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.

host: good morning and welcome to "bloomberg daybreak: europe." let's get to the top stories. yields sinking on dovish fed speak. netanyahu vows retaliation against hamas has only started as militants worn they are prepared to kill hostages. in europe leaders are going to hold an emergency meeting. a lot going on geopolitically. let's see how it is being priced into the markets. we are going to see a potential turnaround from yesterday's price action. futures action is crucial. you are seeing a complete reversal. the idea here is that if you have war on the horizon and

breaking out your gut reaction is to sell everything. today it is the opposite. looking at it from a sectorial basis. the defense bid is being actively priced into the market. some might view it as an overreaction in the market which is why we are seeing futurists outperform. -- futures outperform. some of that is going to be a function of the yield picture. what is lacking is what is going on in the u.s. markets and that has a lot to do with the wartime story. the u.s. wartime strategy is going to be coinciding with what you see end of the middle east. that is not a positive for global investors. the cross asset story is going to be a function of what you see in the bond market. you see a bid into the treasury market. 2 year yields dropping by a margin. the japanese markets are back online today.

a lot of this is playing catch-up. some flight to safety and some reaction to the fed speak. 2 year yields, 496. what that it is -- what that is doing is creating weakness in the dollar. it speaks to the idea that perhaps risk sentiment is positive which is why you are seeing a bid into the mexican peso. the safety trade is pulling away. the swiss franc is a great example. that is just part of the cross asset picture. our reporter in singapore, walk us through the morning trade. >> we are seeing asia stocks gaining ground today on the back of those dovish messages from some of the fed officials.

the japanese and south korean benchmarks are getting support from the gains among the energy related counters as traders get their first chance to react to events over the weekend as well as the surge in oil prices. commodities are playing out or geopolitics playing out for dealmakers. the eu is planning to announce these anti-subsidy investigations into chinese dealmakers according to the financial times. they could announce those as soon later this month. a summit with the u.s., for context this is part of joint efforts to protect him tick industries. we are seeing moves with the chinese dealmakers. -- chinese steel makers.

taking you to country garden as well where we are seeing it ramping up warnings that it could be headed to its first ever default. it is saying it will likely not meet payment of all of its offshore obligations and it has hired advisors. we are watching this closely. if there is any fallout from the financial market, it could be worse than what we saw in 2021. host: the crucial market update, thank you for pulling it all together. at the core, the move you are seeing in terms of japan and south korea pricing in what they heard over the weekend. and on top of that they have to deal with the fed speak. we heard a lot of commentary about what asked weeks bond volatility -- what last weeks

bond volatility means. >> what i think about is the real rate that is required to bring aggregate supply back into balance with aggregate demand. i think current policy is restrictive and putting downward pressure on the inflation rate. and that is really what my concern is. >> higher term premiums result in higher interest rates are the same setting. if term premiums rise they could do some of the work of cooling the economy for us leaving less need for additional tightening to achieve the fomc's objectives. host: let's bring in our reporter for more analysis. maybe some of the fed's work was done by the bond market itself and was before you had the geopolitical volatility to consider. is this 16 or 17 basis point

move justified? >> i think it is worth paying a lot of attention to to what policymakers are saying. what they are not saying is also important. they are not saying the big selloff in the bond market looked spooky to us and is worrying. they want to get that back under control to a certain extent. they are saying the high yields we are seeing across the curve are putting us into more restrictive territory and doing some of the work for us. i don't think this is the big moment where the fed will indicate a pivot. if bond yields stay at this level we don't need to do that much more. that is why the market reacted so violently in pricing out rate cuts the rest of the year but don't get carried away. continuing to factor in the

longer trend. host: the fact that the -- i think that is pretty significant. paul dobson walking us through that bond market move. there is the geopolitical volatility as well. benjamin netanyahu says military retaliation against hamas has only started. this as a militant group threatens to kill hostages it captured during the weekend attacks. >> our allies are ready to join the fight. they will not sit with their hands tied. the government of israel knows they will open the gates of hell if they try to destroy gaza. host: let's bring in our own yousef gamal el-din.

