dani: good morning. happy friday this is "bloomberg

daybreak: europe." i am dani burger in london. while bond yields rise, the yen breaks. decelerating momentum. the chinese economy continues to lose steam as -- contracts. they call for calls -- policy support. plus, more clues on future ecb hawkishness. inflation numbers from the u.s. also had today. good morning. the recession everyone has called for but no one has seen. really strong u.s. did it yesterday that set the bomb market alike. a move over the past two days of 20 basis rings. we are now back at the high. here are for s&p 500 futures. oh sure you bonds in a second.

but bonds do not care -- maybe it is not they do not care, but they do not see a recession, that is what we are trading on. not even a soft landing but a no landing. you can say we are pricing into a more hawkish fed. can stocks continue to trade where they are? can apple continue to hit new record high after new record high. we are close to that $3 trillion market cap. yields are still marching higher on the front end of the curve period look at that pickup. that is data coming in. initial jobless claims. the spot of really strong data. we are now pricing in a june 2024 peak in sulfur. that also field a selloff in week two. a lot happening in the asian market trade session happening. charlotte is on it. charlotte, what is market

reaction? >> the situation on china is not looking good. the latest pmi data showing that we see activity further contracted. in the nonmanufacturing sectors, momentum is slowing receipt chinese equities as sly -- a slightly higher. investors -- knowing the economy will be slow. what is changing now is that investors will have high expectations for the chinese stimulus to come. what they want is one thing, whether it might not -- whether it may come is another thing. all eyes on that is coming up. dani: thank you for that. that is bloomberg's charlotte yang. you can get around to the stories you need to know in today's edition of daybreak.

dayb is where you want to go. sir core rises. we will have all these stories for you throughout programming, including our weekly segment on our deals report. let's get to our top stories. morning roundtable with bloomberg's lizzy burden and valerie tytel. i'm to start on the market story. it was a painful day yesterday. lizzy: it seems like it is not breaking the u.s. economy yet. traders are still pricing in a nearly 50-50 chance of a second hike by the end of the year. bonds have been sold across the curve. bonds are jumping but was at 1.50 basis points. dani: a banger of data released. the claims rug was pulled.

this is the remarkable thing. positioning -- i don't know if you guys at the latest treasury survey but we were at the highest net long since 2010. i mean, again, the positioning. the bond is definitely moving against it. valerie: that revision to first quarter gdp was impressive. it was all down to household spending. that component rising to nearly a two-year high. does not the recession the fed has been looking for. the narrative that a lot of those economic -- were hanging on is the trend on jobless claims. that is completely reserved -- reversed. continuing claims are trending lower. dani: the other effect is what was done to the yen. it is below that -- level. if a go back to this february

narrative about our start up being much higher than it was thought. the neutral rate possibly being much higher. it sir -- sure does not feel like we are at surgeon yet but the move in the market yesterday was impressive. we even had a new 50 year high. 10 year treasury yields are now part -- are now past that as well. dani: is -- and that is doing it just. lizzy: did not overdo wall street yet. china revenue has actually beat projections. dani: i don't what -- i don't know what company nike is. [laughter] obviously market reaction was not good. the forecast was not great. one thing that is good as they are starting to work through the

inventories they have had. inventory levels were basically flat. i do think there is a bit of good news coming from earnings. valerie: we followed h&m who has been struggling with an inventory got really has started to turn it around and close it out. they have held up their margins. his is -- it is easy to say profitability should be strong. it is not necessarily weighing on all retailers. maybe some of that good news will hit nike later in the year. lizzy: you still say trainers nike -- trainers dani? dani: i do. what else is happening? [laughter] lizzy: supreme court effectively ending affirmative action. it really ends decades of

