that's all for this edition of "dateline." i'm craig melvin. thank you for watching. ♪ good morning welcome to "street signs." i'm joumanna bercetche >> i'm julianna tatelbaum. these are your headlines spanish inflation falls in may to the lowest level in nearly two years while prime minister sanchez calls a snap election for july after his party suffers regional losses. >> this was a reach and the direction of vote goes further. the debt ceiling deal faces

a test in the committee today after the resistance from hard-right republicans, but president biden is confident the bill will pass . >> there is no reason it won't get done by the 5th. we'll see. the u.s. dollar index hits a two-month high as investors await the wall street reaction to the debt deal struck over the holiday weekend. the japanese yen regain ground with the ministry of mac finance announces an emergency meeting in a half hour very warm welcome to "street signs. we'll kickoff with spain a lot going in the last 48 hours. consumer prices jumped 3.2% for the year in may. the lowest level in two years.

that is less than expected and well down on the 4.1% reading from april core inflation jumped 6.1% on the year that was below the april reading. mean meanwhile, spanish retail sales rose and excluding inflation, that is well down on the march figure ibex 35 is trading up 0.5% it is not all about the data politics are firmly in focus as well spanish prime minister sanchez has called a snap election in the wake of heavy losses for the left-wing coalition government a national vote was expected in december, but it has been brought forward taking place three weeks after spain takes over the presidency of the eu in july charlotte is in madrid she has been covering it on the ground char charlotte, what is pedro

sanchez's decision behind calling the snap election? >> reporter: it is a gamble. the parliament has been dissolved today after the shock announcement by pedro sanchez to call for the snap election on july 23rd instead of december. this comes on the back of the terrible results of the party at the local elections over the weekend. a reminder, the nine regions we were holding and they lost six of them. pedro sanchez with the shock announcement and calling for the snap election in 54 days he was saying when he made the announcement yesterday morning that he was taking responsibility for the result and it was time for the spanish people to decide the path for the country. >> translator: yesterday's elections with the support of regional reach, the direction of the vote goes further.

as prime minister and general secretary of the socialist party, i assume the results and i think it necessary to give a response and put under the scrutiny of the people's vote our democratic mandate >> reporter: now, calling this snap election by pedro sanchez is controversial are you doing this for the country or yourself trying to limit the damage in the local elections and not try to drag out to december. he is trying to give a bit of shock to the left-wing coalition partners trying to get the house in order. he is saying let us get the far right conservatives. that is what is happening on the other side now this election will be held in the middle of the summer holidays a lot of people planned to go away schools will be shut because of summer holidays.

that is controversial. now they have to assume the electoral program because of the campaigning was anti-sanchez t. -- anti-sanchez it will be hoping to have solid majority to lead the country >> translator: the result from the regional election has expressed powerful desire for change i congratulate my party and urge it to work to confirm it and improve it in the general election we enter the challenge with the best version of the popular party, united, calm and committed to the country >> reporter: so a big gamble by pedro sanchez. it is unclear who might get majority because for the socialist, we have to see the

left-wing coalition partners and see a message of saying it is for us to block the far right. for the conservative, they have to pack a demake a deal with the far-right party. that could be controversial of the we have to see if they face the moderate voters as well. a lot of uncertainty here remaining on the table as you said, the issue that spain is to hold the eu presidency from july 1st with the elections on july 23rd, there is a worry in brussels that spanish politics will derail the presidency and reforms and plans for the presidency will not happen any more the official campaign starts on july 7th during the official campaign, pedro sanchez will be at the nato summit giving a speech.

you have all of the events happening during the campaign. it is an interesting exercise. he is for an agenda which is one of his strengths for sanchez we have some past experience with emmanuel macron with the presidential campaign last year and having the eu rotating presidency we have to see if it works for sanchez. it will be tough after the result in the local elections. whether each block can get the majority here and we may have instability ahead. guys. >> what an amazing turn in the last 24 hours for spanish politics something we will keep an eye on into the now snapelections taking place in july let's turn to the markets. uk is back online. u.s. markets will open later on. the first chance for investors to trade post debt ceiling agreement over the weekend they are having positive

indication p coming from the u.. futures. the stoxx 600 is treading on flat line. we are trading round zero. we tried to open up more green, but that optimism has actually simmered down in the last hour or so. in terms of the individual index, the under performance is the french index, cac 40, down .40%. continuing with the luxury space. dax is up .30% the ftse 100, of course, the first day back since friday. down .10%. we are looking at some of the industrial names trading at the bottom shell and oil and gas as well. in terms of sectors, this is the breakdown. real estate is a volatile basket of late. trading in the green today up 1.2% a lot of concerns over what is happening in that space.

