>> good morning, happy thursday. this is bloomberg "daybreak: europe." fed chair jerome powell signals rates are headed higher but at a more moderate pace, telling u.s. lawmakers two more hikes this year is a pretty good bet. >> the process of getting inflation back down to 2% has a long way to go. nearly all participants say will be necessary to raise interest rates somewhat further by the end of the year. dani: another big day for central banks. inflation comes in hotter than expected for a fourth month. plus, a surprise filing for a crypto etf goose optimism. a busy day on what otherwise is a short week for the u.s.. we've got the boe and a fed rate

decision. until then we are still digesting some of the words of powell. they were not too different from the fomc decision. one of those people who agrees said that if were going to cut it would not be in the first half of 2024. all of that in itself was enough to continue a selloff that started in the u.k. nasdaq futures fell more than 1% yesterday and the selloff continues. you could basically see the impact here when powell started to speak. then we hit a new low around here after the caustic comments. not the ones about them holding but the ones about them not cutting. more to the point, not necessarily central-bank speak, some of the ai names are the

kind that if you squint really hard, they have been selling off pretty viciously. i picked out a few, some of them are closed today, china, hong kong and taiwan are close. this is yesterday's session, a decline of 20%. this is one of those ai adjacent stocks that people love in the u.s.. that closed down about 10% yesterday. it is starting in the smaller ai names that we got really excited about, does it spread even further to some of the more established players? let me show you what the yield curve did yesterday because we did see more flattening fueled by the front end of the curve, over the past two days we hit a -1% for the first time since march. it popped above 1% ever so

slightly a few hours ago and now we are back below it. let's get to that story with our reporters from around the world. we will talk about jerome powell's testimony in congress. decision time for the central bank of england. jerome powell has told congress that fed policymakers expect interest rates will need to move higher. he said last year's decision to hold should not be seen as meaning the central bank is done. >> we never use the word pause, and i wouldn't use it here today. we agreed to maintain the rate at that meaning. almost every single, 16 of the 18 participants on the fomc wrote down that they do believe it will be -- majority believes we should raise rates twice this year. that's a pretty good guess of what will happen if the economy performs about as expected.

dani: let's get over to mark cranfield. this isn't really new, right? why the market reaction? >> the fed have been saying they are data-dependent for some time. i think what you will see is that traders are beginning to think the data isn't what -- is going to support the fed decision and that two rate hikes can still be done. the inflation numbers will start to move lower of the second half of the year, maybe they won't reach 2% but they will fall enough to hold the fed back. possibly some changes in the unemployment situation, deteriorating a little bit and that also puts the fed on the back foot as well. so you can see the traders are not confident that 50 basis points is going to be the case.

that is been the case for little while, the market is not convinced that after pausing that they really can re-energize the rate hikes. some people think the fed is done for the rest of the year. so you got this discrepancy between what the traders are thinking and what the fed is thinking and it's going to be a pretty tough second half of the year for the fomc to convince the market they really can drive rates much lower. dani: part of the thinking in terms of having that is there trying to convince market they're not going to cut. >> he might not be the only one, powell hinted earlier that there were a few members that were not convinced about this as well. the market has been skeptical for a while.

when they did pause, there was quite a bit of uncertainty among the various members, there were some politics going on and they could not agree on a decision. bostic may not be the only person who thinks have done enough. so while you have their voice is not sounding uniform, since you guys can't come to a consensus, there's no reason for us to become too aggressive in pushing for higher rates in the market. so they've got quite a lot of work to do to be on the same page and really convince everybody that we are going ahead for at least two more rate hikes. dani: mark, thank you so much, mark cranfield. speaking of rate hikes, after

the may inflation, cpi is still on the rise. we're going to get a hike, but what are the chances it is a jumbo hike? >> it will take rates to 4.75%. markets do see a 40% chance of a .5% hike. as you say, we've had the fourth upside inflation surprise in a row yesterday. that's why they need to get a grip on this problem now. this is why economists are not ruling out 50 basis points but they say it's more likely in august because then you will have a press conference, you have the forecast, it's easier to walk back the language of acting forcefully. by the august meeting, they will have -- megan greene has been

making more noise recently. you could get a three-way vote split. emphasizing the monetary transmission like, but you could have a halt and it could be hold 25-50 split. dani: you need to have a word with andrew bailey. i want to quickly mention some lines from the snb. they have released their financial stability report and said that the too big to fail framework needs review. they also said over some lessons to draw from the whole credit suisse debacle which is what that line is from. ubs meets capital requirements or show their new systematic importance. in terms of some of those other -- they say the capital one

