the ecb must hike the rates. he said inflation in the country is set to top 10% by the autumn as russia continues to throttle gas supplies he doesn't expect germany to fall into a wage price spiral. unions have acted responsibly in the crisis let's look at the banking sector and see how we are looking european banks deutsche bank down 2%. commerce bank taking a sizable hit. we are seeing a selloff in european banks this is very interesting if we are talking about more aggressive rate hikes from the central bank usuallyhigher interest rates are good for the mib if it comes alongside the worsening growth outlook which is what the investment community is thinking about, then it is not necessarily a tailwind for the banks. we are seeing a selloff in european banks let's look at yields yields up across the board right now, german 10-year trading at 1.19% in italy, 3.4% let's welcome morgan from global x etf. i wasn't going to start the conversation here, but the euro crossing below the parity line with the dollar. can

in the background, you have the potential of the ecb to do the same. now we have some comments from other ecb officials to suggest it is at least on the table, and in these markets in this world, who knows? it could easily be 75 basis points. cannot believe i am saying that, but that is where we are. 75 for the fed, it will last similar for the ecb, and i'm not sure that will change the dial significantly. in terms of the message for next year, that is important because if the markets are still pricing 75 basis points for monetary easing, at the moment, there is no chance of that. could change to justify that, but over the short term, we see easing on the markets next year and that continues. tom: we continue to watch that. kristine, let's get your views on the data points we are watching. we get nonfarm payrolls from the u.s. on friday. what will you be watching? kristine: in terms of that data point, we will be watching for signs of that peak inflation narrative that is starting to hate -- to take hold. is that the case when it comes to -- i think th

the ecb delighted about that. kailey: and we are just looking to see what moves the ecb needs to make in september, which is next month. it is already august. i cannot believe we are here already. we are coming off in july that was the best for the u.s. equities since november 2020. we have seen fluctuation throughout the session but at the moment the s&p 500 is in positive territory to the tune of .3%. in the bond market we seal yields moving lower. this is the lowest we have been since april as the focus turns to growth fears rather than inflation. the dollar is weaker. on that crude story, wti down for percent. we have a 90 handle on a barrel of crude and that is very much a demand-side story as we consider china and europe and the slowing in the global economy. guy: interesting we did not see that in the manufacturing data out of the united states. solid numbers. let's talk about the story that broke just a few moments ago. bloomberg has confirmed house speaker nancy pelosi is expected to visit taiwan. we thin

a better way than ecb. they haven't left it quite so late they have been cautious. i think they have a bit more framework for inflation. the ecb is purely in reaction mode at the moment that is never a good thing i still think cable can head lower. sterling against the dollar is challenging. euro and sterling, the euro has more down side. >> dominic, thank you for joining us and sharing your thoughts >>> we are just gettingsome flashes from the ukrainian foreign minister in stockholm. he has called on sweden to provide further air defense systems and shells to ukraine. he adds that accepts the iaea that russia violating nuclear proptocols and russia is putting the world at risk for a nuclear accident adding russia must withdrawal from the nuclear power plant putting ukraine at the center of the catastrophic incident at the nuclear reactor, but the rest of europe the foreign minister is not mincing his words. he is expecting to say russia is violating the protocols and putting the world at risk for a nuclear

how closely does the ecb monitor that? >> if you look at gas storages, they are quicker than you would have expected a couple of weeks ago, even if you're taking into account the lower flows that come from russia. at the same time, we see the big drop in gas amounts. that is something where the industry is adapting. in our forecast, we have no gas rationing as a baseline. it still remains a risk. the point i would make going forward is gas storage helps you during this winter. you would still have a problem filling up your storages next year in preparation for the winter that comes afterwards. gas rationing remains a risk. i think filling up the storage is indeed a positive sign, or positive than thought before. anna: it's a positive sign that there have been too few of those. we have some european commissions on the line. they want to do an emergency intervention. we don't know that's going to look like yet. what actions can really make an impact here? we were talking about capping gas prices. it's not clear how caps woul

the message continues to be from the ecb, sub 50 on the pmi, you can be plus 50 on the ecb.hat is a tough nomination for the european economy to handle, and it comes back to the energy prices and the impact they are going to have. it is going to be a tough winter, the pmi do not reflect that. european economist of the u.k. investment office at ebs wealth management joining us now, what do you make of the data? how bad is it to come? dean: it isn't as bad as it could have been, especially given the impressions we are seeing across the euro zone economy. to be sure, it is not exactly positive. i think it is a bit too early, the euro zone is heading for a big recession. the data at the moment more looks like stagnation in the current quarter. pressures are building as we head into the winter. kailey: the pressures are building, and are building for central bankers in particular. as you look at the data and think about the inflationary pressures out there and the pressure on the growth side, what about policymakers -- monetary policy makers? dean: i think monetary policy will st