you heard from the leader over palestine. talk to us about the international reaction. what are the odds of peacemaking right now? >> quite a few dominoes have fallen on the diplomatic side of things. we heard from the u.n. secretary general who made a passionate plea for violence to stop. qataris have been taking the lead in terms of talks around the hostage swap which would affect women and children on the is really side being held there and on the gaza side. it is unclear if they have made any breakthroughs but it would affect about 36 palestinian women and children and qataris have been doing negotiations. i was talking to an official from the intelligence shop saying they are not going to make much progress on the diplomatic side. host: we talk about the prisoner

swap. historically there is precedent. hamas once had 1000 israelis swap for one president. hostages working politically in their favor. talk to us about the market reaction. we talked about the oil surge yesterday and this time it is natural gas. >> there are huge moves in european natural gas. you have a field close in israel based on security concerns. this is actually a really big deal because they had ambitions to become a regional gas exporter. an egyptian official said the israelis are on track to export their gas a week ago. although that gets put into

question and you see the aggressive repricing. host: and then whether people want exposure -- sometimes they pull out of the market because they don't want to deal with the volatility. thank you for that crucial insights. there are several different sides to the conflict especially when you look at the broader region. iran is a big part of it. and is really minister said iran may have known about the attack but the u.s. says there is no direct evidence. iran is known as a key sponsor of hamas. what have they come out and said? >> yesterday the mission to the u.n. came out denying the wall street journal reported that they were involved in this latest particular operation. but in the same message they were reiterating support for hamas as a movement and its aims in particular and the state

media yesterday said that it was celebrating this unprecedented, deadly attack from hamas. iran trying to distance themselves from a particular operation as an operational sponsor but at the same time ideologically clearly aligning themselves with it and framing it as a success. host: certainly something that has international ramifications. if the u.s. had a big stance on it right out of the gates. patrick, thank you for that insight and analysis. let's get a check on what you will see ahead. the bank of england will be in focus on that front breaking away from the hamas coverage. those minutes are due later today. the consensus is that this will not be as earth shattering as the fed. raphael bostic, the atlanta fed

president speaks as well and that is coming up at about 2:30 p.m. u.k. time. will he follow in the footsteps of lori logan or jefferson? and lastly, we are getting some earnings. slowly creeping into the session. lvmh has numbers coming out later. is the la grippe story as dominant in the european session or have -- is the story -- is the luxury story as dominant in the european session or has it moved? get full analysis from our team around the world. coming up we will speak with ayham kamel for the crucial geopolitical insights. and we speak later to schneider electric's executive vp of european operations on all

things sustainability and how much it costs ahead of the bloomberg summit. stick with us, this is bloomberg. ♪

host: welcome back to "bloomberg daybreak: europe." our coverage of the geopolitics in the middle east continues. the saudi media says the crown prince told abas that he was working on an expansion. he has also been in touch with the king of jordan and president of egypt trying to use a little diplomacy it feels like. let's bring in a true expert on the saudi view. matthew, a pleasure to have you. talk to us about the normalization efforts. it feels like the more united

states pushes normalization, the more turmoil it creates. your take. >> the saudis have been reaching out to the contacts they have in the region. they have good relations with the palestinian authority and egyptians and there has been a normalization track going on with israel. the challenge has been that the events of the last few days shows as far as hamas is concerned it is a repudiation of the vision for the middle east that the crown prince has. he has been looking to lower the temperature in region and create new alliances and sure relations. there was a spot with qatar -- a spat with qatar. that has been resolved. there was a disagreement with iran as well.

there were demands that the palestinians had for a political state and this vision was that the more you create economic prosperity that some of these conflicts and demands -- this has all been thrown out by what has happened over the weekend and by hamas. i think that means that normalization with israel will have to be on the back burner for quite some time. it is always -- it is already a policy that was unpopular among saudi youth. trying to push ahead on it right now will be very difficult. they will see themselves as the diplomatic power of the middle east. they will be wanting to have a role in trying to resolve this conflict and stop the fighting but the challenge is going to be that they probably don't have the diplomatic clout with hamas as they do with others.

