mlion people's lives, it's overwhelming. it's everything. yousef: good morning. i am yousef gamal el-din in dubai. welcome to "bloomberg markets." the u.s. markets are closed. the rba hold rates but warns further tightening may be needed amid inflation pressures. recession risks are a key segment of the u.s. treasury yield curve and approaches the most inverted level since the 1980's. the tit-for-tat technology battle between china and the west escalates as china restricts exports of key metals.

let's get you a check on the markets because you have u.s. cash equities and treasuries that are they will resume trading on wednesday. investors mull the risks and brace for upcoming earnings. we are lower on the stocks europe 600 initially. we are up by 1% -- .1%. let's get to the big mover this morning which is australia initially out of the gates with repricing of the back of the reserve bank of australia decision. the bulk of the intraday gain on the aussie three year have been erased. the rba is holding the cash trade of 4.1% predicted by 60% of economists surveyed by bloomberg extending the series of staccato like healthy moves. the euro-dollar is 1.0896. brent crude higher by 1% as we address the latest salvo from

opec+ as saudi arabia and russia tried to prop up prices by curbing supply. let's get detail on the treasury curve inversion because they are back to levels that we last saw it in march before easing on u.s. manufacturing data. the levels are basically some of the same that we saw on the back of the 1980's. we are joined by our global macro economist who joins us now. what is your initial read on the extremities of the yield curve inversion? what do you take away? anna: i think from the macro perspective we do believe that it is a recession signal. it has been a pretty reliable indicator even before the covid recession which did not have anything to do with inversion to a large extent. we do think this is signaling a

recession but there are also technical factors that are probably playing a role. the overall macro economic signal. yousef: bond investors are betting on a recession and will need a brutal recession if bonds are going to outperform. i'm wondering what a path to a potential soft landing could look like or is that now a needle in the haystack? anna: we think surely there is a path to a soft landing but it is a very narrow path. we think the probability is low. let's say we see a smooth decline in inflation and core inflation from here going back to target. perhaps the labor market starts to ease. again, it is smooth and there is not too much of a rise in unemployment rate across the board and that should allow the

central banks to potentially pause and start easing. this is an ideal scenario which the central bank wants to achieve but it is unlikely because the transmission is nonlinear and markets are nonlinear. we are yet to see the hit to the real economy from all the tightening we have seen so far. we do not think a soft landing is likely at this point. yousef: i want to rope in the u.s. economic data that we got in specifically to ism manufacturing data. it is a shocker. it does not matter how you look at it. we have a chart that tells a story. eight straight months of contraction and limit -- and employment falling below 50. is that a growing weakness in u.s. economic activity? anna: it is not just in the u.s. but across the board and including europe.

that shows we are seeing real weakness in some parts of the economy and resilience that we see on the surface is just driven by consumer and the services sector. now, that is mainly related to those covid related excesses, excess savings and we talk about it so much. that is fading. those tailwinds are fading and we think it is a service sector that will start adjusting soon to that manufacturing weakness and closing the gap rather than the other way around. certainly, there is weakness. it is patchy and only in certain sectors, but we are expecting that to go out in coming months. yousef: how do you approach the strategy point of view because we are gearing up for earnings season. i'm not sure what you are expecting, but the street it's getting more cautious. how do you advise clients to go around the next few weeks?

anna: we are cautious from a multi-asset perspective, and this is the next reit-six months. we are underweight equities and underweight credits. we are overweight government bonds. there are some use within those broad asset classes but we do think that we might as well see if you weeks of good performance in equities drifting up and potentially yields going up. but we do think this is going to reverse soon as we start seeing that broad weakness in the economy while inflation stays high. we have the view that inflation is not going to be easing -- it is not going to be easy for central banks get back to target. very much cautious on risk and this is what we talk to clients

about. yousef: there is significant news flow around the u.s.-china relationship in the last three heaven four hours. whether you call them tensions or frictions, the reality is they could lead to reduced supply or more rigid supply chains at a minimum. could there be another wave of increased inflationary pressure as a result that is being underpriced? anna: absolutely, and there is a risk and tail risks and some of them are high probability risks on the horizon. we do think that there are risks to inflation which are skewed to the upside from more structural things like exactly like the tree tensions. the russia-ukraine more is still ongoing. the news today about the u.s.-china related restrictions tell us that this reshaping of

supply chains is going to be a big theme and will continue to be a big theme and it will take time to play out dirt it will be inflationary. that is something we take into account not just in the near term but also the longer-term horizon when we think about where inflation might settle. we think that is going to be above the target for a significant number of years from here. yousef: it sounds like to a degree from the ecb's joachim nagel who believes there is more work to bring inflation down. how does the ecb get a lid on that? anna: they are clearly determined to hike more and we think maybe another two hikes they are going to push through or potentially more. it is interesting that when we compare inflationary numbers across the board, europe --

european ablation is less entrenched than that in the u.s. and u.k. so we do think it will probably be one of the first central banks, the ecb, to stay there longer. rather than taking rates too much higher from here beyond the due hikes are there about -- they are about to do, they will try to stay there higher for longer to try to tame inflation. yousef: after having spoken to the rest of your team, what are the conclusions about what is left of economic growth at the end of 2023? how much do we get across the line from what you can tell? anna: in terms of where we are heading, we think we are heading towards recession towards the end of this year. across the board particularly here in the u.k. given how much the boe has to rebuild that

credibility and tame inflation. so we think the second half of the year is pretty weak and will make it to q4, we might be really weak or negative growth across the board. we have stagflation or stagnation which is something will be talking about towards the end of the are. then depending on how fast inflation falls, central banks be ready to pause as we move into 2024 and hopefully will start cutting rates third yousef: it is all about recalibration and readjustment. that is anna stupnytska of fidelity international. let's get a snapshot of what else is to compared stockmarkets pause in terms of the rally after a strong first half. we will have more on that next. this is bloomberg. ♪

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>> my view is you end up with growth disappointing a bit and inflation disappointing on the high side a bit ending up probably bad for bonds and a little bit bad for equities and generally week -- weak growth. yousef: that was bridgewater's greg jensen weighing in earlier when speaking on the bloomberg podcast odd lots. i want to get to bloomberg's reporter who joins us from london. give us your first take in terms of how you reconcile this with other abuse in the market? >> the second -- other views in the market? >> we have seen a surprising and

superpowerful rally in the first half and even with economic weakness and the fears of recession and central banks something cautious and hawkish, the equities rallied in the first act of the year. major strategists and investors think we will not see double-digit returns. tread carefully and look at defensive sectors and look at companies that are undervalued and perhaps taking profit on more expensive growth stocks like the tech stocks that have rallied the most in the united states this year. yousef: what about the note from j.p. morgan? yes, maybe the first euan munro six months of the year may be as good as it gets when it comes to earnings, but where could we see potential for differentiation within that sector? ksenia: the earnings season will be interesting. the view on the street might be

this is the last positive earnings quarter that we kept for a while before the u.s. and europe get hit by a recession at the end of this year early next year. we have already started hearing warnings from chemical producers and investors are looking out for that and going to most likely start taking profit ahead of the earnings season and if the earnings season turns out to be more robust, we might see a rally like we did in the past few quarters but this will be a more challenging earnings season and investors will be paying most attention to the outlook that companies are making even perhaps for next year already. yousef: the nasdaq has returned 32% so far this year. it is hard to compete that for any other major indexes. what about the value versus growth debate and may be a revival of some of the russell plays? ksenia: that is interesting that because value has underperformed so much this year compared to

growth because this rally has been so narrow because it is mainly driven by tech stocks. investors are starting to look towards these value cheaper sectors and stocks and especially european market here which stands out because europe does not have that many tech stocks that have outperformed this year. it is very much value dominated markets. has spoken to fund managers who say they are more bullish on europe because it is undervalued and does not face as many risks from a potential class -- crash in tech stocks. yousef: fantastic to get your analysis. that is ksenia galouchko there. china has unveiled restrictions on exporting gallium inc. germanium which are used to make chips, electric cars and telecoms equipment. heck trade in particular is front and center in to break it down for us we are joined by

bloomberg's asia government and economy correspondent rebecca choong wilkins. it is not so much of the metal globally. it is the fact that china can produce this at a low cost. industrialize this for our audience. rebecca: these are restrictions or potential restrictions on two different metals. they are not rare metals but are expensive to produce and produced as a byproduct of refining other commodities. china accounts for upwards of 80% of the world's use of these two different metals which are found in everything from semiconductor chips to tell communications, defense industries, and dvds. they have a -- and dvds. evs his full -- longer there is a risk that this policy could ultimately backfire by forcing

other nations to accelerate this move to diversify or de-risk their supply chains. yousef: what else would you pull in here because there wait a few news lines. you have janet yellen going to visit china and wall street journal piece on more tensions on the cloud front. what would you highlight? rebecca: there are two elements. on the one hand we see china showing a new willingness to re-combat what it sees as containment by the u.s.. on the u.s. side, we see no slowdown in this attempt to enforce or roll out restrictions with the latest report that the u.s. is considering restricting chinese companies' access to cloud computing services particularly for amazon and microsoft, among the two biggest providers. as we see this coming janet yellen visit to beijing this week we see both beijing and tc

locked -- and d.c. locked into an escalation. there is question that beijing may have a little bit more leverage now that it is really supplying more bite with its bark when it is pushing back against efforts to restrict access to strategic tech but i'm not sure the outlook is particularly optimistic when it comes to any kind of breakthrough in relations during janet yellen visit. yousef: excellent reporting. that is bloomberg's rebecca choong wilkins there. let's get you a snapshot of what else is in the pipeline. yahoo! may make a return to markets. we will have more on that next. this is bloomberg. ♪

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yousef: this is "bloomberg markets." i'm yousef gamal el-din in dubai. the ceo told financial times that the company is ready financially and has a great balance sheet and is very profitable. bloomberg's alex webb joins us for more. this seems like a blast from the past. it is still one of the most visited websites even though it has a legacy from the 90's. alex: they claim to be a top five visited website globally. they were for a long time, six years, part of verizon the u.s.

telecoms giant which sold it to the private equity firm apollo for $5 million. it was inevitable that at some stage apollo would try to exit. it seems that moment is nigh. it is ultimately a media company even though it is a website. much of it is about content consumption. i am fascinated to get an eye on their financials when ipo perspective comes out and see what has happened may have been behind the scenes and turning things around under the auspices of apollo. yousef: there is a lot happening at alibaba and i want to pick that up for a minute because basically, they are doing a strategic review of some of the video streaming platforms. could there be a bit of a cut back would you say or a prioritization? alex: there is talk about them

and we have known they are breaking up their business into six different units. the attention is turned to the video operations youku and tudou , and those could be merged into the movie arm which is publicly traded but alibaba controls it. essentially the studio which would be kind of similar to warner bros. emerging with youtube and netflix. it would be quite a monster the chinese space. how those things will play together, again fascinating. the founder of tudou was a been consulted. that would get interesting in gluing these disparate but related uses together. yousef: facebook is getting ready to unveil its competitor to twitter. i'm willing to give it a go. is it going to be successful as far as you can tell and from what you have heard? alex: facebook is better at

running advertises -- advertising businesses in twitter. it is very good at using the profile of users to target ads precisely and it has been good at taking other people's product ideas and bringing them and developing them itself and making success of them. the main example of that is stories on instagram which was shamelessly copied from snapchat. it does have failures as well. facebook paper no one remembers anymore, an effort to do a magazine on smartphones and it died a quick death. twitter is it more -- twitter is a more successful product than papers. can it really from a standing start to get to a similar position as twitter eco possibly. i would not say it is an shoo-in success. yousef: this has been very helpful. thank you for making it to the program. that is bloomberg's alex webb.

coming up we are going to get to chris willing to talk about microstrategy. this is bloomberg. ♪ ♪ to help you see untapped possibilities and relentlessly work with you to make them real. ♪

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five million people's lives, it's overwhelming. it's everything. yousef: welcome back to "bloomberg markets." i'm yousef gamal el-din in dubai. it is the fourth of july if you are celebrating. the rest of the world is operating. cash equities and treasuries are closed in the united states and will resume on wednesday. the s&p 0.1% lower. the stocks of europe 600, investors are bracing for the upcoming earnings season. i want to flip the board and look at the bond space. we had the australian rba opting for hawkish hold. they held the cash rate at 4.1 percent. that was predicted by 60% of

economists surveyed by bloomberg. we have seen yields come back a little bit, erasing initial gains and they are dollar at 1.09, flat. brent crude getting traction. not in excess of 1.1%. we had saudi arabia and russia moving to prop up races by curbing supply. let's get out to, chris watling from longview economics. i want to get to the yield curve inversion which we have not seen since the 1980's. that is a unique superlative for the year. how concerned are you? chris: it is a good illustration that money is very tight and what we have to remember is it takes a while for tight money to work through the system. every day we get more and more stories of what is going on in terms of that tight money impacting asset prices and commercial real estate and other

types of asset prices. we can see the bank credit conditions are tight. it is a pretty strong message. has been the most inverted since the early 80's and that is an illustration of how much deflation is out there and the central bank over tightening. i think it is a pretty key metric to watch. yousef: it also helps investors put on a lens or glasses that helps them frame the tone for narrative for how to approach markets and understand the fed. let's start with understanding the fed for the next six months. how does it color that view? chris: well, the fed have made it quite clear they want to do their hawkish escape at last meeting and they want to price in two more hikes. they are looking for that kind of expectation if you look at the dot plot. there are a couple more hikes coming out of the fed and that is consistent with the yield curve which is very inverted. yield curve versions when they

start steepening and in march tried to steepen. on the banking crisis 2-year yields came off a lot in the curve steepen up and moved from 100 points inverted to 50 in a matter of days as the market started to think the banking crisis to a recession. then we had the fed coming to the rescue and providing liquidity. the steepening of the curve is what we are interested in because that is a signal you are about to start moving towards the recession dynamic. over the next six months, the fed will continue to tighten and that is why the curve remains so inverted but for me, that is not really interesting story. interesting story is when it starts to steepen up. yousef: i want to pull in the view from goldman sachs. they are writing that the equity bond correlations have turned more positive recently cautioning against the missing two early the risk of higher rates weighing on equities.

less worrying inflation should contribute to more negative equity bond correlation. we remain underweight bonds. agree or disagree? chris: i think the inflation is going to dissipate fast and the drumbeat of recession is still banging. it is just a question of timing. if you look around the world, a lot of the global economy is under pressure already. the u.k. is not growing as we sit here. germany is in recession. a lot of the french pmi's yesterday were very weak. revisions downwards in the middle of the month in june. you look into chinese housing, there is a lot of economic struggles out there. i think inflation will move fast because it is monetary inflation. it is not a wage-price spiral. we have a monetary situation here and money supply is very tight. i expect monetary inflation to move out of the system quite fast. we are overweight government bonds. not underweight.

i think, yet we are the other way around. yousef: what about the capacity to surprise because we had the decision from the rba and quite a few economists expected that but for the remainder of the g10 central banks, some of the bigger ones but the fed and ecb bank of england and maybe boj, the remainder of the summer, where could we see a real shake up? chris: well, i think the biggest surprise could be inflation surprising to the downside. or potentially growth later on this year. those are the key areas to focus on. clearly, the central banks have a view that inflation is persistent and sticky and we are getting a wage-price spiral impulse and that is what they are focused on. they are focused on remaining hawkish whether it is the fed powell or lagarde the bank of

england's ability or the rba and so on. the surprise could be inflation is not quite as sticky as people think. look at commodity prices. many commodity prices are down sharply over the last 6, 9, 12 months. almost if not in many instances back where they were pre-pandemic or a couple of years ago. i think inflation could surprise to the downside. that is the thing we are focused on and that could change central bank rhetoric over the course of the next few months. yousef: there are a lot of investors out there who did not take part in the full rally to the upside, be it u.s. stocks or other indexes that were able to pull through so far this year. i am wondering what the messages to clients or potential clients about taking part again now or has that ship sailed and would recommend waiting another drawdown if it happens? chris: everyone is getting very

excited about ai and excited about what happened in 1999 and maybe we are repeating that in the big cap tech stocks and there's excitement and a broadening participation of single stocks in this rally last few weeks to cyclical stocks. there's excitement out there about these markets. i would say even in 1999 the markets québec significantly a chunk -- the markets québec typically a chunk and we are coming to that season now. the july season on average is a good month but i'm not sure that is a case after a strong june. a lot of the models are saying we need to pause here or give back gains. it would be cautious over the summer and would not chase it for now. i would watch how the macro plays out over the next 2-3 months. that is the crux. risk appetite is too high at the moment. not everyone has been in this rally but risk appetite is

high-end has been some strong participation in the last few months. a lot of the market timing models are back. i would not chase it here. let's see how the macro evolves over the next month or two. yousef: we had news from russia and saudi arabia who are both moving to hoover up more barrels out of the markets. we have yet to see with the remainder of opec+ is going to do. is that perhaps one of the risks for the remainder of the year that if they continue to do that it would support oil prices to the upside and push inflation higher even though you forecast it down? chris: there's a battle in the oil market, i agree. 70 and change is a big support level for brent. i think the fundamentals are starting to shift and part of that shift is what you articulated, the fact that russia and saudi are doing voluntary cuts on the supply side. that could be an issue over the

course of the summer. i will have to say that i suspect there is one more selloff in oil price and then you should think about buying oil and energy related assets. we are watching that space closely watching that support level closely. it is going to be fascinating but i don't think we are quite done on the bear move in oil supposed korean war. yousef: this has -- post ukrainian war. yousef: that is chris watling of longview economics. let's get you more insight on oil as there will be supply curve announcements out of saudi arabia and russia. brent crude is trading higher by 1.1%. this is bloomberg. ♪ und. you should get a second opinion from innovation refunds at no upfront cost. sometimes you need a second opinion. all these walls gotta go! ah ah ah! i'd love a second opinion. take the first step to see if your small business qualifies.

yousef: welcome back to "bloomberg markets." oil is climbing after the latest efforts from saudi arabia and russia to prop up prices by curbing supply. saudi arabia will prolong the cut one million barrels a day through august, warning it may extend further. opec+ ally russia announced fresh curbs on exports cutting 500,000 barrels a day over the same period. we are joined by bloomberg oil strategist julian. opec plus likes to play itself as a tightknit family. the fact that saudi arabia and russia hold these moves on a group level, how stunned are you? julian: i don't think this is particularly stunning.

