protect future slots. will all of those aircraft deliver as currently contracted? will many get deferred. will airlines opt out of the aircraft or swap with other buyers? guy: it's a rational thing to do now. >> look at it as a dynamic order book, it's not just static. guy: why do you think this industry has wound up in the pickle it's in? >> first of all, we have had frequent five years were airlines were extremely cautious. they have laid off a lot of pilots, a lot of engineers, they cut back on infrastructure, investing and maintenance facilities. now it's a catch-up mode.

the demand is much greater than what they are able to supply. it's a good phenomenon. guy: what's the lesson to learn from that? >> not to overreact because if you overcompensate, you will get harmed during the recovery. guy: do you think that's something that will be learned? the danger right now is the industry goes from a standstill during the pandemic to a huge boom and then slows down weekly once again. >> area growth slows down but what is negating that to some degree is we have a placement cycle. aircraft at 25 or 30 years of age, number wide body aircraft, even if air traffic growth seems to taper, there is a big replacement cycle. guy: they are being replaced

because they don't feel sustainable? >> lower maintenance costs and in many countries now, the older aircraft, you have to have additional taxes and lending fees are higher so there is an initial cost besides fuel that are being opposed by airports and government authorities. guy: the idea is to renew the fleets >> progressively. guy: do you think these goals are achievable? >> personally, i think it's a very tough goal to achieve. i think the industry will do everything it's -- everything it can to get is as close as passable -- as possible but i would not be surprised if it was five or 10 years. guy: what kind of deals are you

talking about? >> we are seeing airlines that projected maybe it 3-5% growth in 2023 compared to 2019. they are now saying we have 15-20% growth. demand. they need aircraft in the shortest possible timeframe. they want current lease is extended they are no longer asking for discounts on existing airplanes. . they are asking for capacity guy: in this environment, what do you do? will you keep ordering? do you say this market is getting crazy now and i will back away? >> we already have a backup log of almost 400 aircraft.

guy: given what's happening, you will take a list price right now? >> we still have some price protections we order the limited number of additional aircraft based on our existing contracts. we will not join the herd in order planes for 2030 and so on. guy: you think those slots will ultimately open up again? >> exactly. there will be airline failures, there will be leasing companies and others who want to dispose of assets. i'm not worried we will be food if airplanes. guy: lisa: guy: fantastic to get your insight. thank you very much indeed.

anna: thanks very much. they were talking about having a long history in the aviation sector. if you are interested in the aviation sector and airshows, the paris edition newsletter is available to you. it will contain all of the news coming from that event and all the deals being done and all the announcements being made and the conversations to be had that are available to you on the bloomberg website. let's get to some of the items on our agenda next week -- this week. the u.s. is closed due to a holiday and that's why we have a special edition wednesday we get the latest inflation print. 8.4% is the target. the fed nomination hearing will

calm as we get the rate decision from the bank of england. five rate from here are still priced in to the guilt curve. we will get the bank of england take on that later this week. that is it for this hour of programming. thanks for joining us. this is bloomberg. ♪ n still play golf... sometimes. take control of your financial future to empower what's next. somebody would ask her something and she would just walk right past them. she didn't know they were talkto her. i just could not hear. i was hesitant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear for the first time, i started crying. i could hear everything. call 1-800-miracle and schedule your free hearing evaluation today.

it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop.

we have been able to reach over 100 million people impacted and affected, and at risk of hiv. the rocket fund takes all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> welcome to this special edition of bloomberg markets. u.s. markets are closed for the juneteenth holiday and there is news when it comes to u.s. politics. a meeting of the mines in beijing and america's top diplomatic shaking hands with

the chinese president. antony blinken calling the trip a positive severed ties between the two largest economies progress is hard. it takes time and it's not the conversation that's easy. we will have better communications and better engagement. coming up on >> plus executives and political leaders gather in paris at the world's largest air show. we've got highlights a more key interviews from that event next. a stark morning for credit suisse, the ubs ceo signaling cuts could be on the way and we will give you all the details. u.s. markets might be shocked or might be futures trading for the u.s. markets but there is no lack of volatility. the front end of the u.k. curve, we are back about 5% for the first time since the gse concerned there is a mortgage great concern about 6%. what is it mean for the boe when we get cpi?

some concern out of china, no clear details when it comes to stimulus. the geopolitics has more positive size but does there need to be a big show on the way of stimulus to get these markets moving again and crude has recovered from some sour sentiment around china and when you have u.s. markets closed, u.s. -- european stocks will trade off of what china did it was a negative session. there have been gains for the u.s. markets. let's get more into these markets. we are joined by jeremy stretch. the market is disappointed that it did negative clear sign of any market stimulus. we need to get a big show from china in terms of stimulus? >> i think the reopening

narrative -- i think there are signs -- they are reticent to spend that degree of spending so i think this is the degree of caution which may -- the real estate market is the overarching issue which remains a worry or concern for international investors and may be the case we need to see some degree of reduction would -- in terms of monetary policy and stimulus extension. >> this is goldman's argument in cutting the china gdp, essentially saying that any help on the property sector, anything is going to be smaller in scope than previous downturns just because they are cracking down on speculation. what is that mean for the type

of stimulus specifically around property we could get? >> to the point about the gdp forecast, that is interesting because downgrading gdp still leaves those numbers above the official target so that is one thing we should keep in mind and we should necessarily expect that we should see a material reaching of that target even though it is comparatively modest. there are concerns involving the chinese authorities' desire to crackdown on a number of sectors including real estate or speculation so it will be the case, assuming or expecting a strong and large stimulus package. a number of five and change growth this year is probably unrealistic -- a realistic

number and we shouldn't put anything to significantly about that in terms of our profiles. >> what is that me for -- mean for the -- >> i think there is a little bit of a natural barrier towards the seventh 20 threshold and i think the authorities will be particularly keen to see the currency cheap and up. in the context of the dollar leg, we have potential policy tightening two,. --to come. christ on the december -- priced at the december leg. which we got close to last week and i think we will probably continue to oscillate around the course of next few periods but will increase around the seven