instruments only as started to absorb losses when became clear that credit suisse was headed for state intervention and that non-viability was imminent. the third one, the scale deposit outflows that resulted from the loss of confidence were unprecedented and more severe than assumed under the liquidity regulation. we will get an snb decision later in the morning at 8:30 a.m. u.k. time and we will also speak with the president of the snb, thomas horton, later today. so stay with us for that. bitcoin has surged back above $30,000 for the first time since april. it has injected a shot of optimism. su keenan has more. >> arrays to file bitcoin related etf's after years of

reject and spy the fcc. a surprise filing last week had bitcoin jumping more than 20% and it is now once again above the 30,000 level for the first time since april. at least three other issuers have followed like rocks lead -- black rocks lead. its status as the world's biggest money manager is taken as a sign that despite years of rejected applications, blackrock may be seeing a green light at the end of the regulatory tunnel. changes backed by citadel and fidelity are adding to the optimism and bitcoin enthusiasts believe in upper trend is now in place.

the renewed push follows years of rejections, about 30 such failed attempts according to bloomberg intelligence. many now believe that now that blackrock has made its move, dozens of other issuers will quickly be following suit. su keenan, bloomberg, new york. dani: let's get a quick look at where bitcoin is this morning. still up 30,000, it has gained about 21.5% since that blackrock filing. let's take a look at what we will keep our eyes on for today, 12:00 noon we will get the boe decision. will we get the jumbo hike? what hints will we get? how far can enter bailey push things before we see some serious damage to the u.k. economy?

later in the u.s. session, 1:30 p.m. u.k. time, u.s. jobless claims. the trend has been higher, by more than 20,000 jobs. is that trend real, is there finally cooling of this labor market? coming up, we will dig deeper into those comments from fed chair jerome powell. also later, guy will speak exclusively to the deutsche bank ceo on the banking landscape and more. this is bloomberg. ♪

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dani: a selloff yesterday that began in the u.k. just accelerated after powell's testimony which reiterated much of his fomc statement. bostic added fuel to the fire, his message no more hikes for 2023, but no cuts, either, in the first half of 2024. market darlings like nvidia hit the lowest of the day. the weird thing is that stockmarket internal suggested something decides doom and gloom. what i have in front of me is

the homebuilders etf. this is one of the most interest-rate sensitive sectors and this thing yesterday rallied to the highest of 2020 one. that's not exactly something you would expect if the yield curve is correct and we are heading for a recession. let's bring in the seats -- cio of soft chin -- sofgen. >> to the extent that the incoming data we get from the u.s. is clearly supportive for opposing rate hikes. so we have to be mindful, but when we look at things like ppi, it has turned negative in may.

it's probably going to be even worse in june. it means that part of the economy is already in deflation. also the fact that things are heavily normalized on supply chain constraints, we are at a stage where it will become probably more difficult for the fed to support sustained hikes in interest rates. to position against further hikes. dani: we have seen some high wages, bloomberg intelligence figures it's going to be a summer of poor readings. can we really say we are starting to enter the deflationary stage as long as the labor market is as tight as

it is? >> that's the difficulty in reading the economy, cpi is coming down very significantly and rapidly. service inflation is still high. that is linked to the fact that salaries are increasing, and they are increasing because of the lag of inflation, but also the fact that people are switching jobs. when you focus on that, you see that the rate in the u.s. has come back down to pre-covid levels. so it seems that things are starting to normalize in the market as well. dani: i guess this is the problem, we talk about the long and variable lags. everyone seems to have their own

estimate for when that is. i am assuming your position -- when can you actually do that in such an uncertain timeline? >> we reckon that it is quite likely that the inflation surprises, especially in the u.s., will remain pretty positive for markets. potentially it can support things a little bit. but what we reckon is that it makes sense for us, casuals are very attractive, it makes sense for us to try and capture it for a little longer. that we move the duration for something out of range, but for

a bit longer than the tightening cycle might offer. in a nutshell, we think we are in a pretty late stage of the tightening cycle. the quantity of interest rates spreading through the system is very significant, it is the highest we have seen in previous times. the lens of this tightening cycle is rather short, meaning the fed has been very rapid. dani: it has certainly been a strange cycle. we are running out of time here, and i want to get away from the macro a bit and talk about ai. i have a board in front of me with some of these ai tightening's. they kind of touch it, and here