the ecb does not have the tools to address that. u.k.lation numbers let people in the market say, why zero different and what can the ecb do about it? when you see the trading, the market is punishing currencies that belong to central banks that have an inflation problem and are ambivalent of a how to approach it. kriti: kriti: joining us now is mark mccormick from td securities. thank you for joining us. it's a foregone conclusion that as we see natural gas prices and power get higher it will have a reverse effect on the euro. how much of the current weakness is more of a function of the ecb's ambivalence as opposed to the energy story? mark: it's a tricky story. the ecb would like to hike rates than what the market is pricing higher now. -- both countries in general and financial conditions. the part of the story is they don't the euro to drop further than it was. a big part that is interesting is despite the focus on defending the ecb have mistaken impact the currency, the euro is not trading on two-year rate differentials. it is all

that is a huge problem for the ecb. with the policies developing they way they are, maybe that will become even greater. you have brought dollar strength. u.k. data is uniformly grim and i close the retail sales numbers in this as well. we will talk about that in detail in a moment. alix: let's get more of the dollar story. in the u.s., you're seeing the nasdaq 100 is down by almost a full percent. the s&p is down by 1.2%. the consumer discussion i space is the weakest performing stocks. in the s&p, no real news, just trading heavy, the cyclical stocks. the dollar index is up. the longest winning streak is going back to the first week of july. the pound and the dollar are getting taken down. the u.n. is at a 10 year low. the bond market here, to year yield up by seven basis points, nothing like we are seeing in your neck of the woods. higher dollar, weaker equities. guy: let's dig into the u.k. data. let me go through what we are seeing here. three pieces of data you want to pay attention to. jfk, consumer confidence in

does the ecb have a fed problem? mike: the ecb does, the bank of england does.he strength of the dollar is a real problem for all of these countries, and it is only getting stronger, because the fed is perceived as being more hawkish. tom: a single line within three or four paragraphs, note it is all about energy. the geometry of the energy charts is not -- jonathan: it is converted. is it inverted? tom: the cliches or anomaly, or pick what have you, it is vertical. jonathan: 15 basis points on the front end in germany. this is 30 minutes after powell at the ecb would take over the headline. lisa: you are seeing the response, which is interesting. jonathan: let's get you up to speed on the market action with kailey leinz. >> it has been a roller coaster. after chairman powell said we are going to get instructive, stay there for a while. he saw stocks dropping, but in the markets seem to question whether or not they knew that all -- knew that already. we are up about -- we are down about 1.4 percent on the s&p 500, as we digest that that pivot narrative might be

you say about the ecb's hawkish comments recently, to factor in how all of this will affect the ecb,e are expecting a 50 basis point hike at the next meeting. but of course, if there are big beats in terms of inflation, you could get 75 basis points. you heard all these comments, you have heard ville roy at jackson hole saying the ecb needs to show determination now to stop unnecessary brutality down the line. martin kaz x called for a very strong response. another said it is action time. so you have the pmi's showing the euro area may slide into recession, but it does not look like that will deter the governing council. tom: he was suggesting 75 basis points is where he was going. he did not confirm that. i just wonder if the hawks are now in the ascendancy and how they do square that with the slowing growth picture. lizzy: you will also get the jobs numbers on thursday. they are expected to show the unemployment rate will hold at 6.6%, so very low, showing that the labor market remains tight. add that to the inflation data, it does seem the ecb will look through the recession risks

he was the most dovish of the ecb board members and the ecb has to deliver a monetary shock just like fed has done over the last few months and they are quite behind the curve so they have to play significant catch-up and the currency markets are waiting for that ecb action. dani: can they really deliver that shock in a world where we are talking about rolling blackouts in europe and we are talking about a deep recession as inflation and energy costs really eat into the cost of living? martin: there's two points. one is the economic issue and one is the inflation issue and it's the ecb's job on the inflation, and its government's job on the energy issue. there's nothing the central banks can do on energy so there is a disconnect between these two particular issues and the ecb unfortunately will have to actually play with the inflation front and leave the energy side for the emergency meetings as all of these policy -- that all of these politicians are going to have. dani: we certainly have had a lot of government officials talking about the desire to solve something. he was speaking m

the ecb, is it a case in point?: the difficulty is it is more of a stock -- stagflationary shock. which means central banks and policymakers are hamstrung. it is a tough position. the ecb has a window to do more tightening before it is more difficult. francine: overall, i don't know what you make of china at the moment. there is money being plowed in china and today we had two figures that did not point to the rosier picture that certain investors were expecting. shaan: china had a very tough first half of the year. they contracted by 3% in the second half. clearly the pmi today seems to have poured cold water on that. the other issue is the real estate market. it is the largest asset market in the world. even larger than the u.s. stock market. at the moment, it is manageable in terms of the mortgage is affected. it is something to watch for. francine: thank you for joining us. shaan raithatha. i feel like we went around the world in a few minutes. we hear from hsbc's chief financial officer next. this is bloomberg.