threshold and beyond. >> on the dollar, i am a novice but i was surprised to the extent that the dollars sold off last week post fed especially when we had the ecb in hand, and perhaps the fed looked dovish in comparison. deep think -- do you think the dollar pressure will remain lower? brenda cisco --where does this go? >> the upgrade in terms of the inflation profiles and ecb suggest that the ecb was going to be more hawkish. i think markets took the dot plots and moderated some of their assessments. that will be interesting in the context of chair powell's context -- testimony. we had a high price for the july meetings but there is not much price in into the september meeting which is in contracts --

contrast to the dots. if we see something price in for september, and that will probably put a cap terms of euro-dollar so it may be the case that this trend probably is valued in the near term. you may be it -- you may get something lower towards the summer. we make it something durable. -- we may get something durable. >> i heard that the dots are aspirational, two more hikes. will they get there? no. it's at the right attitude to -- is that the right attitude to have? >> we have seen the fed pushing up those progressions -- projections for a significant period. i think it is going to be interesting to see how he frames the debate even though he is not

a immediate voter. in context of the resilience we see in the labor market, that probably warrants additional tightening but there are questions about those longer policy legs and how much the leg goes through the system so there is a case that there is a reasonable prospect of two additional hikes here in terms of 225 basis point adjustments. we would expect a protracted period of that inertia as the continued policy works with the system and mixtures -- sure inflationary pressure is squeezed out. there is a lesson to be learned from the early 80's where policy west perhaps these two early. i think the fed will act upon that on the basis of the data remaining relatively constructive through the book of the summer and only it is into the fall where we perhaps see

more moderation in terms of labor market resilience. >> the superlative i have for you, i wrote this down because i would not remember this but u.k. two year yield, we are back about 5% since the gmc and 150 basis points worth of upticks on the two year yield this quarter and that scale of increases has have been three other times in the past three decades. how worried should we be? >> the uptrend in the front end of the u.k. yield curve in terms of the selloff in yields has been exponential. we are seeing a scenario where the u.k. has had a higher degree of rate of inflation than its international peers. that differential has been highlighted significantly in the context of the inflationary pressures we have seen and have yet to see in any meaningful form in the u.k. in this week's

and frack -- inflation print, there was a concern of court prices moving lower that will move higher and if we see a 7% threshold on core inflation, there is a risk that the market will further amplify its concerns regarding a 50 basis point hike. i think we moved very far and aggressively and i'm not sure that the market is right to price at this magnitude policy tightening because i think there will be a substantial deceleration in some activity through the year as the higher rates reset in terms of the mortgage levels which are going to seriously detract from levels of discretionary spending and that will reduce some of that factor -- sector inflation. rates have further to go, but i don't think the markets will improve in terms of the direction of tightening price into the u.k. yield curve. >> how big of a risk>> is stagflation when we see this

come in at a time where things like food inflation is extremely troublesome? >> food inflation is a lack effect from the price gains. food price inflation is a lag. it is starting to show signs of peaking. it won't come down fast but that will be a problem for large sectors of the income strata where food energy is a high proportion to spending but it will be the case that growth trajectories will be lackluster but it will seem -- if we see relatively low contrast growth, that contrast with the negative perception we were forecasting. it will be a tough year. inflation will be elevated and for some, it will be the conditions with our -- which are akin to stagflation and it may be the case for those in

pleasures that have been looking at the u.k. as a attractive destination. we in the basis of you differentials -- purely an eight the basis of yield differentiates. we have seen as stunning rally and it may be the case it will be tough to extend the directional -- the pace of upticks we have seen into the upcoming months. >> it will be interesting with u.k. cpi and the boe decision. that is jeremy stretch, from cibc head of g10 ethics --fx strategy. we will have more highlights from our exclusive interview from u.s. transportation secretary pete buttigieg stop that is up next -- pete buttigieg. that is up next. this is bloomberg. ♪

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>> welcome back to bloomberg market. global transportation ministers gathering this weekend at a g7 meeting in japan. a bloomberg coast spoke exclusively with the u.s. secretary of transportation, pete do judge -- pete buttigieg. sec. buttigieg: as we seek to the risk and diversify our supply change in the economic relationships, we want to make sure these capabilities are not concentrated with any one country and certainly with a country that may demonstrate a willingness in -- to use things in ways that is not connected to the best ways going forward either commercially or in terms of the rules-based national order. we want to make sure at least in places where we can agree, that we are operating on a basis that

can be understood to be for the benefit of all. those are the things we are focused on. >> you talked about the risking. --derisking, are there any sectors that need that? the world has relied to -- on basic drugs when it comes to china. sec. buttigieg: i know these are subjects of active conversation. with regard to supply change, there is not enough diversification and you see extraordinary levels of geopolitical risk or logistical risk in the u.s. because of the extreme variation between the closures and the reopening's in asia and china specifically. there is unevenness in terms of the arrivals of goods. reports -- our porch and are ready to take them in all at

once. that is the example of wake-up calls that we have been experiencing especially in the last 2-3 years. >> semi conductors front and center. we had chip four, u.s. japan, to -- korea and taiwan and leslie -- investing heavily in their own sectors. sec. buttigieg: overcapacity seems to be the least of our problems when it comes to the race of semi conductors and we saw how problematic it was when we came up short. this is a process with the very intentional, direct and ambitious use of public policy has to match the unique ability of markets to allocate resources to into -- and to make sure their resources are tracking the future of demand. semi conductors are going to be more important in the future. we think about the automotive sector and the fact that a car

is increasingly as much a computer as it is a vehicle. the same can be said of many other sectors. rather than allow ourselves to be in a situation where we are coming up short, we are making sure terms of our relationship with friends and trading partners and domestic -- that is helping to create jobs on u.s. soil while strengthening our partnerships and relationships across the pacific, into something that makes sense for the future and helps us cushion some of the geopolitical risk. >> is there a sense when that may be happening? how are you trying to push this along with the chinese government? sec. buttigieg: our focus from the faa's standpoint is on certification and safety. the rest is a market matter and

there is a lot of interest from the trait perspective but we are cautious in our administration and in my department to separate trade questions and safety questions. > you talked about ev's, gm and ford talked about that they are able to adapt -- adopt tesla's superchargers. that made make it more difficult for your department to have oversight over tesla's department. sec. buttigieg: we viewed the relationship with charges as a positive development. our concern is to make sure a good and strong charging network is available. we are not out to pick winners and losers and say this company's standards is better than the others and we established a baseline in terms of access to a certain connector to make sure everyone knew what to expect but that was designed to be a floor not a ceiling.

