>> if it sounds too good to be true, it probably is. even if it's your mom [chuckles] that's advising you to invest your money in something, check that's advising you to invest your money in something, check it out first. good morning welcome to "street signs." i'm julianna tatelbaum these are your headlines receiving only 40% of russian gas volumes as the largest economy turns to coal ahead of winter. emmanuel macron loses majority as they grapple with the left green and resurgent far

right. warning of uncertainty of the government >> this risks the country of the challenges we have to face global airline says the industry is within reach of return to profit next year easyjet sinks as it cuts more flights amid labor shortages. bitcoin recovers after crashing below $20,000 in the selloff taking the world's biggest cryptocurrency to an 18-month low warm welcome to "street signs. we will kick off the show with the energy situation in europe, uniper has been receiving 40% of russian gas volumes in the last 48 hours the firm insists it can deal

with the shortfall uniper is down 1.5% this morning. the story gaining momentum with europe calling on russia suggesting that russia is withholding gas supplies deliberately the kremlin rejected the calls suggests that is not the case. now germany has taken emergency action to brace for a gas supply shock from russia. they are looking for increased reliance on coal fired power plants annette joins us with more we know germany put in an action plan which is needed to deal with the gas supply shocks what are the measures? categorize how germany views the situation in terms of severity

>> actually, the rhetoric from berlin is alarming and also for the general public clearly it is of the interest of the government and people will panic with the energy situation. what the german economic minister is saying is there is a risk of the energy crisis this winter we are not changing track. that means to restart full capacity again there will be an emergency law passing on the 8th of july parliament which enables the government to restart 1/3 of the coal plant to produce electricity through that authority. the dirty way of producing electricity. that can enable the government

to idle gas and electricity capacities currently, 30% is produced with gas plants that should be redirected into gas storage for the winter period the general aim is to fill the gap storage to 90% in the monday of november and that will provide energy security for the industry we are not talking about households here like general warming or eating system we talk about the industry and they desperately need the russian gas supply to keep the production processes up and running. they are not substitute with lng. energy you can use with the heating system, but the pure rationed gas needs to be there in order to keep the chemical industry up and running over the next winter at least

they can also recalibrate the production processes, but that needs time and that time needs to be provided moving again into restarting the coal capacities that is the plan for now german storages need to be full by 90% by november that brings us up to three months of the winter of gas supply there is also the general aim to cut down on energy usage across the board. the german government is saying all households should look into w cutting down on the energy usage. that is the general plan coming from berlin for now. as i said, the tone has changed as we are seeing that russia is cutting down its supply by 60% to germany it could be first step

the official reasoning is there is some technical problem and there are parts of the pipelines which are missing -- as a side story. i guess the government doesn't believe in that story and that's why they're changing track now >> annette, if the german government is able to execute the plans they just announced to restart some of the coal plants and store more gas, do you think we could avoid a situation where we move toward rationing within german industry within the next year >> well, probably yes. that's at least the plan to cut down on gas usage wherever you can so the german industry will have enough gas coming over the next winter. i've been talking to experts on that issue as well

also the german industry is not static they are in the position to change the production processes as i was saying toward using other quality of gas also that they can be able to at one point in time use lng. they also can power parts of the plant in the future with hydrogen that is the future right now, what we need is to have the bridge period and transitionary period with the gas out of russia which is why they want to fill storages for the coming winter now at full speed. there is a 15-day loan for a gas supply company here in germany which has the only target now to buy as much gas from everywhere in that natural gas as it is

possible there is enough gas supply in the storages and as i was saying for the other electricity needs, these should come from other means. especially by increasing the coal capacity by 1/3 they are not lockoking into expending the lifeline that has not been discussed. i think that has also met in previous discussions stiff resistance from the utilities. it is not so easy to restart a nuclear power plant. it is easier to restart a coal plant. >> annette, thank you for bringing us up to speed with the latest measures and mapping out the german options german producer prices surged by 33% in may driven by price increases in energy and

intermediate goods with medals and fertilizers. the output price rose 1.6% here is a look at the dak. trading 0 .4% higher we are seeing a bounce back in shares which took a hit on the back of warning in asos. the majority of stocks in germany are trading higher this morning. this comes after a tumultuous week for stocks for germany. let's look at the broader european market. the stoxx 600 is up. the stoxx 600 last week closed down 4.6%. bond yields rising across the board with central banks taking focus and signaling for the most part it is a hawkish journey from here. from the market perspective, we are looking at 0 .4% higher for

