my angel. woman: there we go. good morning welcome to "street signs." i'm julianna tatelbaum these are your headlines european equities turn lower as we wait cpi which forecasts to 40-year highs. there is nothing to suggest recession is in the works. janet yellen suggests a down turn is on the way as she li highlights the labor market.

>> it is pessimistic to think we have this in the post-war period people can easily find jobs. the german central bank doubles the forecast after the ecb raises rates to 25 basis points in july and leaves the door open for a more hawkish move in september. >> we are determined to deliver on 2% in the medium term expectations should remain anchored because we will deliver. and china bucks the global inflation trend and the trend hits a 14-month low as they come in before low forecast for may welcome to "street signs."

we have kicked off the final day of trade this week in a brutal fashion. stoxx 600 down 1.3%. we saw the selling kickoff stra straightaway european investors selling in the wake of the ecb decision in terms of market action yesterday, we are looking at red in the lead up to the decision after the statement came out and through the press conference, we saw selection intensify. the stoxx 600 closed 1.4% lower yesterday. you see the selling is cont continuing we will have plenty of analysis later in the program about why that is. the key feature is the european equities will sell off let's look at this from the regional perspective red for every region in europe uk holding better. down 0.9% compared to 1.4%

losses for the german market cac 40 down 1.3% the swiss market, one of the defensive markets in europe, down 1.4%. broad based selloff. sector wise, we are seeing losses across the board. no sector is trading in positive territory. the only one trading less than 1% lower is basic resources. health care is the most resi resilient. down 1%. the heavy selling taking place in real estate down 2.5% construction and material down 1.7% retail and travel and food and beverage it is a broad based selloff that we're seeing in europe as for wall street, it was a heavy day of selling negative sentiment coming through after the u.s. session the dow jones industrial average

ended more than 600 points lower. s&p dropping 2.4%. all 11 sectors in the negative led by communication nasdaq, the tech heavy index, dropped 2.75%. in terms of the wall street trade today, all eyes on the cpi due out this afternoon at the moment, futures are looking stable that the point. it seems invest orinvestors area holding pat tern forecast for may shows a 3% annual rate for the second consecutive month. energy, food, housing and health care costs are the core drivers. here is the line from the treasury secretary janet yellen. she said inflation is the key concern despite improvements in the job market >> inflation is clearly a major

problem. it is president biden's top priority it's what i most focused on and it is what american households are concerned about because when you look at opinion polls and you see what households have to say, it is amazing how pessimistic we are given we have the strongest labor market we had in the entire post-war period people can easily find jobs. confident about the job market >> pretty upbeat comments with the labor market from janet yellen here in europe, the bundesbank doubling the expectation for inflation. cpi would rise by 7.1% this yea versus 6% six months ago here is a look at the dax. down 1.5%.

the ecb is raising 25 basis points next month. the central bank cut forecast for the next three years, and predicted inflation will end at 6.8% ecb president said the central bank is focused on bringing inflation down to the 2% target. >> we observed inflation expectations are well anchored we want to indicate to those who form expectations, whether markets or whether they are experts or consumers, that we are determined to delivering on our target of 2% in the medium term therefore, expectations will remain because we will deliver >> she does not expect the prices to decline after the immediate hike >> do we expect july interest

rate hikes have an immediate impact on inflation? no first of all, because of the anticipation of our monetary policy and because of the inflation and growth outlook, financing costs have already moderately, but significantly increased whether you look at corporate bonds or sovereign bonds or bank. those financing costs increased. with the signal we're giving here, concerning the short-term rates, this signal will continue to have an impact on financing costs. >> very pleased to say that james appe joins us now. james. it is great to have you with us this morning how do you explain the market reaction to yesterday's ecb meeting? we have seen europe equities

surge and move lower after the volatile session >> good morning, julianna. i think the outcome has been determined as hawkish. i wrote my note to you and i was skeptical that it was necessary to whether the fund was already priced i'm not sure it needed to move higher based on what we heard yesterday. i think inflation outcomes is the most determined of where rates get to it in the next six months i don't have any strong expertise with inflation environments i'll let others try to do that in terms of broader reaction, this is what we expect the eurozone has been held together by the ecb. ecb has been really the only force trying to push these economies and fragmented systems together and the only way which that could continue was when