is some of the performance yesterday and today for the japanese stock. we are seeing some of these niche ai names correcting 20%, 10%. are we starting to see some of this ai tight bubble deflate? >> what i found interesting in ai is that companies benefit in terms of performance are the u.s. gaps. the performance would be to the tune of 3% or 4%. large, quality names that are

already installed. what i found more attractive is that when you dip into the acro indication of ai, it means that you could have a significant boost in productivity, and services. it adds a lot of growth potential in developing economies. back to the inflation question, it is likely to cool down a lot of the inflation pressures. we think what is interesting is that it's not a new market. dani: it's totally fair. it kind of came to the fore just because we had chatgtp and all of a sudden us normal people can access it. that's all the time we have four, thank you so much. coming up, more noises have been

hurt in the hunt for a missing sub. we will have the latest for you on that search, next. this is bloomberg.

dani: search teams hunting or missing submarine near the wreck of the titanic are zeroing in on an identified detected underwater. the noises have been picked up in the past two days by the canadian aircraft with sonar devices. five people were on board the titan submersible which is estimated to only have a few hours of oxygen remaining. we will bring you any updates on the story as it comes. elsewhere, the u.s. federal trade commission is suing amazon, alleging that it duped

customers or consumers rather into signing up for its prime membership service, making it deliberately hard to cancel. the ftc has riesling targeted subscription cancellations, proposing a rule that would make -- require making as easy to cancel as it is to sign up. i'm going to be honest, i've never tried to cancel prime, but it does not sound easy. another story we are watching today has been happenino pst fe. it is agriculture. look at this price chart. corn, soybean and wheat have seen a meteor rally, as much as 30% and a little more than a month. the issue here is whether dryness is affecting crops in germany and russia, more rain is also needed in northwestern france and parts of eastern

europe and ukraine. these -- the issue is we are expecting little relief in the next two weeks. there's also concerns about el niño. we did see some of these prices pulled back slightly this morning in the future session but they are still elevated, up 30% in the past month. coming up, back to the macro stories. a week of central bank decisions. today alone, several banks, but how much will they hike by? harold -- how careful is the balance need to strike? this is bloomberg. ♪

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dani: good morning and welcome back to bloomberg "daybreak: europe." i'm dani burger in london with the stories that set your agenda. fed chair jerome powell signal rates are heading higher, saying two more hikes this year is a pretty good bet. >> in the process of getting inflation back down to 2% has a long way to go. nearly all fomc participants expect it will be necessary to raise rates somewhat further by the end of the year. dani: another big day for central banks. you came patient reading comes in harder than expected for a fourth month. we will bring you the latest. plus bitcoin jumped above $30,000 for the first time since april. crypto, the one risk market that is its own story, but elsewhere

it's been a difficult week for stocks. it started out looking like rebalancing, maybe you sell stocks and go to bonds. but yesterday it looked like it turned into a true selloff led by big tech names, led by some ai names. the nasdaq yesterday falls more than 1.3%. we continue that drop today, off about .3%. the yield curve has dropped back below 1% too. it managed to push above that level earlier this morning but we are back below 1%. it is flattening, led by the front end of the curve. all of this might be shaken up even more today. it is a big week for central banks and the era of jumbo hikes is a thing of the past, that does not mean every major

central bank out there will be following that path. today we may be in for surprise or two. our markets reporters joins us now for more on this. s&p, bank of england, nor just bang all meet today. it's difficult to keep track of, but you've been doing it. >> the snb is the first one to meet at 8:30 this morning. most economists are saying point between eval percent hike, but the market has gone to pricing a lot more than that at the moment. the snb only meets four times a year so the next time they could meet will be in september. perhaps it don't want to miss the next wave of hawkishness and don't want to be left behind chasing their tail in december when the ecb and the fed might be done hiking. in switzerland they don't necessarily have an inflation problem but we've heard from the

snb president a few weeks ago saying even though inflation is relatively low, it's not a good idea to wait and i would rather hike or now. so watch out for that one. in norway they meet at 9:00 a.m. economists are split, but it is a slim majority for 25. the market is priced in the middle. a lot of local banks are calling for jumbo hikes, based purely on the inflation outlook. it sounds similar to what is going on in the u.k.. they have an unexpected rise in core inflation, higher than expected wage increases and some improving prospects for growth. it's really tempting for them to go for a jumbo hike today. they've seen their currency weaken a lot versus the euro. they risk a devaluation of the currency slightly like their neighbor sweden has seen. dani: i've been fighting the

urge to call it a hot course summer all morning, but i've been doing it. >> the big one is at noon today. the unexpected rise in core inflation saw yesterday alongside that really hot labor report that reflected a lot of wage pressures going on in the u.k. labor market. the market is pricing 35 basis points for today, so squarely in the middle. the next two meetings have priced in 75 basis points. the market is thinking is going to be a jumbo hike, whether it's today or in august. we whitley see an argument for front load hikes, and could we possibly see a three way boat split? -- vote split? i will have an eye on that as well. dani: let's talk more about this.