there was never an ecb backstop. now there is an ecb backstop. that makes a big difference.oss assets, fx is probably where it has been priced in. european equities are probably second and then the corporate -- i think you will see some of the risk premiums being priced more aggressively across different asset markets and not just the euro. jonathan: short-term weaker euro , longer-term your more constructive? vasili: we are more constructive. let's look at the broader picture. i know jackson hole is coming. you should be longer dollar when the economy is slowing. this should be a relatively shallow recession. there will be a turning point in that cyclical turn will coincide with some dollar read this from very expensive levels. a good friend of the show -- jonathan: a good friend of the show over the years. thank you. looking for more constructive you on the euro towards the end of the year. tom: and we heard that from steven englander as well. if i do a bunch of fancy technical, i want to make this clear, we are not at the angst of the plaza accord. we are nowhere near the

alix: and you have the ecb tacking on 75.nna: the market is thinking about that and pricing in 75 basis points from the ecb. now to our question of the day. this goes back to the job market. we want an assessment of how weak the job market has to get for inflation to come down. will we get really detailed about this? let's discuss this with anna won g and michael mckee. we are primed for weakness in the u.s. jobs market and we are seeing that today. the market was not as red-hot as some say it would be. how weak doesn't have to get? how weak does it have to get to way down inflation? >> the most optimistic case, let's look at what the fed wrote down back in june. they see the unemployment rate has to eventually rise to 4.1 percent in 2024. that's about one million job losses from today's number. that's the optimistic case. our team is thinking more that inflation would be more of a persistent problem and the fed will eventually have to hike rates 5% and that would correspond to an on appointment rate of about 5% in 2024. that

some inflationary numbers might change the ecb's outlook, what are we expecting? is the balance between transport and road fuel costs falling, and the core, food and energy, rising. germany is one of the only big four euro nations to see inflation rise but across the euro area it is the same balance. german inflation could reach double digits later in the year because you are seeing policy measures -- in france, and europe you will see inflation decline so the overall inflation rate is expected to slow just a notch from the 8.9% record high to 8.8% before it bounces back in september. that's partly because of the hot weather which will add to agricultural prices. but also russia shutting off gas to the nord stream 2 line. manus: still mind blowing numbers. we just played you olli ren. analysts resolute about what is on the table. what are the other factors economically that will play in here? because this is an ecb which is on a one-way trajectory of the moment. >> the governing council is very much dominated by the hawks at the moment. if we get a bead on the inf

there is talk from the ecb -- in frankfurt. there is talk from the ecb. the ecb is looking at 75 basis points at the next meeting. that is now priced at 50-50. we are trading north of parody. you are getting a huge move in the front end of the curve here in europe. we are north of 1000. 1130 is the current price. we are up by 25% today on the french power prices. 25% in a day going up. this is unsustainable, and as somebody pointed out, we are all going to need bigger computer screens if we are going to track what is happening with french power prices. a lot of what the news flow looks like today not only comes from jackson hole, kailey, but i think it also comes from europe as well. i think the ecb story is front and center. kailey: it feels like europe and the ecb are trying to steal the u.s. and jerome powell's thunder. but there is that speech from chairman powell. the idea they are going to get restrictive, they are going to stay there, and they are not going to prematurely ease. that pivot narrative, put it to bed. that was the message from chairman

kailey: the ecb can hike enough even if their supersize hikes to stabilize the euro? >> central banks getting another 50 basis points at the meeting and than the forecast recession we have 25 basis points per month. but the uncertainty here is quite large. market expectations of the terminal rate have swung pretty dramatically in europe over the last month. guy: back to understanding what your understanding of what's going on here. we have an energy crisis in europe, part of that is to the fact we have a very cheap currency. it's good to be hard to resolve that till the gas crisis is over. you can fix the supply-side on this front. when we see rates coming down as far as they are with the euro going up and you've got these charts here which are worth watching, they are not rescuing the euro right now. front-end rates are going higher. that shouldn't be what's happening, is there anything the ecb can do to control this environment. >> i think the ecb will remain quite focused on the inflation outlook, and not necessarily targeting the levels for the euro. that being sa

>> the ecb and the bank of england have got a much harder job than the fed.he fed needed to cool down some of these enthusiasm in the u.s. economy. in europe, the biggest issue is energy prices. it's not what the central bank can do that will change that. the fiscal side of what european governments do vis-a-vis the energy crisis is important for where we go on the european side because, yes, the consumer and the company's are being a lot more squeezed in europe than they are in the u.s. vis-a-vis the energy situation so it's much less clear cut what central banks need to do or can do on the european side compared to the u.s., a very different situation. manus: that job at the bank of england is made even more difficult, as part of the narrative is this. well, yes. he is technically the p.m.. somebody said -- you are a government in waiting. a prime minister in waiting. to be fair, yes, you are right. on a semi-more serious note, the fiscal agenda of the u.k., they are hamstrung. if they go for another bailout on the energy side, they just do not have that ca

the seven ecb italian, we will have growth.d and we will keep hiking with his you want to get inflation down. tom: you mentioned it earlier, both the bears and the bulls are looking to get corporate performance -- looking at corporate performance. earnings, revenues, will he be slow down? edge they have the cardinal rule, in every case, adapt and adapt rapidly. as an aside, retail has the holidays coming up. jonathan: and with earnings happening, can you keep repeating that through the next couple of quarters given what the fed is about to do? lisa: especially retailers, i looked at a survey that talked about people spending less on goods during the holiday season. so some of them keep percolating out. what does the strong dollar do? i do wonder, we are seeing the dollar at the strongest level going back to 2002. how does that affect the multinational? jonathan: with jp morgan, year-end targets -- they are immediate now. lisa: that could be one explanation. we can discuss what will come out to be bullish. it is a media gain but