inflation was low enough to justify ongoing monetary support. obviously when inflation has an eight handle, it is difficult to justify and continue the ecb inter interference if the force is applied, we would see considerable more weakness and volatility in sectors. >> james, it is interesting to me that the european banks are not resilient right now. we are seeing european banks sell off the broader market. we talked for so long about the need for higher rates to boost nim at the banks what is the story there? is it a case of concerns with asset quality deterioration offsetting the positive impact from higher rates? >> yeah, that is part of it. the reality is the nim is the

spread if the curve is flattening, the nim is part of that. what we are seeing across the developed world is this is a fr front-end move they have been way behind the curve for too long they are sniff out outcomes which are not possible, but probable as aggressive tightening that mentans that transition is getting less beyond that, we know from previous episodes within the eurozone, they are looking to bond markets flatter curves and tighter spreads. less profitable and potential for weakness in the egb market that is not a good environment for what is a structurally flawed banking system.

>> there was some debate if we get something tangible on a new tool to address fragmentation in the future we didn't really get much d detail you had madame lagarde say trust us with a new facility or using the existing facility. what does the credible simple tool look like when it comes to trying to address the risk >> i don't think there is one. i certainly don't think there can be one the complexities are numerous. rulings we have seen with the ecb policy questioned and the word proportionate has been used economic policy should falter to national governments and you're

e european union if you are hiking rates, justifying a bond program is much more difficult. i think at the moment, the ecb is hoping a threat of the bond buying program will contain spread sufficiently and they get runs on the board in terms of monetary tightening. then the inflation will moderate and they can ease back a little bu bit. that is a hope if they implement the problem, it will be much more of a miss. >> that is something we love to see materialize. james, we have seen spreads widen. not only bond spreads, but credit spreads widening. what is the outlook for credit >> i think this is very part of the same story and dynamic

spreads driven and not in the eurozone this is a phenomenon we see everywhere banks are seeing everywhere and bonds buying and direct support. now that is in reserve at the growth inflation trade i'm reluctant to use the word stagf stagflation, but that is the risk in europe higher policy rates and tighter rates. you know, consumer demand really likely to be hurt by really negative wage growth this is not a friendly environment for cyclical companies at all yields and spreads were lower at the beginning of the process it has been entrenched for a number of years. the need for widening is going

to be necessity. >> james, your language, is it a friendlier environment in the u.s. we heard from janet yellen that in her view there is nothing to suggest a recession is in the works. to me, that runs counter what what we are hearing. >> obviously as treasury secretary, she doesn't want to strea scream fire in a crowded theater. she knows the labor market is the most lagging of the most economic indicators. it describes the cycle you don't know about recession and things until the rear-view mirror and the labor market is lagged to that reality i don't take any comfort from there being a strong labor market if the indicators are saying there is nasty demand down the road. there is a situation which is

better in the u.s. because the fed has been quicker to respond and more consistent and aggressive in terms of the response and moving with actions. the u.s. is not a ill fitting monetary union it is a huge advantage to them in terms of the economic outlook and potential hit of demand for tighter policy and real wage cost of living crisis, the u.s. is still not in a great position >> james, we have the cpi number coming out later today and that is a more forward looking or certainly more relevant indication of the jobs data. any surprises we could see this afternoon? the last big data before move before the meeting >> we don't have a macro move. in this environment the last few

years with the forces clashing into one another, that made the job of forecasting inflation more impossible than it already was. i think absent the war in russia and ukraine, we would talk about declining inflation because of the commodity prices that is kicked further in the future the markets are higher than the economic consensus which is 8.3. the market is looking at 8.5 nothing would surprise me. the significance of the small down side is bigger than an up miss i think we might see real volume t volatility in the bond market. >> that could be market rattling james, thank you great to talk to you senior investment manager at aberde.