sara, thank you so much for joining us. i'm sure it's going to be for you and insane day. are you expecting any surprise jumbo hikes from any central banks today? >> we are expecting to see 25 basis points across the board. we could see an upside surprise. thinking about the bank of england in particular, the data we've had on inflation, on wages , make some of them really worried. we may end up with a two way or three way split. i would expect some policymakers to be voting for a 50 basis point hike. the reasons why we don't expect there to be a shift back to 50 basis points, this meeting, we haven't had any signals that that is what they're planning. it's not a meeting where week get to forecast, that comes at the next meeting in august. and the question of time lags,

the like impact of previous rate hikes which affects all policymakers across the board. dani: when you look at a market that is pricing in somewhere near 6% terminal rate, is this a kind market andrew bailey wishes he had a press conference to talk the markets down? he has done in the past. >> we would not rule that out. we would expect there will be a lot of explaining in the minutes about the reasons for the decision. we will have a panel with powell, bailey, lagarde, and we should get some interesting discussions there about the direction of policy, what the policy drivers are, and in some of the other meetings as well. but i'm not sure the market is going to be very happy about waiting until next wednesday. dani: in the meantime with markets imagination, what is the danger if bailey and the boe

does price it in right now? can the u.k. economy handle 6% terminal rate? >> it feels as if it would end up in recession. >> the growth outlook is weak but all those households that are likely to struggle with higher interest payments, you have households that are mortgage free and have savings in the bank but stopped generating further income. and what point do you run into the wall? but 6% would certainly feel as if it could end up being very risky for the economy. dani: we also saw the swedish krona hit a new low versus the euro this week.

do any other central banks risk the same thing of being left behind if there is a renewed hawkish wave from central banks? >> boj is the outlier so far. i think i'm not expecting they will move in the coming months, but so far they have really pushed back against the tide which has been to reintroduce hikes in the case of bank of canada. so everywhere wage growth is still stronger than central banks would want to see it. labor markets are still relatively tight, core inflation is above where it should be. so the need to tighten continues. you've seen a big run up and rates in a short space of time and the risk is that just as you

are doing that final rate hike, the economy turns down into recession and you can't reverse that in a hurry. dani: we will get some jobless claims from the u.s. and the past few data points have surprise the upside by about 25,000 claims or so. is that a real trend? can we call it a trend? does it seem like the labor market is starting to soften? >> two weeks hinted at the beginning of a trend, if we get another high number today i think that will signal that we are likely to see a weakening of the labor market. so it was a big step in real data and we tend to see the unemployment rate and payrolls really following quite closely. so another big number today that i think would confirm what powell said yesterday and last week, a rebalancing of supply and demand in labor markets. there are signs that it is easing.

dani: maybe he will incorporate it into his new view if it is priced the upside. thanks for joining us. breaking news now, ses said it's talks with intel sat on a possible merger have ended. this would have been a $10 billion merger and would've created a satellite giant trying to fend off some of the joint competition. saying those talks have a need ended. keep an eye out for those went trade starts, we might see a fall in share prices. as we had to break, yesterday fed chair jerome powell's testimony, out of everything he said, the most important thing we learned is that jay powell is indeed a deadhead. take a listen. >> i'm excited to see the public