host: to your point, the alliance is being redrawn even within the arab league. this throws, i think the british term is a spanner in the works. i want to get a little more analysis and bring in ayham kamel. good morning. let's talk about what our reporter was just hinting at. the idea that saudi arabia is the broker of peace in the area. is that going to happen? ayham: i think the saudi's are likely to play a role in some form but the parameters of the conflict means that the egyptians or the qataris will play a role in the short term. riyadh could coalesce other partners and i think that is what the crown prince is going to do. but it is a difficult time.

i think getting to a place where diplomacy plays a role is not now. i think israel will be focused on rebuilding in the gaza strip. it is unmanageable at this stage for the israelis to take a step back and engage in diplomacy before showing hamas that there is a heavy price to pay for the attacks they conducted over the weekend. host: where does qatar fall in this? it feels like reports that qatar is going to organize a prisoner swap -- what is the reliability of that kind of thinking? ayham: i think whatever discussions are happening regarding a prisoner swap or hostage swap is narrowly focused on a set of parameters. not really a grand deal aimed at getting a large number of hostages that hamas has captured

in the last 48 hours. hamas is unlikely to agree to anything of that sort. they won't use all the leverage they have. qatar will try to de-risk from something more bloody happening in the gaza strip. a narrow set of parameters but i doubt you will see a big deal. host: so then if you have these kind of crosscurrents and the middle east, let's talk about the role of the west. you are joining us from morocco where the imf meetings are happening this year. what is the take from the west? how reasonable are they? it was not long ago that you could have the united states come in and make a call and that

is something a lot of other middle eastern countries would not push back as aggressively for. it feels like we are in a different era. what is the sentiment? ayham: there are two challenges. one, the u.s. will not be focused on diplomacy as it was in the past because of the scale of what has happened. this is one of the largest attacks you can imagine on israel in the last 50 years. it is a very difficult time for the u.s. to try to push. in terms of the mood, geopolitics is front and center because of the gods events and the crisis a merging their -- of the gaza events and the crisis emerging there. there are risks we have not thought about. host: what is the timeline?

you are speaking to a financial audience. everyone wants to know how long this is going to last. is this weeks, months, years? ayham: at least weeks. this is not a traditional limited scale operation. you have already had a call up to all reservists in israel. the preparation is for months. i would not say years. one of the most important factors is the immediate israeli reaction. you are seeing some recalibration from the first 12-24 hours where there was a big fear that this was going to potentially be a regional conflict. our viewpoint is in the immediate term, israel is

focused on restoring order in the gaza strip rather than expanding the confrontation elsewhere. iran is a supporter of hamas and has been for years but for now i think he is really focus is on the gaza strip. host: a lot going to be changing in the next weeks and months. we will be excited to have you back for your analysis. ayham kamel joining us from rocco where the imf meetings are happening. kevin mccarthy hence at a return -- hints at a return calling out extreme members from both parties while israel is under attack. to this is bloomberg.that ♪

host: welcome back to "bloomberg daybreak: europe." let's get a quick check of the

stories we are following. delta, united and american shares fell as though three carriers halted flights to tel aviv. multiple airlines across europe have also suspended flights to israel. the faa is advising airlines to expect delays and exercise caution. kevin mccarthy says he is willing to return as house speaker calling out extreme members of both parties are focusing on petty politics while israel is under attack. he is the first speaker in u.s. history to be ousted when republicans voted with democrats to remove him. he tied the attack on israel to policies by biden. and speaking of the geopolitical turmoil there is a chart i want to bring to your attention in terms of market trade. when we think of a europe, we

think of the edge that la grippe stocks -- luxury stocks have had. add on the geopolitical volatility you're seeing in israel and defense stocks are looking good. that is the take of analysts across wall street. on a normalized basis the european defense stocks specifically have outperformed the s&p 500 index and the broader market and that will be an interesting dynamic that plays out for the next few months. coming up on the program we discussed the world's reaction to what is going on in the israel-hamas (aidyl) hi, i'm aidyl, and i lost 90 pounds on golo. i struggled with weight loss and weight gain my entire life. with all the yo-yo dieting i did in the past, i would lose 20, 30, 50 pounds just to gain them over and over again.