elina: the central bank, the ecb has a single mandate. the fed has dual mandates come the ecb has won mandate. it is inflation. the markets have been worried about the ecb being behind the curve and the mixed messages in june and comments about some banks making too much money. i think that has created confusion that the ecb needs to decisively dispel and continue to bring their policy rates close to neutral and out of negative territory. it sounds counterproductive, but it is the right time to be raising rates. alix: no matter what happens with the weather as the climate crisis meets the energy crisis will we be in a lower growth and higher inflation scenario? elina: we will be in a higher energy costs scenario for europe for a number of years.we will have high volatility. it's possible in the recession the prices will continue to come up next year, but you are right to bring the climate issue. the green deal in europe meant that europeans have switched to more short-term contracts on energy production and a lot gas suppliers to europe d

the ecb meeting is this week. >> that is right. the pound, euro is doing better but the gains have been erased. this move to havens is going to benefit the dollar. the euro we also have to closely watch. we heard from the ecb that they are very determined to lead those rates and the euro has been one of the worth -- worst-performing this year. that is one to watch. i think it is safe to say that the beneficiary and the flight to safety will be the dollar. kathleen: getting ready for the trading day in asia, for more on the bank of korea, let us keep the door open for another outside interest rate hike, he said he would join jerome powell in bolstering inflation if prices remain out of control. >> the interest rate cap is not our prime objective. the higher interest rating will have a depreciation pressure in korea and that depreciation will increase inflation rates. i think a large difference in rate difference will not be ideal but we have to allow it to move and we had to focus on our own inflation and exchange and depreciation.

it is here, but hiking into the ecb for weakness, so how does that play out for a bank socgen?the bank has already enjoyed boosts from lending operations because high interest rates means that lending is higher, as well, and gains were in the double digits, and a bit less for deliberations, but overall, the bank has set itself a new target for profitability and growth for 2025. doing that, it is cautious, assuming they will be normal conditions in 2023, so this will be an interesting take. in the short-term, we heard them say that the cost of risk this quarter was very low. eventually, they kept the guidance and changed for the course of the year because they know something can happen, and there was nothing unfolding at the moment. i asked the ceo what his take was on the worst case for europe should russia stop all deliveries of gas and it said that the maximum impact points to gdp growth. guy: we have got to leave it there, thank you. this is bloomberg. ♪ guy: little bit more traction being gained in europe, heading into the close. we are about to wrap up the session, largely

how hawkish expectations do you have in it comes to the ecb right now?the most hawkish i can remember for sure, and i think what is driving that for me and what makes such a departure from the last decade is that i can see the neutral interest rates globally is accelerating higher. that is taking place in europe. i can see the neutral rates, that is the policy rate whereby the economy is not expanding nor contracting. that is going higher as inflation invents itself -- embeds itself further into the economy. i think that is what this quarter is going to be about, and ongoing realization for market participations that neutral interest rates are going higher because central banks are not getting ahead of the inflation curve. therefore, it needs to be tightening policy more quickly than previously expected. to talk of 75 basis points hikes from the ecb is not a surprise. they need that option. they need the option to reduce the balance sheet. alix: does the 75 basis point talk and balance sheet reduction talk turn into action on either of those things? pete

physically picking up energy situation together with the ecb worried by the ecb rate hikes.has been an underperformer recently. alix: is there any sign stocks may have bottomed in europe or what would be the bottom signal? tim: we indicate stocks have bottomed globally in absolute terms. june, the lower the market with the first half of the year of course is cyclical bear market down 23%. all the markets start dissipating in this. that also let us to extreme panic and fear an extremely high volatility. a lot of the worries we are hearing about europe and the u.k. in general with economic growth globally worried about the fed rate hikes have yet to really be substantiated by signs of economic performance really trailing off. meanwhile the inflation threat has subsided. we are sort of at the point where most likely peak inflation people worried about rate hikes in aggressive monetary policy. i think that setting the stage for potentially a good end of the year and investors realizing maybe it's not as bad as it's priced in. i knows just mentioned that september has been the we

>> i am also chewing on this one when we make our forecast on the ecb. i think all the rate hikes right now are mainly aimed at normalizing monetary policy and restoring inflation credibility. when you look at inflation expectations, especially the survey-based ones they have already come down. so i wonder whether anything central banks can do right now will really help restore inflation's credibility. i could see a point in time from -- after the september hikes in which central banks, a boe also ecb will decide to just let go of inflation because they know they would rather choose to support economic activity and choose to rather push the recession rather than try to fight or kind of run behind and inflation that in the short term cannot really bring down. guy: we will talk about gas in just a moment and a bit more detail. how quickly could inflation, down in europe? >> it's all about energy prices. the only upside is there's higher energy prices start to increase now, the more likely it is that we will see base effects in 2023. if it's some point, ene

