the shares jump in late trading. francine: let's take a look at that futures. i like one of the entries we have in our mliv, ecb hawkish ms. has gone mainstream, and ftse futures gaining .3%. jay powell and christine lagarde speak today. tom: the money markets now pricing in 325 basis point hikes from the ecb by the end of the year. we will get into that shortly. a selloff in the peripheries but also german boones as well. use all repricing in the other direction yesterday when it comes to u.s. sovereigns, you had bank of america saying maybe there is a buying opportunity but how does this hawkish ms. from the ecb flow across to the

fed and the right cycle there? markets expecting 50 basis points in may and june, some even suggesting another one in july as well of 50 basis points. the ftse 100 lower by .2%, the cac 40 higher by .2% with that presidential debate and the pull suggesting president macron came out ahead after going head-to-head with marine le pen. the final vote is sunday. the ftse in italy is lower by 27 basis points, range bound on the benchmark earnings. we will pick out some of the individual members in the u.s.. tesla had is very strong earnings. futures estate with gains of .4%, u.s. yields currently at 2.85.

the euro-dollar in focus on the back of these hawkish comments we have had from members of the ecb, 1.08 with gains of .4%, and the german bund with a move higher of nine basis points, a pronounced selloff when it comes to that two-year benchmark. francine: let's dig into some of the sectors on the move. energy, construction and chemicals are on the up. if you look at the stoxx 600, health care also being pushed up. there are not that many in the red, if they are, they are down between .02%, basic resources are the only ones on the way down. we don't know whether markets are pricing a more aggressive ecb. for the moment those are the moves we are looking at sector

wise. tom: let's look at individual corporate and how inflation is affecting the different and's of the spectrum. anglo american is pulling down their guidance for the likes of coal, platinum and iron ore and they are being punished for that update down by .5%. they are raising costs by about 10%, diesel is a significant concern. also labor costs as well. nestle have been able to pass on a lot of input costs around copy and packaging and shipping to consumers, some of the most significant price rises we have seen in years for this company. and they are prepared to raise prices going forward to mitigate input costs. abb with a beat for them as well, even though cash flow came in below expectations, the

robotics maker up to .7%. francine: it feels like it is only going to go up. let's get over to our mliv managing editor mark cudmore, we are looking at u.s. stocks and their earnings yield. mark: we are talking about real yields in bonds this week. this is the real earnings yield of the s&p 500. minus the cpi print. the last three times this turned negative, it preceded a 20% drop in the s&p 500 in 1987, 2000 and 2008. we've been deeply negative for some time now, and of course, stocks are holding up well which is a question you guys asked me a lot. and the reason is we have just got too much liquidity out there, there is no alternative. there has been exceptionally

loose conditions, something we have not seen before in the history of monetary policy but we know that is changing. financial conditions are starting to tighten and yields around the world are starting to rise. notably in europe this morning, and that means this could be bad for stocks later on this year. tom: mliv managing editor mark cudmore, thank you. let's bring in kristine aquino, we will hear from ecb members acknowledging they have been behind the curve when it comes to inflation. kristine: exactly this day last week, we were hearing from president lagarde being a bit more balanced with her comments at the last ecb decision saying they need to prioritize growth and while inflation risks are in the offing, growth is also very important. back then, bond markets were very disappointed based on the reaction we saw. but obviously in the past week or so, we have heard from several ecb policy makers,

including one this morning saying that a rate hike story is gaining traction and money markets are responding accordingly. francine: is that saying the supply shock from ukraine will last longer? kristine: i think it is probably a bit of the markets waking up to the idea that the ecb can't go it alone in terms of trying to walk the line between hawkish and dovish especially becausefrd repricing as well. as far as the markets in europe, they are catching up to the idea that globally speaking, policy is heading more towards the hawkish side of the spectrum. and to be fair, markets were responding to a bunch of inputs from governing council members.

president lagarde's comments last week were very measured, but since then we have heard from other policymakers that are more emphatic on this idea that rate hikes are coming and this year, specifically. and we could get to that zero level for the deposit rate as soon as december. tom: the hawks in the ecb on the ascendancy. tesla is smashing it with earnings. it is a very different picture when it comes to technology in china, our that is the regulatory outlook and the other part is lockdowns on supply chains. kristine: this is that china versus u.s. divergence play we have been talking about. it is the tale of two ev makers. one is tesla acknowledging supply chain issues, but they sounded optimistic they can overcome it. then we have a couple chinese ev makers citing the same factors,

supply chain disruptions, but sounding very negative. that tells you a lot when it comes to the sentiment in each of these countries. of course, the u.s. still growing tremendously and that's why we are seeing such a response from the federal reserve. in china, it's a completely different story. sentiment has been bogged down by the fact that there are lockdowns and regulatory concerns, and all these really weighing on that sentiment in this sector. francine: kristine aquino, our markets editor. joining us now is citi's head of equity strategy. a lot of headwinds from what we are seeing in bonds, what does it mean for stocks overall, will be correction happen in european equities? beata: thanks for having me, equity markets will be facing a lot of downsides.