precedent. it is all the more fascinating. it is the first time you have to black justices serving on the court together. dani: their dissent is really worth reading. it is very biting on this decision in terms of what it means for the future of universities and work lace. it is very conservative. biden, before he went to new york yesterday also had a statement around noon u.s. time. this is what he had to say. pres. biden: discrimination still exists in america. today's does not change that. a student had to overcome adversity on the path to education. college should recognize and value that. dani: we are expecting more decisions today. it is the last day for the

supreme court to hand down decisions for the summer. we will likely get a decision on whether or not president biden can go ahead with his decision to cancel about $20,000 of student death -- student debt per person. i want to get to some of the other things. we will get some euros era data. we'll get french data around 7:45 a.m. then around 10:45 we will get some more data. 5.6% is the expectation for euro area data. 11:55 a.m. -- guys it is the end of an era. today is the first official day of dollar libor, after 50 years of history, it is finally gone. then we will get pce from u.s.

my see a softer pce than april. how will you be commemorating the end of it? valerie: think leah don't work on the trading desk anymore but my heart goes out to all those traders. it is a bit more pain. today is month end, quarter end. be prepared for some czar price action. it is always the likelihood that these popular positions get squeezed as we loose the quote -- as we look to close the books period -- books. dani: we get u.k. data as well. lizzy: interesting after we had the last data showing a 13 month high despite this raft of rate hikes. this was between the 12th and 13th so maybe that jumbo hike would have had an impact. we heard from the bank of england from -- who is leaving the committee and she said, you

need to wait and see the hikes. dani: we will look out for you and about 50 minutes time to break down that release. valerie, lucy, thank you so much. lizzy burden and valerie tytel. coming up, we are joined by bank of montreal global fx strategists, stephen gallo. what does he say? that is next. this is bloomberg. ♪

>> we have always face a question, is a recession going to happen? we have shown our ability to maintain growth despite extraordinary negative environment that has been created by the war. i'm reminded that it is a narrow path that we are treading, walking through, in terms of supporting growth within our economy. dani: that was pascal donahue on maintaining growth in the tale of headwind period u.s. data shock ensuing in selloff and treasuries yesterday is emboldening bears. dollar-yen did breach 145 for the first time since november. it is still trading just under that level.

less bring in stephen gallo, from bank of montreal. -- do you risk betting right now? stephen: i don't think we are that far off. by and large, central bank who is looking -- or a finance ministry looking, there are three things that really matter. one is the speed of the move. the other is the level of the currency. broadly or at one exchange rate. third is the drivers. rooms of the speed of the move, the seat of this year has been with less than what we saw in 2022. the boj, that is a better situation overall for the boj.

we are getting close to their intervention zone, to our it was. from a monetary policy perspective, japan is cornered, they are cornered by the weakness in the rmb. we're having a downward impact on the asia block, certainly currencies that are more free-floating than others. and of course, the g7/g10 where there are still firmly in tightening mode. dani: you cannot argue that the drivers of this do not necessarily make sense. so all boxes are not ticked off. can we pause for a second on what this means for japan specifically? how much of a headwind is it for japanese growth to have headwind around these levels? stephen: i'm not looking at it so much from a growth perspective right now.

i don't think it is a headwind for growth, if we were sued -- if we were to see fossil fuel prices rebound in the end go down further, that becomes a potential risk and headwind to growth. i'm not really looking at it from the specter of growth, i'm looking at it from the perspective of risk that the boj loses control a bit of the currency. from that perspective, with psych policymakers, the mof, they may be trying to older here until the late july policy decision. to sum up for you, even though intervention is more likely, it is not intervention but a policy shift that will come in july. that will put a bit of a floor underneath the yen. the issue that the boj needs to

be worried about is because they dragged their feet so long on this policy shift, the market is not going to be impressed with tweaks. they're either surprised somehow or they have to go all the way with some type of monetary shift if they are going to weigh into the end of july. that is the risk that they take, in my opinion. dani: we saw last time how costly eight-week was. japan is part of this narrative that is building this year. it is not central-bank cohesion but divergence. the haves, have-nots, maybe the haves too much. when it comes to tightening, how are you thinking about the evolution of that narrative from the back half of this year? stephen: i think, look, based on what came out of sentra, the panel discussion between some of the major central bankers, earlier in the week, i don't