the dak. the cac trading higher despite the surprise over the weekend. emmanuel macron lost majority in parliament a huge number of iimplications o the ground we have charlotte with us coming up to say where we go from here. ftse 100 up .50% similar for spanish and italian markets. and in the auto sector up 1.5% retail is bouncing back. we had under performance in the key retail names last week a bounce back there. 1.9% higher. travel is trading 1.4% higher this morning we had an encouraging report suggesting we could see a quicker recovery on the airlines construction and materials is

down 1.8%. fixed income markets ed the bund is trading higher. and the emergency meeting driven spreads higher trading at 3.7% now. in terms of the gilt, it is trading at 2.5% higher we have jerome with us from pimco. thank you for being with us. perhaps we can kickoff with the fed. that is driving markets here and other central banks in part. the fed is facing heavy criticism for not acting sooner for not anticipating the situation we're currently in and not being aggressive enough now what do you make >> good morning, julianna.

all central banks, specifically the fed, has been dealt a tough hand we have been trying to find our way out of the pandemic and now fiscal stimulus, we are trying to thread the needle we are looking at growth and inflation. the central banks and that has chosen to focus on inflation whether it is later is not the question at hand, but the balance to figure out the prospects of weighing in the balance and fighting inflation and offsetting growth and prospects of the weakening jobs in the medium and longer term. the fed chosen to take the more challenged route to focus on the inflation front which is front and center for probably the next one to two quarters in the united states. that said, we are focused on the balance at hand. there are two things to focus on number one, focus on rates and where they are headed. a tighter and higher level which has a lot of pros because

situations facing negative interest rates is facing a recalculation. the second thing is secular in nature changing liquidity landscape that is something we will see with the tightening monetary policies around the world and really from the changing landscape of higher cost of capital. that will mean there are two things in the market number one, we will focus on higher volatility in the markets as we move from programs of kwquantitative easing to tightening in the united states and around the world higher costs of capital. transaction costs are higher cheap liquidity will realize how investors will think about the portfolios and there will be more volatility in the market that we are not customed to.

that is the take home for investors. be more defensive in where we are today in the cycle and sensitive to credit asset classes and equities be more balanced with the higher interest rates and create a more balanced portfolio to withstand the events that might happen with lower growth and higher inflation and weakening jobs >> you are talking about significant structural changes to financial markets here. you know, we are heading into the environment which many young investors have never been part of before. what is your word of advice for those experiencing this i inflationary environment >> that will have to have a psychological impact on the investment community and real world.

there will be implications practically speaking with the economic cycle, i would not call it stagflation, but the stall speed economy that we will witness the next for quarters will be between 0% to 3% gdp growth that means the federal reserve and central bank policies are not going to be as reactionary to the risk-off events as the past it will be they are trading off that growth and jobs for fighting inflation that fighting inflation is front and center with the debate in all central bank policy meetings going forward. specifically at the federal reserve. they chosen to be very hard and dynamic in approaching that. probably more data dependent that with the shift of inflation means the tendency of investors

so buy the dip and not worry about the economic cycle needs to be recalibrated and a more balanced portfolio approach which encompasses more fixed income that is something to be contended with the risk cycle and the systematic points of liquidity really create a unique playing field. maybe dust off those old textbooks and read about it. this is a very different economy and market and one which warrants caution and wrecrecogns the fact that the central bank and others are alerted to dangers and trying to put the fires out. >> jerome, you mention yields across globe as central banks are combating rising inflation what do you make in terms of portfolio distribution, how do

you think of treasuries versus stocks and bonds versus gilts? >> we like where we were in the treasuries they recalibrated dramatically we have seen a flattening of the curve and recalculation in the united states. that is something to be alerted to a 2-year treasury trading at 3.2% is attractive considering all things in terms of safety and liquidity. when you deconstruct it, not to get more bond long, when you decon decon deconstruct, the 1-year rate is 3.75%. that is attractive with the federal reserve is looking at 3.5% to 4% the markets are friendly in recalibrating that we see that where the fed is a little bit ahead of how we are thinking of the sequencing the markets are pushing the fed

to be more hawkish we will see other central banks with regard to policy actions lastweek hold the markets to higher yields. when you think about the opportunities, it is different from 2021 with flat yield curves there was not a lot of opportunity. today's opportunity set and going forward paints a different landscape. more diversification to fixed income is more reactive. >> what about the environment you describe which is not the worst-case scenario of slower growth and higher inflation. what does that mean for the most credit sensitive parts of the economy and credit markets more broadly? >> it means do your homework we're in a later scycle. the tradeoffs mean it will fight inflation with the central bank.