we are not expecting any particular group level announcements coming up. there is an opec seminar in vienna the next couple of days but that is very much a gathering of ministers and and is -- industry experts to talk longer-term about the energy transition and i have no doubt about the need for more investment in oil. it is really a conference and not an opec meeting in the sense of being a decision-making gathering. so we are not particularly expecting anything from opec as a group. i think what the saudi's wanted to do was get this announcement that it is extending its output cut out of the way before the scattering happens because i think if they had not done that, it would have overshadowed what for opec at large supposed to be a sort of big family gathering and a very public event. i think it was understandable

that they wanted to get that out of the way. what is important is that russia has joined them very quickly after they made that announcement, and most importantly of all, that russia has said it will cut oil exports . that is the thing that they have not done until now. they have talked about cutting production, but we have not actually seen an evidence of that in the flows out of the country. yousef: that is something i want to flesh out a bit more in detail because it is all about being able to display transparently that output in russia is being brought down. what kind of data is the energy world leaning on to really confirm that is actually taking place? julian: what we are leaning on now is the exports that we can see. we here in london are tracking

the ships carrying russian oil out of the ports. we have a pretty good handle on the volumes that are being exported by pipeline. we looking at both crude oil and product exports and we are not seeing those having come down since the output let's were due to come into effect back in march. there has really been no drop in exports since then. of course, russia has decided to make its production data effectively a state secret. it is not publishing production data anymore, so we don't have a clear sight of what is coming out of the ground in russia. there are a number of companies that are opec secondary sources who are trying to assess that production level but it is very, very opaque. we have to rely on exports.

yousef: what are you hearing about the trajectory for brent and wti as we move closer to q3 and q4? julian: everybody's expectation is the market will tighten significantly in the second half of the year even without these additional cuts that have now been announced. and that should certainly put a floor under oil prices. i think the expectations for the upside have been eroded somewhat . the talk of $100 a barrel oil has all but disappeared. the forecast of chinese demand growth are getting cut a little bit. the growth there has not been as strong as many people had anticipated despite the opening up the economy. one of the factors there is that unlike in the western world, transportation only accounts for

about half of china's oil consumption compared with a much bigger proportion in the west. opening up after the covid restrictions does not have quite as big a impact in china as it did in europe or the u.s.. yousef: julian, your insights are critical to the energy conversation. thank you for the chat. the as bloomberg oil strategist julian lee. coming up, part of our exclusive interview with sean the mere from bnp paribas. this is bloomberg. ♪ ♪ ♪ a beach house, a treehouse, ♪ ♪ honestly i don't care ♪ find the perfect vacation rental for you booking.com, booking. yeah.

yousef: welcome back to "bloomberg markets." i am yousef gamal el-din in dubai. the chairman of bnp paribas, france's biggest bank is ready for the rebound. he spoke with bloomberg at the euro place form in paris. jean: on market reaction, it is a long debate. we have a long debate about the valuation of stocks, the difference between the u.s. and

europe. you know it well. we have a high dividend a reasonably high dividend. we serve while the shareholders. it is up to the markets to appreciate the value they want to give but we welcome a better appreciation. on the point you have made, which is what are we going to do? the main trend in bnp paribas is to support organic growth in a well diversified business model that we have all across the world, notably in global market activities. you know that we have old bank of the west and -- we have sold think of the west and we are going to use the money of this operation to support the business but mainly in an organic way. the growth will be supportive. >> and i ask you about paris as a financial services hub? it does seem that in terms of continental europe's attempt to build up a petition to london

that paris has done very well at attracting banks to expand. bank of america, j.p. morgan, goldman sachs citigroup. it's is putting strain on for structure? is this something we will see more of? jean: well, as a whole, the continent has done well. you have paris, amsterdam, dublin, frankfurt. all the financial places in europe have done well after brexit for obvious reasons. clients are on the continent, and is easier to operate from the continent and to serve the client in the continents. this is the reason why most of the banks have shifted staff and skills to the continent. paris is probably leading this, which is positive from my point of view for various reasons. it will continue, and you have raised a very important question

is the quality of financial infrastructure on the continent in the euro zone. we should never forget that since the decision was made on brexit, the competitiveness of the continent, the work has been delivered. on the continent, people are working hard to build up better, stronger infrastructure, financial infrastructure. time is running away, and with this, we see an increased competitiveness. so i know this is a debate, a sensitive debate between the u.k. and the city and continent but people are working hard to improve and they do. we see the results. yousef: that is a perspective with the bnp paribas german speaking with bloomberg -- chairman speaking with bloomberg. sticking with banks, bank of america and citigroup say the fed's stress test has got it wrong when it comes to

projecting their future income. bank of america says the fed is to rose and city famous as it is to -- citi said it is too low. tom metcalf joins us for more. where are the discrepant is coming in? where is it in the goodwill or the net income? >> it is on the interest income line or noninterest income lines as well. this is interesting thing about the story. these banks are going back to the fed and trying to work out how they have come to different conclusions from running in their view of the sink isolation. this goes to show you how important these tests are. they play a huge role in how big the payout are from either of these banks. also there is a black box around it as well which is sometimes hard from the outside to unpick immediately what the federal reserve is doing in the banks

are trying to work out the calculations. it is absolutely fascinating and something i cannot remember seeing very regularly and i'm sure we will hear more details about it in the days to come. yousef: the other story i would like you to a an honest credit suisse -- to weigh in on his credit suisse, the most read article on the terminal. this is about a message to get cds out of the wardrobe, polish them up and prepare for change. tom: absolutely. huge job cuts expected at credit suisse and the wealth managers have been told to get your cvs out and burnish them because it looks like people will be applying for a smaller number of jobs. interesting to understand why it is very well read. we know credit suisse will be heavily shrunk by ubs but this does give a sense that it is not going to be unilateral across

the board. if you are a good performer at credit suisse particularly and in the asset-management or wealth management units, you do appear to stand a fighting chance of keeping your job. yousef: com, this has been very helpful. thank you for reflecting on these developing spirits as bloomberg's tom metcalf seeing how the bank stocks that they european trade later. let's get you a snapshot of what else is coming up. the nomura g10 fx strategist is going to join the debate on the extremities of the yield inversion but also whether or not we're going to get a meaningful recession and how that affects his approach and thinking to market dynamics. all eyes are on the u.s.-china tensions as well. it is july 4. if you are celebrating, good on you. the rest of the world still operating for the most part.

our coverage continues. this is bloomberg. this is bloomberg. ♪ it's an amazing thing

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>> good morning, happy fourth of july. the u.s. markets are closed for independence day. our top stories today. the rpa -- the rba warns further tightening may be needed. recession risk is a key segment of the u.s. treasury yield approaches its most inverted level since the early 1980's which triggers further fed policy tightening. the technology battle between china and the west x collates as china restricts exports of key metals. let's get a check on the markets. volumes are lighter.

they're about 50% less than where we usually are for european equities dragging us down is germany. the data there continues to be troublesome. there are weather issues. s&p 500 futures again we are off hopefully celebrating the fourth of july you are not currently looking at the screen. a basically flat trade in the u.s.. aussie dollar fell amid the hawkish pause. brent crude getting some traction. russia and the saudi's unilaterally going out alone. cutting their oil production. we are higher by one and one third percent. i will dive further into the fx moves. joining us is jordan rochester. thank you for joining us. americans are off so we can say anything. we have to start with australia. the aussie dollar is strengthening but the immediate

reaction was weakening. in a world where the fed is an up hawkish rhetoric do currencies like the aussie dollar, do they risk getting left behind? >> it's actually about global growth. when you are building plans, doing the industrial process you need those commodities, of those exports. all the surveys say manufacturing is down. so there key export group is in a tough place. commodities are on the back burner. the rba for example did not hike today. you have that immediate reaction lower. i think with those rates are tough for cad and ozzie to do well and so we have a week nfp. all bets are off. you'll have markets thinking maybe the fed turns dovish more quickly. dani: we are not in a place where some of the central banks

need to defend their currencies and be more hawkish for that precise matter. are we at that level? if manufacturing continues at the base it's at. jordan: some banks are close or could consider repeating what they did last year. the bank of japan is one of those. the rba it seems very unlikely. g10 banks often say they don't move a different currency levels. they need a weaker currency because we are in a manufacturing slowdown. they need to help their economy equalize. that's part of why we should see higher effects, underperform the likes of euro. dani: if we are talking at a central bank where it is their top -- their style. the pboc, just stopping the pace of weakness we've seen. at what point will they draw a line in the sand. is there a level where they do

that will that continue to be the pace for them. jordan: we've already seen every single day the daily fixing data. we have a fringe basis point era pip the other day. this is clearly a quasi-signal we want to slow down the move but i don't think it will end because it's a similar story. china has low inflation, growth is underperforming. again from a macro perspective, they have the ability to say we have a weaker currency to boost exports in this time of global slowdown. we are not too far from it. today has been of a knock -- has been a bit of a knockback. don't read too much into their moves. >> dani: while america is on holiday. it does seem like the dollar is the least dirty. is that the second -- true in the second half that were were looking for economic strength even though some of the data has been spotty.

>> usually if i have a euro-dollar view everything else is correlated to that view. this is a really different time for fx. so rates markets saved by the dollar. in terms of picking up carrie against the euro. the equity markets are rallying. fixed income investors have a tough time, sometimes you have to control your bearish urgencies, your predispositions. with equity markets rallying. you have to pick high carry currencies and where you think there will be some sort of move in a hawkish direction by the central bank over the fed. i think in q4 of this year will change his we will have very weak inflation in the u.s. compared to what we are used to. and the labor markets might start to crack. nfp this week won't do that but we have signs from the surveys that labor markets also down by q4. we might get zeros and that might be enough to say the fed

is done in the market will price in rate cuts. >> it's taken so long to get to that point where the labor market crack send the data slows down. >> it's been a bit of a widow maker of a trade. in terms of rates. in one way i'm glad i mostly trade fx. it's all about lags so i think the excess savings story has made the chance difficult to read. pmi went to minus two standard deviations. now down to minus one. these usually say it's as bad as lehman brothers. so the surveys that guide us through the process are a little bit all over the shop because of the pandemic it really makes things change quite quickly. i do think they point to one thing which is u.s. inflation has to go back towards 2%. that sort of narrative makes the second half of this year clear to me but we should see euro break above this, we will have dollar weakness against the

euro. >> one reason is dani: europe -- dani: europe considering the economic data is less likely to stick with higher for longer. that they will crack. they won't get to where they are guiding the markets. do you have any credence to that market. >> europe is it depends on which one you're looking at. but the ecb, they started hiking after the fed. they've been hiking more slowly than the fed and are looking at the most lag barry -- variable as their guide. the ecb was quite stubbornly on hold for so long pointing to negotiated wages being week saying inflation will be transitory we don't need to hike because wages are week. when inflation is falling and looking quite weak and the market might be pushing them to consider rate cuts next year they are pointing to the wage data which is really strong. some of it's the highest they've

been since the creation of the euro. because they are using that variable i think that most they will just be on hold. >> the bond market at least is not pricing that. it's not really doing that from europe. why are we slow to come around to this narrative then. i get what you are saying but the market isn't heading that direction. jordan: what's been the big surprise really in modern history is this level of excess savings. countries have the highest and the lowest. the u.k. has a high amount of excess savings. that's why services inflation keeps surprising us. even though models suggest inflation is much lower on the services. for the past six months it should be lower but it's been printing new highs. looking at sweden, they did not lock down as aggressively as anyone else. they also did not have the same level of fiscal spending as everyone else because they did not lock down. we are seeing the charts work in

countries like sweden. dani: that's a really good point we often lose sight of. before we let you go, while we are talking about the second half, best performing g10 currency dollar, what does the second half hold? jordan: the market is pre-positioned because of brexit to be very bearish on sterling. who should be higher towards 88 and 90. that service inflation has made the bank of england pricing high. over 100 basis point by the end of the year. until we get some signs that inflation is topping out in the u.k. especially on the services sector. i'm waiting for that moment. let's see the next cpi release. a lot of people will jump on that. >> jordan, thank you so much for joining. really appreciate your time. sticking with the market calls.

expecting the global economy to stage a recovery from mid 2024. it's as equity markets are heading towards challenges after a strong first half. they spoke about the expectations for a soft landing. >> it depends vividly on central banks to termination to kill inflation. what is fascinating today is one of the main risks to the economy is the risk of policy mistakes from central banks in this risk between fiscal and monetary tightening at the same time. so behind our soft landing even though i don't find any landing to be soft in history there is this assumption that policymakers do the right thing at the right time. so maybe don't pull the plug too strongly to fast on the support mechanisms especially in the u.s. and europe. >> i'm interested in what defines a policymaker from a central bank.

if we end up in recession but it can be justified by the fight against inflation does that equal a policy mistake do you think? >> last week i was in sintra for the ecb forum. president lagarde mentioned she will look at some of the past through some of the transmission uncertainties and so forth. for me what would be a policy mistake would be the decision to wait for the full pass-through meaning that this data dependence obsession central banks have could yield to a moment where we decide to private when it's already too late which means the tightening from central bank is already visible. so that's a policy mistake. this is the discussion we had which is if what would happen if the ecb were to hold rates high on top of adding more hikes to see the full transmission, this would qualify for a policy mistake. we would start seeing the real

economy effects and that would be already too late for the central bank to pivot. >> ahead of 2024, when do we get to a position where the ecb can hold and does not need to be hiking anymore. maybe it's a skip at the fed already. >> i think what came up a lot last week was this wage price risk which seems to be quite the question that everybody has in mind in europe because we've seen some inflation in the services sector and we know certain countries have the fixation of may be a public sector wage it's very strong and that leads to some form of additional upside risks on the wage bill. you also see what's happening on the social risk, so i think the risk now is to say maybe they will hike until they see wage inflation and especially services inflation is under control. that could be in the fall.

they hold still as of q3 or maybe the beginning of q4 this year. >> the chief economist speaking to bloomberg earlier in paris. it might be closed in the u.s. for stocks and bonds but that doesn't mean it's not interesting where we leave -- where we left off yesterday. the yield curve inverted further in the u.s.. one year since this inverted and stayed there. that's the risk appetite picture looking into today. european stocks are doing well but some of the more high debate type stocks aren't doing as well. a flat future session. aussie dollar, we just spoke to jordan about this. he says currency is like the aussie they won't be left out because of rate hikes or differentials. it will be because of the growth picture. this is an interesting one on the bottom of the screen. you can see up one and one third

percent. this is off the back of saudi and russia announcing they would extend their unilateral cuts, their oil cuts into next month. this is interesting because we have not seen as much pickup with these moves. the fundamental some argue are not worth sticking in the market. perhaps it's the bearish feel growth. we have these types of cuts in the hope that finally oil prices will pick up. coming up the technology battle between china and the west escalates. china restricting exports of key metals. this is bloomberg. ♪ innovation refunds at no upfront cost. sometimes you need a second opinion. all these walls gotta go! ah ah ah! i'd love a second opinion. take the first step to see if your small business qualifies. and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner

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>> my view is you end up with growth disappointing a bit and inflation disappointing on the high side ending up probably bad for bonds and a little bit bad for equities and generally weak

growth. >> bridgewater's greg jensen speaking on bloomberg podcast odd lot spread let's get into this dynamic. this continues to be the most hated rally in equities. everybody loves to rail against it sing the first half has been too strong. he found the interesting note from citi. >> the positioning -- is getting quite stretched. it's not as stretched as it was a couple of weeks ago but still causing a rally. there might be a short-term profit taken and into the earnings season is the heck rally -- as the tech rally is continuing. investors might want to take profit at this point in time. dani: this is mostly concentrated in tech. ksenia: that's the main cause of

concern because this rally has been so concentrated. in order for it to become one of those real rallies and to bring double-digit returns the rally needs to spread to those other sectors like cyclicals and value. so many investors are really getting concerned about those overvalued tech stocks driven by this buzz around ai. most agree that ai will drive lots of profit growth over the next decade and it's a huge turning point but at the same time the rally might've gone too far because the nasdaq is about 40% over the long-term average. it's a very expensive level and i was looking at the relative strength index and that's also now heading towards overbought territory once again. dani: one of my favorite quotes is from the excellent piece over the weekend. he spoke to andrew and you said resilience now is sowing the

seeds for fragility down the line. i love that. how much of this is also about the economic picture not just the technicals but fear over where not just american but also european economies are going. >> the second half of the year will be difficult in terms of economic data. we've been seeing resilience in general and u.s. data like consumer confidence. at the same time manufacturing came in quite weak in europe and the u.s. and that's posing concerns. this recession risk is getting pushback. we keep waiting for it to come. it will hit at some point according to our strategists it will be at the end of this year or early next year. investors are going to be preparing for that and they will not want to miss out on these double-digit returns. at some point to post good returns for this year it will just be safer for them to take profit and exit. >> the phone mode turns into the fear of getting stuck if you're having losses. not good.

what about earnings? what are they saying about the earnings risk if the economy is starting to -- ksenia: the risk in july might be the last positive earnings season in a while. the biggest earnings season was more robust than expected and they continued the rally. now this one we are already starting to see strong warning signals from the chemical sector from fedex. we are going to see some warnings and investors will be looking out for these forward-looking guidances. another concern is with inflation coming down in the u.s. companies won't be able to pass on this price growth is much as they were able to do that last year. last year earnings surprised investors. companies were able to pass through those higher costs to consumers who still had enough savings to keep spending. but now this picture will be more complicated. dani: i think it's a good point.