think the likelihood of central banks coordinating monetary policy i.e. moving together, hiking at the same time, cutting at the same time, adjusting the balance sheet at the same time, whatever it may be, i don't think that is high. what is clear is that they are coordinating their thinking. i think they are pretty much on the same page, including the boj. they can all clearly see where the risks are. right now it looks like they are all pretty much concerned. even if you did not hear it, they are all pre-much concerned about the risk of not doing enough with monetary tightening. i think that is where we are. it leaves the boj in an awkward position. it is not clear that they can exit this monetary stimulus that they have built up over decades smoothly. that may be one reason why they are dragging their feet. to sum up, we expect a policy

shift of some kind in july. longer the dragged their feet, the more they have to do to impress the market. if they don't do anything july, i think they will move furtively into the physical intervention camp as the base case. dani: quickly, if we do not get that policy shift in july, do see this trade accelerate? could we go 150, could be go even further before intervention happens? stephen: it is possible. i think if we see 150 before the policy discussion, the risk increases measurably from where we are now that the boj will do something. speed, level, drivers. if we get to 150 and a very gradual fashion, i don't think the boj will be as worried as if we get to 150 within a day or within a couple of days. you have to watch the speed, the inflation data, the monetary

policy adjustments coming out of central banks and japan. and you have to watch the armed b. -- march the -- watch the rnb. dani: china has disappointed again. what are you looking out for? stephen: they are shifting away forum -- from an export led growth model. which means private demand needs to play a greater role in achieving -- growth and mainland china. that is difficult to do when you have been relying on an export led investment led growth model by now. that will take a while for china to get there. in the meantime, it makes sense, totally reasonable for the currency to be doing what is doing. i do not think this is a

distressed move in the rnb. the pboc will try to tweak the speed but nothing says to me that they are perturbed by it or it is not being driven by capital flight. that is important. this is a purely policy driven move in the r&d. dani: for those who said 75 was the level and they will do major policy shift -- that is all we have time for. thank you so much for joining. enjoy your weekend. stephen gallo, fx strategist at bank of montreal. coming up, nike fails to impress their investors. we will bring you the top line from that, next. this is bloomberg. ♪ the queen sleep number 360 c2 smart bed is now only $899.

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dani: volkswagen has replaced the ceo of their brand audi. -- will take over leadership of the label in september. happens is the carmaker is trying to keep up with the electric car race. we got into the story earlier. questions from u.s. politicians over work with the yuan project. the state backed the bank of china on being relatively low-key. bloomberg understands that the bank received a phone call from a republican congressional aide asking about the project. nike shares fell in late trading after the company's outlook for the full year failed to win over investors. sportswear giant expects revenue to grow in the mid single

digits. let's get to our consumer goods reporter. what are some of the key takeaways for you on this report from nike? >> revenue raised more than expected. i was the good bit. as you said, shares fell, that was from the outlook. the other point is that nike has been dealing with excess and inventories which means it has to stocks sitting there at a discount. creating margins. those increased slightly. overall, it is a slightly mixed picture. dani: part of that mixed picture, something we have seen for many retailers, inventory. h&m yesterday we saw have a huge inventory.

they had a huge surge because they were able to clear out some of that huge influx. thus nike done with that that's how has nike done with that? -- how has nike done with that? >> there has been a slight increase but that could play into profitability later on. dani: i know china sells for closely watched. how did the company perform when it came to the greater china region? international brands have suffered because of things like boycotts and the company reopening. china -- nike did very well in china. that is another bright spot, especially when you compare to the european region, which has been sluggish. it looks really good. dani: thank you so much. that is bloomberg's sasha -- bloomberg's dasha on the latest nike story. with nike post-market, it did

fall. it is down about or .4% in the post-market trade. -- 4.4% in the post-market trade. look out for houma. any of those types of companies, after board hours. we'll talk a china and the war in ukraine. leaders are beaten -- leaders are meeting in brussels. we will get to maria tadeo with a live report, next. this is bloomberg. ♪ hi, i'm jason. i've lost 228 pounds on golo. so when my doctor told me i needed weight loss surgery, i knew i had to make a change. golo's helped me transition to a healthier, sustainable lifestyle. i'm so surprised just how crazy my metabolism has fired up. i have a trust in golo 'cause i know it works. golo isn't like every other program out there, and i'm living proof of it.