especially withrespect to commercial real estate vacancies and office blocks and exposure to higher interest rates utilities is putting in a good session. up .75%. on the other side, food and beverage down .30% we spoke about it yesterday that opec plus meeting is coming up next sunday. saudis have been warning about the potential for further cuts on the output side of things let's see what happens as the week evolves let's take a look at u.s. treasuries the theme is one of a rally this morning. we have the 2-year note up at 4.53 the 10-year treasury is 3.74 it rallied about seven basis points overnight why is that the case a lot of uncertainty over the soft debt ceiling deadline has been taken out of the market

remember, the front-end bills expiring in the next week had shot up to over 6% expect a lot of the premium to get unwound in the next couple trading sessions switching to foreign exchange. the dollar is at a two-month high against the euro. euro trading at a two-month low. down .10%. dollar/yen continuing to breakthrough the 140 mark. a lot of people taking bets on the strength of the dollar/yen this is the position that is moved against the market the pound today is trading sideways at 123.50 a lot going on in markets. let's get out to the global macro stratiegist. raj, it is great to have you on the show

there are so many factors we are talking about, be it monetary policy or geopolitical concerns or snap elections in spain, for example. i wonder what is the most dominant market narrative in the second half of the year? >> it is a tricky one to navigate when you have so main balls to juggle, i dpguess. the debt ceiling was the most important thing over the last couple sessions. it seems like the market is largely re-priced that risk out. i think the focus now turns to how we get to some sort of landing zone when it comes to the inflation and macro economy. i think geopolitics is not being talked about as much we have the spanish elections and china tension. we have more peripherally going on that the markets are not discounting. all of this centers around one thing. the pace of the deceleration and

timing of recession and secondly the magnitude. all of these things input into that single the question that investors are asking >> that ties to the question i want to ask next which is whether or not you anticipate the u.s., which is essentially the center of all this, going into recession in the second half of the year the data recently has been quite resilient. particularly on the consumer spending front i wonder whether it is becoming less and less mainstream now to think of the u.s. recession happening. >> yeah. it is a difficult one. you know, you can look at the data and we do a good job of tracking the spending. one month it tells you recession is on us and next month it is pushed back. i think this volatility is happening. the zig-zag recession down

i imagine recession would be in q4 we are trying to track that timing to get it as close as accurate as one can be really, i think that is probably what the markets expect. you know we should discount the fact that the thing everyone has been talking about which is credit tightening. that is going to work through also in the second half of the year we are still working through the long lags that monetary policy has. that still has yet to show up. q4 is the best guess at this moment in time i say every day it changes >> viraj, let's assume you are right in q4 in the u.s. recession. what does that suggest about rates and when the fed may consider cutting interest rates and what may be the trigger for that >> usually the fed cuts come just before that recession

we would not discount the likelihood of the fed cut this year i know there is a lot of pushback for that. we get pushback and people don't understand why they were pricing in fed cuts. i think that is something you have to put probability on that is how i think about things right now when it comes to monetary policy. we see a gradual pause or pivot or end of hiking cycle ths comig through the summertime and look at the first cut for me, q4 and the turn of the year and every data point takes that back or forward generally thinking, the idea of the bond yields sell off the last couple weeks and for me that is a great opportunity. you want to buy bonds into selloffs because we are going to get that pivot and central banks starting to lower rates in the next 12 to 18 months. >> if the fed lowers rates in the next 12 to 18 months, why do

you say investors should avoid shorting the usd >> this is a great question. sometimes it feels like it is almost like an expectation against reality. i felt what would happen is the expectation around the timing and magnitude and i diosyncratic n nature you can get a sense that this has run its course that was the bounce back in the do dollar you know, it is really every country for itself on the gauging of the timing of the recession. one thing i have a strong view on is if the u.s. goes into