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host: good morning and welcome back to "bloomberg daybreak: europe." these are the stories that set your agenda. yields sinking on dovish fed speak. feeling the debate as to whether it is at the right time to hike. netanyahu vows retaliation against hamas and that it has only started as militants warned they are prepared to kill hostages. european leaders hold an emergency meeting. a lot of crosscurrents when it comes to the geopolitics and the monetary policy as well. let's dive into the markets because we are seeing a reversal of what we saw yesterday. the idea of sell everything. some traders and investors deemed as an overreaction by the

global market. you are seeing a major bid into the european session. euro stoxx 50 futures up. you are looking at s&p 500 lagging. there seems to be a hesitance to the exposure of the u.s. stock market. a lot of the israeli defense companies and corporate culture structure has exposure to the united states advisor versa. there is a hesitance in terms of having that exposure. it is the equity picture. cross asset, the core is the move you are seeing in the bond market specifically real guilt. you are seeing a massive bid in treasuries pulling back on yields. coming off the comments from the likes of lori logan and jefferson talking about that the bond of volatility did some of the work for the fed. add in geopolitical risk and

markets are pricing in a more dovish federal reserve. are they right? we don't know. the currency picture. that is your cross as a picture. a look at the asian markets. forcing a lot of movement. the green is a result of the asian session. japan and south korea are back online. you see them make a bid in the nikkei and the hang seng. samsung electronics which makes a third of the korean index higher after trade restrictions set by the united states are going to be pulled back. south korea does not have the same restrictions as china when it comes to some of their memory output. we will dive into that. risk appetite, you can see it in the aussie. that is just one part of the story. back to the geopolitics.

netanyahu making strong comments in the last 24 hours about the latest in israel. take a listen to what he had to say. >> i know we want immediate results. it will take time but i promise you at the end of this campaign all of our enemies will know it was a grave mistake to attack israel. but we will do to our enemies will reverberate with them -- what we will do to our enemies will reverberate with them for decades. joining me now is yousef gamal el-din. what is the solution? >> that is the trillion dollar question when it comes to human life. every life lost is a life too many. we heard the passionate plea from the u.n. secretary general. we have some progress on the potential swap.

if you agencies have reported to various degrees as to how many hostages -- a few agencies have reported to various degrees as to how many hostages might be released. we don't have any diplomatic breakthroughs about a cease-fire or an offramp. i was checking -- catching up with an intelligence firm who said there will not be progress because taking out hamas is the israeli objective. that will happen over time. host: a scary prospect. let's make a pivot to markets. off the back of this conflict we saw natural gas move today. >> the natural gas side of things a huge pop to the upside. the field had been temporarily suspended. this is a field operated by chevron.

six fields if you break it down. six wells. does it not seem like a huge amount in the globally equation but europe -- egypt has been importing is really gas and israel had ambitions. that is critical. on the energy side of things we are catching a breath after the biggest move we have seen in about six months. $85-$90 per barrel in the short term. host: we are looking at live pictures of southern israel and you can see the tank buildout. we look at the market reaction, look at oil. brent crude trading -- i of $88. -- $88. >> you have exports from iran

not at risk of u.s. sanctions. look at the technical levels. look at the skew. you have a ratio between some of the calls -- the biggest one-day move since the start of the ukraine war which shows you how we are shifting on the technical. host: record call options on brent. yousef gamal el-din, our middle east and east africa anchor. thank you for joining the program and giving us crucial insights. i want to go to what the eu is saying about the middle east. officials having an emergency meeting today. let's get more from our european correspondent, maria tadeo standing by in brussels. a u-turn from the european commission on palestinian eight. >> a u-turn and an embarrassment