bringing up the chemical companies. they are in kind of everything. that was a european company so how do you look at the divide or how folks are looking at the divide between europe and the u.s. because there was this narrative that the u.s. is frothy. maybe go to europe. is that part of the conversation. >> i'm hearing more of investors being neutral or overweight europe and underweight u.s. because of how much the tech rally has gone ahead. in europe the problem is it's dependent on china growth. china recovery has been -- the monetary stimulus is not very -- this weakness in china will be quite risky for the european rally because of the luxury stocks that are super dependent on those china sales. at the same time europe is cheaper than the u.s.. the rally has not been as strong because it doesn't get as many growth and tech stocks. i'm hearing more and more europe might be a better opportunity if

the tech rally comes to hold and starts telling -- starts selling off. dani: thank you so much for joining. she was just mentioning china. let's look at another angle of this. in the escalating tech battle between china and the west. we had china unveiling restrictions on exports and if you don't know what those are that's fine. i do know there used to make chips, electric cars and telecommunications equipment. let's get over to bloomberg's lysol hill who leads coverage on mining and metals. i mentioned part of what these things do. explain how big of a deal this is to restrict these exports. >> you're not the only one who hasn't heard of it. basically these are what we call minor metals. which means there metals that can be found on their own in

nature or anything like that. there found with more familiar commodities like zinc or aluminum. they are pretty expensive to produce. china has become the most significant and dominant producer of these two minor metals. and because of this dominance we've seen other companies just not having that production elsewhere has increased quite dramatically. they are quite specialist. not as important is something like silicon. there sharpen all kinds of places. in semiconductors used in high performance, of their light up. >> also ai for example?

would they be using these kinds of materials. >> that's not my specialist but very possibly. chips, they used in satellites. absolutely everywhere. >> where else are mining these types of metals could this possibly change the supply chain or are we extremely reliant on china. >> very much reliant. they're not particularly rare. they are found all over the place is just whether or not you have the facilities to extract them. we do have other countries, japan and south korea, russia and ukraine are places where this is produced. germanium in north america and the u.s. and china we also get from belgium as well. the question is whether these other companies and additional

producers if prices arise as a result of this move if we see other people want to get on the back -- bandwagon. the one comparison we do draw in recent years with china given everyone a bit of a shock. and other strategic minerals. china around 2010 with supplies to japan, all of a sudden we realize how significant these are. other producers go to try and expand production and we have and so that's probably what will happen with these but the fact of the matter is it takes time. this specialized processes and high purity metals. there's all kinds of procedures that need to go through getting these new products tested,

credited for supplies. the customers need to make sure they know what they are getting. >> thank you so much for joining. really fascinating. maybe not everything but much more. from bloomberg metals team. still ahead, jennifer will be having discussion about this economy. we will talk about the globe. plenty to discuss on this fourth of july. this is bloomberg. ♪

dani: welcome back to bloomberg markets. we go without the u.s. today. it is the fourth of july. volumes are certainly lighter. we have europe up trading. we are off the highs of the session. the dax is underperforming. maybe some more of those cyclical type sectors weighing down. the future session still trading. we are basically flat at this moment after that rally in the first half continued. aussie dollar gets a bit this morning. the rba data hold. only about four basis price hike

-- we had that gut punch reaction of moving lower. they might need to hike more. brent crude getting a bit after saudi and russia decided to keep those oil cuts going, that was a unilateral decision ahead of an opec symposium. we will see how that plays with the rest of the cartel. let's stay on the central bank story. we had some more from the ecb. there still some way to go in the banks hiking campaign as upside risks to the price outlook. joining us to discuss is the chief global economist at capital economics. really wonderful to speak with you today. the euro has failed to break out of this range. a continuation of hire for longer in europe. you think rates will stay higher for longer in europe more so than the u.s.. why. >> i think that probably is right. that tone we can see is really

consistent with what we've seen at sintra last week. i'm not that surprised that it hasn't moved markets significantly but it's clear that the time from the ecb is a pretty -- tone from the ecb is a hawkish one. and they're concerned about the strength of price pressures in contrast to the u.s. what we are seeing is services inflation even if we measured on a month on month basis is just persistent -- persistently high. it is no evidence at the moment. there's a real concern in the euro zone the stickiness of wage bargaining will mean that the wages are stickier. that it stays higher for longer. there's really no sign of labor markets of loosening in the euro zone employment and tensions in the latest pmi service for example still very strong. dani: if we think back to when we ditched the word transitory.

this is energy derivative. can we just barely say, put a line under it and say this is much more demand driven then we had originally thought. >> i think we can but i think it's about the passage of time in sintra last week. lagarde set out three different stages which have progressed initially for just energy prices , energy inflation now zero or lower. that's been an issue at this point in the level of energy prices. it still pushing up inflation so now it's spread to supply shortages and the impact that was having. now more and more it's about domestic price pressures and that's a real concern to be more sustained. this tightness and labor markets, that's really what's worrying the ecb at this point and the potential for that to have knock on effects on inflation expectations. >> given the continued strength

of the labor market is there a sense the transmission mechanisms, but the impact of them is perhaps less and then we've seen historically. >> transmission mechanisms are still uncertain at the moment because it's been so long since we've had a tightening cycle. the ecb which is relatively new, this is pretty much unprecedented. so it's so hard to judge just how it's going to be through to the economy and how long that will take. i think the concern of the moment we can judge what's happening to market interest rates. we can see policies feeding through to market interest rates. that will then take some time to take effect on household cost and mortgages in particular given that a lot are at fixed rates. but it's also taking time to feed its way through inflation expectations. because we've had a succession

of inflation shocks around covid , energy prices and the ukraine war that the longer that persists the more of those shocks there are the more people start to build that into their inflation expectations and to the inflation psyche and across the economy so the concern is there's been a shift in a lot of the trade-offs in the economy they could just be persistently higher inflation. >> you mention some differences between the u.s. and europe. we have that ism manufacturing data yesterday. we since may of 2020. how much confusion is there in this data. how do you read past what's potentially noise when you get data, strong housing and employment is still strong. and then something like this, like manufacturing at a three year low. >> there's a big contrast at the moment. across the advanced economy and what's happening in manufacturing in the services sector.

we know manufacturing output was really affected by supply shortages around covid by factory shutdowns. and now we are seeing the kind of payoff from that. things are weakening again and now that we know -- are no longer in this environment, so it's understandable that manufacturing output is weakening alongside global demand. but for the services sector it's a different story. you are still seeing a great deal of resilience, a consumer's seem to have some savings or had savings they've been spending because of fiscal support that you've seen across the advanced economies. the services sector is still relatively resilient and feeding into these persistent price pressures. >> it is almost two things happening at once. you have the bullwhip of the covid effect on the manufacturing finally starting to unwind.

you also have demand destruction from central banks. how are you thinking about that dynamic specifically in the u.k. when it comes to finally getting demand destruction worrying inflation back down to earth. >> we think that that will happen. it has to be that that starts to take effect on the economy. so far the u.k. economy has been surprisingly resilient. there been widespread expectations that it would be firmly in recession by now and that hasn't really happened. we think given a lot of mortgages in the u.k. have shifted from previously being very variable. a bit like the situation in spain to be more on fixed interest rate sprayed edging towards the u.s. normal being not quite as long fixes in the u.s.. that means the transmission is a bit slower in the u.k. than it

used to be so it's taking longer for this monetary tightening to actually affect households but now mortgage rates have risen about 6% in the u.k.. that's bound to start, and normal people having to refinance, it is clear that that's having an impact on the housing markets. that will have an impact on people's ability to spend and our calculations is suspect hikes in the u.k. has yet to come through. so ignoring what's yet to come in terms of the policy rate is still a lot of pain to come from the rate hikes that we have already seen and we think that will push the u.k. into a recession quite soon. dani: your experience and knowledge of the bank of england. we have the piece sounding a bit more hawkish. she's comfortable with that. what does that do to shift the

dynamic at the boe if she's replacing one of the most dovish members. >> it could mean a bit of a shift in the dynamic for sure. we don't quite know how she's going to be as an -- as a member. comments she's made across social media and newspapers. she does seem to be more on the hawkish side. so we will see how that influences her policymaking. her views on the neutral rate of interest in the long run rate of interest might not be the same as those where rates should be right now and what the appropriate rate is for the economy at the moment. i think it does seem pretty clear that there some supply demand imbalance in the u.k. particularly given the shortage of labor we've seen as a result of reduction in labor supply. that's pushing up wage growth and does mean interest rates

probably need to be set significantly higher than that neutral rate for some time. i suspect she will be on board with the message we heard from andrew bailey last week that there is further to go for the u.k. interest rates and perhaps more importantly that they need to stay at higher rates for a while after we reach the peak. >> jennifer, so wonderful to get your thoughts today. please enjoy the rest of your week. let's turn now to oil. it's climbing more than 1% after the latest efforts from saudi arabia and russia to prop up prices. saudi arabia will prolong its unilateral oil output cut of one million barrels a day through august. warning it may extend further. it's opec-plus ally russia announced fresh curb on exports over the same period for more we are joined by oil strategist julian lee. i want to start with the timing

of this announcement. we will be getting an opec symposium shortly. we are also looking at the u.s. refilling. what do you think of the timing of this announcement? >> the timing is understandable. opec has this big conference coming up. this is a public event, showcase for the organization for oil ministers and their view of the energy transition and the need for more investment in oil. both of which i think we will hear a lot about. i think it's quite understandable that saudi arabia which it implemented unilateral output in july and had already hinted this might extend it. i think this makes sense to get that announcement out of the way because if it hadn't i think that would've overshadowed this event and taken all of the oxygen away from the much broader discussions that they want to have in a very public sector.

i think the timing is understandable. >> what about from the u.s. side of things? if they are looking at saudi and russia. >> i think that the refilling of the spr. to whatever extent various u.s. administrations going forward decide it's necessary, this is a long-term thing. this is not something that will be done in the next six weeks or even the next six months. so i think there are different timescales at play here. what's interesting is this announcement was made the day before independence day when although not a holiday yesterday in the u.s. it was still a pretty quiet day. but i think they really run out of time with their seminar due to start tomorrow. they had to get this out in the open. dani: what does this do to price

dynamics for the rest of the year? julian: it will put a firmer floor under prices. particularly of both countries follow through. saudi arabia has a history of doing what it says it will do and doing it transparently. i think it's very likely that they will focus these cuts on sort of the very visible parts of the market. i would expect to see less saudi oil for example going to the u.s. this month and next month. because that's where it will show up most quickly in the weekly u.s. important figures in the weekly u.s. stockpile figures. there is nothing comparable to those anywhere else in the world. the question always is around russia. will they actually follow through. they say in february that they would cut out by half a million barrels a day march and then sort of extended the duration of that. we see no sign of that in any of

the visible flows of oil coming out of russia. i think it's important but what they've said this time around is that they will cut exports. so that's going to be very visible. that will be visible if they do it but equally it's going to be very quickly visible if they do not. dani: really interesting stuff. bloomberg's oil strategist julian lee. why bank of america and citigroup say the fed stress test has got it wrong. that conversation next on bloomberg. ♪

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dani: this is bloomberg markets: i'm dani burger in london. think of america and citigroup said the fed stress test has got it wrong when it comes to projecting future income. bank of america says it's too

rosy and citi says it's too gloomy. bloomberg finance editor tom metcalf joins us now for more. i know two different sides of the same coin here between bank of america and citigroup. what is the fight -- defining reason these banks say the fed has it wrong. >> it's probably the most interesting part of this is it's pretty hard in the very statements which bits they are contesting as it were and it's fascinating. you've bank of america saying these are too rosy and citigroup saying it's too sort of stringent in our case. what we know is bank of america effectively saying there's something going on in the comprehensive income test which we differ substantially from the fed. citigroup bankers saying it's more of the noninterest income line. but that's pretty much it. it's an open question. to see this it's really

interesting thing and a good reminder that the stress tests as well are out there. in some instances there's a bit of a black box here and that's presumably bank of america citigroup. >> obviously the stress tests have the implications when it comes to the bank's capital requirements. but is this about trying to prevent some of that or is it about guiding shareholders. why would these banks come out strongly so publicly and say we are right and they are wrong. >> it's probably around the payouts. this has shareholders. if the stress tests are more onerous you would expect dividend payouts. it's not quite as clear-cut as that. citigroup saying we will raise this. so i think there's a bit of almost academic here in terms of the bank saying we want to

understand what's going on. they don't want to be in a position where they don't quite understand the stress tests at least till the fed is running the stress test. dani: citi still giving us payouts. in europe of great bloomberg story credit suisse wealth sent out a message to its staff saying get ready for this merger. it's my understanding that when the calling -- culling of credit suisse as it becomes ubs they want to keep wealth folks. what is that dynamic of integrating credit wealth into ubs? >> ubs are doing their best to keep as much as possible. various stories in the last few weeks about how they are trying to retain those managers. if you have a wealth business, the key are the people who have those ins into the richest people in the world in some cases.

i found the story interesting. a lot about how the job cuts will be. this goes to show there's definitely opportunity to stay around, but again this memo was not perhaps sort of particularly charming in order to be mobile, burnish -- looking out for this lower rank. dani: we have the quote up right now saying ahead of the selection process, of these organizations it's important that we are as prepared as possible by showcasing our latest experience and skill set. if you were a veteran at credit suisse wealth, wouldn't you be like this is ridiculous i've been doing well. my work speaks for itself. isn't this concerning if you were in again that division specifically. >> it's all in the tone.

you have people on one hand say they're still considering credit suisse but on the other hand i agree it comes across as a bit jarring especially if you're a long worker at credit suisse. moving out, so i'm sure some people who read it one way or another. >> if my manager told me to brush up my cv i would be very worried. always a pleasure to speak with you. bloomberg's tom metcalf. a lot of stories we are tracking. yahoo! planning to return to public markets. jim said the company is ready financially and has a great balance sheet and is very profitable. alex webb joins us for more. we have a lot of stories to go through. let's touch on this yahoo! one. this is something in the.com boom that was so much bigger. what do you make of them going back to public markets

potentially? >> they were acquired by apollo, presumably turn it around i'm most interested to see what they've done to the finances in that time. but also how it plays in the market. that i think will be a really bellwether -- interesting bellwether there. >> sometimes when they say soon, soon to be 18 months. but as a bellwether or a test case for the market, it has a big audience. the ceo says that it still top five global website by traffic. it still had about 7 billion in revenue in 2020, of the last time have numbers that makes it bigger than twitter. but a lot smaller than other tech giants. >> you know i just wanted to talk to you about twitter. i'm grabbing ride on.

facebook, meta, apparently this thursday. the timing here it was just this week that i yelled across the newsroom that my tweets deck was not working which is maybe them -- lamest thing. is this strategic in terms of releasing this when we are getting all these complaints or is this just the timeline as always. >> it's hard to know what meta is thinking on timing but essentially we know about this timing because you can preorder it. through the app store and on the app store it says we will be available -- it will be available on july the sixth. the timing seems opportune given the problems, of the fact if it does launch on thursday, one thing meta, instagram, facebook is good at is scaling. they have plenty of scale when it comes to capacity. that seems to be the issue with twitter complaining about scraping data from ai.

it has to really keep tight control of its costs because it's not making as much money as it used to. the issue that instagram, they say threads and instagram app is unlikely to have similar issues. it's taken 15 or 16 years for twitter to get to its current scale. it's unlikely threads will be able to do that inside a quarter or a few months. >> this is a time when facebook, meta, instagram or cutting down on costs. how do they justify launching something new, do that. >> we talk about facebook or meta cutting costs it has -- it's a way bigger company. it's something like 20 times by revenue bigger than twitter is. it has way more wiggle room that it might as well try this. the thing is interesting is meta does not have a great track

record at launching standalone apps. they don't quite well incorporate other app features into their own. instagram stories which is a fairly shameless ripoff, when they try for example facebook paper which was a sort of it didn't go very well. so that's good to be the interesting challenge here. how they bring either twitter's audience over to threads or their existing audience into the app. it's clearly not an easy challenge. dani: jack dorsey tweeting. let me read it so i do not misquote it. all your threads belong to us and he put a screen shot of the data that you're agreeing to allow threads to capture. elon musk tweeted back. is there a data concern, is this different from twitter, of the data they would capture. >> one thing that's good is they have not been terribly good at

taking user data and turning it into revenue. if you're a twitter investor that's a bit of a problem. you want to be able to make the most out of what you have. revenue per user is so much lower than facebook sprayed it means meta is able to form an investor perspective build a more compelling app business on the users it has. it might also mean users are more nervous because they have a far better deterministic sense of who is at the end of every account. they know what your profile is. with twitter than of the accounts you follow. they don't necessarily know who you are. that's partly about advertising. >> last time i checked twitter it thought i was a man so clearly the data. alex, thank you very much. coming up we will be speaking to alberto gallo.

this is bloomberg. ♪

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>> central banks need to do more. risk assets have been still very resilient despite cuts, the fed cuts being priced out of the curve. but the reason is the long end of the yield curve is still very inverted so for a long-term investor the alternative is still to discuss it. treasury yields are still too low. so the elephant in the room as the central bank policy. that will determine volatility. dani: if

>> twitter was valued in the area of $40 billion. could they get half that? >> it is difficult to get funding, they were owned by apollo financing. the capital is really high right now. exits haven't really been an option. >> i don't know how many conversations you have with many people. you are seeing a loss, you were in berlin recently. you are starting to see lps go i'm not putting any more money in. i want to see some of my capital

come out. you have to wonder that is part of the motivation. if you look at the money they paid for it, they have already raised about $1.6 billion by selling a few assets, doesn't leave you that much more for them to be able to cover their face. you have to have a valuation to get there. this is all speculation on my part. it is fascination. a very old internet company might be a public company once more. >> lps are willing to invest in other firms and have to give them their money back. we will talk more about threads, twitter, it is a necessary conversation. markets in europe still heading higher. that is up about 2/10 of 1% with the u.s. on holiday, oil getting

a big good. we looked at both russia and saudi extending their unilateral cut. they are matching up with the oil price. opec action which didn't have an impact yesterday. finally, a very light trading day. coming up, massive unrest in france is finally starting to ease with increased police presence. we will have more on the economic and political impact with those protests next. this is bloomberg.