where companies that need cheap funding and capital, they need to recalibrate with valuation and funding. with these conditions, it warrants more caution. looking from the bottom up and earnings projected and looking at profitability and how they can become more productive in terms of embracing technology over labor these are as expect aspects to credit sensitivities we are looking at quality and emphasizing structure products which has asset backed asset classes and not relying on a profitability matrix from that perspective, it doesn't mean all credit is bad, but with the uncertainty in the global economy, specifically for 2023, we may see tradeoff which clouds the outlook

why take uncertainty in terms of the portfolio risk and focus on the downside in the credit markets and have a little bit more liquidity and up and credit quality and for fixed income, specifically at secure products. >> what kind of returns could investors expect if they were to restructure portfolios along those lines? >> that is a great question. the as exppect is where we havee from we think about declining interest rates and one benefits of fixed income is driven by the total return as well as income and capital appreciation that total return has been driven by the decline in rates the bond prices moved higher today, it is really reset. what we are focused on is income

and income generation. the other hand of the piano is playing more of the melody we can find opportunities out the interest risk in the yield curve that ran from 3% to 4.5% with modest high quality credit and structured product exposure. that allows you to have degrees of freedom and be more resilient with the portfolio and give you an option of the impact of the central bank policies. we have more open mindedness in where inflation is headed in the next two years this is what investors want. have the return and have the ability to pivot once we see more clearly down the road where the cycle is headed. that is the key to surviving the uncertainty in the marketmarkete

>> jerome, thank you so much. coming up on the show. emmanuel macron loses absolute majority in the french parliament in the major setback for his second term. we'll discuss after this break

french president emmanuel macron's centrist blok lost the majority after the second round of the election. the alliance failed to reach the 289 seats required after a strong performance by the leftist alliance as well as marine le pen's national rally speaking after the exit polls were published, the prime minister of france said this is a challenge for the coalition. >> translator: the situation is unprec unprecedented. never before has the national assembly seen a configuratconfi. this is a challenge for the country that we face we must respect the vote and

dp draw the consequences. we have a special responsibility as of tomorrow, we will build an action plan. >> the leader of the france's largest opposition said macron's defeat was total >> translator: above all else is the fall youfailure of the emmae macron policy. they reinforced the far right. >> charlotte joins us more. i know this shocked many what does it say about what the french people want with the leadership with the outcome so different from the presidential election less than two months ago. >> reporter: it is hard to believe eight weeks ago that emmanuel macron was elected president and four weeks ago the

new government formed. french people were happy to have him elected, but they did not want to give him a blank check like 2017. this time is a different scenario you lkook at the front page of the papers "a slap. or "incredible." he is still the main party and they lost absolute majority. very far away from the limit to have majority to get anything through. the question is they have to look for alliances and other places to get on board in france, you don't have the traditional coalition and you usually have president with majority you don't have the fragmentation coming through with the results of the election. you said the main opposition

will come from the left wing block. the one who did not run as an mp, but said vote for the block which is the socialist and we will be the opposition and make me prime minister and we will control what emmanuel macron can do they did not win that as melenchon will not be prime minister he is the main opposition. the question is how much coalition they will have they have a lot of different views and positions and topics in the socialists areas. how that coalition will be is a big question the surprise or victory last night was the far right result of the party of marine le pen who ran against emmanuel macron in the presidential race they had success with 89 mps in the last assembly with 7

huge numbers of mps. she called it a huge victory just a few months ago, people were ruling her out. she had contenders on the far right. it looks like she was in diffic difficulty she will have the third block. you have the three blocks with three very difficulty views on everything nothing in common. in some way, emmanuel macron will have to find alliances. it could be the center right the small group of mps could be crucial for emmanuel macron. everything is on the table we will discuss if this is a win for emmanuel macron. we caught up with the new parliament and all this debate is good news for democracy or

whether it is instability. >> it will be interesting to see as you clearly put it. either more debate or consensus or building on the other and ability to make the parliament work and convince people we are working for them as opposed to working for us if that works, we will bring people back to the voting booths if it is just about emmanuel macron on tv and block the parliament, then we won't go very far i also think that to have four elections in a row, french people voted twice for the president and twice for the parliament in the course of eight weeks away too many. we have to think how to reorganize the process in france and the institutions that requires outside assistance i hope we can get that

it will be hard with some of the guys let's hope we can build consensus. >> there are very clear big challenges ahead with the situation and the cost of living crisis and potentially the health situation that could deteriorate. the pension reform which is urgent how quick and how well can these issues be tackled with the parliament that seems to be coming up? >> we have to learn from our neighbors. the germans take up to a month before making sure they build a proper coalition and then they deliver. i don't think we will go that long i think we need a few days to g through the parties and see what we can do with that. let's build enough of a consensus to move forward and put together the reform.