chinese inflation rose to a low with cpi coming in below expectations sam filed this report. >> reporter: prices in china cooled to a 14-month low last month as demand for commodities faded because of covid curves. the government has been trying to stabilize prices as it it focuses on the energy. on the monthly basis, coal saw prices fall over 1%. beijing has been trying to rein prices rather than pass through to the consumer. chinese inflation was a five-month high in april sticker prices are rising because of food and energy costs. on a monthly basis, consumer prices fell. the bureau putting this down to seasonal factors and supply chains smooth oed out

economists expect the cpi to stay below 3% which should give the pboc to lower rates to further shoring up growth. fueling concerns of the outlook, shanghai has announced covid curves ten days after it ended the two-month lockdown in most part of the city authorities want to test half of the residents this weekend and some residents are forced to stay home while they do that in beijing, entertainment venues have been shut in a couple of districts days after residents there were able to go out and eat in a restaurant again. in singapore, sam baddas, back to you the bank of england published eight major banks concluding the lenders would no put the banks at risk if it failed state street has denied a

are report it is weighing a takeover of credit suisse. that follows a denial from the ceo who described the reports as st stupid shares of credit suisse closed 5% lower. coming up, the foreign minister tells cnbc what it would take to back a russian gas embargo. that is coming up next

welcome back to the program. hungary's foreign minister says the country stands with ukraine over the war with russia it supports long term plans to get away from oil and gas exports. the eu has not offered enough support to wean off russian fossil fuels hungary's foreign minister was speaking to charlotte and she

joins us now this is a fascinating interview especially in the context of hungary being the key hold out key opposition to the eu plan to sanction russian energy imports thus far tell us more about hungary's stance around the issue. >> absolutely, julianna. look, you remember last week the package of sanctions against russia with the embargo on oil and partial ban. it is the oil from the sea and night not pipelines. hungary has said they have been dragging their feet. look at the map, we can't get oil through the sea. we need access to ports. we get oil through the pipelines from russia. we cannot just not take that oil. as you said, there is a sentiment that hungary has

deeper reasons to drag their feet on sanctions. we know viktor orban is a close ally of vladimir putin hungarians should not pay the price for the war. the question is who should the job of ukraine alone the conversation i had with the foreign minister on hungary's position on the whole issue. we talked about the sanction and i commented on the draghi comments he said do you want air conditioning or do you want peace. i asked him if he agreed with this >> energy supply is not a philosophical question or ideology philosophically, you cannot heat your house or cook it is a question whether you have physical access to a source or delivery route. if you don't have both in the

meantime, you are stuck. the question arises what to do if you don't have enough oil to run the country. that situation should not be created. you know, we have to be honest again as usual i'm frustrated that hungary is being portrayed in the international media as a country which wanted to make this whole procedure about the sanctions stop what is reality? the first five packages have been voted by us as well no problem after the fifth package, we made it clear there is a red line for us red line meaning energy supply this is oil and gas. we didn't consider the sanction on coal. because the polish have asked us to vote in favor because it did

not cause too much traouble, we voted in favor they are our brothers. when it comes to gas and oil, we cannot act against our own national interests everybody has to understand that >> that brings me to my next question the seventh package would include embargo on oil and gas >> that is impossible. 85% of gas supply or demand is supplied by russia 85%. you know, it would be possible to replace it. >> hungary saying that further package of sanctions against russia look difficult because it is absolutely impossible for them to put an embargo on gas. ere are other stories with hungary and eu started the discipline procedures against the country. eu is worried about attacks on

the country. rights of minorities and gay rights and crackdown on media and the judiciary. i asked the foreign minister where they stand with the eu and holding funds for hungary and how the negotiations were going. >> we have been governing since 2010 we execute elections all of them constitutional majority without coalition that shows trust of the people when it comes to the issues of democracy, i don't think it should be challenged by that because if such a big majority of the people support what we are doing, it cannot be anti-de anti-democratic. if there was a government which would violate any kind of rights of the people, they would not land in support to the majority in the parliament for that party or government. i think that the debate between