recession, it won't be an idiosyncratic event. it is not necessarily an environment you want to be short dollar don't fall into the short dollar trap is my message i think that is playing out the last couple weeks. >> very clear explanation. viraj, thank you pleasure to speak with you elsewhere in fx markets, yen has firmed after the emergency meeting with the ministry of finance. the meeting taking place this hour to discuss international financial market the yen is the worst performing currency this year. and demand for hydrogen fuel is expected to increase in the coming usyears, but comes with challenging. that is according to the ceo who told cnbc the company had big ambitions with the energy transition >> we ware working european wid where the supply is not going to

be in the same countries we will have a lot of hydrogen demand in the industrial heartland of europe and germany and that part of europe. they will have a very significant deficit of the green hydrogen they will need. we have a clear spare production capacity in countries such as spain. we need to build european corridors too much for supply and demand the capability is a challenge. we have to see it within the european perspective for producing the industrial supply chain to cope with the challenge and we also have to think of infrastructure >> arabile joins us now from the goldman sachs conference in london arabile, talk us through how the mood is on the ground for some of the utility companies in

europe >> reporter: certainly opti optimistic they are trying to move ahead and into the energy transition as quickly as possible with the right measures let's chat to the cfo who joins us now luca can unpack this a little more luca, thank you for the time i appreciate it. the performance of the high inflation and high interest rate environment and market volatility is massive as well. yet you are still able to weather the storm. how are you able to do that? >> let me comment the first quarter results were good for inve investment 5% 300 million for the first quarter. actually, we basically manage to cover what is the inflation effect on our accounts

our relations provide for regular asset base to be linked in inflation as well as ease inflation. this solid set of results firms our guidance for the year. clearly, our investment plan is pildi building for the year. >> reporter: it seems what has been necessary is europe needing to find a clear path in the energy transition. is the path clearer because of the crises we had over the last year or two? >> i think in terms of europe, the path is clearer. we had to source to stop in terms of how we manage the infrastructure from the storast.

we had to fill storage higher than before. we have more than 70% level which is more than 20% from last year to prepare for next winter. this is contingent response from last year. clearly we have to navigate through the next winter. we will see if it will be a mild winter like before and whether lng and gas demand picks up from asia which is uncertain at this point. >> reporter: we spoken to businesses which say they expect things to look better from the gas perspective as we head toward the winter time period. is this now a ways of europe has found where it needs to go the direction it needs to lead when it columbmes to renewablesh better regulation? >> absolutely. there is coordination in europe with the countries with energy transition

it is more stringent than before when it comes to electricity, renewable production or whether it is the support of the supply when it comes to gas of the t industry we are in a better place we need to basically resume from high import from russian gas and provide gas from different countries. >> reporter: not just italy, but the rest of the europe as well ending winter with higher reserves than we thought we probably would can that happen again? is it now a case we understood what it is europe needs to do to create a more, you know, compliant energy mix that

filters through? >> i don't think it will happen again. the strategy that europe is taking is a multi-year strategy. clearly, in order to move a more secure environment when it comes to energy, the source is apatte. last year, this year and next year will last for the next decade when it it comes to investment in the electricity sector as well as the gas sector >> reporter: you think energy crisis over? >> i don't think it would be intelligent to say it is over. we are coming out of a mild winter and a lot of regulation provides for, i would say, lowering of the demand of gas. as soon as this regulation is lifted and demand will pick up as i said before, the question is whether asia will pick up given europe is more reliant on

lng. gas via ship if europe picks up, then pit wil be in a more difficult decision. to say it is over, i don't think it is a wise approach. >> reporter: a lot of funding into the projects. do you expect that to be the case does this become easier as time goes by? >> there is a lot of funding in the project, but a lot of support for the plan we are very ver active. we expect more funding to see these projects we have the flexibility to pursue our business plan which provides investment as we are without the support of the country. >> reporter: how important is it for europe to move as a block when you consider what the u.s. has done p wiwith the u.s. inflo

reduction act? >> it is very important. the i.r.a. is providing subsidy for investment and production and technology which is something at the moment we lack in europe. it is very important that you are caught in the policies around the topic especially when new technologies are needed for the transition and gas is clearly hydrogen which is important there are no subsidies in europe for those facilities >> reporter: luca, i appreciate the time all the best with the conference we hope to get more words from snam the goldman sachs utilities conference here in london. luca, the cfo from snam, sharing thoughts for the remainder of the year when it comes to the energy transition. guys >> arabile, thank you for bringing us that interview and