>> pete buttigieg speaking with haslinda amin. we will discuss another u.s. official as u.s. secretary of state antony blinken speak -- meets with xi jinping. we will have all the details for you. this is bloomberg. ♪ ht for future generations. ♪ welcome to a new era of flight.

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>> roberts is hard. -- progress is hard and it takes time. it is not the product of one trip or conversation. my expectation is we will have better communications, better engagement going forward. that will not solve every problem between us. far from it. it is critical to doing what we both agree is necessary and that is responsibly managing the relationship. it is in the interest of the u.s. and china to do that. it is in the interest of the world.

>> antony blinken speaking there on the heels of his meeting with chinese president xi jinping. that wraps up a two day visit of -- to beijing. our reporter joins us with more on this. we have a press conference. what were the main takeaways? >> it was interesting to see the language out of these meetings from the secretary of state's vision to china -- visit to china. words of stability. in the need for cooperation and coordination on certain things but at the same time, there was the language about the tension points that exist between them and lots of trenton -- tension over trade, technology, cyber and china's end, they feel like they are not seen as an equal

partner in that table and some being penalized. you are seeing the are barging sense, this desire from the u.s. and certainly from antony blinken's conference -- comments and from the china side during their meeting to make sure that ties get fashion things don't get any worse and a sense to put that on the back burner. >> things like taiwan, some of those points, it is hard to see the u.s. and china coming together and having an agreement. how do we measure success between leaders from china and the u.s. meeting? >> success probably means a president has made later this year, seeing -- in the interest of both countries to do so. if you get something down between the president and u.s. and china that goes from several hours and you get some understanding of each other and

understanding of world -- where the red lines are and that is important, some tangibles on the economic side but at the same time, fundamental disagreement on things like taiwan and warnings that we are headed towards potential conflict in asia over taiwan. there is no great desire for that to happen but those are the big risks about policy on taiwan and not born -- and nothing can paper over that. >> his original visit was delayed because of the chinese spy balloon. what has changed? >> when you look at the state of the chinese economy, going through struggles and that is a warning side -- signed not just for china before the global economy because what happens to china feeds through the rest of the world. we are seeing beijing coming with stimulus on that to drive growth and it is perhaps in xi jinping's interest to have this

meeting because he needs to focus on things at home and he cannot afford to have a dustup with u.s. he needs things calm so they can focus on getting the economy moving. on the chinese perspective, there is a vested incident -- interest to have is now. >> bill gates meeting was in china. >> it is a word salad when it comes to china. the reality, we have seen trade between china and the u.s. hold up even with this effort to withdraw and change supply chains. you cannot disconnect the global economy and global supply chains to that extent in the way they u.s. and chinese economy and the global economy is connected makes that difficult. companies in europe and u.s. still want to do business in china. >> thank you so much. that is roz mathieson, a busy

morning when it comes to the china's new -- news flow. we will speak with one economist who says that companies are according labor and that cannot last for much longer. he will explain. this is bloomberg. ♪

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>> welcome back to bloomberg markets. i am dani burger. volumes are lower in the u.s. is off-line on a holiday. nonetheless, the action is here in the u.k. and 2k yields purge -- surging above 5%. some china weakness coming throughm some --dashed hopes.

let's get more into that u.k. story. concerned abound with mortgages jumping over 6%, and that means the squeeze on u.k. finances is set to intensify. it is the two year fixed mortgage rate has climbed above 6% for the first time this year. the cost of government borrowing has reached a level not seen since the financial crisis. this comes the same week as the cpi data release and the boe decision happening in the next few days. joining us is ludovic subran. great to speak with you. another jump higher in the front end of the u.k. curve, mortgages are above 6%. our -- how worried should we be about the u.k. economy? ludovic: the u.k. is one of the

trickiest situations both because they had inflation before, the big inflation surprise of 2021 due to brexit but they had some ailments related to the energy dependence of the u.k. and the problem is that they are accruing a lot of problems so it may be the last one to cause hiking and maybe the economy where the embedded time tending -- companies margins but generally, the financial instability and we saw that with the guilt meltdown. >> that is the reason we have had some warn that a credit crunch is on its way, that the pension crisis is the first -- and the banking turmoil is the first of more. do you see that? are there more credit issues, or are they just canaries in the coal mine? ludovic: we have seen some

chairs being withdrawn. we saw the svb situation and if you go back, you saw what happened with the margin close. with this abrupt and very strong tightening of the economy, we have to expect some form of collateral damage. all eyes are on the economy and the efforts where there is deep and somehow consequential financial system and where the economy doesn't seem to restart as fast as possible. i guess the u.k. is one of the usual suspects. it is being well managed. and the banking -- the question is really credit crunch. is there more tightening company -- coming that will kill whatever growth the u.k. has an this is high risk just because they are -- uncertain political landscape and they have been

affected by the long-term legacy issues of brexit that make the rebound that we see elsewhere not possible in the u.k. >> we seem to love to talk about long and variable lags but should not those legs be shorter for the u.k. considering that trance -- the mechanism is relaxed? why is it taking so long for inflation to come down in this country? ludovic: the u.k. has had a massive transfer of public money to private sector. the dislocation of the labor market are strong and that is why you see a strong labor market. lesser than the u.s. and strong compared to the low growth and high inflation and high cost of credit using. the excess savings from the transfer of wealth was new for the u.k. households that have always had quite a low savings rate so they have these crude

savings that they are absorbing. that is why the transmission of mechanisms are not as linear or one to one. the problem in the u.k., -- economy, this could impact very much the most vulnerable households just like on the corporate right side, you see leveraged retail companies that are having a tough time over the past two months. that will be the tricky part of the u.k., it could take a longer time and they have less sources of resilience and the other economies. >> we saw in the there was a tight labor market. there was a spat of data from the u.s. and australia that labor markets are tight. i love what you write in your note that companies are according labor. how does that make --rake?