for the european commission which yesterday failed to articulate a joint position on this issue for hours. we now know the european commission said it will carry out an urgent review of the funding it gives to palestine. they say a lot of this should be going to humanitarian issues. they don't want money to be misused to fund terrorism. they will carry out a review. they say however because there were no payments expected to the palestinians that no payments have been suspended. and any humanitarian assistance would be left out of this review. this is a u-turn from some of the initial comment that we heard at the start of yesterday which suggests that the development package from the eu to palestine could be suspended and the payments halted. this shows different

sensitivities when it comes to the humanitarian question stemming from the conflict but showing the embarrassment it was for the european union which was unable to stress and act like a geopolitical agent at this point. host: what can be expected from the meeting today? will there be a solution? >> right now it is clear the review is ongoing and we are waiting to see what comes out of it. a lot of the issues and the goal of the meeting that will happen today from european foreign ministers called with urgency will be about the coordination. the eu has been clear about its stance. it stands with israel. it condemns the attacks. but when it comes to the coordination and what could be a humanitarian crisis, there are still sensitivities playing out

behind the scene. the other issue as the hostage situation. there were people kidnapped saturday morning. the european union leaves there could be european nationals. and the member states of the eu has the duty to not just track their citizens but also bring them back. european foreign ministers meeting, some in person and some in a conference call. host: certainly something we will be watching closely. maria tadeo in brussels monitoring the situation. let's get a quick check of some of the other stories we are following. starting with something going on in the eu. a merger watchdog -- a $7 billion acquisition. it would be the biggest escalation in a long-running legal fight over the deal which was vetoed by the commission last year over competition

concerns. asset management is closing its wealth business. this comes months after its founder was accused of sexual misconduct. the asset manager has been shutting many funds as part of a reorganization in the wake of the allegations against odey. the 64-year-old former executive was ousted from his former firm has disputed the allegations. workers at gm's canadian plans are on strike after wage talks failed. the union represents more than 4000 gm employees are trying to get them to sign a deal that matches ford. gm is already dealing with strikes in the u.s. by united auto workers. shares of samsung and sk hynix moving higher on news biden administration will let them ship key equipment.

the decision removes the overhang for the chipmakers allowing them to operate in the world's biggest chip market long-term. sk hynix warned that escalating -- will force them to sell. we will talk about all things sustainability as regulation is on the horizon. that conversation is ahead ahead of bloomberg's summit. this is bloomberg. ♪

host: welcome back to "bloomberg daybreak: europe." ahead of another european winter a new regulation due at the start of the year, business leaders are paying more attention to sustainability efforts. gwenaelle avice-huet from schneider electric joins me.

an early riser. let's talk about the costs associated with sustainability. it feels like from an americans point of view that this was a transition born out of economic need. the war in ukraine creating a tailwind of a release from our traditional energy sources. and yet it is still an expensive prospect. talk to us about the costs. gwenaelle: you are right to. with the energy crisis, we need to be more independent to secure the supply and in case of the risk of a shortage. that is why the energy transition is bringing security. it has some cost but on the contrary it is bringing jobs. and it is bringing resiliency

for the energy system. and many companies have taken the commitment and showcasing it is good for business. energy transition and sustainability are also good for business and this is making sense. host: how good for business? i understand the concept of a long-term transition and how it can save money end of the long term but talk to about the pushback in the short term. it does take a big initial investment. gwenaelle: let me give you an example of a building. we are working with many building companies. they have a goal of decarbonization. how to reach that? deploying software tools in the building segment and to achieve a reduction of up to 50% of the emission and the energy costs. less than three years. it is showcasing that with

existing solutions, you have an initial cost on the table but a big payback. host: something europe specifically has a concern with the turnaround time. we know new rules are kicking into effect. a lot of businesses have been making the transition in anticipation of that. talk to us about the carrot and stick method. what happens if you have businesses that do not abide by it? is there a structure in place to hold people accountable to the sustainable solutions? gwenaelle: with the combined solutions and we have different regulations implemented. the first will come in january that everyone has in mind. the carbon reporting tool. hugely impactful. we need to report in a regular way and a comparable way across