what can an ecb or boe do to curb inflation coming from a gas crisis?there is a level in the piece by jordan rochester. he got more twitter followers than both of us put together. the fx market for him is mispricing energy prices. where does it go to? 97, 95. i like what jordan said. fx -- are you surprised there is not a more aggressive slump in the euro? dani: euro falling virtually against everything. rochester saying we have been focusing too much perhaps on that narrative but markets certainly alive and awake to the issue when it comes to european recession. more market next. this is bloomberg. ♪ when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo, i was barely eating but the weight wasn't going anywhere. the secret to losing weight and keeping it off is managing insulin and glucos

look how trade is pricing and what the ecb could do.he odds of that third quarter hi, we are closer to 50%. let's get the first word is. we have vonnie quinn. >> beijing has a partial lockdown here. residents in four major downtown districts were told to stay home for three days beginning sunday. they will conduct citywide test on monday. last week, state media is at the front of the costly zero-tolerance go to the pandemic. u.s. warships have entered the taiwan strait for the first time since nancy pelosi's visit to taipei. two ships were conducting a routine transit. china says its military followed the u.s. cruisers, adding it was on high alert. nasa is about to take up the steps on the return journey to the bone by the end of the decade. they are scheduled to lift off on monday. the artemis one mission will circle them on an admission that will take it deep into space before it returns. the artworks were sold for $17.5 million. beating presale estimates. nearly half the works will achieve prices over their estimates. global news, 24

ecb officials seem to be talking tough. i wonder how tough they are willing to be. >> we have excessively high inflation globally, and our mandate is price stability. kathleen: listen to what elizabeth, one of the most influential people at the ecb, governor hillary from france, talking tough, but i wonder given governor rehn's concern about the energy crisis in europe right now, our heart it could hit the economy, even though he is saying they would do something significant to the be more significant than 50 basis points? >> the big question is what can rate hikes do about the energy crisis in europe? the ecb are at a point where they're debating go by 50 or 75. they are on the whole in hawkish territory, some officials making it clear they have to hike even if the economy starts to slow deeply. what happens not just in europe but globally if in the back end of this year we are seeing a pronounced slowdown in global growth, ongoing energy crisis? will the central banks continue to raise rates at the base that they are or w

what is the risk of an outsized 75 bip move from ecb?icardo: maybe a 33% chance of a 75 basis point hike by the ecb. however we must take any hints from central bank officials that they are very committed to just get on with the job and leave everything else to the fiscal side. but we must take that with a pinch of salt. it is a very easy win for ecb officials to come out in public and say such strong words. and telegraph the idea that they will do it. this will have an immediate impact on markets. it will somehow ease the situation for europe, and this is that. -- a cheap way of achieving that. dani: if anything, what has been supporting the euro get back to parity has been higher stockpiles of energy. but have markets accurately priced in just how bad things are likely to get this winter? ricardo: i don't think so. i don't think the worst case scenario is priced into the euro. which would entail a complete cut off of gas by russia. it would have serious consequences for economies, so we would see a dramatic slowdown in activity in germ

the fed, ecb. gosh it's a lot. david: quantitative tightening?e's the thing too, you have all of that against -- history is not on your side. september is the second worst month on record, after august, which was horrible as well. it where that takes you. debt where that takes you -- see where that takes you. rishaad: august ending on a high note, at least. looking at byd's, warren buffett, they're responsible for some of those declines. also looking at china's megabanks as they report slow profit this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes. [ cheers ] are we actually going? yes!! and once in a lifetime moments. two tickets to nascar! yes! find rewards like these and so many more in the xfinity app. >> took interest break there. we do have the prime minister talking here. you can see them talking about the reopening of the country. saying they will keep all of those lines here. they will be raising their daily capital to the seventh of next walk -- the seventh of next month. >> these are non-

what can ecb do with the highest inflation a decade?make a weak dollar, except he can't, in resilience or even stronger dollar call. jonathon: so, what are we doing here through the next couple of days? [laughter] that is the point here. it is the road to september 21 and the fed's next meeting. next year as well, perhaps even longer. we need to focus on september, right? in the ecb, we have people essentially saying germany is not about if they goat into recession, but how deep that recession is. he had the european central bank hiking 50 basis points in two weeks time. tom: it is about energy, and steve schorr, who is in cycle peta gone this, was adamant that energy in europe matters to our american viewers and listeners. jonathon: just published moments ago, effectively the news is dire, worse than expected. that is a market question, isn't it? how that is the economy for the market if it gets worse than expected? tom: i think it is as simple as that. any politics landscape, is just to say that better or worse than expected, get out

do you think the ecb can keep hiking? mark: i think they have to.abilize inflation expectations. even as the euro is part of tightening the inflation expectations, it is reducing credibility. they basically came in and they are going to use the currency to get ahead of the curve, but the ecb still has to use the euero as -- euro as an anchor. i think the euro is probably even a little bit stronger than most people but hope a part of this is the ecb still has to anchor rates and keep rates relatively high because a weaker euro actually create more inflation. jonathan: that is if you believe higher rates lead to a stronger currency. that has not happened with the bank of england. why would it with the euro? mark: a big point is relative expectations. the market was very bullish and basically, the growth story deteriorated so rapidly in the u.k. that the bank of england is not going to deliver. 50 basis more priced in than what they are going to deliver on. for the ecb, they out-performed a little bit over the last couple of months. again, you do have