ludovic: if you look at the reasons why american companies are according --hording labor, they are expecting stimulus. it is what is really the -- everyone is under ptsd from the trust moment which was a problem. the u.k. has a harder issue, they cannot over welcome their stay like the debt ceiling in the u.s. which provided a cushion for more monetary tightening going forward. we don't have that in the u.k. and that could break the moods. >> is there some -- evidence, that it cannot just be monetary policy but fiscal policy that tightens? ludovic: i hope that fiscal will

tighten a little bit because i don't think it is well spent. there are questions about the tricking up fossil fuel subsidies and questions of social transfers and the amount that was given to some companies whose margins have been going ok. i've -- i hope fiscal will get to their senses because the debt servicing costs is increasing. the u.k. has doubled in the last 18 months and this is creating for the arbitrage down the road. that is why germany is in recession and i think more companies -- countries will go for a bit more disco disappointment in the coming quarters and that will spoil the party especially on this margin -- margin wages. >> it is a bold call especially ahead of elections. some politicians won't have to have.

thanks so much for joining us, that is ludovic subran of allianz, chief economist. one person will be joined by glenn youngkin, the governor of virginia next. this is bloomberg. ♪

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>> welcome back to bloomberg markets. welcome back to the paris air show that is being held here for the first time in four years. it is great to be back and we have fantastic guests lined up for you. we are joined by one of those guests, he is the state governor of virginia, a republican.

he is glenn youngkin and joint is kindly. next -- nice to see. -- nice to see you. gov. youngkin: what a day to be at the paris air show. >> what is the secret sauce that brought many of these businesses in your state? have you turned virginia into the air and space state? gov. youngkin: we open virginia for business and when he will lower taxes and reduce regulations, -- reduce companies to go to virginia, they want to talk to you. we have been focused on the workforce development and streamlining regulations and making it easier to do business through transportation and expert -- export capabilities. it reflects the fact that we see companies moving and this is important. with the air and space industry taking off and the defense industry strong, we are seeing

real supply chain challenges and we are moving to meet them. they are investing in the united states supply chain and we are working hard to get that into virginia and have been excited to see the headquarters of boeing and raytheon move in and we have four the big five air defense areas -- come these in virginia. we have great manufacturing infrastructure and we have a great workforce and we are seeing this all over the commonwealth. not just northern virginia but in that hamp -- hampton roads area where many of our military are trance -- transferring to the military reserves. we see is -- it along the senate over -- shenandoah. it is representative of the fact that supply chain's need investment because of the great

order book. guy: the president has an industrial policy, we see the chips act and the inflation reduction act which is helping to bring companies back but we have a supply chain issue within the aviation industry. gov. youngkin: the federal government has a huge job as a customer and that is through the defense industry and the intelligent sector but as a state governor, i have a huge job to make sure we are partnering with companies to create that will force, talent development is huge. we are investing in sight to make sure we have sites that are shuttle ready so when companies want to come, we have a great place for them to come and we are investing in infrastructure. when companies come, they can go right to work and start manufacturing and supply those most important components that are needed in supply chain. guy: it is not just proximity to d.c. >> no, i would say being close

to the customer is important and we have the pentagon and the entire intelligence structure in bed -- virginia but we have the largest naval base in the world and a huge presence from the army so this is a opportunity for us to have proximity to d.c. but to the operations of our military and with dollars and the role dca, recognition and dollars play in our commercial airspace -- aerospace industry, we are seeing demand. >> are you pleased with that? guy: the reagan airport and dulles airport operated as a system. there is one board that oversees them and we have a construct that allows both of them to thrive. i am happy with the current

construct and there is work going back and forth but the current contract works for both reagan and dulles and we are seeing both areas bill -- built into that. guy: reagan national named after the former president. i have to ask you the question everyone is asking. you think we will ever see a glenn youngkin national airport? what we see one named after president youngkin? gov. youngkin: i hope not. guy: you are not running? everyone is making -- waiting for you to make the decision. gov. youngkin: it is humbling for people to ask me about and i am new to this and i had a 30 year business career. this is not the first time i went to the paris air sure. it is the first time in am here as a governor and we have a lot of work to do in virginia and we have elections. i have state elections and midterms. i am focused on virginia. guy: i hear what you are saying

but there is an election and we are wondering by november whose hats will be in the low -- bring --ring. are you saying you are not doing it? you are not going to announce on air with me today on bloomberg but tell me if it is it a job that you are interested in? gov. youngkin: the first thing i know is that i have never gotten up promotion without doing a great job in the one i got an we have real opportunities in virginia to continue what we started. this whole conversation about the robustness of the economy and the air and offense space in virginia reflects the fact that we brought in conservative policies, lori taxes and building a workforce, overhauling our education environment. making sure we support law enforcement. i am humbled at the fact that the rest of the country is watching and likes it because

this is a moment for virginia to prove that we can take a state that was one by the other party and didn't think it was run well and we can step in and change the direction. we just had a 10 year high in labor participation and a 50 year high in the workforce and we see 175,000 jobs created since we came in. that is at a. record pace. . it is important to demonstrate that a state can reorient itself and be successful. guy: if not you, what kind of a leader does the republican party need now and does the leader look anything like donald trump? gov. youngkin: what i was saying now and i have repeated it, i am focused on the commonwealth of virginia in the primary reason is i have the midterms. the nation -- guy: what kind of the leader does the republican party need?

gov. youngkin: i would limit it to the republican party. the nation needs a leader who can bring us together, chart eight course forward that embraces common sense approach is these challenging issues and allows america to leave -- lead. we should be leading in education, we should be leading in a fenced manufacturing and restoring and leaving in a world that needs our help. i had an extraordinary trip to asia where i visited timeline -- taiwan and japan and south korea and i was overwhelmed by the urgency that they all have to grow deeper ties with the united states economically and on a national security front. we should be leaning in hard at a time where everyone recognizes the threat from china. we need a leader who will accept that challenge, lean into it and make sure the united states is strong around the world.

guy: people watch this space but thank you for letting me ask the question. thank -- great to see you. thank you for spending your time here at the paris air show. governor glenn youngkin joining us. >> the governor of my home state. breaking news to bring, and ago has ordered 500 airbus a320 aircrafts. diet will be speaking to someone from airbus tomorrow. on the program, credit suisse may be due for a "massive downsizing". this as european regulators are said to be parent -- telling banks to prepare for adjustments. we will talk about that next. this is bloomberg. ♪ - i ended up spending less money my entire time at snhu