companies. many companies, not just the larger ones, they will have to report. it is difficult. schneider electric is a company that can help to make sure we have the right model and software in place in order to report in an appropriate way. that is super insightful. this is something that can be tangible in terms of commitments. it is not just announcing new commitments but realizing them. the beauty of this regulation is that we will turn the commitments into solutions by reporting them. host: but if the people report them and they are not meeting the standards, are the fines large enough to incentivize that? when you look at european regulation on big tech for example, the fines are not large enough to justify a real change

and approach for a lot of tech companies from around the world. what happens is they pay the fine and get around the regulations. do you see that happening for the industrial sector in europe? gwenaelle: it is transparency. at the end of the day we are trying to make things comparable and how to report things fairly and how to distinguish between real commitments. that is what it will bring. host: talk to us about where that begins. do you feel this is going to get a lot of pushback? do you feel this is a precedent-setting moment for the rest of the world? gwenaelle: i will give you an example. today we have a commitment with the european union to reach 45% of renewable energy in the mix by 2030. we would need to implement 30

gigawatts of wind every year. last year we only implemented 16 gigawatts. that means we need to double the past. by communicating transparently where everyone is going in terms of achievement, it will help to reach that goal. host: how will that go wrong? it is admirable. gwenaelle: we just released today a very important publication with boston university. we wanted to assess the number of jobs created through the energy transition. best in the europe, -- just end of the europe, u.s. and asia we are talking about 2 million jobs. the message is when it comes to transition it is not just good for co2 reduction but also for wealth, job creation. that is what matters. host: a rainbows and sunshine example of regulation. thank you so much.

gwenaelle avice-huet it looks like things are going super well in sustainability. thank you for your crucial insights. coming up we go into u.k. politics. keir starmer's crucial speech as she pop -- as he promises to rebuild. stick with us. this is bloomberg. ♪

>> i said tout the fiscal rules that i would -- i set out the fiscal rules that i would stick to. we will bring that down as a chair of our economy and subject to that we will invest in the things that can boost our productivity working in conjunction with business to

unlock further private investment. host: rachel reeves speaking to bloomberg from labor's annual conference in liverpool. joining us is lizzy burden. what where did we learned yesterday about how labor would run the economy? lizzy: labor riding high on their 20 point lead into the national polls and sticking to the big picture. in a sense what is happening in israel has spared keir starmer from having to get into the details of the specifics of what they would do if they were in government which perhaps they don't want to do even that we could be 15 months from the general election. i spoke with three shadow ministers yesterday who refused to tell me where they plan to get the fastest growth in the g7 even though this is their top mission. it is how they plan to fund public spending. i also spoke with rachel reeves

about her plans to borrow and invest -- her plans to borrow to invest. i asked her how she could be sure how markets would react. given that debt is already 99% of gdp but she seemed to channel our grid thatcher and give us words of caution. but it seems to be working. the hall was packed when she gave her speech yesterday. you had to stand in the back if you wanted to see her. and she has the backing of a mark carney. he has been made the chair of bloomberg lp. what this shows is his endorsement that she should be britain's first female chancellor is that the business community is taking labor seriously which is a long way to come from the leadership of jeremy corbyn. host: what else can we expect from this conference? lizzy: we are going to have a

speech from keir starmer, the leader of the labour party today and this is his big moment to present himself as britain's next prime minister. you can expect him to say that labor will turn the country from the decline under the conservatives to a decade of national renewal. this is a man that wants to be in office for two terms. you can expect him to contrast his approach with rishi sunak. including canceling the northern leg of the hs2. the slogan of the conference is let's get britain's future back so it is expected to focus on housebuilding. host: let's see how quickly that happens. lizzy burden from liverpool, thank you for that update. as we stick with the political conversation and monetary policy conversation, some breaking news.

the governor of the bank of france saying a couple things. written -- interest rates at the right level he says and it is not desirable to raise rates higher given there is a clear downward trend in inflation. nothing to supermarket moving but something that feels he is emphasizing again. we will keep you apprised if we get any new headlines. pepsico and lvmh will be reporting in a few hours. walking you through the drum roll to the european market open. stick with us. this is bloomberg. ♪

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