♪ ♪ 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? ♪ ♪ dani: welcome back to bloomberg markets. i am dani burger. french president emmanuel macron will meet with officials from the areas hit by the ongoing riots. protests were sparked by the

shooting of a 17-year-old of north african dissent. the chairman of bnp paribas shared his thoughts. >> let's be honest. france is not the only country in which there are tensions in society. i have seen many of them in democracies in the united states, in the u.k., in other countries. it is part of the life of a democratic society. we need to understand this. it has little to do with competitiveness and attractiveness. dani: join assess -- joining us is paris-based reporter caroline connan. have things calmed down? caroline: it has been another quiet night in paris and other

major cities across the country. only 70 arrests last night compared to 1300. there up in less than 20 arrests in paris. also one of the reasons is not only the heavy police presence, you have 45,000 police officers deployed across the country every night for the past week, but also the fact that a lot of these young people have already been arrested and sometimes they have already been judged so you have more than 3500 arrests. most of these are for young people between 14 and 18. the average age is 17 years old. they are facing tough sanctions. you have this 14-year-old who got seven months prison term for stealing some soda after looting one of the supermarkets. clearly tough sanctions and this is how police are trying to

control the situation today. dani: what has been the impact on emmanuel macron? is he weakened from these events? caroline: he is clearly weakened. just a few months ago we had the protests against pension reform and now we have these riots. he is currently meeting with more than 200 mayors, local mayors who have been affected by all of these places being vandalized and the public buildings set on fire. he will not make an announcement at a time of the motion. he is saying he will do in x-ray of exactly what has happened over the last week and how the government can respond with longer-term measures to deal with the police discrimination, with the under education in those poor suburbs. one thing emmanuel macron did

mention today was to have some kind of instant fine for the first stupid act, as he said, of those teenagers. a fine for the parents. this is also the responsibility of the parents to prevent young people from going out and burning cars and participating in these riots. dani: thank you very much for that update. that is bloomberg's caroline connan. in the u.k. former liberal democrat leader vince cable is suggesting the financial pressures from the water crisis is a sector wide issue. he spoke about the regulatory functions needed in the u.k. to avoid a potential collapse. >> if the investors are willing to put in more cash, that at least temporarily solves the problem. tens water is not the only water

company in trouble. but from the government's point of view it is by far the best option. there will be painful conditions. investors are expecting to see prices rise to ensure there is adequate return in the future. if the capital raise falls through and the government is forced to back into public ownership because you cannot just allow a water company to collapse its fundamental service. if that happens all of the liabilities of the company go to the public balance sheet, which in the u.k. we already under debt to gdp. if the government can avoid nationalization it will and will presumably have to make some concessions to the investors to stop that happening. anna: how would you expect this to develop politically? i am interested in your

assessment. some labor mps calling on the opposition leader to reintroduce policies around renationalization of water. would you expect to see that? >> there may be calls for it, but the problem of how you handle public debt, which of course is the whole reason behind privatization in the first place, was to try to get these utilities off the public-sector balance sheet. it is a big problem. politically there is a lot of anger. these water companies have failed to deliver essential public goods. we have this problem of overflow of sewage because of underinvestment in the sewage system. there is a lot of leakage. the anger is about things in the past. it is the weight mcquarrie took advantage of lax regulation to spare very large dividends that

were completely unjustified in terms of a verily -- a fairly safe utility. it is in the past. the politics of this are quite toxic for the government. anna: do you think the sector has -- some people have argued the sector has a private equity problem, not a private ownership problem. from what you've been saying in the strains nationalization have put on the public purse, you might agree with that view. vince: i think where this is headed is to a tougher regulatory regime. the problem is not a problem of privatization but a problem of very weak regulatory operations. the regulators in some cases have been captured by the industry and regulators went off to work for private companies with much higher salaries. the regulation has been applied very flexibly.

a lot of things have not been enforced. i think the pressure will now be on to have a tougher regulatory regime. how you reconcile that with trying to get private capital to make up the deficits of investment is a tricky one. the obvious logic is we moved to higher prices which is difficult in the middle of a cost-of-living crisis. anna: what do you make of the complex structures that seem to exist in some parts of the utility space in the u.k.? talking about layers between operating and holding companies and many parts of the companies issuing debt. some parts of the company relying on dividends, domiciled parts of the business in lexington, is there a place for these kind of -- in what were previously public utilities? vince: this is not just an issue for the water industry but this is a phenomenon we have seen. that is how mcquarrie -- the

villains of the story -- took advantage of thames water and were able to attract large dividends which were not justified. this is a low risk utility, after all. dani: vince cable, the former liberal democrats leader and current visiting professor of the london school of economics and political science. an interesting debate. is this just a thames water issue or are these companies who loaded up on debt when rates were low and are now prepared for a boe potentially taking rates to above 6%? when it comes to the markets at the moment, not tons of action when it comes to the u.k. specifically. in general we are looking at lighter volumes because the u.s. is off on holiday. futures in the u.s. are basically flat. here is the interesting one. rba decision this morning. they held but they said we are

not done, we might need to hike more. the initial reaction was to sell the aussie dollar. it is not as strong as the kiwi dollar. i would make the argument these are rallying based on what oil is doing. these are commodity currencies. does the rba risk getting left behind? here is oil. this is off the back of saudi and russia extending their price cuts. still ahead we are going to talk more about the u.k.. rob would, chief u.k. analyst for bank of america u.k. global research shares his views. this is bloomberg. ♪

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dani: welcome back to "bloomberg markets." i am dani burger. it is a special edition because u.s. markets are off. that does not mean the set up are any less interesting. before markets have their early close yesterday we are looking the most inverted yield curve in some decades. it has been one year of a negative yield curve. you can track that with what is happening in equities and europe is picking up the mantle. we are looking at gains with a strong first half. are they telling different stories or deciding to trade on different parts? is about continued strength in the american economy?

in europe it does look like it is some of the cyclical sectors weighing on this rally. we are on doing most of yesterday's losses. s&p 500 futures are flat. meanwhile the aussie dollar is stronger but it is not as strong as the kiwi off the back of stronger oil. oil is up 1.5%. we had the cuts from opec. specifically saudi and russia. we will be talking to our julian lee about that shortly. aussie dollar and kiwi dollar get a boost. we did get a decision to hold. the gut punch reaction was to sell aussie versus dollar. we are stronger yet again. we did say more hikes are likely to come. let's talk about the u.k.. megan greene, the boe newest policymaker is morning interest rates may settle at a higher level terminal -- permanently

thanks to a wave of green and artificial intelligence investment. our next guest also thinks there will be higher rates for longer. rob wood is the chief u.k. economist at bank of america global research. he says the u.k. has entrenched inflation problem. are you on the same page is megan greene? will we have to be higher for longer? rob: i certainly think u.k. interest rates will remain elevated. i think inflation expectations are somewhat de-anchored as well. i do not think they will be able to cut interest rates before the end of next year. dani: why can't they go to 6% or

6.3% where the bond market is pricing it at? rob: they certainly can and the risk is they may have to. inflation forces them. if core inflation does not slow, which i'm expecting it to gradually come in particularly towards late summer, if that does not happen they may have to keep fighting interest rates. the bank of england is nervous or cautious about all of these hikes and further hikes are going to have on households if the pass-through function is delayed or smaller. if it is delayed than they need to be cautious about -- this level of mortgage rates will put more pressure on households, more pressure on the housing market. i think the bank of england would prefer to hike to a lower level rather than put more intense pressure on households.

if inflation does not slow than they will have to go there. dani: i love how you framed that. is it delayed or is the impact smaller? everyone is saying it is the long and variable lag. what do you look to to figure out that debate? is there data you used to assess that or is it that we have to wait to see what happens? rob: the answer is going to be we have to wait which is also why the market is a bit aggressive in pricing -- the bank of england is trying to balance the risks of going too high with inflation. wished also look at the data.

pmi holding at around a quarter percent a quarter which may well be u.k. potential growth. the jobs market added 250,000 jobs in the last month. we should be starting to see the effects of monetary tightening. it does not seem to be in the growth data. one of the reasons is there are a lot more fixed-rate mortgages in the u.k.. it used to be almost all closing rate. this is delayed the impact of monetary policy but also reducing it. people in the past would have paid. the other point for the u.k. is there are fewer mortgage holders than there were. significantly reduces the

pass-through of monetary policy. the cash on household balance sheets also potentially slows down households response to these higher rates. i think it is a bit of both. i think one has to be very uncertain given the most effects of a tighter policy might be a feedthrough and that is why the market is a bit aggressive and what it attaches to further hikes from the bank of england. dani: you have done fascinating work when it comes to u.k. consumer confidence. it is stable, but how strong are we in that stability? rob: be run a proprietary u.k. consumer survey. it is nearly 6000 people a month , which is significantly higher than other consumer surveys. it is also a real-time survey so we can see the effect of events

and how that affects consumers. it is really interesting. we can see u.k. consumer confidence is stable but at a weaker level. it has been the u.k. consumers willingness to make a major purchase has dropped sharply as mortgage interest rates begun to rise and this is still the front page of newspapers. that is one additional margin the bank of england should be cautious. you can seat immediate response from households to those rising rates. we also see inflation expectations are declining in the short-term and the long-term. much more in the short-term. the decline in inflation expectations is not because everyone is expecting -- it is because people previously expecting inflation now say they do not know where inflation is going to be. whether that has been proven or not is questionable, but a lot

more uncertainty around where inflation will head. i would take falling inflation expectations -- i would not take falling inflation expectations as a vote of confidence just yet. dani: i want to get your thoughts on this bloomberg analysis. basically saying interest rate increases are benefiting savers more than they are costing mortgage payers, saying it would take longer to slow the economy because folks are able to get that extra yield two and that is more beneficial than what it is costing them in mortgages. i am wondering what you think of that dynamic and what it means for the direction of this economy and monetary policy? rob: the rise in the number of people of fixed-rate mortgages is delaying the pass-through of the bank of england rate hike to consumers and people have more

incident access -- more instant access to deposit where the interest rate is trending. the change is not the rise in savings people are getting. if anything deposit rates are lagging. the change is this rise in the proportion of people with mortgages which significantly delays the effects of rate hikes on consumers. only 20% to 25% of people with a fixed rate mortgage refinance to this year. for those people the effect is severe and mortgage payments will go up a lot. the number is between 400 and 500,000 people a quarter. relative to previous cycles where it has been everyone with a mortgage seeing the rate change immediately, it is a very big change.

what it does is delay monetary policy. i think there are good reasons to think the overall effect of monetary policy is reduced. that is where the bank of england -- i think it will be cautious. i think the bank will focus on this debate. dani: it is such an extremely fine balance. the market can pricing whatever it wants. the stakes are lower. money is on the table, but not the u.k. economy. that is rob wood from bank of america. let's turn to energy markets. opec-plus officials will gather for the annual opec international seminar tomorrow. this is happening just after saudi arabia and russia extended their oil production cuts, keeping a lid on supply as

recession fears linger over the global economy. here with more insight is bloomberg's julian lee. thank you so much for joining. we are seeing oil have a pretty solid rally. it is light in holiday trading but it fell more than 1% yesterday after this announcement. what you make of that price action? julian: i will echo the saudi oil minister. this is a very rare occurrence. this is not about the immediate move in prices. this is about -- he would say it is not about prices at all, it is about balancing supply and demand. i do not by that. this is about the trajectory of prices over the longer period of time. it is not about a daily move in oil prices. the fact that they announced what is effectively a million

and a half barrels a day of additional supply cuts for august and prices fall, that is not quite the reaction you want. we are seeing the recovery, abbvie it in very thin trading on a u.s. public holiday. they will be looking at what this does over the next month or two. for the saudis, they have cut their output target and their production normally follows the target. they will be cutting output by 20% from this sort of 10.8 or 11 million barrels a day down to 9 million barrels a day, and they will need quite a substantial uplift in prices to offset that and they do not seem to be getting it at the moment. i think there concern is if they do not do this there is a real risk of prices falling even further if we get a much slower

than anticipated recovery in chinese oil demand, which is one of the big worries for the second half of the year. dani: is there some degree where $75 a barrel brent does not reflect fundamentals? no we are dealing with growth concern but now we have an even tighter oil market. julian: i think there is a concern, and this is one of the things the producers keep hammering away at. this is a paper market price that is being affected by broader macro concerns. it is not reflecting what is going to be increasing tightness in the physical oil market, even without these additional cuts that the saudi's and the russians have announced. the market was said to tighten dramatically in the second half of the year. these cuts are going to make that tightness even more extreme.

i think they are waiting and expecting that at some point the market will start to reflect physical fundamentals and not broader macro fundamentals. dani: maybe a little sugar rush to get there. that is bloomberg's julian lee. coming up, we'll will be talking about the big banks. they passed the stress test but some are questioning the results. more on the discussions between bank of america, citigroup, and the federal reserve, off the back of more cash return to shareholders. this is bloomberg. ♪ rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations.

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i could hear everything. call 1-800-miracle and schedule your free hearing evaluation today. dani: welcome back to bloomberg markets. former fbi see chair says nonaccounting for liquidity and -- underscores her view the

current assessment methods need improvement. she spoke in an exclusive interview with david westin. sheila: i don't think we should take a lot of comfort from it. to its credit the fed acknowledge there a lot of potential risks that may not be reflected. i do think we should not take a lot of comfort in this. the big issue is they do not stress high interest rates. that is the issue concerning the banking industry right now. ironically, if you assume rates go back to zero in a severe recession, that helps banks that have a lot of unrealized losses on their books. when you take rates back to zero the low yielding assets regain value quickly. in a way they are hoarding banks for not managing their interest rate risks very well.

that is a big problem. the other issue is what happens if we have a protracted period where the yield curve is inverted, meeting short-term borrowing rates are higher than long-term rates, which is a situation we have had for a while. that leads you into a situation where banks cost in funding what they have to pay in deposits or borrowing will exceed what they can get on their loans, and that will be a real challenge for banks. those are the issues the fed needs to be thinking about and putting banks through, not this artificial assumption that if we have recession rates go back to zero and we start the party all over again and assets are inflated. that is not realistic. david: how does liquidity figure in? one of the issues in these banks as they did not have the liquidity so they have to sell securities. does liquidity factor into the stress test? sheila: there are separate tests

on liquidity. they probably should be public. the market will likely have accelerated deposit withdraws. that might mean they have to sell securities they're not planning on selling, which will have a big impact on capital. these need to be integrated. you cannot have a clean separation. that is part of the broader interest rate scenarios, liquidity risks as they impact capital that the fed should be running these banks through. david: are talking about the regulated banking sector. there are transactions outside of that. that has been growing dramatically because of the difficulties the banks are having. they are getting out of some of

the business private credit is stepping into. is there is an effective way to take account the systemic risk from the nonbank banks? sheila: it is a huge issue because in my experience we had a lot of nonbank lending during the pre-financial crisis. the big banks were doing securitization. they were doing the lion share and they still do. those sources of credit try up quickly. if you get into a distressed market situation the banks that have stable deposits are the ones that keep lending. if you keep squeezing the banks, and if we overreact, especially with the smaller banks, you will push even more of that into the private sector. you will constrain their ability to land. there is also not a lot of transparency between the intersection of the regulated

banks and the nonbank sector. this was a huge problem during the great financial crisis. most of the mortgage lending's was at the nonbanks. this is another huge area that supervisors have not been sufficiently focused on. we have been talking about nonbank risk for years. there are tools that were provided in dodd-frank that are not being used very well. more scrutiny. this is more of issue for the larger banks and we have relationships with a lot of these private equity funds and other so-called private funds. those losses, to the extent the bank customers will have problems, that will probably flip back to the larger banks. we do not have a good understanding. dani: former fdic share there speaking with david westin. you can catch wall street week

every friday at 6:00 eastern. let's get more from tom metcalf. we had these banks pass but citi was singled out as one that might face higher capital requirements. yesterday we heard citigroup and bank of america take issue with some of the results and forecasts in the stress test. what did they take issue with? tom: a fascinating response from both of these banks that effectively set the need to understand the fed methodology a bit clearer. the really interesting thing is the fed has proven too stringent. one has said the fed is too rosy and citi has said it is too stringent. it goes to so -- it goes to show that these fed stress tests, even the banks involved need more guidance. dani: to these nuances

ultimately matter? i know that is cheeky but i ask that because we are still getting shareholder -- we are still getting payouts to shareholders even with some of the variety in these results. tom: that is the interesting thing. if everybody thinks the pushback might change the level of payouts that is unrealistic. what it shows is how seriously the banks take this. from their point of view they do not want to have any kind of uncertainty because these are the most important tests they go through. all of the big lenders in the u.s. did pass the trust test -- the stress test with flying colors but in the future it may be passing or not hinges on my new ship. dani: while we have you, i want to get their latest on the credit suisse ubs merger and

this memo the bloomberg team got its hands on from the credit suisse wealth side saying brush up on your cv. what are your takeaways from what we were able to see? tom: this went out to all of credit suisse wealth management division. my read is management saying we are still looking to keep plenty of you but it will be a doggy dog world where we are going to see low ranking leadership positions. we were talking about the precise wording. you might find the memo a bit jarring. it is saying put your best foot forward. it does not matter how long you've been at the company. we are expecting everyone to reapply to positions. dani: i am sure not what everyone wants to hear. it is clear this -- we saw this

in the bloomberg scoop in terms of cutting folks at credit suisse into the newly merged company. this company will still be ubs dominant, isn't it? tom: exactly. there has been a lot of stories about the scale of the cuts. we understand it could be more than 50% of credit suisse's overall workforce. the clear message is this is not a merger. ubs is taking over credit suisse. it will keep what it wants. as this memo shows, some areas, wealth management, asset management that ubs is keen to keep as credit suisse crown jewels and they're trying to do as much as they can to keep it in place. with the huge merger like this it is a very tricky thing to wholesale bring in credit suisse asset. loss of assets --

dani: when you're getting memos like this, you're looking at the fact that someday folks will be losing their job, it is hard to retain talent in that atmosphere. thank you so much for that update. tom metcalf of bloomberg news. coming up we will get more market insight from jeremy stretch, cibc head of g10 epic strategy. that is up ahead on bloomberg. ♪ >> defending champion novak djokovic eased into the second round with a win over argentina. the world number one keeping his perfect record. listserv is looking for his eighth crown in london and to extend his lead on the all-time list. don't forget, you can watch all of the action daily at 5:00

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dani: welcome to bloomberg markets, and happy fourth of july. it is independence day.