brussels and hungary is somewhere else this is that we in hungary have been a rightist and democratic and conservative government which has been putting national interests as number one. if you compare to the current, let's say liberal oriented mainstream in europe, that goes against. we are successful. last year was the best year in the hungarian economy with all kinds of records broken. this cannot be brokenly brussels currently. the basis for the debate is not about facts. it is not about concrete regulations. it is about approach and perc perception that is why if you ask if i see an outcome of the debates, it is hard to say because if it was about concrete measures, i could tell you in this regard, we

agree and we go to court or whatever it is about perception >> it is about concrete measures >> this is a simple blackmail. media. hungary in media is free it is not totally liberal. there are media outlets who are supportive and others heavily against what government is doing. i understand in brussels the definition of liberal or free media is 95% this is not the case in hungary because there are outlets that are rightist and supportive of the government and others don't. i think this is natural and healthy in this regard you know, when such perceptions are put forward, it is complicated to sucdiscuss. we don't discuss this which is always more complicated. >> the hungarian foreign

minister talking about the government being too successful. that is why the eu wants to go against them and saying this is essentially blackmail from the eu i leave it to you to judge on that interesting comments showing how difficult the head is for the imm immunity you have governments like hungary and the prime minister has been relying on vladimir putin. and the next package of sanctions could be a ban on gas which could be a tricky negotiation ahead. julianna >> charlotte, thank you for bringing us the interview. in terms of the latest in ukraine, russia stepping up the offensive in sievierodonetsk the city is coming under constant shelling and urging for western artillery shipments.

russia has seized mariupol nbc's richard engel has more from the besieged city >> reporter: his mother and family just escaped russian occupation their lives saved by a book. safe at a refugee center after three months in mariupol invading russian troops bombed their house and chased them to the basement and killed his grandfather. he kept a diary of his war through the eyes of a

9-year-old cartoon tanks and russian helicopter destroying buildings and setting the forest on fire >> these are soldiers? and they're shooting >> did you see a dead person on the street did you see any bodies on the street >> reporter: he drew his house before it was bombed and his grandfather with wings to carry him to heaven. he drew the food he wished he was having on his birthday >> what kind of food was that? >> reporter: an activist sneaked photographs of the diary out of mariupol and posted them online. they touched many ukrainians and the warm reception gave helen the courage to risk attempting an escape.

a network of activists details of the work secret rescued the family last week a daring escape inspired by memories no child should have. richard engel, nbc news, mariupol >> a powerful story from richard. coming up on the show, hong kong chief executive carrie lam is stepping down and handing over the reins to the incoming chief. updates on that story next

welcome back to "street signs. i'm julianna tatelbaum these are your headlines european equities slump and u.s. investments look weak with cpi forecast to hold near 40-year highs. nothing to suggest a recession is in the works. janet yellen rejects suggestions

a down turn is on the way. she highlights the strength of the labor market >> it is amazing how pessimistic they are with the strongest labor market we've had in the entire post-war period people can easily find jobs. confident about the job market the german central bank doubled inflation forecast after the ecb pledges to raise rates by 25 basis points in july and leaves the door open to the hawkish move in september. >> we are determined to delivering on our target of 2% in the medium term he he expectations should remain an

anchored. outgoing executive carrie lam says hong kong is not just another city telling safety and security trump freedom. >> it is not just about law and order in hong kong if you look at the other aspects in living in hong kong, i would really dispute any unfounded allegation that hong kong is not a free place we're now just over an hour and a half into the final trading session of the week and the losses are continuing to pile up. we have red across the board yesterday's selloff is continuing into today. the stoxx 600 dropped 1.4% yesterday. we were already trading in negative territory before the ecb decision and accelerated selling after that it was a down day on wall street in terms of the breakdown, the dax down 1.6%. heavy selling in italy the ftse mib down 2% the cac 40 down 1.3% in the uk, we are down 1%.