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dani: welcome back to bloomberg markets. european regulators are telling banks that -- that the final results would be less rosy and to prepare for adjustments. jp, what exactly is the ecb telling banks? >> there are preparing them that the stress test is getting harder and it is probably a good thing after all the mess up we have seen in earlier this year in march and at the end that led to the downfall of credit suisse. the banks always pass, some better and some worse but they always pass, the majority of them and the ecb as well as spiced if they move the stress test -- i hope they will include some conditions about deposits leaving the banks so they can

get a feeling of what happened in march and how the cuts when they appear in the banking system, how fast and how deep they will come an systemic issue. dani: banks are not so happy about this idea. what has been their argument that this strategy from the ecb doesn't make sense? jan-patrick: it is the usual line of banks saying that banks are healthy. we have seen in march, you can't be as healthy if you -- as you want to if there are headlines coming about you and people are losing trust in your ability to have it -- payback deposit and it is well and good that you passed the stress test but it will not help you survive. thanks say we have enough capital and less risk than a decade ago. we have seen the banking system far from rock solid and

withstanding everything so i -- i would appreciate a stress test where we see majority of things fail because we know the point where the banking system get into trouble and we can watch and be careful about it. dani: i feel like your phone is about to bring out the book with angry bankers saying you want to see them fail. ubs, one person had an opinion piece over the weekend. i can't imagine being a banker from credit suisse and now at ubs at finding that you may lose your job through an opinion piece. work with a hint that we got in that there were job cuts to come? jan-patrick: it was not surprising. the investment bank, the core reason why the bank fell into trouble or set it struggling road over a year ago.

and make sense that ubs is saying when we merge this, we want to keep the parts that are helping us and we will get rid of all the other stuff. we have not seen any number of but went as ceo says they want to do a massive downsizing, i assume they want a 50% cut. a couple thousand jobs will be lost or will move to other banks. the thing with ubs, it is the second time we get the message from the top management that it is not very kind to the employees. it feels that what top executives are trying to do is send a message to investors especially to the staff of credit suisse. they want to say that this will not repeat and we will be conservative as before. low risk and that is the message they are doing it. dani: maybe a political message saying we will not need the

guarantee the government gave us. thank you so much for joining us. as we end to the end of the hour, we are looking at the u.k. to year yield rise further by eight basis points and we are about 5%, a gse high --gfc high. this is bloomberg. ♪

it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> happy monday, welcome to this special edition of bloomberg markets. u.s. markets are closed for the juneteenth holiday. thawing tensions between the u.s. and china, antony blinken traveling to beijing and shaking hands with chinese president xi jinping. a positive step for ties between

the two largest economies of the world. >> progress is hard, it takes time and it is not the product of one trip or conversation. my expectation is we will have better medications and engagement going forward. >> plus gathering for the world's largest air show. and what it will mean for the global economic outlook, still ahead. but before we talked china, we've got to talk about the u.k.. it is a mortgage market under pressure. an economy under pressure and a boe under pressure. they all have their decision, the time to make that announcement on thursday. for that they got cpi. the tight labor market data we've been getting is -- means the two-year yield has been -- is about 5%. it has not been at that level --

we talked to jeremy stretch last hour and he said for some people, this will feel like start inflation. a better development when it comes to geopolitics. perhaps relations between the u.s. and china are starting to talk. we had the china state meeting - thaw. we are looking -- european stocks taking their cue from chinese equities. we don't have the open higher to rescue european stocks. stocks are felt impervious to inflation. on friday they closed at a level -- racing more than when we saw the titan campaign. now we go to anna. thank you for joining us on what

is a holiday for you and cleveland and in the u.s.. when it comes to equity, i know they are not trading today but there is a lot of talk about we are in a new bull market. is it actually? are we about to start a new investment cycle? >> technically it is a bull market if you are above 20% from recent lows. in spirit i would beg to differ. a bull market implies there is a new cycle. i would expect to see small caps rallying, certain value sectors rallying. we don't really have that with this 20% up. a lot of them are full by six or seven stocks. the year-to-date will dig again is really the action of a few stocks out of 500. i would not necessarily call this a market. having said that, i would not be bearish on u.s. stocks.

relatively speaking, because we are alligators and we do so through public stocks all over the globe. we are relatively constructive on u.s. stocks. it has been amazing how resilient they have been, even when people have said bonds are more attractive, yields are more attractive. people are going to go into bonds they have, they've also got into stocks as well. even the we are skeptical, there are headwinds and we are constructive in u.s. stocks. dani: i got to say, looking at surveys and sentiment readings, you see that impact that it is negative when it comes to sentiment. everyone thought that long tech was trade. you have to buy it or you are going to miss out on this rally. how much of it is the technicals , if you are not buying the big cap names, you are --

anna: last year it was negative. we were due. we were expecting things to be a little worse, especially after the banking issues that service in march. some of that has been solved through acquisitions. we are probably going to expect more consolidation in terms of liquidity. who still need to lend. we were expecting it to be a tighter credit crunch. we are not seeing that as much after the banking issues have surfaced. it looks like the european economy is more resilient. there is technical support from the selloffs last year into this year. and those tech stocks, ai driven stocks are giving us a boost. we would expect there to be a correction. it seems to have caught a helium

balloon. maybe in the fall, or their may be an exogenous shock, may be related to geopolitics that could be a headwind for stock market. dani: when you seek companies that have nothing to do with ai mentioning ai in their earnings calls, it may be concerning. if there is a possibility for a shock, where do you want to hide out? how do you protect something -- prepare for something and protect your portfolio from the likelihood that happens? anna: the shock i'm thinking of now, the fed is so good at telegraphing things. they pretty much telegraphed the skit and telegraphed two additional heights. i would not call that an exogenous shock. at this point, it comes from geopolitics. you talk about blinken.

maybe china not giving the stimulus we were expecting. but i don't think the shock will be in policy. i think it would be more in the fundamental numbers. what we are hearing on main street is when it comes to china, it is the abcs. it is an acronym for anywhere but china. when people say that maybe the supply chain is pretty much off, maybe 80 or 90% for a lot of businesses, it is going to shrink if everybody is practicing anywhere but china. i think that is going to be a shock. we finally see the numbers of trade later this year. dani: you have seen some of that reflected in chinese equities. they had a tough go as the u.s. moves higher. someone i talked to said this would be great news for india, other economies that see the restoring. is that where you want to poke

around? anna: yeah. if not china, and asia, it is probably vietnam. a lot of companies are talking about shifting the supply chain through vietnam. in terms of near shoring and on shoring, there are a lot of opportunities. on shoring happening in the united states is probably not good for inflation. the prices will probably remain high because things are more expensive to produce here. mexico would be a big fish area. we have seen that a little, but in the next three to five years you will see more and more. dani: we will have to leave it there. wonderful to catch up. that is anna rathbun, suppose -- cbiz chief investment. coming up, we will talk to the qatar airways ceo about supply chain, challenges and more.