we are going without american markets today. futures are still trading and volumes are lighter in europe, but equities are heading higher. basically erasing yesterday's losses. it is a day of central-bank action, despite the fact we have a country off-line. the rba decided to pause. it was the same hawkish because we have grown to know and love from the fed. it is very likely we will indeed have to hike later. another central bank that not just pauses, but signifies that they are not ending, that they still have further to go. unlike holiday trading, brent crude is higher, up by one, almost 2% at this time. we are about to get into an opec seminar, a meeting of opec-plus members. head of that we had saudi and russia announcing they would continue their oil cuts. we have seen the price reaction. there is this element where, perhaps, they want this to more

closely reflect fundamentals. at $78 a barrel perhaps is not high enough given how tight the market is. let's turn to the world of tech. instagram's highly-anticipated twitter rifle is expected to launch this week on thursday. the app is going to be called threads. let's get insight into what to expect. alex cora joins us now. -- alix webb joins us now. how much can it capitalize over some of the recent turbulence over at twitter? alex: it took 17 years for twitter to get to the scale it has today. which is in the order of 250 million active users. threads is not going to be doing that over a compressed timeframe. nonetheless, facebook and meta have a better-oiled advertising machine than twitter. if they get it right there is the potential for quite a lot of upside. if you think about the closest

rival to twitter it is probably linkedin. sort of professional audience, often, you know, people, sort of media and journalists and politicians, but adjacent to linkedin. they have not actually benefited massively yet from all of the issues at twitter. revenue is up $200 million year on year. maybe there is a lack as some advertisers look toward them, but it is may be a good metric for the space being vacated by twitter, and at the very least the times square -- the timescale required to fill it. dani: having another social media platforms launched seems daunting for advertisers to try to get their grip on where they should be, where there should be more, where they should be less. we don't know the pitch for advertisers, but what do you figure it would be from threads to say, we know we are new, but advertise from us? alex: it is a lot easier for them than blue skies.

they are the rifle being ginned up by four -- former twitter executives. but has existing relationships with advertisers. they can say, if you want the kids we have instagram, if you want a different graphic i will not identify, you can do facebook. if you want to get a media trend news-agenda-setting audience, we hope to have threads. it is easier for them to build that up, and you can pump the same ads through these different channels. if you are selling it on the basis of people you reach rather than use, there might be nothing stopping them pumping it through that. that is clearly an opportunity for them. in advertising you talk quite a lot about public -- probabilistic and deterministic advertising. deterministic is, we know exactly who was on the end of this device watching this piece of content. deterministic is the stuff people want, because in the can target their ads with far

greater accuracy. some of the anonymity settings now and play because of gdpr. facebook, instagram, meta have that deterministic data, and that is something twitter generally doesn't have. it is about knowing exactly who is on the end of a given account, which helps them target better ads. dani: in terms of the uphill battle that met our faces from here, we talked about this earlier, jack dorsey -- look, it takes -- and make sense they would take aim at them. jack dorsey saying, all of you threads belong to us, tweeting the data privacy policy. then you have elon musk saying, "yeah." you say it is good for advertisers. is there some degree where it is bad for users that in this age where we are perhaps becoming more alert that it will hold

people off from signing up? alex: you might think so, but actually the thing that has seemingly caused the shift out of facebook itself is not necessarily about ads itself. it is not about people sacrificing their data. people seem to be blase about handing the debtor over. it is the quality of ads and the quality of the content you see on facebook. it is nonetheless interesting this is being marketed -- the way we know it is coming on thursday is that on the app store it says expected on the sixth of july, because you can preorder the download, as it were. it says threads, an instagram app. instagram is perceived as being the safest of -- the shiniest, in a way, of meta's brands. it is keen to associate it with

that, in the blew rep, which is associated with a slightly older demographic these days. dani: thank you so much. that is alex webb. obviously american tech is not trading today. but for the rest of these markets we are still digesting moves from the rba, a hawkish hold that at the moment means we are looking at a stronger aussie dollar. let's get more perspective on markets and get over to jeremy stretch. jeremy, really great to speak with you today. initial reaction from the aussie dollar? we are stronger now, may be getting a lift from oil prices. i wonder more generally, in a world where the fed has amped up there hawkish rhetoric, to affects, does central banks like the rba, like the kroner, today risk being left behind? jeremy: i'm not sure they risk

being left behind, but clearly the market was mindful that there could be a risk of an rba hype today. it was only pricing in eight or nine pips from this decision. we have come out on the others with the market same, we think there is a reasonable probability of additional adjustment coming on the august 1 meeting. we do get the inflation report prior to them. i think that is the reason why the dip in the aussie proved to be shallow. we have seen investors buying that debt because there is still that presumption that the rba are not done in terms of policy tightening. there is still scope for the currency to get traction off the basis of both the rba, but also this presumption that the main will be -- that there will be additional stimulus from china, which will provided and if it to the australian terms of trade. we are looking at the 200 day moving average, and if we can

close above there then i think it will amplify the presumption that the rba is still very much in play with all of us still looking at a reasonable polyp -- reasonable policy tightening. dani: the fed, the ecb, we heard it all last week, right? we heard this hawkishness coming from central banks. you can contrast that with china putting out stimulus. how much is the second half of this year going to be about central-bank divergence? jeremy: i think we are currently in an environment where investors are looking for carrie and will certainly favor carrie. that has been the theme that has predominated over the course of the last few weeks and months. i guess the question will be how much further do the central banks have to go in terms of policy tightening? we are expecting two more hikes from the ecb and fed. in a since we have that situation where there is less

price for the pad -- less price for the fed than the ecb. i think also in the context of the boj, the reasoning they were is going to be an increasing focus on when the boj will consider adjusting policy, because inflation expectations are moving higher. we are seeing some degree of inflationary impetus in terms of japan. i think in the context of the upcoming cpi revisions in the boj's forecast, i believe if we see upgrades in those and some resilience in the earnings data, we can start to see some semblance of discussion about policy adjustment coming from the boj. maybe not this next meeting, but certainly through the course of this quarter. i think there will be some degree of alteration in terms of this dynamic that the boj is the central bank sitting on the sidelines, and it has been the ecb and fed driving forward

aggressively, obviously with probably 225 basis point adjustments over the course of the next two to three months. dani: he mentioned the difference in pricing between the fed and ecb. we were talking to -- talking to jordan rochester, said the euro is going to be able to break out of this range because the ecb will be higher for longer. they are behind the hiking cycle of the fed. this market is really preventing the euro breaking out anywhere. are we going to get that topside breakout from the euro versus the dollar? jeremy: i think we are, but unfortunately you are going to have to be patient for those who are anticipating it. i would expect to see euro-dollar ending the year at 1.1 three, perhaps that magnitude. it is going to be a story for q4 , because our base case presumption is that we get two hikes from the ecb. we will continue to monitor the data in order to facilitate that

25 basis point hike post-ecb summer recess. there is still an underpricing in terms of fed expectations for the september fomc. i think there is enough opportunity that can and will result in euro-dollar drifting lower first, but as we go through q4 and get to that realization that the ecb will remain higher for longer, i think there will be a case that the fed will be looking to adjust policy -- policy for earlier. i think that is the timing that will encourage that range break. we have already seen your positioning proving to be excessive, so we are already looking at real money players holding their positions around 1.5 times the one you moving average. we are long euros. we need to see a paring back to some of those positions over the summer, and i think q4 will be the opportunity to encourage that range break. dani: just quickly here.

how confusing is the american data right now, trying to get a handle of where the fed goes from here? manufacturing is weak. all of the other data last week was so strong. jeremy: in a sense what we are seeing is a manufacturing recession. in a sense we have seen a rapid pace of monetary tightening policy over the last 12 months, and manufacturing is much more responsive to tightening monetary policy. we have seen manufacturing data deteriorate, but services sentiment, which is not quite as responsive to monastery -- to monetary policy tightening, remains robust. those economies that have a greater preponderance on services as opposed to manufacturing -- that includes the u.s. and u.k. -- are performing better than otherwise would have been the case in the context of those much more

driven by manufacturing. i think the u.s. economy will be reflecting that service sector resilience, and that will be played out in terms of the employment backdrop. and that will keep the fed predicated toward additional tightening over the next couple of meetings. dani: certainly germany comes to mind for that. unfortunately, that is all we have time for. jeremy stretch of cibc. coming up, the massive unrest in france is a starting to taper out due to increased police presence. more on the economic and political costs of the protests next on bloomberg. ♪

dani: welcome back to bloomberg markets. emmanuel macron will meet with local officials from the area's hit by ongoing riots. protests were sparked by a police shooting of a 17-year-old

of north african descent. an exclusive interview, the chairman of the mp parable -- of bnp paribas shared his thoughts about the unrest. >> let's be honest, friends is not the only country in which there are tensions in the society. i have seen many of them in democracies. in the united states, in the u.k., in other countries. it is part of the life of a democratic society. we need to understand this. it has little to do with competitiveness and attractiveness. dani: joining us now for more is bloomberg news reporter caroline connan. let's start with this seems right now. how did things stand? is it more calm? caroline: it is been quiet tonight. sunday was also quiet. it seems like the situation is getting under control.

emmanuel macron is meeting with the mayors as we speak, and he said himself that he thinks that the peak of the violence has passed. he also promised those mayors more than 200 of them gathered at the palace right now, that there will be a strong response from the authorities in order to help prepare all of these public buildings, these schools, this public transport infrastructure that has been damaged over the past few days. clearly these mayors have been at the frontline of this open violence over the last few days. they are important in the response emmanuel macron is planning to provide over the next few days. dani: in terms of that response, in terms of what marcon has done, has his position weakened with all of this? caroline: no, of course it is. there is on one side the financial impact.

france's biggest business lobby was estimating that the riots have caused at least one billion euros in damages to shops, supermarkets, banks, etc. of course, then you have the political impact. where is this big divide between two totally opposed ideologies. those who actually say that you should understand the revolt, we should understand these neighborhoods where you have a lot of undereducated, underemployed young people of immigrant descent that are not integrated as much as other young people in the french republic and french society. for example, melenchon has not condemned the violence, but they understood with -- understood the revolt, and issues of racism should be addressed. on the others argue have the right wing, who have been saying

that the response from the state, from the authorities has not been strong enough and that the state should be there to ensure public safety and control immigration. for example, the head of the national rally has said that the family allowances to the parents of those teenagers involved in the riots should be scrapped. of course, a huge debate has started her in for -- in france, and the debate will keep going over the political landscape in the next few weeks. dani: very different narratives you are laying out there. how has social media played into all of this? caroline: emmanuel macron has accused social media of making this violence escalates. he actually said this was because of video games, which obviously is something he has been criticized for saying.

clearly there has been a lot of these violent images, of these cars burning on social media, on tiktok on snapchat, and clearly this is the social media that all of these young people -- the rioters are between the ages of 14 and 18, and they use social media on a daily basis. french social media has seen subscribers increased by 700,000 subscribers over the past week. now they have more than 5 million, which is basically the same as the daily mail on tiktok. basically, a huge impact from the social media as well, and this is also an issue that needs to be addressed. dani: thank you very much. that is caroline connan in paris. let's bring you more the conversation we had with the bnp paribas chairman. not just about what is happening in paris, but the company's

growth outlook and how bmp is ready for a rebound. >> our market reaction, it is a long way. we have a long debate about the evaluation of stocks, difference between the u.s. and europe. you know it well. we have a reasonably high dividend. we serve well the shareholders. it is up to the market to appreciate the value we give. on the point you have made, which is what are we going to do , the main trend in bnp paribas is to support organic growth in the well-diversified business model we have. notably in global market activities. you know that we have sold think of the west, and we are going to use the money of this operation to support the business, but mainly in an organic way.

>> some mainly the focus on that organic growth story. can i ask you about paris as a financial services hub? it does seem that in terms of continental europe's attempt to build a competition to london, that paris has done very well at attracting banks to expand. jp morgan, goldman sachs, citigroup. is this putting any strain on the infrastructure? is this something we will see more of? >> well, as a whole the continent has done well. you have paris, you have amsterdam, you have frankfurt, all of us in europe have done well after brexit. for obvious reasons. clients are on the continent. and it is easier to operate from the continent and serve clients in the continent. this is the reason why most of the banks have shifted staff and

skills to the continent. paris is probably reading this, which is positive from my point of view. you have raised an interesting question, which is the quality. we should never forget that since the decision was made on brexit the competitiveness of the continent, the work has been delivered. on the continent people are working hard to build a better, stronger infrastructure. time is running away, and with this we see an increased competitiveness. i know this is a sensitive debate between the u.k. in the city in the continent, but people are working hard to improve, and they do. and you see the results. dani: that was bnp paribas

chairman jean lemierre. market action is certainly lighter. about 50% of where they usually are for this equity market-rate. we are off the highs for the session in europe. we more or less have erased yesterday's losses, but it was a strong first half for equities. cannot continue into the second half? jeremy stretch was saying that manufacturing had been tilted economies are the ones that are going to -- manufacturing-tilted economies are the ones that are going to suffer. services are doing better, hence the strength in the u.s.. of course, we are basically five. aussie dollar, thank games off the back of an rba hawkish pause. yet another central bank taking that rhetoric. it is this hawkishness that has been whipping up from the ecb, from the fed, from the rba. inflation is not yet conquered. brent crude is up almost 2%. the training is lighter, but we

are seeing an impact from russia and saudi extending their oil cuts. we are going to get an opec-plus symposium, basically we are going to have a meeting of opec. we were just talking to julian lee about this. the fact that announced these cuts before the seminar to get them out of the way. they want to talk investing, infrastructure, that sort of thing. elsewhere we are seeing the dollar-yen consolidate. yen is moving higher today. we did get to that 145 level last week, and that is where we got the jawboning from officials. what will the second half of the year look like? that is next. ♪

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dani: welcome back to bloomberg markets. it is the fourth of july, so volumes are decidedly lighter. we do not have a cash trade for american equities or bonds. we are up and running in europe. germany is underperforming. most other regions are higher. aussie dollar getting a bid after the rba held, saying they have further to go. you may have heard that before. brent crude is up more than 1.5%. that is as opec-plus oil ministers, eu officials, and big oil ceos gather for the opec international seminar tomorrow. specifically on those prices, that is in reaction to saudi

arabia and russia extending their production cuts, keeping a lid on supply. he with more insight on that is julian lee. why announce these cuts ahead of the seminar? julian: i think it allows the seminar to focus on the program they have put together, which is looking at the energy transmission at reducing methane, and other emissions from the oil and gas production, looking at the investment needs in the energy space going forwards. the last thing the saudi's wanted was all of the media attention on, will be extend their cuts? which would overshadow this meeting. this is not a policy meeting, so i think getting the policy out of the way allows this seminar to just be a seminar. dani: is there some degree which it might overshadow it anyway, especially because these cuts

are unilateral? it is not the whole of opec doing this. a prominent will that be in the discussions? julian: the expectation was always there that saudi arabia would extend these cuts. it announced a month ago it would make a unilateral cut of one million barrels a day in july, and said it might extend those if it felt it was necessary. i think there was always that expectation there that it might do. we did a survey of traders and analysts last week, and almost unanimously they asked active there's got to be -- they expected this cut to be extended. it was quite clear that they were going to have to extend this cut. the surprise, perhaps, is that russia has come on board and announced a cut of its own. and, importantly, the russians have said explicitly that they will cut exports. this is been the problem with russia up until now.

they announced an uppercut in response to western sanctions on russian oil and price caps on russian oil exports. they announced an output cut, but we really have not seen any evidence of it in the flows of russian oil you can see coming onto international markets. that is what is really important. they have said now really stepped this up, by saying that they will cut exports. we will be able to see that quickly if they do, and equally if they don't. dani: assuming they do, just how tight is this oil market? julian: it's going to get a lot tighter than it is now, according to virtually everybody's forecast. we have had somewhat of a surplus in the first half of the year. not desperately big by historical standards, but that is a set to shift to a deficit in the second half of the year. even before we had these cuts by

saudi arabia and russia. initially it was looking at being somewhere around one point 5 million barrels a day of deficit. if we get these cuts and if they are extended beyond august that could become as much as 3 billion -- 3 million barrels a day. if it is implemented, and if growth is on a level with what people are expecting at the moment. there are some concerns that china's oil demand is not going to pick up quite as quickly as a some of the forecasters have been suggesting. dani: i know we have not seen it yet, it has been mostly small-scale but consistent stimulus in china. if we do see more stimulus, not just in terms of continuation, but scale, how does that shakeup oil prices? if so much of it does hinge on that lessened demand? julian: if we do get stimulus in china that really starts to boost chinese industry, chinese

construction, road-building, and things like that, then i think we very quickly start to see the oil market titan, and, you know, the opec-plus group of oil producers makes a big song and dance about how responsive they are, how forward-looking they are, how concerned they are about balance of supply and demand. if things do start to move dramatically to the upside, those claims may well be put to the test before the end of the year. we will wait and see. dani: i know we are dealing with a whole lot of hypotheticals here, so this is not an easy question, outlook for the second half in oil prices? is the path of least resistance higher from here then? julian: if you look at most people's forecasts -- and i no longer forecast oil prices. it is not my job since i have moved to bloomberg. dani: you are probably ok with that too. julian: i am very ok with that.

if you look at most people's forecasts, that is for prices to rise in the second half of the year, but not anything like as strongly as they were forecasting back at the beginning of 2023. back then we were seeing almost everybody forecasting oil prices hitting $100 a barrel sometime in the second half of the year. you are not seeing that anymore. people are now talking about perhaps $85 a barrel, and that is partly on the fact that we have seen more supply and people were anticipating in the first half of the year. russian production has not fallen in the way that people anticipated it to. some other countries have been producing. iranian production is up. venezuelan production is up. you have had that additional supply, and you are also seeing these fears about the global economy and about the pace of chinese oil demand growth going forwards. dani: thank you so much for

joining on that oil outlook. that is julian lee. let's turn now to economic data. inflation in the euro zone is falling from a record high, but still far above the ecb's 2% target. a ecb policymaker reaffirmed yesterday that the bank has a long way to go to raise interest rates. let's get some perspective from the chief economist at berenberg bank. always a pleasure to have you in the studio. nagel talking a hawkish game. from christine lagarde, same story there. how much higher and for how much longer are you expecting from the ecb? are they going to walk the walk along with talking the talk? >> they will walk the walk for a while. the rate hike in july is a done deal. september is a possibility. but the ecb is far too optimistic as to the growth outlook for europe.