in terms of the wall street close, this is part of the potential reason we see a pull back in europe this morning. not only did equities accelerate losses with the ecb but in the wake of the decision on wall street has the dow jones industrial average down 1.9% the dow coming in down 1.9%. in terms of the forex markets. volatility in the euro when the decision came through, the euro plunged against the dollar and climbed yesterday throughout the press conference. investors trying to decide what the ecb policy path means for the euro right now, the euro is steady at 1.06 sterling is weaker he against t the dollar today is all about the dollar side of the story ahead of the cpi release.

as for the u.s. futures, we are in a holding pattern in the lead up to the inflation print the majors are all in for a flat start to trade today goldman sachs chief says markets have already priced in the probability of the economic recession next year. >> the view of the portfolio managers is the reasonable probability for 2023 less probable for this year. the equity market is trading that when we look at the performance and trading of cyclical stocks, they are applying the level closer to 50 the recent print of the 1st of the month was 56 it suggests the equity market embraced the view trading the idea of the slowdown imminent. the view of goldman is you will have a decelerating economy. we had a major conference on

tuesday afternoon where we looked at fund mann manag tuesday afternoon where we looked at fund mannrs and som ideas of investments for the new year and the idea of dividends was a strategy as being the biggest and compelling opportunities in the market. the idea that the forward market is pricing as though it is dividend cuts in 2023. it will be rising at 9% or 10 po10%. they have challenging situations in near term, but raise dividend for the 51st consecutive year. you think of companies with a policy of dividends. the ratio around 30% there is plenty of cushion and plenty of cash flow. the strategy is a defensive one certainly. that's the idea. >> we said in the intro, focus on stable growth rather than balance sheet. why is balance sheet strength

not as relevant? >> it is interesting when you ask the idea of risk of recession. traditionally, stronger balance sheet stocks are better. investors owning that durable would be more prized that is not the case a lot of the stronger balance sheet stocks are a lot of the growth stocks. as interest rate market has re-priced the fed tightening over the last several months, growth stocks have done less well that is a congruance of overlapping. why fund managers are perceivin a more stable and secure strategy hong kong chief executive carrie lam is weeks away from

the end of the tenure. a period defined by covid and public unrest over the controversy national security law. our asia colleague spoke to carrie lam where she said hong kong is not just another chinese city and the one country and two systems policy is here to stay >> in fact, it will not expire by 2047. i said this last october and noticed that a couple of officials also made the point that the one country and two systems is on the right track. as the president xi said it is the best arrangement to ensure hong kong stability and prosperity it is a good formula to show to the rest of the world how historical problems of this nature could be resolved why should it have an end date

i said recently that we would look forward to the continuation of what is in basic law including the upholding of individual rights and freedoms and the practice of hong kong's capitalist system and all of the high degree autonomy that has been given to hong kong. i sometimes find it very disturbed that a lot of the western media try to portray hong kong as just another chinese city and no proper recognition or understanding of the one country, two systems i really hope and i will be telling this to the next government once the quarantine rules are relaxed, we should do a major campaign to bring back journalists, politicians, think

tank people to come and see hong kong for themselves. when people complain there is no freedom, this is not the situation in hong kong hong kong is as free as ever whether it is freedom of expression or freedom of assembly or media and so on. >> madame, the issue of freedom and hong kong turning into just another chinese city, you've gone on record saying you have no regrets during your tenure and your report card is something you are proud of you have to agree that hong kong today is very different and perhaps less free and the freewheeling hong kong that you as well as i grew up in, no? >> freedoms are not absolute

freedoms have to be retrained where there is a public interest no public interest could be more superior than national interests, right every place should have rules and laws in place to safeguard national sovereignty security and the interest of the nation >> this was a big event st stateside yesterday. the january 6th attacks with the committee discussing we have this report. >> reporter: the hearings into the insurrection presenting jarring images in the video. >> you will never take back your country with weakness. >> the president of the united states trying to stop the transfer of power.