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welcome back to "street signs. i'm julianna tatelbaum >> and i'm joumanna bercetche. these are your headlines >> spanish inflation falls to the lowest level in two years, but pedro sanchez calls for a snap election. >> yesterday's election had a municipal reach, the direction of the vote goes further. the debt ceiling deal faces the first test in the house rules committee today among resistance from republican lawmakers, but president biden is confident it will pass. >> no reason it shouldn't get done by the 5th. i'm confident we'll get a vote in both houses. the u.s. dollar hits a two-month high as the reaction to the debt deal takes hold. and the ministry of finance

kicks off an emergency meeting right now in japan we're about an hour and a half into the european trading session. a mixed bag this morning contained trade. european equities range bound as we await the u.s. reopening after the long weekend and see what the market reaction is to the debt deal and what happens next and whether it makes its way through congress still questions, but it is a catalyst for markets as for the european trade, ftse 100 is down .20% swiss market opened .40% lower cac 40 is down .50%. we see green on the board in italy. the spanish market rallying this morning. up .50% after the surprise news, shock news, that charlotte brought that pedro sanchez

called for a snap election after heavy losses for his party in local and regional elections in the fx markets, the u.s. dollar hit a two-year high the euro trading weaker against the dollar 106.97 the u.s. dollar down against the yen. the japanese authorities meeting this morning financial services and ministry of finance and bank of japan discussing the international markets. 140 level is something to watch. sterling is stronger against the dollar at 123.59 we have wti down 1.2%. brent is down 1.4% we are trading $72 and $76 we have all three major notice

u -- majors in the u.s. looking to open higher at the end of last week, the story was the chipmakers soaring. we will see if that is the same theme for this week. as you were talking about spanish prime minister pedro sanchez, he called a snap election for the losses in the coalition regional ballot. we have charlotte in madrid talking about the fallout of the regional elections and big decision taken by mr. sanchez yesterday to hold early elections. >> reporter: the parliament is dissolved after the snap election announcement by prime minister pedro sanchez after the bad result of the party and coalition had in the local elections we had been covering

now july 23rd is the date of the general election held instead of december as originally planned 54 days now of campaigning to start and very interesting, but big gamble from pedro sanchez. for the center right party, the local level now putting together a general election and it is unclear which of the two could have majority. a lot of unceruncertainty. we have our professor of economics with us from the business school. thank you for joining us a quick view on the snap election it is a gamble by pedro sanchez. do you think it will payoff? >> it was a gamble it was a surprise walking to class and a student came up to me and i couldn't believe it i had to change any lecture

plan it is a huge gamble. who will pay will it payoff for spain i think for spain it is a good idea we were going to go through six months of delayed uncertainty and lame-duck government lots of problems inside the coalition and now all this will be resolved on july 23rd if there is a clear vote. we have not mentioned a party or invest in a prime minister right now, the polls and p whole situ -- and the whole situation is divided. >> reporter: it reduces the wait-and-see situation actually, there could be more instability coming ahead it is unclear which could have a majority >> my hunch is a change of government

i think i detect in conversations at the coffee bar now that everybody is discounting the result will truly represent what will happen in the general election. i think if i had to bet, it is better than 50% chance that the opposition party will take on the government and policy will normalize a little bit remember, it was in the european union and euro area with the limits of how far for country and governments is limited by the growth and stability and fiscal policy imposed by the union. even if there is a change in government, i don't think there is a great uncertainty on major economic loss or reforms they will not happen if they do, they would be a long alliance >> reporter: we had the inflation figures which were

better than expected in spain. inflation slowing down in a way, the spanish economy is doing well, but it hasn't come under local election campaign. do you think now that sanchez is going to start talking about the economy? >> the spanish economy is better than expected in the last six months all this uncertainty of how 2023 will play out. now half a year gone through and we see the spanish economy is resilient in the circumstances yeah, you know, i think it will be an argument and spain finally will recover the pre-pandemic gdp level. probably already has halfway through the second quarter the numbers are coming out on june 23rd. one month before the election. i'm sure they will be trumpeted by the official government and