they expect significant growth over the summer. if you look at recent indicators manufacturing is heading for a recession. i think that in september they will have to revise down there forecasts for growth quite a lot, and then probably the doves would say, look, if growth is significantly weaker than expected and probably co-inflation, underlying inflation ought to be weaker in the future as well, so let's stop. there is one thing to the higher for longer story, where i believe may be for longer. the ecb next year probably will not cut rates. dani: what do they do with the balance sheet then? holger: they let the balance sheet shrink. dani: do they do more than letting it roll off? holger: absolutely not. with the ecb no longer reinvesting the proceeds from maturing -- from maturing bonds,

the ecb by the end of next year, relative to gdp, will only be slightly above where it was pre-pandemic. given another year, 2025, and the balance sheet of the ecb will look normal without having to speed up the process. why rock the boat by speeding up the process? dani: dani: dani: to put a finer point on what you said moments ago, the fed maybe not. what is that divide that might force the fed's hand sooner than the ecb? holger: ultimately it is a question of, what is their target? the ecb has one target, 2% inflation. at least half of those at the board take it literally. it will be a long time before inflation is all the way down to 2.0% on a sustained basis. next are probably the hawks would say, while the fed is cutting rates, we should not. whereas the fed, with its

balance between unemployment and inflation, will probably conclude earlier inflation is heading the right way, it is getting close to 3%, we see finally late this year softness in the labor market. early next year, more softness in the labor market. it will probably start cutting rates early next year for the sake of the labor market. dani: i've really been trying to help myself back from having an r-star conversation. i think this debate is an interesting one, of where equilibrium in rates is. is there some degree which given covid, given the stimulus we saw, that models and are to find out that equilibrium don't work. that we cannot rely on them as we once did? holger: that is absolutely the point. on the past we could not rely much on r-star either. there have been revisions as to what r-star probably really was. it is an interesting concept.

in a period where we have had the pandemic, or we have had rush war against ukraine, with these supply shocks, supply chain pressures, with all of these unusual things how can a model based on past experience without any of these shocks come up with answers that are good enough to rely on? in other words, we have to lean back, look at the big picture, and the big picture for the u.s. is rates are high, probably going higher. inflation is gradually softening, the economy is gradually softening. as monetary policy works the fed should stop and reverse some of its tightening next year. dani: is pausing and going at its lower, is that in some ways an acknowledgment of that environment, and are they doing the right thing in that case? central banks that are too overly reliant on models? holger: central banks have been

too overly reliant on models, which is why they missed the initial inflation problem. because there models did not have this longer-term wage element coming from demographic reasons. shortage of labor. there models missed that inflation is trending up anyway, regardless of these funny things. regardless of the models, what the central banks should really do is look at the evidence with an open mind and be very mindful of the point that monetary policy works with a lag. we all know that, but they are often too close to looking at what is current inflation, especially core inflation, rather than thinking, ok, headline inflation is coming down. that will likely mean core inflation will come down significantly as the leg impact on goods and services prices, right? our hairdresser needs to heat her room. all of these will be positive based effects, reducing inflation in the future.

central banks are not paying attention to this kind of outlook. dani: is it just the lag, but also the transmission mechanism in terms of the overall impact? the size of the impact? is there some degree now where monist -- where monetary policy tightening -- not just that it is taking longer to filter through, but that it is filtering to last? holger: it is filtering through less than in the past. one reason is consumers have the excess savings built up during the pandemic. companies have good balance sheets. and banks are by and large in good shape. on top of that, banks are being protected by central banks from regulators, from turmoil. we have to remember that a significant part of these extremely low rates were a kind of insurance policy against pandemic risks. that is, if you think the fed is going up 4.5 percentage points, the first half of that longer

required insurance. it is only everything on top of that which we should compare to previous monetary tightening spirit in retrospect it is not so much of a surprise that the economy is holding up relatively well against higher rates. dani: this is been so fascinating. thank you so much for joining. that is holger schmieding, chief economist berenberg. two major u.s. banks push back on the fed in the wake of the latest rounds of stress test. we are going to get into the details of that next. this is bloomberg. ♪ 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.

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dani: welcome to bloomberg markets. blackstone cfo michael chase says artificial intelligence is likely to give private market investing a big leg up. he spoke with david westin on wall street week.

michael: we have been focusing on the potential in this area for a while. at first, just big picture. say that, i believe ai will reinforce and further the advantages of private market investing relative to public market investing. david: why is that? michael: it is actually pretty simple. public market investing, which relies on publicly-available data, that sort of data will be increasingly and further commoditized in an ai world. in contrast the value of proprietary data and insights you can glean from a large private market portfolio accumulated over many years, across many businesses, the value of that information and data and ability to mine insights from that and have pattern recognition coming out of that, that will only be further enhanced relative to public market investing. i think that is a big picture perspective. for us on our business, first

operational e-for sure over time there will be efficiency gains in our business processes from leveraging these tools. on the investing side, obviously lots of focus. you can say there is a goldrush mentality right now. david: as cfo you are looking not just at the here and now, but the longer term. take us into the longer-term future for blackstone. you are very big right now by most measurements. it gets harder to grow at the same rate as you get bigger. what is the path forward for blackstone to maintain the growth it has had so far? michael: it is a fair question, but also a question we have been hearing for years. you have gone to this size, you know, where will the growth come from? we have proven ourselves on that front, but to answer your question i would say our firm has been around for 38 years. i have been fortunate enough to be there for 26 of the 38 years.

we have a long-term view on building the business. we do not want to be a very good asset management company. in addition to that we want to build one of the great companies in the world. that is very enduring. that is steve schwarzman's vision. that is the backdrop. against that backdrop there are some really profound secular tailwinds that continue to power the future of our business. both with respect to markets we invest in, and also the markets from which we raise money to invest. on the former, there is a really amazing long list of addressable market opportunities. i just ticked off a few of them. globally and private credit, globally in the infrastructure area, in energy transition, which will require capital, in the further development of the

secondary market for alternatives generally, which is still underdeveloped, investing in the life sciences revolution. there are some really big markets to invest in, with a lot of runway that i think will create big opportunities. on the fundraising side the markets where we raise capital, structurally the world's investors are still under allocated to alternatives. people focus on traditional institutions and there is still a lot of runway to go, but in other big channels like insurance, like individual investors around the world, they are barely penetrated with respect to alternatives. there are a lot of tailwinds there. we think we are the best-positioned firm in the world to capture the opportunities. we like to think we are a reference institution. that we have the brand, reputation, scale of, and culture. we think we have created a culture that does both performance and innovation well.

if you had to ask me what makes us special, i would say we have been able to combine being very good investors with being very good business-builders and being able to institutionalize that. that is unusual in the investment business, and that is what has powered our success. that is what we think will propel our future. dani: michael chase speaking with david westin. you can catch wall street week every friday at 6:00 p.m. eastern. a check on your markets. we go without the u.s. today. there was markets are off for the fourth of july holiday. european equities are stronger. not being helped out by cyclical shares. we are looking at the dax. that is dragged lower. things like automakers are underperforming. the big fx story, not just the pickup for oil, but a hawkish hold from the rba. kind of like the fed. then as i mentioned, we are finally seeing a rally in and crew.

that is up nearly 2% off the back of cuts announced -- continued unilateral cuts from saudi, from russia. that is important when it comes to russia. it is not just output, it is export. we will see in the data whether that actually happens. just under $76 a barrel. let's check in on the broader market story with kristine aquino. i feel bad doing this, because the u.s. is closed. there is no cash trading for the bond market, but i want to talk about the twos and tens inversion. it has been one year since it is inverted, the deepest since the 80's -- the 1980's. what does that mean? [laughter] kristine: the debate of whether it means a recession, and whether it doesn't, i feel like that has really matured now, right? it has been a year since we have been in this inversion mode. it is a bit of a milestone.

yet to me, really, it just shows how in some ways, how broken the marketers. in terms of the short and really having to catch up with all of those bets on higher rates, and because there was a time when markets were convinced the fed was going to keep going, right? it was this narrative of a pause eventually turning into a complete stop. obviously that has been dispelled. so, there is that dynamic. on the longer and too, just this idea that there is the market believing all of these rate hikes are going to amount to slower economic growth, maybe even a recession. that is what we are seeing in the long and. the broken market, i don't know how it is going to be fixed. dani: you know why i love this? the conversation about bonds versus stocks typically goes like this. equity investors will buy a new

rally, they are in lala land, whereas the bond traders are right. going forward, how is the sentiment split in terms of what is correct now? a bond market still pricing in a recession, or an equity market that continues to defy gravity? kristine: i wish i could tell you there was consensus there. within the bond market we have the likes of morgan stanley arguing the direction is going, that there are more losses to be had in the bond market. morgan stanley saying the hikes we have seen will eventually feed into economic growth, slow that down, and we will see yields coming down. when it comes to the interplay with stocks, even within the equity market itself the debate is very much raging, where are stocks going to go from here? is the first half, the gains we saw there, double-digit gains for most major markets, is that

behind us now? are we now staring down a second half that is going to be a lot more subdued? a lot is going to depend on the earnings season coming up. and what the outlook is for companies into the second half of the ship. dani: you read my mind. what is the current consensus, if there is one, in terms of corporate's, and terms of maintaining profit margins? kristine: let's get away from the consensus discussion. dani: that is probably wise. this is what makes the market. kristine: one thing there is consensus on is what is going to be the main concern for investors. that is really going to be the since we get from companies over their profit margins. the first half really has been quite a surprise, a pleasant surprise in terms of companies' ability to pass on higher cost to their consumers. that is going to be a higher bar in the second half, just because consumers are starting to awaken to the fact that maybe there is readf -- greedflation at play

and they need to push back on those higher costs. i think that is going to be one thing that you would really want to pay attention to, because that would factor into the future outlook for earnings growth as well. we are seeing more downgrades rather than upgrades, according to citigroup. there are worrying signs, but that profit margin story, definitely want to keep an eye on. dani: bloomberg's kristine aquino there. as we close out the hour we are still looking at an equity market rally in europe. coming up, coverage of these markets will continue, with the u.s. offline. futures are basically flat. we are going to be having a conversation coming up with spanish foreign minister jose alvarez on this fourth of july holiday. this is bloomberg. ♪

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guy: welcome to bloomberg markets. i am guy johnson. let's talk about what you need to know today. no fireworks. markets adrift. the u.s. is closed. fourth of july holiday. back of the week a lot of data. ahead of janet yellen's trip to china beijing announcing export controls on key metals. shaky foundations. in the u.k. the five mortgage hit 6%.

housing stocks under pressure. jp morgan downgrading britain's third-biggest builder. let's talk about the markets. it is quiet. the u.s. is out. a chunk of volume out of the market. the stoxx 600 drifting sideways right now. real estate stocks doing better. saints breeze -- sainsbury is one of the uk's biggest brochures. the reason the stock is down is it is not upgraded its guidance. the comps are easy for some of these brochures. -- some of these grocers. there are big numbers coming up later on this week. will a crescendo with the payroll number friday. that will be a big moment. this as we enter the second half of the year.

let's talk about the first half. let's figure out where we were. maybe that will tell us where we are going. this chart tells you a story of the fact that japan has done really well. japan and technology have been the big outperformers in the first half of the year. if you currency adjust japan it does not look quite so clever. if you put equal weight s&p into this chart it mirrors the blue line at the bottom, which is europe. the trend is this. if you have been in tech you have done well. if you have not, do you need to chase this market in the second half of the year. if you're a portfolio manager behind the fundamentals do you need to chase the markets? let's bring in john lynch who joins us on the fourth. nice to see you. thanks for giving up your morning to talk about what will happen next.

in the first half of the year if you are not in tech, if you are not in japan and certain other markets, you are probably behind on your benchmarks. what do i need to do now if i am the portfolio manager? 20 to play catch-up or do i wait for the market to come back to me? john: i agree that if you look at tech and japan outperforming year to date, that gives me some caution because that is a market that shows me it is still dependent on low rates. the bank of japan has not raised rates. we are still discounting long-duration earnings. the mentality of 0% on the short end of the curve but we all know it is 5%. i would not chase this rally. i think we should wait until the market comes back. the equal weight s&p 500, i think that is more reflective of a market that is accurately

pricing in flat earnings and the potential for a mild recession in the u.s.. guy: when does that happen? this is the key question. the fundamental should have told us we were heading for a slowdown. the recession has been pushed out. the stock market has continued to rally. john: we just don't know when this recession will occur. we are in a manufacturing recession. we saw that again. we are in an earnings recession. it is hard to have a true recession when everybody has a job. not only do we have the june payroll report, but the jolts report will be as or more important because i think the fed wants to attack job openings. once you start to see that --

then second-quarter earnings, this will be the second or third quarter of profit to clients and typically the playbook is businesses start to cut jobs and expenses. guy: is that going to happen this quarter or am i going to have to wait another quarter? i am starting to see some companies withdrawing guidance but it does not feel like a wave. john: i think companies will start announcing it, which could give the market some sort of comeuppance. i do not think we test the october lows. i think the 200 day moving average on the s&p 500 of around 4000 could be very important support. there is still so much liquidity. december 2019 m2 was 16.5 trillion. guy: the liquidity question is

interesting. i was always told liquidity up stock market up, liquidity down, stock market down. is it going to be that simple? john: that is what your technology in japan chart shows. when you look at the other companies in the s&p 500 i think they have accurately priced in and i am not convinced when you see leadership from communication services, from technology, and from the tech names in consumer discretionary, i'm not sure that is fully reflective and you'll have to see something there before the market will test that 4000 level as i suggest. guy: there is a lot of money and money market funds. do i look to lock in duration or do i look to get back into the stock market? john: i like 5% at the short end of the curve. that can make up for a lot of sins.

there been many articles on the idea that 60/40 was dead and i think the death of the 60/40 portfolio is greatly exaggerated. i do not think you should go duration. we are inside a benchmark on duration and we are high credit quality. that is a good point your investor should pay close attention to. while the treasury yield curve has been pointing to recession for over a year there is not too much stress in the credit market. corporate credit spreads are still well within or below their average band over the last 25 years. treasuries are saying we will go to recession. corporate's are telling us it will not be that bad. guy: what has been interesting is high-yield has outperformed ig. does that flip on its head the second half? john: the fascinating thing

there is high-yield trades in line with small caps. small caps have been lagging. i think the high-yield game had something to do with the yield differential as opposed to the traditional correlation between high-yield and small caps. guy: i understand why he would want to play it at the front end. the curve is heavily inverted. at some point this economy will rollover. when that happens, how i know the point to get out of the short end and goat longer? when do i want to stretch out further down the curve? john: i will wait to see jay powell the next couple of meetings. he has been very aggressive in his messaging and the market has kind of ignored it. you look at fed fund futures. we have taken 50 basis points in cuts off the table. we have added 50 basis points an additional hikes in the s&p is up 5% or 6% over that time.

that is a market still dependent on the old playbook. i will not flip to long-duration until i get a good sense that if we are at 5.5% on the fed funds by year end, i want to make sure i've a good sense that powell is done and will hold for the first half of 2024. we need to see a couple more quarters of this. guy: you think the cuts come late next year at the earliest? john: late 2024. a mild recession. a 50 basis point increase, the unemployment rate has been the line of the sand when the economy slips into recession. the political climate in 2024, the pressure will be on like he is not experienced yet. guy: great to catch up. enjoy the fireworks. thanks for stopping by so early. comerica wealth management cio

john lynch. thank you very much. coming up, china imposing export bans on metals needed to make chips in the united states. details to follow. this is bloomberg. ♪

guy: 12 minutes past the hour. time for chemistry lesson. let's talk about key metals. a journey through the periodic table. china escalating the tech trade war with united states and europe. it is restricting exports on two metals.

bloomberg's mark barton joins us. what are these metals and why are they so important? mark: the two metals impacted our germanium and cadmium. these are tiny industrial metal markets, the production of which is born out of larger industrial metal waste streams. the core ingredients of aluminum and due process that into those metals and it is a process you extract some of the minor metals as well. those are then sold in unrefined forms to specialist refining companies, the large majority of which are in china and then they turn them into very pure

metallic products that have critical applications and things like satellite imaging and optical like electronics and so on. guy: why the chinese so dominant? mark: it is about that industrial supply chain that has been built up. you can find small quantities all around the world. china has excelled in managing to turn a profit from extracting these materials and turning them into high-purity products and getting very close to customers in things like chipmaking because it is a exacting science. he did these things to be incredibly pure and the verification process to sign up

as a supplier to chipmakers is a very arduous process and you have to go through lots of r&d and there were really just a handful of chinese companies that have excelled at that in recent years. guy: the united states has taken a step forward and making sure it does have security in its chips industry. if we do see restrictions, if we see concerns around this, how quickly could america or others turn this around and produce what they need? mark: in theory you could have a relatively swift supply response. zinc producers, in the past when prices have spiked, they have boosted production. getting to a commodity grade

product is one thing. if the price incentive is strong enough and the strategic support is there perhaps that happens. the second obstacle is in developing that high-purity refining circuit to get products that can actually be used by the very exacting customers and that could take a while longer. there are few suppliers that whether they have additional capacity to make up for china's loss is unknown. it is unlikely they can compensate for it in full. guy: and potentially could become more expensive. great stuff. bloomberg's mark barton on these key metals. let's turn to another commodity. opec-plus and ceos of oil companies will be gathering for opec's annual international seminar.

joining us is bloomberg julian lee. what should we be watching? julian: this is a public conference. this is not a policy gathering. we are not looking for opec-plus policy. we are not looking for any talk about output cuts or balancing the short-term market or anything like that. this is going to be a bunch of panels of academics and business leaders and opec-plus ministers talking about the energy transition, cleaning up the process of extracting oil and gas and reducing methane emissions and reducing energy use in the oil and gas fields and talking about the need for investment in oil production going forward because we have not been doing enough of that. guy: let's talk about that need for investment. there was this idea we are going to see a squeeze.

we are talking about saudi arabia and russia announcing fresh voluntary cuts which tells me they are not so convinced the market will get tighter the second half of the year. julian: if you look back to the start of this year everybody was forecasting oil prices would be back in the triple digits by the end of this year. $100 a barrel forecasts were everywhere. now i do not think you can find anybody forecasting $100 a barrel oil. people are talking $80 to $85 a barrel. there are two parts to that. one of those parts is that although the chinese economy has opened up from its covid restrictions, only about half of a chinese demand is related to transport. while transport has picked up chinese industry and chinese construction hasn't.

it hasn't boosted oil demand as people thought it might do. then on the supply side, russian oil production has held up much more strongly than people thought. the forecasts are still for a tighter market in the second half of the year. if you look at the energy forecast or opec, they are forecasting a shortfall even before these additional cuts. guy: let's get back to what you spoke about about the future of oil. i am seeing byd out with strong numbers in terms of electric car sales. tesla really strong numbers. negative power prices in europe because europe has installed more solar than we anticipated and we are having problems using all of the electricity we are generating. what does that tell us about the

rate at which we are going to walk away from hydrocarbons? julian: what it says is the shift is inevitable. the shift is happening more quickly than the oil producers would like. there is truth and the argument the internal combustion engine will be with us for a long time. you can have very high rates of penetration of electric vehicles into what is a huge car and truck fleet. that is going to take decades to displace the rump of internal combustion engines. those vehicles will get older, they will get sold. there will be countries continuing to use them. the oil demand is going to be there.

i've been following the oil industry for longer than i care to admit. i can remember back in the 1990's industry conference after industry conference, and there were two things that ceos were continually worried about. one was the lack of new talent coming into the industry and failing to attract graduates into the oil and gas industry. a huge staffing problem. the second is there was not enough money going into the development of new oil fields. this is not a new concern. this has been there for at least 30 years. guy: i remember your interview a long time ago. julian, nice to see you. still ahead, credit suisse bankers are dusting off their resume as the ubs takeover continues. what do these changes mean? we will talk about the wealth management business next.