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dani: good morning. friday addition of -- friday

edition of "bloomberg daybreak: europe." love possible explanations. it is the end of the quarter, maybe some rebalancing. the fact remains that the data coming from the u.s. yesterday was really strong. growth revised up, inflation revised down. claims, the rug pulled. maybe this is an equity market is pricing not just a soft but perhaps no landing. the stock market is pricing in two hikes. it is peaking in a terminal rate that is higher than pre-svb collapse. a bond market that is having bowls abandoned their position. jp morgan said they will technically abandon their bond position there. we also saw a record high record

long in the latest jp morgan survey. profile bostick was in dublin. he had a rare bit of disagreement with jay powell. romain -- ra -- raphael: -- or we risk draining too much momentum from the economy. dani: are they going to end up doing too much? that is as much of a sick burn as you will likely get when it comes to bank speak. market is not listening to them, is listening to the data that also said dollar-yen through 145. he came down after we had some job loaning. we were just speaking to stephen gallo. he has said we are getting closer to an intervention.

he also said more likely than not it will not be intervention, it will be a move, a policy shift in july. something to look out for. let's talk about what is happening in europe. european leaders are continuing a two day meeting in brussels that talk about security guarantees dominating. speaking to me and alex -- speaking to me yesterday, the ukrainian ambassador to the u.s. urged more support for her country, including a path to nato membership. >> ukraine has the inspiration to become members of nato. i think all nato countries have been helping us in these past over 200 days and we have been grateful. all of us are democracies. we are not interested in doing anything and russia. we have to take into account how weak and risky the situation in

russia is and think about contingency plans, what we have to do to protect the civilized world from russia. dani: the ambassador there. bloomberg's maria tadeo has been at following the leader summit in brussels. maria, you heard it there, they aspire for nato membership, what are the chances of that happening? maria: the summit continues and went on until 1:30 in the morning yesterday. they are in their conclusions. there is a document that ukrainian leaders really need period the message that came out of brussels yesterday at 1:30 in the morning is "stand with ukraine." also now, a new references since the european union agrees to contribute to future security commitments. is that nato membership? no.

but we move into the debate about what can be used to break this pattern of aggression from russia with ukraine. nato is the elephant in the room. you heard it there from the ambassador. ukraine still has aspirations to one day join nato. this is very clear for both ukraine and nato. the country cannot join when the war is going on. the question is, is there now a clear path to membership? that will come up next month at the meeting. i expect we will see you -- in terms of what can be offered to ukraine. if you do not get membership, what do you get in between? what could allies provide ukraine and that stopgap, so the country is able to defend themselves? dani: ukraine is not the only

topic. when it comes to geopolitics, it is ukraine and china right now. with china, how much of the conversation will feature de-risking maria: they talked about security yesterday in terms of the war. we'll talk about security in terms of china. they want to not decouple from china, that is too late, the train has left the station. they also remained that trade between china and the european union is the most part beneficial for the european union. they say there are specific areas where it could be dangerous. de-risk is a terms that is well-liked the u.s.. they say no decouple, yes de-risk. it comes down to the different