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dani: it is bloomberg markets europe, i am dani burger. the world's largest aviation showcase returns. playmakers go to the paris air show to announce deals in a post-pandemic world. guy johnson is at the event and spoke with the ceo of qatar airways, about the new plane orders for the company. >> we have a large amount of orders already placed with boeing and airbus and we are just waiting for the supply chain to ramp up. everybody is very excited.

both manufacturers want a huge orders. you can always get them. where will you supply them? that is the question. guy: how many of the planes you are expecting are you getting on time? akbar: none. all of the deliveries are delayed. i don't blame the men fractures. but as the supply chain that was decimated during covid. people did not realize and the government did not that they should compensate the industry. to keep everybody on their jobs, for when there is a turnaround. nobody paid attention. except qatar airways. this is why we were the highest growth airline during 2021 and 2022. with the highest air escape of anyone in the world. guy: the industry is now bouncing back.

akbar: back to 2011. guy: is this sustainable? akbar: for the sustainable -- for they just -- for the foreseeable future yes. manufacturers are struggling and they are on the ground because they have engine problems and the manufacturers cannot live up to the supply. the requirement of the men fractures. guy: you say the industry is capacity constrained. are you not worried the -- that you won't be able to see this in the future? akbar: this is a problem. it is related to the extension plans that we had before 2019. each year until the end of the second. guy: you don't think now would be a good time to place those orders? akbar: no, they already have

substantial orders. the problem is that even if you order today, you are not going to see those airplanes for the next five years. guy: how long do you think it will take to sort out? akbar: i agreed during your economic conference in doha. me and others mentioned that the supply chain will not come to the 2019 level. guy: will the industry be supply constrained? does that mean affairs will remain high? akbar: it is all supply and demand. there is less supply and double demand. you're going to have to ask the price you need because people will want to travel. i think fares will stay high. we are now being pushed to get

stuff -- it is expensive and unavailable. all of this is a factor that is increasing the cost of the value that you have to pay to travel. guy: but the move will be inflationary, you think. akbar: absolutely. you are paying four times the price to have staff. what do you expect? guy: do you think 2020 targets are achievable? akbar: no. please explain one staff member undertaking they would be able to meet the demand of then? i don't think so. but is not full ourselves. let us see from show, exxon mobil, delta energies, all of these people. ask them what volume they produce. there will never give you the

answer. guy: you will see significant competition in the gulf. expected to place a new big order, we now have read air. are you worried about competition? akbar: i love competition. guy: how strenuous do you think it will be? akbar: it will be tough, but he will be the survival of the fittest. guy: why do you think qatar will be the fittest? akbar: i did not say i will be, but i like competition so let's see. guy: a great interview with the qatar airways ceo. he loves competition and expect rates for your next flight to remain high. still ahead, we continue our coverage of the paris air show. guy is there and will be speaking to the ceo for one of

the competitions for qatar airways. does he love competition as much? this is bloomberg. ♪

guy: welcome back to bloomberg markets, and the paris air show here. we are hearing from the ceo of qatar airways a moment ago, talking about how he sees competition developing in the gulf region. one airline he was talking about is brand-new. ryadh air has launched, the ceo tony douglas joins us. you win the competition for the best jacket so far. great to see you and the jacket. i seat the airplane behind me, newly unveiled. what kind of airline is yours going to be? tony: delighted to be here at

the paris air show. i hope the livery wins the surprise -- wins the prize as the best livery. it is a definitive design and speaks with a modernistic twist to what the capital city of the kingdom of saudi arabia is all about. i am sure many people agree that it stands out in a crowd. it is going to be one of two liveries and the second will be released later this year. it will be in operation with two beautiful liveries. they are making a statement about an airline. because it is one of the biggest startups in recent history, it has no legacy. we will be a true digital native. we will make sure we've got attention to detail when it comes to guest experience. it is primarily to serve the kingdom being connected better

to the world, and the kingdom of saudi arabia. guy: so this is not a hobo model your building. a lot of the traffic that comes through will be distributed to other places in the world. the idea is this is a airline to travel to or from saudi arabia. tony: that's right. we are talking about a traffic mix in the low 90's. we've got the biggest population within the arabian peninsula. it is the second fastest growing economy in the world. june 20 country. the capital city is not well enough connected today and in terms of what we are to do, it is to make sure we've got global connectivity into the capital city. there are trillions of dollars being spent on world-class destination attractions. in his also to allow the world to be able to connect into the kingdom with a high-quality

camera to experience that as well. guy: are you building this further a tourist market, or is this a business market, saudi arabia growing rapidly? tony: it is both. all successful economies have global connectivity because we are growing so quickly. it is primarily to connect the kingdom to the world in that way. but as you rightly said, given the investment in tourism, it is to give that incredible warm welcome, saudi hospitality. people are going to come into places like kadir, go on google and check out this one. it will be incredible, but how do you get there? ryadh air. guy: is there first-class?

tony: no. we don't think it is financially or environmentally sustainable. we be revealing in the way that i already done. the second later in the year it will be a standout. the first one is a statement of our intent. the interior product will be q1 and q2 of next year. it won't have a first-class, but once inside it will be exciting. guy: business class, premium economy, economy. tony: correct. but redefining business-class, premium economy. guy: so you are going to out luxury qatar. tony: this is about serving the kingdom of saudi arabia what they deserve. but you never get a second chance to make a first impression in life. the first impression will be us. guy: when are you going to march? when is the airline going to start flying?