it will be part of the campaign. you compare with the rest of europe and it shows a delayed rec recovery you are talking to cab drivers and people in the stores and restaurants and tourists are flocking back in the spanish economy is not tanking. it is not booming exactly, but it is a strong recovery. for the first time, employment with the furloughs and change in employment and labor market regulation and we have seen employment has resisted. we have brought employment numbers up there is a question about ours, but people withold jobs and getn the paychecks and the general mood is not negative i don't know if the argument is going to work or not >> reporter: we have issues within the spanish economy you were talking about

unemployment at 13%. youth unemployment is very high. productivity is an issue in the spanish economy. does that need to be addressed which ever party wins the election >> that story will be here for ever spain will never been germany no matter what they do to it. spain will be spain. the way we make our gdp is labor inte intensive. remember when you have to choose between high productivity or more jobs, which is the opposite side of the same coin, then in spain, we want jobs. unemployment has been a big concern in spain or low employment which is not exactly the same thing yes, we will have the opposition to use the arguments we talk gdp per capita lagging behind we talk about productivity and growth model that twill not change. look at the weather, look at the

streets. people are flocking to bars and restaurants. we will keep doing that as long as we don't ruin the climate. >> that will be an issue in the campaign >> it will be an itch knew the cam -- it will be an issue in the campaign >> reporter: it is impacting food prices, et cetera >> across the board. it has been raining very much in the last few days. we come from a severe drought. our water reserves are below average for this time of the year that will always be concern. spain gets 18 million visitors every year which is twice its population which means a lot of pressure on natural resources and environment. >> reporter: quick question on the conservatives. he could be the next prime minister in two months what does that stand for >> he has had a successful time winning a couple of elections.

he will bring all that to the management of the spanish economy if he does win the election i don't expect many surprises. he doesn't have a flaming personality. he is not a chair akhar charasm. he will be surrounded by a team. >> reporter: what about the far right? >> it will have to be leaning on the far right. clearly, the spanish situation with the independent in catalonia, any political coalition has to be with the far right. there are no two ways out of that the other party that could bring in seven or eight seats to get majority, they will not make any agreement if the far right is part of the government

it will be. >> reporter: we'll have to bring you back on. >> they could win the election and not govern that is possible >> reporter: we will get to that conversation in another time professor of economics at the business school. lots will be happening for the next few weeks 54 days before the next general election we will be here in madrid. back to you. >> charlotte, thank you for the reporting the last couple days now the lira sunk to a low after erdogan secured another rule of power. this extends to a third decade leading many worried about the future of the turkey economy inflation is above 40% and economists warn his low interest rate policies and emergency measures to prop up the lira cannot continue. meanwhile, russian president

putin called erdogan a dear friend and congratulated him russia targeted a third night in a row of air strikes on kyiv one person was killed and four injured when debris hit an apartment building and caught fire ukrainian defense forces confirm they shot down 20 drones during the attack >> drones hit multiple buildings in moscow. the mayor said several more drones were brought down nbc's moscow bureau is working to confirm the story. coming up on the program, crunch week for congress as they get ready to debate the debt ceiling package. we'll discuss the latest after this break

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welcome back to the show uk supermarket chain asda is buying the petrol group.

it will pick up 3,000 stations as part of the deal which is expected to close in the fourth quarter. the company will generate revenue of 30 billion pounds per year. and tesla and twitter chief elon musk is planning to visit china this week. his first trip in three years. according to reuters he is expected to meet senior chinese officials and visit the tesla hub in shanghai. china is the second largest market after the u.s. and told cnbc earlier this month that the automaker does have problems with its china expansion beijing has declined the meeting on the singapore summit it this weekend. the u.s. house rules committee is set to debate the $34 trillion deal to raise the

debt ceiling today this marks a crucial first step before the vote on the bill in congress the debate could be overshadowed by republicans who vowed not to support the package. the bipartisan agreement needs the backing of the house before it can be signed into law. let's check on u.s. futures. the nasdaq looking to open 140 points higher after the long weekend. dow jones industrial average and s&p also looking at a positive start. let's talk to alex young chief strategist a alec, welcome. this is the first day after the debt ceiling agreement what should we read into that? was this deal fully priced in? >> i think we have a couple of factors going on here. good morning nice to be with you. first off, as you alluded, markets had been rallying into the announcement over the