i'm a perpetual optimistic i represent the french people who believe in north america let's look at the glass half full and go for it let's make sure we work together to build a better france and i think we can do it if we work hard enough. that's good. >> reporter: we'll have to learn from our neighbors is what he is saying in the interview. they lost absolute majority, macron's group they have to find alliance we see french mps trying to resist politics and compromise and see if they are learn to do this in the next few weeks one thing that is certain is a government reshuffle is happening. three of the four lost in the election they have to have a reshuffle in the next few days.

whether she stays as prime minister and there are a number of issues for the next five years. three blocks in parliament with nothing in common. >> we will see how it impacts the domestic political situation and what it does on the international stage. charlotte, thank you for your analysis and results. on to key stocks in focus this morning reault shares rose on the jefferies upgrade. they looked to 40 euros from 22 previously atos has a new cfo after a resignation amid the mass restructuring. they are looking to spin off the cybersecurity cdivision shares are down 6.5% it has been a rough ride for

atos ab foods has a good sales for quarter. the group says it is seeing a positive impact with food sales up 10% the company backed the outlook and said grocery margins would improve. credit suisse rejected the claim for $515 million from the russian investor malkin was seeking the funds after being convicted in 2015 and sentenced to five years in prison the bank recognized the an agrieved party. and coming up, the airline industry has seen a sharp improvement so far revising the forecast from 2021

well come back to "street

signs. i'm julianna tatelbaum these are your headlines europe's largest economy turns to coal to secure the energy supplies ahead of winter. emmanuel macron of france loses absolute majority in parliament as the parties fragment there may be uncertainty with the government's agenda. >> the situation is a risk for the country in view of the challenges we have to face nationally and internationally global airline body says they are in return to profit for next year. easyjet sinks as they cut more flights amid the summer shortages. bitcoin crashed below 20,000 and recovers and taking the world's biggest cryptocurrency to an 18-month low

a fresh week european equities gain. the dax up .50%. and then cac is up .22% after emmanuel macron lost the majority making it difficult to push through his agenda in parliament dpes despite that outlook in france, we see gains for the cac ftse 100 with similar gains. the swiss market is down 0.2%. a quiet week in the u.s. data. u.s. markets are closed for the holiday. we have jay powell providing

testimony later in the week. from the sector per spec tes tive, we are seeing those per tomorrow poorly this morning russia cutting supplies to germany and now moving forward to brace for a difficult gas situation moving forward construction down 2% basic resources is down 0.8% insurance and food and bev on the upside autos up 1.6%. as you saw, renault is the star in that basket up 3%. trading right to the top of the stoxx 600 after jefferies upgraded the stock

you can see ringspan is down 13%. we have at datos is down as wel we see the airlines performing down. easyjet is down after the airline said it is cutting summer flights as it is dealing with shortages it will face cost impacts from the disruption they said quarterly capacity is 87% of 2019 level and 90% of 2020 levels. we are seeing decent demand for travel stocks. air france is up and lust h hun lufthunsa is up as well.

perhaps this has something to do with what iata. it is returning to profit in 2023 the global body revised down the losses this year to $9.7 billion versus $11 billion previously. dan murphy sat down with quantas. >> demand is massive we have more demand even before covid. that allows us to recover fuel costs. it will be able to digest that >> let's quickly talk about how we got here. the criticism and charge in australia is that qantas had its

snout in the taxpayer trough with billions of aid and a bailout. the taxpayer is not there. how do you respond to that >> qantas has a report of $2 billion that came from the australia government actually when you break down that $2 billion, we got little funding from the government directly $1 billion of that was to rent aircraft as freighters to keep the agriculture sector alive we were exporting goods around the world when no other aircraft were flying. that was the cerservice that the government paid for. we didn't make money off that. the second was job subsidies we stood down 22,000 people without income the government across the economy put a policy in place to get through this that was essential

qantas, that was not money to qantas, but qantas passed off to employees. >> lots of focus on the travel industry dan is conducting interviews from the conference in doha. dan spoke with the ceo of finair about the fallout of the war with ukraine. >> russian air space has been looking at the strategy of connecting europe and asia on the northern route now we need to go around the russian air space. that means our routes to japan and south korea and china are now 40% longer than they used to be so, of course, this means we need to adapt. no one knows how long the russian air space closure will prevail. for us, this means that we just need to adapt to the reality of