they will be facing a lot of volatility going forward. to us, we have moved from buying the market at whatever cost last year to buying right now and selling the value, so it is more of a right trading market. tom: when you say you are buying the dip at this point, what are you looking for? beata: we have a framework called bear market checklist, the intention is to distinguish between a correction that will turn into a bear market or a correction that is to be bought. right now, our market check is sending sending seven out of 18 red flags, so any correction in the bear market would be buying into it. at present levels, we have 5% upside from the market where it is trading right now. so it looks a bit more

interesting. if you are buying the market right now, you will get some returns. if you bought the market at the start of the year, you would be flat on the year. so it's a much more difficult market to play. francine: what are you expecting for earnings the next couple of weeks? you had a 9% increase in terms of earnings-per-share, is that now too optimistic? beata: 9% eps growth for this year are the estimates from the analyst consensus, i think there far too optimistic. our earnings forecasts have already turned negative, it is telling me more analysts are downgrading their numbers then upgrading their numbers. the overall number has not moved yet because there are some big upgrades to specific stocks within the commodity space so these are downgrade elsewhere at

this is going to an end eventually. my top-down eps growth number for europe is 3% which is more in line with our current gdp forecast for the eurozone which is 2.4%. tom: money markets are no pricing in three 25 basis point hikes, which sectors will be most vulnerable to that? beata: i don't think it's particularly negative for the equity markets. what i'm watching is the reaction of the nominal bond yields, which direction they will go as a response to the hikes. bond yields coming much lower would be an indication of a policy mistake, this is how it has played out in the past. i am not expecting the current environment to lead us to a deeper session. i have a more balanced

portfolio, so i am selective within cyclicals. within cyclicals, i like basic resources within the commodity space. i also like banks because i think they are pricing in almost a recessionary environment right now. within growth cyclicals, i like tech. and within desantis, -- within defensive, my favorite sector is health care because this is the least inflation sensitive sector within defensives. tom: beata manthey, head of equity strategies at citi staying with us. francine: russia acquires a new intercontinental ballistic missile. this is bloomberg. ♪

francine: let's get the latest on the war in ukraine. russia testfired a new intercontinental ballistic missile. joining us now is maria tadeo in brussels for us, what we make of russia testing this nuclear capable missile at this time?

maria: yes, it is the sarmat or satm-2 as it is also known. yesterday russia made a big deal out of this. vladimir putin himself was overseeing this test launch and commented is saying this would give those who want to threaten our motherland something to think about. so it is clearly a show of force. there is also an element of morale, remember, this is coming just a few days after the m oskva was sunk to the bottom of this see. -- of the sea. but there is a difference between what the russian federation says it can do and

what happens on the ground. in 58 days of war they have not taken any major cities. we are waiting for mariupol to paul, but this is been a difficult operation for the russian army. so yes there is a show of force from vladimir putin, but when you look at the situation on the ground a lot is changing for the time being. tom: we have the russian news agency ifx reporting that the defense minister has told prudent that the russian army has captured mariupol. we will see if ukraine confirms that. the german finance minister says the government is weighing sanctions on russian energy. >> we have to consider which sanction hits putin's war chest, and which sanction in the short-term hurts us more than him. tom: maria, what does this tell us about how close germany is getting to agreeing to an

embargo on oil and gas from russia? maria: you saw that clip when he was speaking to anne-marie in d.c., he would not put a date on this embargo. germany at this stage does not want to do it. when you listen to the foreign minister it is a very different tune, she said by the end of the year we want to halt all imports and by the summer we want to cut them significantly. but what you see in many ways is this is a point of tension in the german coalition. there are growing discrepancies between the spd and the greens. there is the big question which is how much is germany willing to take a hit in terms of economic repercussions? the answer is not clear and this is going to at one point lead to a boiling point in this coalition. it's very complicated for them to come up with a solution but

the pressure is going on germany to take a tougher stance. tom: the complexities of unwinding themselves from german energy. let's bring things back to beata manthey, how much of the economic consequences of the war is now priced into these markets? beata: the market to mine estimates is pricing in flat to negative eps growth in europe. a lot of bad news in the price, in particular financials and banks are pricing even much worse scenarios. when i look at the economic forecast of citi economists, i can see they already have for gdp growth for this year for the euro zone. of course, things can get worse. francine: if we go back to some

of your calls, health care is your preferred defense if sector. we saw a lot of biotech being slammed, so what part of health care? beata: i think the market we are facing right now is going to be very selective in terms of which part of the market is going to buy, it is not the entire sector. in the season you have losers and winners in terms of the announcements so i think the market is going to be very selective and is going to increasingly focus on earnings delivery and sustainability of earnings. tom: do you see much more upside for u.k. equities from here? beata: u.k. equities one of our favorite markets globally in the current environment, another on