european countries to agree on having a want to trade with china. we know there are big differences. mostly it will not end at 1:00 a.m. because i do want to have a weekend from time to time. dani: considering you woke up a few hours ago, that is the point in the day where think he would start to see things. thank you so much for getting up early for us, tracking that whole meeting. bloomberg's maria tadeo. for now, still the same in brussels. security and russia is now in question after -- president putin was under attack. question about the stability of this nuclear power. >> over 24 hours, flat or putin faced what may be the biggest threat to his quarter-century rule. the uprising has raise questions to putin's grip on power. the more extreme view on the war

in ukraine. >> this is the most overt display we have seen so far in terms of a public challenge to his authority. it also raises concerns on whether putin has control on his security services if they were able to move through moscow. >> i think that there may have been at the tatian that he would gain further support from russian soldiers and maybe this would spark protests and other russian cities. i think that may have played into the fact that he decided to turn back. >> has turned russia security into question. after 16 months with little success on the battlefield, and now, ukrainian counteroffensive followed by a muted tea of his own forces. putin's future might be in question. >> question about whether to

continue to support vladimir putin in election next year. >> many think it is good for russia's counteroffensive. there have been signs of weakness. there have been some reports that ukraine has made some small territorial gains but it is unclear at this point. the alternative view is that because of the weakness and turmoil and russia, the russian defense ministry and crime while decided to strike back even harder and do something out of the ordinary to distract from the domestic, political struggles. dani: to watch the four-port go to bloomberg quick take on bloomberg.com. there has just been published an interview with the alianza ceeo. -- alianz ceeo saying investor

sentiment is really skittish. what do they want to do? push more into alternatives, real estate, private credit. it is yet to be seen how much investor appetite there is for that specifically. the ceo saying that everyone assumes bond flow has to come back when we have a peak in interest rates but the question is, how much we go into passive strategies and how much goes into active. a real re-think moment here for allianz. despite a small uptick in may, a below 50 reading still signals contraction in the sector. coming out of all district covid lockdowns, investors were expecting china to shine. that narrative is almost gone.

halfway through 2023, ages economy is still facing a slew of problem's. as the subjects -- subject of today's big take. let's go to shanghai. how are a lot of these economic challenges related in some way? >> in the past, you have seen one or two challenges. but now, it seems like all of these challenges are coalescing at the same time. in terms of how they are related, you can draw a venn diagram to see how things to see -- see how things are affecting each other. how price markets are affecting local governments because of the

sale of land governments. they have to revenues in other ways and. on debt. can see how they are all related. dani: now that we have this concern. would have you been hearing across the country? are you -- other hopes that there would be more stimulus and could stimulus solve some of these problems? >> our issue at the beginning of the year was consumer rebound and it has fizzled. to see what it is like. a lot of this is in andor. we spoke to some small shopkeepers. one shop owner who has been in business for more than two decades exporting artificial christmas trees. she will say how this year she

is just hoping to survive. another shop owner will say that she expects sales to drop 50%. this is a time when things should be booming. they are all coalescing at the same time. we went to these neighborhoods near alibaba headquarters. they were telling us how property prices are down 30% and some of these buildings, a lot more than the broader market. in terms of stimulus, a couple problems. first, what are they willing to do to match stimulus? then, they also think that seamless is not going to solve the problems. a lot of the problems are structural. dani: apologies, i have to jump in. we are just out of time. a lot of issues with the

stimulus there. if folks want to read more, the excellent big take is up now. that was our bloomberg correspondent in shanghai. coming up, $1 trillion in volume vanishes in the first half. we will be talking about the opportunities and setbacks in m&a and ipo this year. this is bloomberg. ♪

dani: 2023 is looking like one of the worst years for takeovers and ipos in a decade compared to the first half of last year. $1 trillion down as m&a and ipo volumes continue to drop. asset management, i spoke to the president of iva equity, who

gave us his outlook. -- president of private equity, who gave us his outlook. >> you cannot count on purely available, cheap financing, revenue growth to deliver your returns. you have to generate those returns and create growth yourself through operational improvements. dani: with me earlier this week. joining us now is our bloomberg ceo -- bloomberg reporter. some deals have been happening. we had news that circor has amended an offer from kkr. what is the news there? >> there has been a bidding war. kkr teams to have won in the