closed russian air space we need to change our strategy. >> how are you changing the strategy of course, routes no longer commercially viable. if you are flying longer, that means more fuel and less demand. how do you pivot >> some routes to the northeast asia are still commercially viable because the cargo yields are up and passenger yields are up we are not turning our backs to northeast asia we sufly to tokyo and seoul and shanghai and beijing cities like that what we are doing in general is pivoting we keep our foothold in europe we are introducing new routes in u.s. like dallas, seattle, starting from stockholm to new

york and this is what we are doing. on top of the measures in terms of revenue and cost. >> that's not all. dan also spoke to the ceo of korean air about prospects in the wake of covid. >> recovery. we are seeing a trend of it. you know, of course, high fuel costs is another trend it seems like a positive move. >> how is the demand bounce back in the domestic market and international in your view >> we are mostly an international airline. international demand is very strong we can't get enough aircraft to fly. as soon as they are out of maintenance, we will fly it.

we will add as quickly as possible >> i want to ask about the acqui acquisition. why is it so delayed >> delayed we need a lot of preparation we started with the korean fair trade commission which takes about a year to get passed once that was done, we are working for the other six countries, u.s., china, eu, uk, australia and japan. they are on track. we are hoping to complete it by the end of the year. i have no doubt it will work out. >> he found those conversations interesting. stay with us after "street signs. we have dan's interview with tim clark. coming up on this show, does the crypto crash has further to run? we discuss bitcoin with arjun

after the weekend selloff next

welcome back to "street signs. fed governor christopher waller expects another 75 basis points like in july as they go all-in he says the below trend growth and slight rise of unemployment would help easing price pressures. the cleveland fed president says the 2% return could happen in the next two years she is not forecasting a u.s. recession. saying growth is slowing, but there is plenty of strong indicators in the economy. the question is what will it take from the federal reserve to rein in inflation and how will it impact growth will we see the soft landing that jay powell wants to see and

still believes there is a narrow opportunity to see or will we see a harder landing judging by the market, we are bracing for severe reaction. one thing to bear in mind in the l lead-up to the congressional testimony is inflation is not only a central issue for the fed governor and economy, but also it is a central political issue and the chair could potentially be grilled for the fed's raised forecast for unemployment. you have the picture of the three indices. the dow and nasdaq and s&p turning to crypto markets. we have seen plunge in crypto assets not the traditional ones that suffered bitcoin saw heavy selling over

the weekend. on saturday, the crypto crossed below $20,000. this was a key level that got a lot of attention it actually crossed below $18,000 for a bit of time. it recovered above the $20,000 mark it clearly has been a rough ride for bitcoin holders. arjun joins us with more on the volatility crypto trade. arjun, this was a dpeevastating weekend for cryptocurrency funds. tell us about the extent of the damage in the pull back of bitcoin. >> julianna, we are seeing pressure on the market it is feeding through so many areas of the crypto space. bitcoin mining levels of bitcoin now is very unprofitable for the miners and mining operations around the world. that means they could be dumping the bitcoin holdings and selling into rallies that will count for

the upside we are seeing projects come under failure with the downturn in the market. terra and usd collapsed. celsius, the firm which is facing insolvency. there are a number of projects around facing big challenges with the downturn. companies beginning to layoff staff. c coinbase and blockfi as well in the new crypto winter. a lot of investors will be scarred from this. especially retail investors in the space. they may not return in the future lots of crypto specific issues a lot of leverage being used in the market at the moment some of that has been shaken out with the downturn. there is a lot more left to be shaken out

we will see how that plays out you might see firms in the lending space having the asset liability and mismatch where they are unable it pay for the debt and leverage. a lot of problems and what you are seek are the knock-on effects from the downturn. it is unclear if we are out of the woods yet although you are seeing the rebound today >> arjun, throughout the last couple years, one of the arguments that bitcoin proponents would make is if we would see volatility, each time bitcoin sold off, it would stabilize at a higher level as more and more investors got involved is the fact that bitcoin plunged below $20,000 changed that thinking >> one thing you hear is in previous downturns, we see bitcoin 70% or 80% off the

all-time highs before eventually getting back up to the all-time high which is very hard to predict a timeline for it. at this stage, there is a sense we are getting to some sort of bottom perhaps not quite there. one of the key levels traders are looking at is the $23,000 mark if it hold above that, in that could be a catalyst to the upside no real signal if the crypto issues are over and where bitcoin goes next. >> arjun, i'm glad you are hearing to help us ride through it our tech correspondent that's it for the show m linaatbai'juan telum stay with cnbc we will see you tomorrow

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