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guy: a slow burn of the day. we are awaiting the fireworks later. this is bloomberg markets. happy fourth of july. let's talk about credit suisse and ubs. private bankers are being told to dust off their resumes ahead of the selection of a new group of managers. this follows the takeover by ubs. let's talk about this with bloomberg steven arons. this is the side of the business ubs wants. how differently is it being treated? steven: the wealth management part is what makes credit suisse so attractive in the eyes of ups

. ubs is a huge wealth manager and they want to become even bigger. we have seen departures in the asian business because of the uncertainty in credit suisse and they are really trying to keep these people and make sure they get the best ones for the business, where they want to grow. it is not easy. competition is strong. guy: i have seen a steady stream of headlines over the last few weeks, many of them brought to me by you about high-profile departures from credit suisse. why would anybody who has a good resume, why would they still be there at this point? steve: is a mixture of several elements. it is not always easy to find something else. bonuses may be tied up. pay may be tied up. if you're a good wealth manager and ubs is telling you stay on,

it is not looking so bad. there are a number of reasons why people are staying up guy: some people have left because they can see the writing on the wall. how big have the job cuts been? steve: it will be massive. we just reported last week that about half of the credit suisse jobs could be gone. there will be much of it in switzerland. much of it in the investment bank. deutsche bank put a research note out saying they expect all the sales and trading and credit suisse to be wiped out. for those people it is not looking too great. guy: great stuff as ever. thanks for bringing us the story. coming up we will get an update from france on the unrest.

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it's overwhelming. it's everything. guy: 2090 minutes past the hour. -- 29 minutes past the hour. in france president emmanuel macron meeting with mayors to assess the damage arrives have done of the last few days. they have been romping france. the massive police deployment we have seen has had an impact. we have seen a drop in level unrest. let's go to paris. our bureau chief is alan cast. it looks like last night was quieter. is that because the rides are being to fizzle out or the police presence is having an impact? alan: it is probably a

combination of both. it hit up each thursday and friday and has been getting quieter ever since. there has been this massive police presence every night. there will still be a large police presence tonight but it has been getting quieter. at the meeting with the mayor's he was a little bit careful in what he was saying. you need to be careful for the next few days and few weeks but in his view the peak of the protests has passed. guy: what is the plan for dealing with the root cause. what is happening with policing, what is happening with deprivation, has this change thinking within the government? alan: that is a tough question. the answer is according to the president's office they will take a deep look at the root causes of what has happened and try to come up with new

responses because there is no point in trying to have the same response they have had to previous episodes, specifically the one in 2005 step they will try to get a deep understanding of all of the issues and try to come up with serious responses. as you point out, this has been going on for a long time. it is true and a lot of multiethnic countries. finding solutions is not an easy task. guy: absolutely. how does this change the trajectory of this presidency? does what has happened change the trajectory of this presidency? alan: that is another good question. the answer -- one possible answer is emmanuel macron has faced a series of protests against authority figures throughout his six plus years in

office. he has had the yellow vests before covid. he had protests over retirement earlier this year and he has had protests which were sparked by the police killing of a teenager in a suburban neighborhood. each one taken separately has an impact on the perception of the french government, on the perception of macron's ability to navigate france through choppy waters. add them together and it does start to on his administration as it seems to be buffeted by a series of crises he has having a hard time getting in front of. whether this has a long-lasting impact is hard to tell you. there was a brief period, it will been roughly a week, which is not an extended period of time. that said it is the third set of social crises he has had and that starts to become a pattern

which is difficult to brush aside guy:. thank you very much for the update. our bureau chief in paris. the next story feels appropriate up back in united states french wine is all the rage. everyone is celebrating the fourth of july. demand will be high. let's talk about a company coming of the wind industry from a different angle. the ceo joins us now to talk about what is happening in wine but also what is happening in the opening up of wine. thank you for joining us. you said this company of a year ago. it is a black-owned, black started wine business, and diversity is at the core of what you do. you've had a meteor cries. -- you have had a meteoric

rise. how important has that diversity been? >> this is the perfect time to talk about amazing french wines. our growth has been amazing not only because of diversity but also what is in the bottle. wind is the great connector and we personify that. we have removed stereotypes associated with wine to make it much more gender agnostic and we are celebration in the bottle and we think the message has been well-received by consumers. guy: in terms of the demand you are seeing, how big is it? this weekend best -- this fourth of july will be a big event. the consumer is back with a bang. how much demand are you seeing? are you able to satisfy all the

demand you have? >> we are up 82% versus last year and we are growing much larger than our competitors. we have also launched a fantastic white wine which is indicative of what we are seeing in the market. white wines from france are becoming all of the rage. we believe we are in the forefront of the ability to bring great white wines along with a rose. has the price point -- guy: has the price point changed over the last few years? you see whispering angel. you see lots of other high end wines. these kinds of wines have raised the price point significantly over the last few years. is that pricing power sustainable? >> we continue to see premium in wine with rose.

we are seeing price depression in the category. we did not know if that will continue. with the acquisitions across the region, that will have fundamental effect on the pricing long-term. it would either stabilize or continue to go up. the weather plays an important part of all of that. all of that dictates the price. guy: france is where the great rose comes from. some may argue with me but let's take that as a fact. you bring up the weather. i've seen really hot summers recently. it is the climate change story going to alter where you think you're going to be producing? >> it has an effect on all of the producers in the region. it puts a lot of strain on some of the most predominant grapes used in rose, which then makes the winemaker have to offset

that lower production and lower yield to produce the same style of wine for each house. we think we've done a great job of that over the years but there is some strain on the operations standpoint as well. guy: there is debate in my household as to whether or not rose should be with ice or without ice. where do you come down on this? >> if you think about how it is consumed in the hot parts of the south of france, especially in the summertime there is little reflate duration, you are out -- there is little refrigeration, it is ok to put in ice cubes. it is traditionally how it is in in the south of france. so you win the debate. or your wife wins the debate. guy: my wife wins the debate. [laughter] that is not an uncommon event. is this year of goodyear? -- is this year a good year?

talk about how you see the wind story in the next 12 to 24 months? guy: we are up 82%. we launched a white wine. blends from the south of france and provence are on fire. we are betting big not only on our rose but also on a blend. it should be good. we think it is the next big thing. we will bring provence whites to the forefront. guy: can't argue with that. great to see you. thanks for joining us. coming up, u.k. prime minister rishi sunak is facing questions on the cost-of-living crisis and he is talking about thames water. he is at a hearing.

we'll be bringing you an interview with former u.k. business secretary vince cable. this is bloomberg. ♪

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guy: i want to take you down to parliament. that is rishi sunak giving evidence today to the lies on committee. what is the liaison committee? it is the chair of all of the select committees at westminster coming together to speak to the prime minister. to give you a flavor of what he has been talking about, the bank

of england has "a very strong record" on inflation. not sure the market would agree. rishi sunak says he supports the bank of england. he also says the government we use monetary and fiscal policy on inflation. questions around that. we will get the latest headline and bring it to you. these are live pictures from westminster where the prime minister is being asked questions and providing interesting answers. let's talk about the upshot of this inflation story and the challenges the bank of england is facing. one of the most interesting articles i've have read on the bloomberg terminal relates to the problems you have a few of the bank of england relating to transferring policy effectively to the real economy. in theory you raise interest rates and that hits demand. that is how these things are meant to work.

the problem is in the u.k. there are people who have no mortgage, so you raise interest rates and they benefit from savings. a lot of people on fixed-rate mortgages and not feeling the effects of the monetary policy. the later will probably change. by raising interest rates are you in a weird way tribe and demand, which is ultimately not what the bank of england is looking for. let's get into this conversation. philip audrey co-authored that piece. this is weird. this is not how this is meant to work. in this country and a people have enough savings post-pandemic. enough people do not have mortgages that net-net savers are getting more. the benefit to savers is significantly greater in those being hit by mortgage rises. philip: it was partly to do with the fact you have a lot of owner occupied houses with no

mortgages. also to do with the fact there are so many fixed-rate mortgages. 85% of the stock is fixed-rate. the rate rises are coming through in a delayed fashion. meanwhile the interest rate rises which are not as large on the savings account, that goes through onto the entire stock of savings quickly. there are different measures of savings. the time deposits, stuff people are hanging on to. the increase in the income has been higher than the hit? guy: how much bigger? philip: since the bank started raising interest rates in december 2021 there is been a net gain of about 10 billion pounds.

if you narrowly measure the wealth of the u.k. of income from savings against the cost of your mortgage debt, which is where the bank of england is trying to operate. guy: does that explain the consumer confidence we are seeing? philip: that is the bizarre thing. we've been talking about the mortgage prices. june was when it hit. the jfk measures of consumer confidence, perfectly the measure of what you think is your personal financial condition, those have improved. perhaps it is because of the survey contingent a lot of people are seeing their income rising on their savings accounts. guy: presumably this will start to unwind. the huge number of fixes are incrementally going to rolloff. philip: this is one of the

problems. the governor has said there is a delay to the transmission mechanism because of the fixed-rate mortgages. we have thought of that as the impact of interest rate rises on fixed-rate mortgages is coming through more slowly because they are rolling off at 7% every few months. this -- looking at it from the other perspective, which is worse than just rolling off slowly, the impact on savings is increasing. the net wealth or net income of households is boosted for now. by the second half of next year i think we will see the reverse happening. it is about a delayed transmission mechanism. do you have to raise rates higher? what you have to do to get on top of inflation if your normal monetary toll is slightly blunted in this way.

it is a question rather than a definitive answer. guy: i look forward to asking that question to the governor at the next press conference. thank you very much. less continue our conversation with the u.k.. earlier we spoke to vince cable, former liberal democrat leader. he says the strengthening of regulatory functions is needed to avoid a potential collapse of companies such as what we are seeing around thames water. vince: they are willing to put in more cash that temporarily solves the problem. thames water is not the only water company in trouble, but a raise from the government point of view is the best option. there will be painful conditions. investors are expecting to see prices rise to ensure there is adequate return in future. if the capital raise falls through than the government is

forced to back into public ownership. you cannot just allow a water company to collapse. if that happens, all of the liabilities of the company go on to the public sector balance sheet, which in the u.k. are already 100% debt to gdp. if the government could avoid nationalization it will end it will presumably have to make some concessions to the investors. anna: i would you expect this to develop politically? there seems to be pressure from part of the labour party, not your political affiliation, but your assessment. labour mp is calling on the opposition leader to introduce policies around the renationalization of water. you expect to see that? vince: vince: there may be calls for it, but the problem of how you handle public debt, which

was the whole reason behind privatization in the first place, was to try to get utilities off the public-sector balance sheet, it remains a big problem. politically there is a lot of anger. these water companies have failed to deliver essential public goods. no underinvestment in the sewage system. there is lot of leakage. they have real anger is about things in the past. it is the way mcquarrie took advantage of lax regulation to payout very large dividends that are completely unjustified in terms of a fairly safe utility. it happened in the past. we cannot retrieve the past. the politics are quite toxic for the government. anna: some people have argued that the sector has a private equity problem, not a private

ownership problem. from what you've been saying, you might agree with that view? vince: i think where this is heading is to a tougher regulatory regime. the problem is not a problem of the privatization but more a problem of very weak regulatory operations. the regulators have been captured by the industry and our regulators went off to work for the private companies with much higher salaries. regulation has been applied flexibly, and i think the pressure will now be on to have a tougher regulatory regime. how you reconcile that with trying to get in more private capital to make up the deficits of investment is a tricky one and the obvious logic is to move to higher prices which is very

difficult in the middle of a cost-of-living crisis. anna: what you make of the complex structures that seem to exist in some parts of the agility space in the u.k.? i am talking about layers between operating and holding companies. many parts of companies issuing debt. some parts of the company relying on dividends from other parts. domiciled parts of the business come is there is a place for these structures and what were previously public utilities. vince: this is not just an issue for the water industry. this is a phenomenon we have seen. that is how mcquarrie, who has been the villain of this story, took advantage of thames water and were able to extract large dividends which were simply not justified. this is a low risk utility after all. ♪

guy: if you are looking for fireworks, this fourth of july, i suggest you not look towards the financial markets. u.s. markets are closed. that means very light volumes. will have to wait until at least tomorrow when we get big data points. we are waiting for jolts. we are waiting for the payroll report friday to give us a sense of clarity and direction. stoxx 600 fairly flat today. a .2%. urc real estate to better. safe breezes an interesting stop. an interesting take on this story. these businesses are working capital businesses. to get 5% in the bank. euro-dollar doing nothing. will be joining -- we will be joined by helen jewell for her

take on these markets. that is next. this is bloomberg. ♪ 5-hour energy. think of it as 5-second coffee. for when you wake up too late to make it. or you don't have time to wait in line for it. or you're just too busy for a coffee break. 5-hour energy. the 5-second coffee. hi, i'm jason. i've lost 228 pounds on golo. 5-hour energy. so when my doctor told me i needed weight loss surgery, i knew i had to make a change. golo's helped me transition

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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. guy: it is tuesday, the fourth of july and this is bloomberg markets. let's talk about what you need to know. there will be far worse later but there are many in financial markets today. we are a little adrift. light volume in the u.s. is closed, fourth of july holiday. we are setting up for a really big week which is going to percent of friday -- which is going to crescendo friday but a u.s. payrolls number. janet yellen has announced export controls critical to the tech sector and taking on twitter, instagram threads set

to launch. let's talk about where we are with the markets. we are seeing light volume in the u.s. is out. this is normal. low volume days can produce interest. we haven't seen any but the markets are starting to set -- the second half on cautious tone. i will talk about with the second half of the year is going to bring so let's talk about that. we built this chart earlier this week and this encapsulates some of the trends we have seen particularly in equity markets this year. the bottom line on the bottom is the stoxx 600. we are up by a .7% but look at the yellow and white line and this is where the outperformance is come through in equities. the white line is the japanese stocks story. it doesn't look quite so clever. the nasdaq has had an absolutely incredible run.

you needed to be in japan and tech to outperform so far this year. if you put the equal weight s&p in, it will be down here with the blue line, a comparable performance of the stoxx 600 but you want and they outperformance as a portfolio manager. if you haven't done that, do you need to taste the market? that is a question a lot of portfolio managers will ask themselves. let's figure out what will happen in the second half. do you chase the rally? helen jewell joins us now onset. >> thank you for having me. guy: if you were not in tech or in japan, you probably are behind your benchmark this year. if you have a global mandate. the nasdaq in particular has had a scorching for staff -- first half. the second city?

-- does that continue? helen: that has further to go but what to remember with the tech names, it is driven by earnings and if you had a global benchmark or u.s. benchmark, the tech stocks are critical but in the european benchmark, there was more breath -- and we did see the servers in a the text takes -- in the text --tech space. guy: do think earnings will hold up. i am starting to see companies downgrading their earnings guidance. is the next earnings season where that will turn from a trickle to the flood or welded -- will have to wait for the next quarter? helen: the next earnings season is the big one. we were -- 60% of companies

outperform expectations in the first quarter but what i think we need to revert is consensus earnings are flat from the global perspective. it is over 0% in europe and 3% for earnings consensus but it is that dispersion, dispersion sector so if you look on a sector basis, some of those sectors are plus 20%. technology, financials, strong expectations. and in the energy space into negative numbers so it is that dispersion, to look on average, it is not what it will be about. it is back -- about the sectors and the granularity in the sectors. guy: what the first have the year has taught us is that the markets have taken off in a direction we have unexpected. the more grounded you get, the more difficult it is to deal with the switchback changes of direction we have seen. helen: i would not necessarily agree.

you say it has been unexpected but what have we seen? we have seen high quality companies with resilient earnings being the company's outperforming. is that so unexpected, not really. guy: are you where be excited to be at the halfway point? helen: i didn't anticipate the markets things quite so resilient -- bark is being quite so resilient. -- markets being quite so resilient. guy: should it change your thinking? helen: there probably should. we learned from what we start -- thought in the start of the year but from my perspective, what has not changed and what i am fixated on now, is the importance of understanding where those earnings numbers are coming through and coming from and the benefit of having that expertise to really understand not just what ai means but through the whole supply chain, which copies benefit.

as an active stop picker, it gets me excited. guy: i hear what you are saying but at some point, in equity markets, fundamentals, you think would matter but don't because positioning is so important. i asked the question because a lot of fund managers may be behind their hashmarks and may have to check the market -- chased the markets. i wonder if the current trends caps on for longer because people have to pay -- play checkup -- catch up. helen: in the long run, i would say fundamentals always come through. in the short run, there is a formal factor --fomo back. -- factor. even if your stock picks were correct, you're probably flat or maybe a nudge above.