>> reporter: the committee chairman bennie thompson and republican liz cheney laying out what the committee will discuss. >> president biden summoned the mob and lit the flame of the attack >> reporter: the objective to show the former president and allies a plot to overturn the results of the lawful election of joe biden bill barr testified that the election was not stolen. >> i told the president he was [ bleep ]. >> so i accepted what he was saying >> reporter: the hearings will seek to outline the role of far right group the proud boys and trump's hand in it >> 300 proud boys marching east. >> reporter: the committee also promising to show a pressure campaign by donald trump on mike pence. >> vice president pence

demonstrated his loyalty to trump. he knew that he had a higher duty to the constitution >> reporter: the committee bringing witnesses including a filmmaker who shot video as they stormed the capitol. >> that day it was just hours of hand-to-hand combat. i was slipping in people's blood. >> reporter: promising to make the case for the conspiracy led by donald trump to overturn the 2020 election and subvert democracy. former president trump still continues to claim the election was rigged and stolen. susan mcginnis, nbc news. and then electric carmaker is showing off a new vehicle for takeoff. that is coming up next

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electric aircraft maker

lilium has a feat to get the electric vehicle to takeoff and get to flight. it is a milestone on to get the aircraft to market where competition is fierce. a arjun is joining us now. these videos are exciting to watch. it always comes down to the question how close are we to the technology getting off the ground what did you learn >> reporter: well, we know at this point in time, julianna, the phase where the companies are trying to prove the technology and refine it and ultimately to make it viable in terms of safety and something that satisfies the regulators and operates in the environment as well when we look at the takeoff and landing vehicles there are a number of companies developing it. i saw at the lilium site, they

have a vehicle they have been working on for some giaged to ce the test flight. a lot of the vehicles are prototypes and trying to work to a point to commercialize these and make these into something they can scale across the world. lilium has aggressive timeline next year it will unreveal the w one. this is a little bit of what i learned at the testing site. >> this is a flying car. i'm at a facility in spain where the electric passenger drone is about to takeoff on the test flight in just a few minutes we are getting a sneak peek at the technology the aircraft can be big business it would be worth $9 trillion in

2050 >> that is some way off, but some companies are hoping for the growing pie lilium this is the fifth generation of the aircraft an. they have been carrying out test flights here in the south of spain as it looks to hone the technology and improve the safety this is not what they hope to finally bring in production in 2023 the final jet will have a cruise speed of 175 meiles per hour an range of 155 miles that is the distance from london to manchester. it is progressing quickly, but what is the potential for companies? >> it is really to rethink how regions connect internally with other regions. if you want to move a regional distance, you take a long car journey or train or take a short flight the way to think about ev is it

takes the long car journeys and says why spend two or three hours in a car when you can do it in 45 minutes >> reporter: passenger drones face a number of challenges from the development of infrastructure like charging stations and landing pads and safety from regulatregulators >> understanding the technology and how it will function in the field. we feel the industry is mature and has strict standards this is going to be a technology that starts to test the edges of the regulations. >> reporter: this is not just lilium, but a handful of companies are hoping to fly ahead. don't expect to see flying cars around your city just yet. with every successful takeoff and landing made by a prototype vehicle like this, the future gets just that little bit closer sdplch closer >> this is a decade long process of growing the market.

we are looking at the middle of the decade when this becomes reality for people in a way that they can see it and feel it and participate. in terms of mass adoption, we are looking out past 2030 for broad adoption >> arjun, really interesting video. something to be excited about in the future maybe not tomorrow, but it sounds like they are on the right track. thanks for joining us. i want to leave you with a look at u.s. futures ahead of the cpi. the main event for markets today. in a holding pattern today not much on the market today after the steep selloff tomorrow i'm julianna tatelbaum "worldwide exchange" is coming up next.

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it is 5:00 a.m. at cnbc. here is your top five at 5:00. selling shifting into high gear as the markets losing week intensifies late in the game yesterday. futures in a holding pattern this morning investors gearing up for the anticipated report on inflation. expected it to show prices remain red hot what you need to watch for in that big cpi report. ahead of the number, treasury secretary janet yellen talking about the u.s. economy saying the recession i