could you imagine the ecb ever putting out a forecast like that?eoff: it's funny you should say that, because i thought with the ecb-stop projections their downside scenario, looking at ongoing supply disruption, that was a very aggressive forecast. one point 7% in 2023, with very high inflation numbers. that was proper stagflation, but now the boe, the challenge there in terms of credibility is going to be weather in september the ecb can turn those downside forecasts into the core forecast. that is what the market is expecting now. guy: that puts the tail risk forecast where, do you think, jeff? geoff: the forecast will be right now they still have good growth penciled in 2023. it is going to swing sharply toward a contraction. but can they force kitchen sink inflation numbers and also see high single digits heading into next year, and then rely on fiscal, which is more deliverable in the euro zone compared to the u.k. right now and try to use that as an offset to meet somewhere in the middle? i think the ecb and boe to a lesser extent, euro and

you have the market in europe pricing in 50-50 odds of possibly 50 or 75 basis points after the next ecbting in september r.i.m. if i read the data -- in september. if i read i data right, they are going to have a real problem. the markets are pricing hawkish. kriti: it almost feel like they are ripping a page out of the fed's playbook despite the discretionary call are way stronger than here in the united states but i am interested in the u.s. price action because you are seeing markets anticipate the more hawkish talk , 70 five basis points potentially here in the united states. what does that mean for two-year yields? is that the trade at play? liz: the curve keeps flattening. i did hear some people saying, two-year at 4% is attractive to buy. i think the people feel like with what powell had to say, he is not letting up he had a short but not sweet statement the meeting that we can't let up and we don't want to be the arthur burns of this era and a stop to soon and let inflation get out of hand. the market will price that the 75 in and even though the fed is still trying to say they

one of the ecb board members, we have to be forceful. i was really impressed and alley rand who i spoke to is the governor of the central bank, even though i think he is more to the 50's side, saying that your going toward the door is a little too early. but european bonds, a lot of these will be on saturday. that is why when we came out of asian trade, what we did see was the future market continuing to sell off from friday. the european bonds then took up the charge for a while and helped sell us off here. the treasuries finished off the worst low but all of this now is sort of the market bloodstream or something. it looked like things were settling down. all we need is another beneficial speaking hawkish late. -- fed official speaking hawkishly. >> let's get more action analysis. >> let's start off with looking at the comments we had. we were planning a massive selloff for s&p. this is the story we've got right now. it is a bit perplexing. it seems that investors are rather unperturbed. >> that is what it seems like to me. in the mont

if the ecb is moving, they can profit from a high interest rate step i would expect the ecb not to look so much at growth. i think that would be positive for them. jonathan: what's more important here, the rate hikes? >> yes but also yen-europe is not a deep recession from that perspective. you haven't seen a mess of movement upwards. there could be some positives, looking at rate hikes. jonathan: thank you so much. lisa: there is an upside argument but hiking into weakness, is it though weakness that matters or the hiking and the currency market is saying it's the weakness that matters because that's what the euro is responding to. jonathan: this is what the european banks have wanted for a long time. they are getting it tom: you're being way too kind. their performance has been absolutely irresponsible. look at the chart for my good friends at bnp paribas. they have gone nowhere in 13 years. jonathan: 75 basis point hike is the expectation for the ecb. if you look at the banks now, you are questioning the exit duchenne and you are questioning the economic back drop. our rates enough t

the ecb decision next week.eptember 13, a couple of weeks why for cpi in america -- a way for cpi in america. september 21. that decision just around the corner. tom: 30 seconds, you've been waiting for this this morning. socially, 8.8% inflation in germany. jonathan: 7% is too much. tom: honestly and all my history of reading this, that is more than anything, that is the biggest shocker. jonathan: you and i have been getting them for the better part of a decade. -- for other reasons. tom: david rosenberg is drowning us right now. it is a jumble in august, jeffrey. if you were adding the next cup of coffee with jerome powell, what would you say he needs to watch globally for september? >> globally for september, are they going to follow you, such a sustained time. the market pricing and a quick, graceful move on the boe because -- is now looking at sustained, i rates. -- higher rates. jonathan: any goals? >> europe right now, trying to deal with the energy persuasion. then again, being in the u.k., we are waitin