that is preying on people's minds. right now is probably not the time to private -- to pivot. where we are now is the feeling that even more so, we had last week, bank of england, interest rates continue to ship upwards or the -- or a few weeks ago on friday, big numbers coming in the u.s. i don't think a complete pivot is the right thing to do if you have made it this far. guy: what shape does have easy comps going into the next season? helen: the answer is nowhere now. at the start of the year, your felt relatively cheap versus the u.s. the european greek tale banking looks relatively under -- european retail banking sector looks relatively underpriced. bear -- they are not completely

gone and i think the banks have further to go but the very easy pickings have certainly disappeared. what this is about is probably taking it to the next tear down. in health -- care, the big names, the defense of names, they are interesting but the valuations are not as compelling there are interesting places in some of the buyer tech names that have pulled back or in some of the -- guy: we were talking about the fact that high savings rates are with high interest rates, are giving people a lot of the spending power. i wonder if you can apply the same thing to companies. if companies have high cash generation and looking at retail sales, it is a working capital business. you can park money at the moment and get a really high rate on return. i am wondering if the great story is underlain be corporate

story and i wonder if cfos will be running their businesses for the cash pickup. is there an opportunity to think about businesses through that lens for higher rates and how it affects their ability to use their money more effectively? helen: we need to be percent of the decisions that cfos have to make but it is interesting. when we speak with corporate, we are not necessarily saying that come through as i would have expected. the corporate's are still incredibly bullish. you might say they always are but they are bullish in terms of the consumer sport -- story and capital expenditure. i can see that they will say we have to be focused on but it is not something we are seeing coming through at the moment. guy: it is great to see. helen jewell, blackrock fundamental equities emea cio. coming up -- we will have

details of which metals and why they matter. that is next. this is bloomberg. ♪ how can you sleep on such a firm setting? gab, mine is almost the same as yours. almost is just another word for not as good as mine. the queen sleep number 360 c2 smart bed is now only $899. plus, free home delivery when you add an adjustable base. shop now only at sleep number.

guy: 11 minutes past the hour. you're watching bloomberg markets and it is the fourth of july. like volumes -- like -- like volumes --light volumes give great opportunities -- china is restricting exports on two metals that are critical to the semiconductor industry, the satellite industry. these are things that are only

really produced in china. mark barton joins is now. we talked about this, remind us about which metals we are talking about and why this is important. >> the two metals are -- belong to a loose category of elements. they tend to have specific, highly desirable properties that make them indispensable or advanced outlook chart -- advanced electronics and this is why this is quite a major cause for concern were small industries in markets. they have an outsized impact and importance in certain strategic applications in things like cameras and satellites and solar

cells and integrated circuit so it is a very precise tool that china is using to exert some leverage. guy: these are strategically critical. the u.s. will have to respond. how does the u.s. responded and will this basically force the u.s. to make this stuff domestically? mark: there are two broad reasons. one is that they go back to the first playbook where they did effectively -- china did this same thing -- china challenged by the japan and the wto and japan with this latest measure has indicated that they will review it for any kind of unfair

trade implication and that is one channel potentially, a bit of a nonstarter. the other one in terms of trying to boost the pie, is to try to seek out new sources of these metals and aa refined form. the comfort that you are up -- the u.s. and europe might have to is that these metals exist in abundance in geographically dispersed concentrations in all bodies around the world. the problem is going to be extracting those metals from those ores and produce them to a spec that is -- to these demanding customers in critical industries. guy: i wonder how price

sensitive they are. mark, thank you. opec plus -- oil ministers will be gathering in vienna for the opec by animal international seminal -- opec by annual international seminal. who will you be watching? let me ask you, who? >> currently it will be a question of who we can watch. bloomberg along with several other agencies who have been uninvited from the event, we were allowed to register and we were given access codes. i was planning to go and i decided not to under the circumstances. our reported -- reporting team are already in vienna and we were uninvited a week ago so we

don't have access to the room. my colleagues have shown their dedication and their skills in getting people to talk to them outside of these events and they will continue to do that. the people we will be watching are obviously be oil ministers of the opec countries or anything they might say about short-term policy although i don't expect a lot of real news to come out of that. i think they will be a make -- a reiteration of bouncing the market. i don't expect policy decisions. guy: what message what they like -- would they like to come out of it. julian: the message they want to generate is something they have been talking about for a long time, which is the need for investment in oil and gas, exploration and extraction because energy transition

notwithstanding, the world is going to continue to meet oil and gas for decades to come and without that investment, they are -- they say they will be supply squeezes and they cannot be expected to manage the market on their own. they attacked some of the, ideas around energy transition the way that the transition is being conducted and particularly, the sort of anti-oil lobby. to some extent, they have a point. the way to tackle transition is not to stop people from producing oil. it is to stop people from wanting or needing to use it. guy: tackle demand and not supply. julian: absolutely and if you take away demand, the supply will fall and if you take away the supplied without producing demand, you create shortages --

i think so and i think it has been for arguably for the last two decades and maybe more. particularly, with the u.s. shale boom, the opening of a places like brazil, guyana, the opec world has shifted to the east -- guy: does china have an influence? we will see a lot of people from the u.s. and europe turning out to this event. how many chinese delegates will be there? julian: probably relatively few. this does tend to be very much a atlantic basin kind of quorum -- forum. if you look at the speakers, they are western trading companies, plus the african

members of opec, the middle eastern members of opec but the asian companies, they are -- there are representatives there but relatively fewer of them and there is an argument that says, i know opec's headquarters is in vienna but there is an argument that says if they really want to bring in their core partners in terms of their core market, they ought to be holding this event in europe and singapore or maybe dubai, or somewhere further to the east. guy: great to see. bloomberg julian lee. -- bloomberg's julian lee. mark zuckerberg preparing to well up the twitter alternative, it is called threads -- preparing to roll out there twitter alternative, is called threads -- it is called threads.

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guy: big week this week for the social media landscape. the instagram app, which we think is going to be called threads, has appeared on the apple app store. -- absorb. this is the latest app from meta designed to compete with twitter. what is a need to compete with twitter? will the user expands be better and how will it work with instagram? let's get some answers. alice webb joins us. -- alex webb joins us. will this hoover up disaffected twitter users? >> that is the objective. it is hard to see how effective or how effective it will be without having played with it.

it took twitter 16 years to get to the point it is today, although there has been a rapid acceleration in changes over the past year or so. facebook, meta, it might as well try. despite all of its spending on the metaverse, it has plenty of money to play with and this is not the sort of thing that is costing it tens of billions stop -- tens of billions. it is low risk. if you get disaffected twitter users, as -- the metaverse investors may be happy. guy: if i were an average servicing -- were an appetizer, how will i view this? alex:alex: you what hope the threads -- you would hope that threads -- you are probably hope

that threads is a safe place to have. meta is better at measuring the effects of ads. and has a way better sense of who is at the end of any given account. it has better deterministic data which means it can target as effectively. twitter tends to be land advertising and it is not particularly sophisticated. there are a lot of accounts and don't go anywhere near there will name. it is quite broad. that is not good if you are consumer because -- that is good if you are consumer because you feel like it is not invasive in terms of way it is using your data. meta is experienced and that is what they are looking to make the most of. guy: if i am a verified account, what am i thinking? how is verification going to work? what is the objective of

verification? how should i think about this, if i played -- paid for a blue tick? alex: we will be interesting because this is called threads , an instagram product. instagram is the friendliest and shiniest of the meta app lineup and instagram has paid verification system similar to the one elon musk has pioneered at twitter. in a blue check -- i had a blue tick because i am a bloomberg generals and they -- there is not automatic -- problematic information of someone pretending to be a bloomberg journalist so we don't know how this will work stuff if it was tied to a instagram account, it would be paid to play. guy: bloomberg's alex webb.

we will have a look at what is happening with the travel story as we take a look at the fourth of july. this is bloomberg. ♪ the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com back in the day, sneaker drops meant getting online to wait in line. (we did it) now with xfinity mobile... ...we get the fastest mobile service

and can get the freshest kicks asap. i got this. save hundreds a year over t-mobile, at&t and verizon with the best price for two lines of unlimited. nice job, little sis! they grow up so fast... i'm a fan. from xfinity. hi, i'm jason and i've lost 202 pounds on golo. so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds, and my doctor was recommending weight loss surgery. to avoid the surgery, i had to make a change. so i decided to go with golo and it's changed my life. when i first started golo and taking release, my cravings, they went away. and i was so surprised. you feel that your body is working and functioning the way it should be and you feel energized. golo has improved my life in so many ways.

i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works. 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.

guy: it is a very long weekend in the u.s. and as a result, is a very long -- strong period for the travel industry. it started friday and finishes tonight. jetblue has been raising questions about u.s. air traffic control actions. robin hayes and mr. kirby pointing the finger at what is happening with the travel story over critical periods. the faa isn't fully staffed and the atc is a fully staffed. problems will show up quickly but the biggest picture, which i think both of those settlements are driving at, demand for travel is strong.

will it continue to be so? this is a useful lit mitts test -- litmus test. we know this summer is going to be busy and the fourth of july looks like it has been a busy weekend. how much longer can this carry on for. >> it looks like the summer is in the back in terms of travel and people have booked robustly going into the summer and lateral part of the year. the question is can bet airlines in the ground people cope with this. -- airlines and the ground people cope with this. we saw that there were glitches in united and other airlines. that did not go well and it was not quite the last breakdown we saw across the globe but it was a warning sign to many and as you said, there is anger pointing. the airlines say they have done their homework and they have hired people but at the mercy of what is going on on the ground.

on and off, security of people -- that is where the crunch point will be. guy: where are the pain points. is my bag going to show up? do i need to buy an air attack to put into my suitcase to make sure i know where it is an any given point in time? as a problems with acc and the faa? you have problems with friends and strikes. where are the bottlenecks? >> the answer is all of the above so you will have a lot of issues still in terms of strikes and we are not out in bill -- of the woods with germany. it looks like they have got it sorted. you mention french, you see the strikes flaring up and we heard from ryanair that they canceled 900 flights in june. that is a high number and that is a warning side, the ground controls are not where they should be so it is all of the

above that could really show a few issues. guy: we heard from ryanair, it was 95% yield -- they are basically sold out and as a result of which, price pressure is enormous. will we see these high price points? is that something post the summer that we will have to deal with as well? benedikt: probably, yes. we are at the p price at the moment and you see them creeping into the ticket, the way the tickets are structured. they are axing -- asking for extras. because the flights are so full, every time there is a cancellation, there is a huge knock on effect because the airline will not be able to rebook the people on to the next plane quickly and we saw in the u.s. that people had to wait -- weights three days to get to the next plane -- had to wait three

days to get two . guy: load factor. i can't believe i -- that left my head. benedikt kammel, great stuff. best western hotels president and ceo lily could kulik joins us -- larry could kulik --larry cuclic joins us now. >> happy fourth of july. best western is having a terrific summer season. we came out of the first quarter and pwc reports a 13% adr and rampart increase over 2019 and that was the set up for the summer, that first strong quarter. as a result, aaa is estimating that 50.7 million americans are

going to be traveling this summer which is up 3.7% from 2019 and up 4.3% from last year so this is a strong demand period. what i think it's important to note is it is a almost five day weekend, which positively impacts occupancy at our hotels. guy: demand is strong. as if i keeping up? -- this supply keeping up? --is supply keeping up? larry: suffice giving up in p hotel industry. demand and occupancy keeps up the rate. guy: do you expect that to continue? there is evidence that the consumers in the u.s. are working their way through their pandemic savings and we could be

getting to a point very -- fairly soon where the savings went out. -- run out. larry: you still have the demand for travel coming out of the pandemic and you have gas prices that are down one dollar a gallon versus last year. inflation and interest rates have somewhat stabilized and as a result, i think that is the positive momentum that we hope to continue into the september, october, november time periods. guy: i assume that is where you your visibility gets fuzzy? larry: no, our forward bookings are on par with what we saw in 2022 which was the strong and pent-up summer demand season that extended into the fall. guy: in terms of what is happening with labor availability, stuff you need, are we starting to see an e-zine

in be inflation rates you have experience post pandemic -- having easing in the inflation rates -- an easing in the inflation rates you have experienced post-pandemic? larry: labor will always be something you have to monitor and manage very quick -- closely, because we want to make sure we are exceeding guests expectations when they travel and stay at best western hotels we have to manage your labor as it relates to occupancy. guy: how are you doing that? are you having to pay more than you anticipated and what you have to carry on paying more? how easy is it to attract staff? give me a sense of what the real picture is? we have the employment number coming out on friday. what is the employment number

look like at best western? larry: we are fortunate. we have a culture that believes in teamwork, collaboration, the spirit of people working together and that is what you have to do. to me and -- what we tell our hotel years --hoteliers, it is about retaining talent and if you build that culture and we have so many of our hotel years --hoteliers that make a difference in the community, that is what allows them to keep pace. guy: what does the u.s. look like in compared to the rest of the world? in terms of demand probably? -- broadly? larry: we are up 4% year-over-year and who will have a terrific summer is europe. alliance partners reported a 35%

increase in bookings to europe of top destinations being the u.k., france, italy, everyone there is doing well. the star of the summer is probably going to be italy and it is projected they will be up 50% year-over-year. guy: these are incredible numbers. year-over-year is a difficult comparison point. re: fully back -- are we fully back in the tourism industry compared to where we were pre-pandemic? is that the better comparison to make? larry: it is uneven because you have to look at asia differently. in the u.s., north america, we came out of the pandemic more quickly which ate up some of the earlier pent-up demand. europe followed and i think asia will start riding the wave of positive momentum because travel

demand is starting to come back very strongly in asia-pacific. it is uneven as we come out of it. guy: to catch up. enjoy the fourth. larry cuculic, thank you very much, the president and ceo of best western. credit squeeze makers are dusting off their resumes as the takeover continues. we will have more on the changes next. this is bloomberg. ♪

>> that compares to the investment bank. guy: presumably, there are other banks out there that are approaching the wealth management staff. is ubs having to compete to retain? >> the top level of talent, that is where you have to keep and we have seen people walk out the door so those prized workers, the ones that have the relationship with the richest clients, i suspect a big chunk have moved.

this particular initiative is focused with more of those looking for the lower right leadership -- lower ranked field -- leadership positions. a few household names that shows the rank and file is still -- there is still appetite for ubs to keep these credit suisse managers. guy: nigel faraj of brexit fame now having issues with the availability of bank account stop i see the front part -- the front page of the guardian, -- what do we know about this, he has claimed there is political interference. what is going on? >> not faraj using its platform to complain about his treatment and we know the bank was -- what he has said it is he has been discriminated events and being booted out for no reason other than political views and he has

been able to find a bank to replace him and he is -- he said he is in a banks in the u.k.. that was his side of the story and you have to look at detail on the other set of the argument. -- side of the argument. they are saying it is a commercial decision. faraj captured that. he is convinced it is because of his pulled -- his political line so it is interesting and i would be inclined to call it a storm in a teacup. do you pay government is involved and -- we need to make sword no one in the u.k. can be -- we need to make sure no one in the u.k. can be unbanked. guy: the latest on faraday? >> we have seen details.

most of those fund managers are looking to move out or all moving out under that name. and today, we heard a few of the funds have been suspended and a few managers are out asking for suspensions to be unwound and i think the way to interpret that is these fund managers who are part of dod over it structure are more convinced that they may be able to survive as independent funds. guy: thank you for the full update. bloomberg's tom metcalf. let's talk about what is happening in france. we have seen days of protests across the country starting to ease. we are taking a look at the damage that has been done to the french comedy -- french economy and business. we will take a look at that next. this is bloomberg.

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guy: let's talk about what is happening in france, the french president meeting with 200 players to access the riots. i massive the police -- a massive police deployment is present on the streets. what we have seen is a drop in the level of unrest. we saw that last night. will we continue to see this story ebbing away and will we start to see order being restored? what is expected tonight? >> so far, tonight is looking like it will be like last night which is a much lower level of violence. it has been going down for the last few nights. that is expected to continue at

least for tonight and for the near-term future. in the meeting, the president that is having with the mayors, he said he is very attentive and it looks like the peak has passed in terms of violence and he spent more time talking about his efforts he would try to commit to help them rebuild businesses or libraries or public buildings that were attacked during these rights -- riots. guy: do we know much -- how much damage has been caused? alan: there have been estimates. the french business lobby said that at least $1 million in damages have been taken place and visited a prompt -- visited upon in businesses. the french insurers association said it received 280 million euros in claims and that will go

up by a lot. traditionally, insurance companies in france will allow five days after incident for a store owner to file a claim but they extended it to 30 days. that number should go up significantly. guy: is there an expectation that we do see a continuing fading of violence, that is it? how dry is the powder could be relit? alan: that is the million-dollar question. the way these things were, for tickly in the modern social media age, according to sophia last -- to sociologists, we days after incident is when you have the peak after the bounds of an incident, and then it goes down. if the trend follows, the peak that we saw friday evening, it declined since then and that implies that it should stay home --calm ready for celia -- for

this foreseeable future. the police will be out this evening and no one is ready to say it is over but it looks like the trend is that direction. guy: how does this change? how this is our to -- how does this alter the trajectory of emmanuel macron's second term. alan: it puts him in the position of having to make -- to think about france's improper suburbs. he talked about it when he came to office in 2017. in 2018, there have been plans about what to do of -- about his suburbs. macron this message and has done relatively little -- micron has dismissed it and has done relatively level, he has done a big program for it and he says

they need to get first detailed information of writing beyond the approximate cause of the police shooting of the teenager last tuesday. before trying to come up with a response to it but he will have to deal with the suburbs in a way that he avoided for the last several years. guy: is there a concern that this could end up impacting the tourism season this summer which is expected to be one of france's best? alan: if the violence stays down, the answer is probably not. there is a guy, i was reading a comment from a big tourism agency in france and he was saying there has been some cancellations in early july stop the next few days from people who have been worried about the writing and the violence. -- the rioting and the violence.

if it stays low, it is unlikely to have a big impact and if it shoots back up again, even moderately, it could have a big impact because people could say, this conflict of at any time and i may put off my vacation to france even if it is in mid august. guy: thank you very much, alan katz. what we have coming up for you in the next hour, we will carry our conversation. this is the picture we find yourselves with. european equity markets going sideways. look at what is happening with omv. there is a story, abu dhabi, the uae and omv in talks to build a chemical giant. it is up by nearly 8%. the euro-dollar is quiet. the united states is out.

no real fireworks in financial markets. coming up,, wall --emma wall. this is bloomberg. ♪ the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com we moved out of the city so our little sophie could appreciate nature. that always puts you first. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far.

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it's overwhelming. it's everything. guy: tuesday, fourth of july. no financial fireworks. a few interesting little stories we should be talking about less of course the second half. the countdown to the close starts right now. >> the countdown is on in europe. this is "bloomberg markets: european close," with guy johnson and alix steel. guy: alix steel is off today, she will be enjoying the fireworks. i don't have any fireworks to talk about. look at the stoxx 6