tony: it sounds like a long time in the future, two years. it is the sprint of all sprint. note legacy, we will be differentiated in the way we connect with our guests. we will have an attention to detail, guest experience. two years we will be up in the skies. guy: and you are confident you are going to get the aircraft you ordered quickly and on time? tony: for sure. we don't have an option in terms of a fallback as we have made it clear with the people we are working with, we don't have leases on existing aircraft. we can't slow down a network because we don't have one. we have to have those aircraft delivered on time. guy: and you've got guarantees that will happen. i promise you are the first ceo of an airline i've spoken to recently telling me he is 100% confident. tony: we have contractual

obligations, there are penalties, but this is around a personal commitment to do what you say you are going to. i've built commercial aircraft 30 years ago. i know how difficult it is. it is a challenge. what they -- but they can't fail. guy: there is a new airport. are you going to work on the timings of the launch? tony: broadly speaking they are. but we will be going first in terms of 2025. there will be elements on the existing infrastructure. but you're right, there is also a commitment to a new, incredible port in ryadh. these are building blocks to the 2030 vision, which implies that

impression the world has a first-class service. guy: thanks for stopping by, love the jacket. the ceo of riyadh air. dani: we will have to step up our jack again, i'm embarrassed in a white one. that is the ceo with guy johnson in paris. for more, subscribe to the paris newsletter and through the magic of technology. you can scan the qr code you see right here. as we get closer, an hour away to the close, european cash markets, we are looking at european equity is trading at the lows of the session. we are down 1% on the euro stop 600, leading us there are the economically sensitive sectors. we go to .99% as we said is 1%. but it is things like construction, chemicals. there's concern if we don't have more stimulus in china we won't have the growth impulse to

support europe. volumes are later today. there is not a cash trade for the u.s., to help lift the european session. speaking of which, the secretary of state antony blinken wraps up his two day visit to beijing. more on that next.

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dani: welcome back to a special edition of bloomberg markets, i'm dani burger. get your check in on markets. pain in the front end of the curve, up 10 basis points. we are above 5% and we have seen 150 basis points pickup in the front end of this curve. it is only happened three other times in the past three decades. to give you an idea of how

difficult they prospect would be for the boe come thursday. there is concern about china, china growth on the overall economy. we had a weekend over the council meeting. it was no detail on stimulus. goldman has the gdp forecast, it was at 6%, the stimulus will be smaller than previous downturns. we are looking at crude falling about .4%, $71 and $.50. the negative session in asia bleeding over into what we see in europe as we head closer to the close of the cash trading session. down about 1%. no cash in the u.s., so we don't have any buyers coming in to save the u.s. and europe. it is not just about the economy. what is happening on the duplicate front two, u.s. secretary of state antony blinken met with chinese

president xi jinping earlier and wrapped up a two day visit to beijing during which he said the u.s. china relationship has taken a positive step forward. still words of caution from antony blinken. >> progress is hard. it takes time. it is not the product of one conversation. my expectation is we will have better communications, better engagement going forward. that is not going to solve every problem between us. but it is critical to doing what we both agreed is necessary. that is responsibly managing the relationship. it is in the interest of the united states, china, and the world. dani: what would be your take away from lincoln and the chinese side? -- lincoln and the chinese side? >> it was a positive situation.

on the one hand, it is a good thing after many weeks and months of strain. when you look at the underlying issues, and those still remain. none of those issues have really been addressed. taiwan is still a point of tension. there are concerns over microchips, human rights issues, the list goes on and on. we are facing this dichotomy where you have to do something talking about a better tone for the relationship. on substance we are still waiting to see if there has been any real progress. dani: is having a better tone enough to say this was a success? nick: that is what the u.s. and both sides are trying to project. it is really something that is going to have to wait and see in the next couple of weeks. what happened several times is that the u.s. and china had these conversations where they

say we want to put guardrails on the relationship, want to manage the relationship responsibly and if something happens, the balloon over u.s. territory or a new round of sanctions or concerns that china may be supplying cooperation for russia and ukraine. then we go down that whole cycle of increased tension and things like that. that is something we have not been able to break out of. we are at that spike in the cycle. you can keep things at various instances. dani: it is not just antony blinken. it was bill gates, elon musk, jamie dimon. are there elements where china, a difficult economic environment for them, they need this business? akbar: there --

nick: are a couple of things. you have the geopolitical government to government situation. sides are circling after each other and the other side you have business and the fact that u.s. companies like microsoft and tesla continue to basically vote with their pocketbooks and say we don't care so much what is happening at the leader to leader level. still believe the chinese market is too big to ignore in a place where we want to invest. we are going ahead with that full speed. train hit a record last year between the u.s. and china. there is no sense that the two economies are yet decoupling even though there is a strong political push from republicans in the united states to do that. it is another fascinating way we have relayed this relationship that has split between the comedy on the business side and at the local level.

dani: and does it seem like we have had the groundwork set for and in person meeting between biden and xi jinping? nick: that is the trend, the momentum is heading toward that. president biden said he did expect that he would speak with xi jinping at some point. it is a question of what is that going to solve? the blinken meeting came out of a meeting between present -- president biden and xi jinping in november. this was one thing that would help keep the relationship on track. so much has happened, so much tension that it is not really clear what it solved. now we are going back to the possibility of another meeting. when you come out of that, you will look at ok, did they manage to solve the fundamental difference is countries have. dani: and it should like -- it seems like there is not budget

on either side. that is nick. investors were primed for the state council, trying to have new support measures for the economy after they met on friday. the council stopped short of releasing specific proposals. that is adding to concerns about the weakening economy. you've seen that reaction in markets and speaking of, chinese homeowners are losing conviction in the decades long belief that property is a reliable source of wealth that undermines even coveted markets like shanghai and adds pressure on authorities to find new sources of economic growth. asking prices in the financial hub have fallen to the lowest level since china emerged from covid lockdowns at the end of next year. any support coming from china will be smaller in scope than previous downturns. we will continue the conversation on china as the

country's diesel exports shrink to the low in may. more with nadia martin wicked -- wiggen.. this is bloomberg. ♪

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dani: the best week for oil prices in more than two months. we are giving some of that back, wti and brent falling at least .1%, around 76 and $71 a barrel respectively. concerns about china, but

overall bearish positioning on the market. let's get to someone who knows about that, nadia martin wiggen, paredo market analysts. >> speculative net shorts are as bearish as they were at the height of covid. currently, we are experiencing 2.2 million barrels per day of demand growth year-over-year. during covid, we were -20 million barrels per day. how much demand is expected to collapse in this macroeconomic setting. dani: what happens? what is the fallout? we are not in a covid demand scenario. look, demand there is for flights around the paris air show. everybody is talking about how

demand is outstripping supply. how does it play out? nadya -- nadia: they want to push out especially the brent shorts and a btig shorts. this is where the oil market is not following supply and demand fundamentals on oil. it is following this macroeconomic narrative. there is part of the market that just wants to say we are into a recession, let's get on with it. it is where it is tough to hold a position in oil. when we look at the balances coming for the summer, we are drawing every single day, between 1.5 million and 2.2 million barrels per day being drawn out of company stocks. why september, we are going to be as tight as we were in january 2022. that is when the market started rocketing higher. this is where we are going to be bite -- by september.