>> the ecb plays a big role from a political part of this point of view in trying to tighten monetary report out that the gas storage situation in europe is much better than expected. there targeting to get supplies up to 80% of the reserve number by november. they practically reached already. the situation of a country like germany is much better going into the winter. if they can control the energy supplies better than expected, that gives the ecb more room to tighten monetary policy. they don't need to be so concerned that they will be tightening policy into a week economic situation. that helps them in terms of if they want to go 50 basis points at the next meeting, possibly even extend that further. that got more in the way of room to do so. because inflation is still extremely high in europe. now, you could see a picture similar to the fed, where the ecb speakers are pretty hawkish and give themselves the room to push the markets a little lower in anticipation of doing a long period of tightening. they may go higher longer as well, in the same tone the fed has been speaking. kat

is this really about the ecb and the fed?e firmly puts the reason for the euro weakness at the moment. this is one of the quotes from that note this morning. i cannot see a significant rebound for any european currency until we get through the gas prices -- crisis. is this really about rates or is about energy and trade? >> the u.s. economy is superstrong. up goes the dollar. the european economy because of this gas crisis and the economy should and probably has to handle much higher rates of close to 4%. one begets the other and looking into that. kailey: and that the dollar keeps going up, what is the readthrough likely to be in other asset classes? >> you might remember from the last couple of earnings seasons, we definitely got complaints from the likes of microsoft and others talking about how the strength of the dollar is really eating into their overseas profits now. jay powell really wants to see. but could offer feedback into the monetary policy loop because the fed has assisted data dependence, watching all sorts of

it is still a hawkish outlook for the ecb, looking at 50 basis points.eet again at there will be all important europe inflation data before then. i don't think anyone is expecting a dramatic cooling and prices, so pressure will be on the ecb to continue hiking despite slowing growth in the euro zone. the other side of the conversation about the ecb is that they have a mechanical tool to keep down boring costs. there is conversation about how the tool can be rolled out. the hocks are not necessarily a fan of rolling out this tool, it is essentially intervention in the bond market. there seem to be, -- there seem to be complications about how the ecb will intervene in the bond market. haidi: the rbnz governors pushing hard against inflation and says it may take countries around the world to close to zero economic growth. he spoke to us earlier at jackson hole, saying the central bank may be nearing the end of its aggressive tightening cycle. >> for now, we had to slow the economy. we knew that we had to be 3% or plus to begin that slowing journey. now, we

. >> it is not just about what the ecb does. you have to take into account the market's inflation premium. >> the market desperately wants the fed to react. >> we are in the early days of recovering off micron extreme low. >> central banks everywhere will take what they can get. announcer: this is "bloomberg surveillance." jonathan: this economic data is not pretty. from new york city, good morning, good morning. this is "bloomberg surveillance," alongside tom keene and lisa abramowicz, i'm jonathan ferro. tk, that data out of europe, ugly. tom: it is ugly everywhere. it is going to be interesting to see the data as chairman powell waltzes to jackson hole. what we see this morning in foreign exchange, can you imagine his speech if we get monday, tuesday, wednesday, thursday of this kind of market action? jonathan: clearly it changes because what we have seen the last month or so is an easing of financial conditions. it has certainly tightened up the last couple of days. here is a quote off the back of the european data. the data

ecb down from several weeks ago.hat is reflected not only the ongoing slowdown risk but also a risk of energy shortage in the fall. it is handcuffing the ecb's ability to tighten. it becomes parity early last month. i think the trade is still in place. i think em is still dicey. when you have slowing global growth and a possible global recession, tight global liquidity traditions, it is -- it is risky. jonathan: win thin trying to catch a falling knife. our member talking about the swissie 10 years ago and it was like putting your hands in the blender. it was that ugly. when it comes to the federal reserve the debate is divided, but when it comes to europe it is one-sided. i do not know a single person who believes the ecb can go that far in the window for most people seems to be getting smaller and smaller. tom: i was upset this weekend because the u.s. newspapers we all read are trying so hard to do softer news stories. they bury there is a war going on, and that is what they are dealing with in europe. there is a

the possibility of the bank of england and ecb having to do much more.'s talk about the stocks we are watching. schnider, the aviva story, the full takeover being greeted fairly well by schnider shareholders. sanofi, a downgrade affecting the health sector. then we come to richemont. everybody has been waiting for quite some time, that it is going to become a minority shareholder. that seems to be greeted fairly well by shareholders today. that stock up by 3.5%. kailey: let's get another opinion on that richemont decision. swetha ramachandran is joining us now. what is your take? what does this do for ridgemont? swetha: certainly it is a deal that has been long awaited. i think what it does for richemont investors is to provide some currency, which is a business that richemont has struggled to turn profitable. it was a great idea at the time in 2018. it pave the way for close integration. somehow the fruits have never materialized. consumer has moved on, and the business has been struggling. to merge it with far-fetched certainly positions at ford profit

we have not had a proper reaction yet from the ecb and cpi is running on the top side. this means is in real terms, if you are buying german bonds, you are losing money in real terms. europe has a very large debt pile and this snapshot means it will continue to stay extremely difficult for the euro this year. tom: that is mark cudmore, and also getting pmi out around eight for germany. that will give us a sense of how bad the economy is faring on the back of that energy crisis. let's get back to the key market drivers. joining us now is beata manthey, citigroup global equity strategist. is this conclusive evidence now that this was not the bear market rally? >> we have still got a ways to go before we can consider it a full bear market rally, but the mood has changed. it is red across the board. the graphic you showed earlier with energy being the only sector up today, that speaks to the big theme of the market right now. francine: good morning. it is -- is it foolish to fight the fed rate? -- fed right now? beata: what we have learned over the past few years is not to