the opposite spectrum is the u.s., we have 7% upside for the u.k. for current levels. francine: if you are to take an optimistic view, what could go right because i see a lot of things that could go worse from here, but if you think everything has been priced in, is there anything you think will not be as deep or difficult for forecasting right now? beata: i think one of the most important indicators is the release of inflation. if it turns out inflation actually is going to start turning faster than economists are expecting it to be, perhaps we won't get as hawkish central banks as we are expecting right now. i think lower inflation would be a positive catalyst. francine: it would certainly be welcomed by many central banks right now.

unless they raise rates, and then have to cut them back down. i was having a good conversation with a hedge fund manager saying they want to be led by the markets. tom: they are being led by the nose by the markets once again. tesla with an amazing sense of -- set of earnings, we will see what elon musk is saying about his bid for twitter. this is bloomberg. ♪

francine: tesla's first quarter earnings beat estimates. elon musk predicts that the carmakers output will grow for the rest of the year. joining us is our auto czar craig trudell, good morning first of all, there is still a buzz about it, and he was confident that despite supply disruptions you will manage. >> the second quarter will be difficult for them, and i think muska was bullish about being able to overcome that. i think it is because it is not

just in tesla's control, you have to give them a lot of credit for a really successful quarter and track record of many quarters going back a couple years now of operational excellence. but this is a situation where their supply chain in china is really going to be tested. they are going to try out this closed-loop system which is fascinating, thousands of people sleeping overnight at the factory. there are a lot of suppliers they are going to have to rely on to get production components back up quickly and keep that going in the face of possible more shutdowns. tom: just briefly on the credit front, because they benefit from this, if you strip that out, is there a little bit of weakness? craig: maybe a little bit. but this is something that the industry for some time tesla

will get its act together as the rest of the industry struggles to get ev's up and running. tom: our global car czar with all things musk at the moment. this is bloomberg. ♪ at xfinity, we live and work

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francine: welcome back to the open. 30 minutes into european trading day and here are your top stories. ecb member pierre wunsch says a rate hike is possible. russia test fires in intercontinental ballistic missile. they rejected putin's demand for gas payment in rubles. shares jumped on late trading

for tesla. we are back on the twitter watch. we are looking at the markets and a hawkish ecb. tom: he has got tesla, spacex. let us get him on that. the markets are repricing around a more hawkish ecb. the markets pricing in three-quarter percentage hikes. this year, 25 basis point hikes for 2022. we have that hawkish commentary coming from officials on the european central bank focusing on inflation with the context of the war on going in ukraine. you see some divergence. the dax is up 0.4%. the ftse 100 lower by 0.1%. resources are bringing a drug for the ftse 100.

-- a drag for the ftse 100. -- read tackling covid zero but no sweetness when it comes to the markets in china. whether the team has stepped in there is something to be watching for. energy is gaining as well as basic resources but anglo american as part of the mix. they came up with the production update around iron ore, coal, and platinum, reducing their forecast. you had earnings from nestle and that was a strong beat. they have increased prices for consumers and suggesting that will be continuing as interest -- production costs continue. it is the ecb and more hawkish sentiment francine: within the

money market. francine:-- hawkish sentiment within the money market. francine: emmanuel macron claimed by taking out a loan from the russian bank, le pen has made herself dependent on russian power. >> why did you do it? i say it with great gravity tonight because for our country, this is bad news because you depend on the russian power and you depend on mr. putin. francine: meanwhile marine le pen emphasized the cost-of-living crisis across france. >> i truly want to make purchasing power the priority of my next five-year term if the french have confidence in me. francine: joining us now is carolyn. we split 50-50. marine le pen had some and emmanuel macron had some paid

who performed better in this to paint -- had some. who performed better in this debate? >> it is said that 59% of the people who watched the debate thought emmanuel macron was the most consistent. however le pen was considered more attuned with the daily issues of the french and also she was considered more rolling with her proposal especially on her stance on immigration. a lot of tension on both sides. green le pen was more prepared, more composed, more comfortable than last time than 2017 during which she had a bad time. we will see over the next few days how this places into the polls. francine: this is what struck me

is that it felt like marine le pen was smiling a lot more than 2017 and it feels like she had spent the last five years for this very moment and with the margin of error, i don't know if it will tilt in her favor. tom: she obviously learned from what happened in 2017. how significant are these debates? do they move the needle when it comes to the french votes? >> it is especially for the left-wing voters and far left wing voters. we have jean-luc melenchon who came third a few weeks ago. if you look at the polls from last night after the debate, 60% of melenchon's electorate thought emmanuel macron was more