this still ultra-gloomy and people think there is something to come on the negative side and maybe they won't put on their bullish positions yet. i cannot understand why anyone would have such a bearish stand on things right out when demand is so good. when we look at china, yes there are concerns about what is going on in terms of housing stimulus and so forth. but amanda is up 1.5 million barrels per day year on year. dani: what does it mean to have a saudi minister who wants shorts to keep coaching? are we going to see more aggressive cuts echo -- cuts? nadia: it is tough. it is a concern. the reason i think he went in so hard is because that saudi's are a rare--aware that it is

continuing to flow out. at least 500,000, eight hundred thousand barrels per day. versus the opec expectations, we note iranian supply is growing. over 3 million barrels per day since april in terms of supply. we expected to be 6000 barrels year-over-year. the market was interpreting that as a demand concerned because there were more than $500,000 a barrel -- 500,000 barrel per day cut. the prices to the asian market remain strong. you see this demand for it available. it is tricky on what they do in this july meeting. if they stay flat of one million barrels per day, it is ok. a deeper cut. they risk having that market reaction that it is a demand problem.

the other hand, i don't think they need to expand -- extend the cuts at all. the market will drop in august, even if they bring back one million barrels a day per supply. dani: there was a lot of volatility last week. whether you had the nella garlands -- netherlands preparing to close a -- how vulnerable is energy security? nadia: we also had delayed maintenance. we were lucky it is a warm winter. we had rain, and now it is a hot summer. that is where natural gas is that swing. we still have not seen china import at the natural gas levels but they would normally would. japan is superhot, china is superhot. we are fighting against that

market. we are definitely vulnerable. but for now the storage is full so we are getting prepared. dani: we are getting prepared. i want to go back to the question of shorts and oil markets here. how much of that is a rise due to a technical factor of shorts getting stopped out? nadia: the fundamentals have been bearish and we are starting to see the opportunity for the fundamentals to actually turn bullish. it is scary what happened last year when we had everyone bringing in the supply. we are not looking at that scenario for this year. there are some quiet ones going -- but we are switching to coal. we are seeing demand.

there are lengths coming in but it is the beginnings. dani: it is always a pleasure, nadia martin wiggen of pareto securities. we heard headlines from china state tv. citing the official saying she was meeting with antony blinken out of courtesy and the problems in the u.s. are due to washington's wrong policy and china tells antony blinken u.s. should end of sanctions that are illegal. conversation has been about the better tone coming out of the meeting between chinese officials and lincoln. more icy than the initial words out of the u.s.. coming up, intel working on planes for the country. next. this is bloomberg. ♪

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dani: german intel has -- germany and intel agree for a plan after 10 million euros in subsidies. the signing ceremony took place a few hours ago. alex webb of bloomberg quicktake is here. how much is an intel story versus a germany story? alex: 10 billion euros. huge. it is both. intel has lost its crown as the biggest chipmaker, overtaken by tsmc, nvidia. trying to remedy that, fix the problems that seems to have evolved over the past few years.

so many countries have identified that during the pandemic when chip supply became constrained, their carmakers suffered. want to have something where their carmakers can get as many of the chips you need from their doorstep essentially. that is one reason the huge chunk of change, the plant that will cost between 25 and 35 billion euros. dani: why does intel need to do this? >> they are really changing their strategy. it used to be that intel sells the chip. intel will get somebody else to manufacture it, it will use the manufacturing facilities, you think about nvidia, apple. they are usually made by someone like tsmc.

we will see how much it has grown in it. and the will approach, idm 2.0, the strategy is going to be a fusion of these approaches that were previously separate worlds. dani: is this considered a success? >> there is a lot of debate. one analyst said it is like building a cathedral in the desert. we don't have a thriving electronics industry. dani: there are plenty of cathedrals in vegas. alex: fair enough. the flipside is if you build it, the industry will follow. you might hear them make that argument. there are arguments on both sides. it remains unclear. dani: there's also story of the building in israel.

some of the u.s. plans of expansion, which is the strategy look like when it comes to this global spending? alex: last year was the most of 25 years that they spent on capex. about one $5 million. they planned to spend 80 billion over the course of the next. there is spending in the minus column. about $80 billion in europe over the next decade. facilities in israel, germany, expansion in ireland, facilities in poland and france. it is a big chunk of change. going up in ohio, it is the same time as abercrombie and fitch. they're also building facilities in arizona. a massive outlay from intel, an effort to catch up to tsmc and the trillion dollar chipmaker. dani: how do you know that's

where abercrombie and fitch is headquartered? alex: it is an embarrassing reason i will tell you off air. dani: does this put intel closer to catching up with those rivals? alex: there's skepticism. the value of 150 billion dollars, it does not give a huge amount of optimism for the direction of travel, given that makes it less than eight times the size by market cap of nvidia. a lot of optimism surrounding nvidia. unsure whether the position is correct for ai. there is the place where they saw the greatest opportunity and it looks like nvidia has stolen marks. they're making big bets, jury remains out. dani: thank you, alex webb of bloomberg quicktake. we'll turn our attention back to markets in the week ahead for central banks. we will speak with that scanner, hsbc multi-asset strategy as --

max kettner, we are looking at u.k. to year yields climbing. up 11 basis points, the highest level since 2008. some china stress, falling versus the dollar, weakening by half a percent. nymex group -- the china signal troubling us. european stocks at the low of the session, down more than 1%. 35 minutes away from the close. it is the economically sensitive sectors that are leading us lower, some of the china impulse, even though volumes are lighter. no cash trading for the u.s.. futures also dipping about .2%. more ahead. this is bloomberg. ♪

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♪ dani: happy monday, welcome to this special edition of "bloomberg markets." we are pushing ahead to the bank of england rate decision this weekend what to expect as yields top 5% for the first time since 2008. plus we are live at the paris air show speaking to the ceos of

saffron