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dani: world leaders are in paris this week as french president emmanuel macron tries to build support for overhauling the global architecture. the summit will be a key chance to address issues such as climate change. francine lacqua is there with the guest. printing: we we hear covering

the event all day and i'm delighted to be joined by my guess from the foreign ministry of france. there is a lot going on. there are 30 or 40 heads of state. what conclusions are expecting from the summit? is it the idea that we need to get more momentum? >> we want to create a new consensus. i hope this summit will send a very strong signal that there is no environmental transition if we leave a country behind. so we should send the signal that countries should not have to choose between fighting and protecting the planet. >> the need for getting away from fossil fuels, is it coming

from the countries at the summit? >> some experts have assessed the need up to $1 trillion. so that is a huge gap, but we should not forget that there is a need for funding when it comes to fighting poverty. finally the third challenge to want to tackled today's the fact that there is also a liquidity crisis that comes as an impact of the pandemic crisis and of course also the war against ukraine. >> you have the president of brazil, the president of south africa, you also have janet yellen alongside the primary china. are you expecting them to find a way forward when it comes to financing debt? >> it is interesting to see all the leaders converge in paris. there's more than 50 of them and also the president of the world bank. we have also the international

financial institutions here and we hope they will converge around the strong signal. yesterday there was an op-ed bite leaders including president joe biden to form this new consensus. we need to reform our financial institutions. they were created in 1945, and it's now a new world with new challenges we need to conquer. >> it's extremely complex when you're dealing with higher inflation, and everything depends on them. do you think we will find a consensus that will actually lead to action? >> yes, we see tracks of discussion that are already open. there more than 50 sessions that will take place today to discuss the various issues. when it comes to financial

institutions, you should not be assessed only on economic indicators. we need to take into account the fact that countries are facing a lack of bowel diversity or pandemics in these need to be taken into account by financial institutions. we also need to help the private sector look at opportunities in developing countries. >> we have the world bank, we have the imf, it's about transferring from the richer companies to the poor. >> first we want to deliver on her promises, and there was $100 billion that was promised. i hope today we will hear from economists that we are finally there, that the rich countries

have played a large part in financing what they promise in the cup 21. but the need to move forward, we had a discussion about special drilling rights and we want this to be a large effort led by different countries. you mentioned debt spiraling because this is a huge issue. the fact that the prime minister of china is attending and participating in the discussion will help also find a better treatment for the debt trap. we are asking all the countries to do more. that was the message also sent to countries all around the

table at the g7 that agreed on the special rights. we don't expect pledging, that's not the role of the conference. the role is to find a new consensus on a transition and how to find it. there's also discussion on innovative forms of funding. >> are you frustrated that because of the economy is getting worse, politicians seem to have less in common. so they talk about talking about doing more, but it is frustrating that we never actually get to the endpoints. >> we want to find a new momentum in the movement at this point. we have the g20 in september and there is a hope that this can

bill momentum to move forward, and we need it. we see all the players trying to play on the divide in the world and say that rich countries are not supporting enough the developing countries. but today we have 50 heads of state here in paris and it shows there is a will and we want to go for. >> will china commit? >> i think it is a good signal that the prime minister is here. they are the largest holder of bilateral debt, so this is a very important discussion. we know that some of the countries that are in the debt trap, including zambia and others, are also attending the summit and we hope this will help them get out of this. >> thank you so much for joining us today. i will be here throughout the

day and we have a couple of heads of state and key stakeholders speaking with us. dani: looking forward to that. she will have a lot more from paris, excluding an exclusive interview with the french finance minister. he will join us exclusively from the summit. in the next hour, we will speak exclusively with the deutsche bank ceo christian sewing. stay with us for that. this is bloomberg. ♪

dani: volkswagen technology said the ev battery push is proving to be one of the company's biggest challenges.

he spoke to our bloomberg germany correspondent. >> it's only possible because were looking for perfect team. we are little bit behind, so we need to catch up. >> one of the challenges a lot of people who are little further ahead, like tesla, they have had issues with scale. volkswagen are masters of scale. what can you do to avoid some of the problems competitors face? >> the advantage of power core or battery companies that have their own firepower, and to have

the ability to go fast. it's the firepower of a complex company. in the technology is important because the increased complexity is what gave us speed. >> in terms of those bottlenecks, is it labor, machinery, raw materials? what are the things you need to smooth out? >> everything is a challenge in that business. it's not only the battery factory, it's knowledge about battery business. the right people is a challenge. equipment is a challenge. getting the minerals is a challenge. dani: that was the be w technology head speaking to

bloomberg. there is still lots ahead on bloomberg television. in the next hour, guy johnson will speak exclusively with the deutsche bank ceo, in an interesting time for the european banking sector. in the french finance minister will be joining us from the summit for a new financial packed in paris. we were just there with francine lacqua. we will also speak to the ukrainian prime minister from the ukraine reconstruction conference in london. that will be at 1:30 p.m. local time. we will also be looking at jobless claims from the u.s., an exciting day head with lots of that bank decisions. stay with us. this is bloomberg. ♪