end. they have given it over from kkr . this is one of those rare deals we have seen where it is a bidding war. and asset gets bought in a rather fast way. most likely these days we're seeing deals being delayed, put on hold. so many details from assets being put on hold, facing challenges. this is one of the bright spots, definitely. dani: that is a good point. i've spoken to a lot of private equity who says that not only are they not bidding anymore but when they are sold, it is done in the background. it is not a public process anymore. and it is slower. in this more slow world where there are less deals being done, what is the breakdown? who is suffering and where has

been more active? manuel: in terms of sectors, industrials is one of the most receding sectors we are seeing. we are seeing a number of very interesting industrial deals. example, here, we saw the buyout of yoshida in japan. that was a big deal. the idea of a flurry of deals across has definitely wants of the year. the outlook remains firmly bleak. we have seen a number of interesting deals, some big and permanent deal. some are seeking to buy some i'll tech company survey pipeline. that has been surging as well.

across the board, dealmaking activity has been fairly weak. dani: we are hoping you can join us weekly for our friday were arts. let's hope there are some deals for us to discuss. when well -- manuel there. pakistan has won initial approval for a 3 million but dollar -- 3 million -- $3 million imf bailout deal. pakistan has had nearly two dozen bailouts since the 1950's. in the u.k., the court of appeal has ruled the controversial plan to deport asylum-seekers to rwanda is unlawful. it is a blow to rishi sunak who has pledged to stop migration in

a key pledge ahead of a national election. what was the final verdict? >> this has really been a controversial plan from the beginning. not a lot of people were surprised about the verdict. he mentions that they deemed it was unlawful. it goes against sunak's commitment to stop conflict -- stop immigration. the difficulty has centered around three key problems. the process itself. people were against the process of sending migrants 4000 miles away to rwanda. the second was this idea of rwanda being a safe country for fling migrants. this is something i spoke to the president of rwanda about last month. take a listen. >> by making progress on this front, the economic front and providing for our people, we are dealing with human rights

issues. that is the thing, the needs of people, that is what you are looking at. dani: that was president speaking there. not enough to convince the court that this was for migrants. the third thing is the cost. u.k. has already paid rwanda about $130 million for this plan. there was a lot of chatter yesterday about how much it would cost to send one migrant versus keeping migrants here in the u.k.. this not the end. the president says they plan to appeal. dani: there is such a huge economic angle. the cost and the u.k. needs people. we have a labor issue. thank you, so much. this is bloomberg. ♪

dani: as we head closer to the end of the hour, let's bring on bloomberg's tom mackenzie. the show is coming up in a few minutes. also coming up at the start of your show is u.k. data. tom: if you did not notice, it was about the markets and it is about the markets today. the forecast will come out at 7:00 am u.k. time. do we want a stronger gdp environment were they are looking at additional rate hikes? it will come in at 0.2%. that will drop at a time we are wrestling with challenges. that links to the mortgage market. nationwide mortgage numbers

coming. dani: are you going to be able to get mark cudmore talking about anything but the dollar? -- dollar and the yen? tom: that will be a challenge. he is obsessed. we are down through the 145 sector. we are looking for any intervention from the ministry of finance. that has not happened since 1998. we will see. things seem to be getting more extreme the day. dani: i am being told you will have an ai conversation. i am hoping that is not been led by your ai avatar. tom: it will be me. it will be a portfolio manager from 91. she is looking to invest towards ai that helps us move towards a sustainable future. artificial intercut --

intelligence and link to sustainability. dani: not all doom and gloom. tom, looking forward to that. tom mackenzie. coming up in a few time "bloomberg markets." in the meantime, the yield curve that flattens in the u.s. even more. we are still having some buying of duration. overall, hot u.s. data continuing to impact these markets. we will see how european markets open up and about one hour's time. this is bloomberg. ♪

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