the ecb is hiking, it is a more cumbersome process but it is happening. we are looking for the u.s.o go into recession. there is some downside potential here. but before people talk about the downward trend, it will be a slow process because everywhere in the world is struggling, and it will be difficult to pick clear winners over the next six months at least. we are looking for euro-dollar to trade higher than 12 months, 1.08, nothing spectacular but i move away from parity right now. manus: no more sub-parity and perhaps even 1.08. the conjugation is that the fed is far from done, therefore the latitude for the ecb and -- dani: did an alarm go off there, manus? manus: we are having a bit of internal renovations on the roof above me. the economy is booming, the roof is moving. i was talking about sterling, wasn't type? how much more latitude is the bank of england have? one more 50 basis point hike, could that be the first and last one, how do you categorize the momentum? sonja: the bank of some room to move. i'm not sure how much the market is pricing but there is definitely more

the ecb deserves credit with the tool using it to the fullest. i hope they will keep doing this.f we have anything that resembles a debt crisis, the danger zone is between now and the september 25 election. if markets lose confidence in italy's leadership to deliver reforms and abiding by the eu fiscal rules, this is the real danger for sovereign debts. barring that, the spread level is it for a while and will not be as severe as previously. manus: and one, let's see how this plays out for us all. antoine, not expecting any nightmares, my words not yours. juliette saly has the first word headlines. juliette: europe's energy security has taken a hit after russian crude flowing to hungary, slovakia and the czech republic was halted. according to the russian pipeline operator, payments prevented the transit fee. president biden has signed legislation that will give the semiconductor industry $52 billion in subsidies. the legislation will spar u.s. chipmakers to construct more production in the u.s. and provides billions of dollars to support research and development. it will reduce

the point here is they've already hinted the conversation might come up with pricing at the ecb.quite shocking. that's another step altogether. clearly starting not just hiking interest rates but aggressively taking liquidity out from the treasuries. with the bank of england. >> the ecb accounts talking about the fact they believe the interest rate differentials. the charts tell a different story. great stuff as ever. thank you very much indeed. greatly appreciate it. speaking at 10:00 a.m. new york time, live here on bloomberg. coming up we will talk tech, nvidia shares falling further. adding concerns. what's the macro story here as well? morning staff joining us next. this is bloomberg. ♪ >> you are looking at a livestock of the principal room. coming up the cwc u.s. chair of senior partners. this is bloomberg. time for the bloomberg business flash. a look at the victim this -- biggest business stories. bloomberg has learned the home goods retailer is in talks free of credit but may be around $275 million that would give stocks breathing room. bloomberg has learned billionaire

we have all heard from the ecb.ositive by .4% for a stronger year going into this one. -- stronger euro going into this one. lisa: we are pricing in the most hawkish stance for the ecb. jonathan: we have to talk about the u.k.. the price of energy bills is rising in the u.k. we were anticipating this move but $4189 will begin in october. i want to give you an idea of how much that will change for the average family. when you put on the dishwasher in the u.k., that one cycle was $.40 last year and now the one pound. our u.k. team broke this down. think about the dryer. it will go from 80 pounds a cycle to more than two pounds. this is a big change. this all adds up. we will have a situation where people are going to not be able to afford it and other going to stop heating homes, pay bills, stopping elsewhere? lisa: or will the government step in and say we have to spend more on what does that do to the deficit? tom: what government is the rope question. -- they lack -- what government is the real question. at the lon

they just sometimes need to be given the alarm bells, such as the ecb.re going to keep raising rates next year if there's blackouts in germany? that could trigger moment when the lights are turned off for german industry or parts of it, where it just becomes unreasonable for the euro to keep levels where it is currently at. jonathan: i'm not comparing the situations. i just look for a catalyst. back in the pandemic, we all saw this risk brewing. the market was unshaken. i thicket was the weekend when italy shut down the people woke up and thought, this is real. it is coming and it is probably going to come to the united states as well. are you thinking of that kind of catalyst? like you say, all of this is so obvious. you can see it on the screen. you see it in the numbers, and yet, very slowly just egging down again. with the catalyst that is going to lead to the wake-up call? jordan: i think the human mind is part of why it is difficult to price this in. we are linear animals. when these prices are rising exponentially, it is difficult to comprehend th

guy: how do you see the ecb progressing?hey also said even if we entered a recession, it's quite unlikely inflationary pressures will abate by themselves. we will have to hike during that downturn. sebastian: i think it's very unlikely. guy: you are fighting the ecb here? sebastian: just to keep you entertained. remember 2008 it was the same thing. inflation was very high. partly due to high commodity prices. but let's move forward six months. i think it's a low probability event. if it does slow, commodity prices will fall. the rate of change in commodities from the peak value will be committed and further recession by definition is demand destruction. it goes from being inflationary to below supply and a lot of prices will come down and the central bank's biggest problem will be weaker growth or weakening labor market. >> you could make the argument the energy crisis on the climate crisis are happening at the same time as structural inflation issues. even if people don't go to work or not buying stuff they still need to tu