weekend. i think this was largely anticipated. that may be dampening the reaction somewhat. in addition, i think there is some concern that the spending cuts could put a bit of a damper on economic growth in the u.s. also, lastly, there is the sort of unlikely, but still, you know, present chance the extremes of either party could derail passage of the bill on the right or the left. i don't think that is the base case for most, but it is a possibility. for all of those reasons, we see a nice reaction in the futures it is not a surging dynamic. >> all of that makes sense, alec if i look at the futures, it is one day. the nasdaq is out in front again looking to out perform today those growth stocks in particular the tech giants, have been the winners so far. the semiconductors got a really

strong bid from investors on the back of nvidia earnings. do you think the rally in tech can continue >> we do we have been in favor of the market overall especially growth stocks over value stocks that was a theme we published a few weeks ago. the bottom line amid the macro uncertainty, investors are really gravitating to the areas with the most reliable organic growth tech really fits the bill. we saw that in spades from nvidia last week that dynamic really hasn't changed. there is still a fair amount of cyclical risk perception in the u.s. economy hard landing, soft landing we know the debate that has been going on for months. the tech sector is able to sit above that and deliver solid results that's less tied to the strength to the underlying

economy. until investors get over this recession anxiety they have been struggling with, it is logical to think a big high quality growth stocks in the tech sector continue to be leadership in the u.s. market. >> on that topic of discretion when it comes to cycle, i want to ask about interest rate hikes and potential for the market and what happens next. when we talk about the fed rate hiking cycle, the issue is them pausing this meeting or the next at what point will they cut interest rates again to your mind, how much sensitivity will the outlook be dependent on the rate cuts start getting implemented?

>> i think you put your finger on it. the timing of the pause or end of the hikes is expected to be no later than this next meeting. it is about a coin toss if they go another quarter point you know, the bond market had been pricing in cuts by the end of the year. it has been a lot of skepticism about that in the markets. that's actually starting to be priced out now the markets are looking for the first cut toward the very end of the fourth quarter. maybe early 2024 historically it has taken about an average of 3.5 months between the last rate hike and the first cut. there's been a spread of about three and a half months. that's why the bond market is quick to price in cuts later this year. that's based on the historical track record of the federal open market committee that has been the tendency

i know the cycle the -- i know the cycle t a lot of people are calling for higher for longer. they really haven't spent a lot of extended time on hold with the rate hiking campaign and beginning of the easing. the easing usually comes sooner. we do have relatively sticky inflation at levels well above 4% relative to the fed 2% target it probably will be a while before they start cutting. history shows that usually doesn't take them as long as many expect to shift into reverse on interest rates. >> alec, let me ask you quickly. we are talking about growth stocks you are bullish in that part of the market where does energy fit into the picture here again, we have been monitoring what is happening to the spot price of oil and there is a sense that as far as earnings are concerned that the earnings

for the oil and gas companies have peaked. what is the outlook? >> that is the biggest predictor of the stocks and what out performs and doesn't energy has been strong on the back of under estimating crude prices that dynamic has reversed with the oil prices on the decline and we're seeing a similar trend with corporate profit expectations to the sector it is difficult for the sector to lead when the analysts are slashing when it is energy and the commodity whether brent or wti crude oil is having trouble getting traction on the upside and not a lot to like f fundamentally about energy in terms of any near-term leadership momentum. sort of the opposite of tech from an earnings visibility

standpoint the best thing you can say for energy is it is the cheapest sector in the market it has a 4% dividend yield you know, there is strong cash flow and buyback dynamic i think it is very cyclical. we have a better visibility on what happens with the fed and the u.s. economy and that should help oil prices stabilize. once we get to the inflection, it will do well. >> alec, we will leave it there. we are running up to the end of the show alec young from mapsignals before we head out, the lira sunk to another low against the u.s. dollar. that is it for the show today.

it is 5:00 a.m. here at cnbc global headquarters. here is the "five@5. the deal president biden looking to rally around the debt ceiling agreement. we are live in washington. and stocks in the u.s. appearing to be on board with the deal as lawmakers and investors return from the long weekend. and different story for turkey the lira slumping to new lows on the re-election of erdogan the latest on the development in a moment. and nvidia looking to keep stock surge rolling.