convincing. francine: thank you very much. everyone is getting ready to vote on sunday. we have a lot of people that think they are not going to vote, but paris is always a good idea for the springtime. tom: you are seeing 15 up. there is no francine: way to beat it. francine:francine: and sunday is our coverage of the election. tom: coming up, the focus from russia and what is happening in china. amcham china's president on what this means for u.s. businesses operating on the ground in that country. stay with us. this is bloomberg. ♪

francine: a comeback to the open. 39 minutes into european trading day and you see change because there is growing optimism for another strong earnings season. you see treasuries resuming but here's an europe a lot of the tilt forward is for a hawkish ecb. that is moving some of the bond yields. you see german 10 year bonds at 0.9. tom: let's refocus on what is

happening in china, the disruption caused by beijing's commitment to the zero covid policy. nomura counting in the forecast for china for 3.9%. it is one of its worst outcomes in decades. president xi jinping has defended the lockdown approach and urged greater global cooperation. >> we need to work together to defend people's lives and health. safety and health are the prerequisites for human development and progress. tom: we are joined now by amcham china's president, michael hart. we have heard this a number of times from xi jinping that they are not walking away from this policy so what are the implications that u.s. businesses operating on the

ground in a situation where you have 300 million plus people under lockdown? michael: thank you. the american business community is telling us that they want to have more access to travel to and from china, and that hasn't changed with the china situation. and shanghai specifically is causing supply chain issues across china. there are implications for the china businesses and implication for global businesses. tom: demonstrate for us the extent of the disruptions for u.s. businesses and what they can do to mitigate some of those challenges. how severe is it now? michael: i talked to one ceo who says they are doing food production and that facility is distributed across china. because they haven't been able to operate at full capacity for a month now, they're starting to run out of products across china. it is food distribution across china. another company, for example,

they are in northern china, but they reach the rest of the world with their product. their supplier is in shanghai. because their supplier is completely shut down they can't send product components to this northern china factory and this company cannot distribute their product to the rest of the world. these lockdowns in shanghai, supply chain disruptions really impacting american business within china and for the global supply chain also that has major complications. tom: if we are starting to think about covid zero policy that persists throughout this year, and that seems to be something that is forming a consensus, what would that mean for the appetite of u.s. businesses to continue to invest in the chinese market? michael: we did a survey at the end of last year before shanghai got hit with covid and we did a survey at the end of march.

between those two surveys we can see before covid hit, companies were already telling us that if china continued its strict travel policy, people would start to invest less. it would stop executives just because it is hard to get people here. at the end of march, it was a more extreme view. companies already said their sales this year would be impacted on the number of companies were saying they would reduce their investments in china. in shanghai, the situation is a big impact. the overall travel restrictions we have seen the last two years, major impediments to additional foreign investments in china. tom: it is worth reiterating for our audience as well that if you need and want to get into china, there is a two week quarantine process and that is if you actually get a visa. that challenge around talent, how acute is that now? michael: it is worse than you

think. now it is three weeks quarantine in shanghai with some executives who came to beijing and they were asked to quarantine for another two weeks, so that is five weeks between home and when you get to your destiny in beijing. that is a major issue. last year at our survey, 70% of companies said they would get a harder time of getting executives to china, and that is if you can. you can -- can you get a visa? can you buy a flight at a reasonable cost? the implication is the number of family members are getting a tough time to get visas to come. china is a difficult place to be for talent. tom: we know the u.s. and european union are pressuring china to align with the sanctions on russia. there is debate as to what

extent chinese companies may be exposed if sanctions are put in place depending on how china responds to what is going on regarding the conflict in ukraine. to what extent is that a conversation taking place within the orders of your partners and members? how much of a risk is that? michael: one thing amcham has done is educate them so we have had a number of discussions with legal experts and others to understand what those potential sanctions might mean for american businesses. it is a concern. a number of american businesses in china export their product produced in china to russia. the truth is we don't know what the effects would be but companies are concerned about potential sanctions. tom: and on the economy, we were leaning into this conversation,

you might see gdp growth below 4% this year for china. within the historical context this would be remarkable. are your members starting to feel that slow down, particularly from the consumer? michael: absolutely. one of the things that came out of the survey at the end of 2021 is that people felt the economy bounced back. we had made some progress. january and february, the revenues looked good but because of covid in shanghai in march, companies have already said their revenues will be affected this year. tom: when it comes to the regulatory front, there has been scrutiny on what is happening was technology, the real estate sector in china. are you largely immune to that, it is largely focused on alibaba and the big real estate developers, or is it impacting some of your results from the

regulatory squeeze? michael: those two areas have not been a major topic of conversation but anything that impacts the chinese economy in general impacts are members. our members are attuned to the economy in general. tom: before we let you go, a broad question of the general sentiment. when you weigh up what is happening in china with the covid zero, regulatory front, geopolitics, to what extent is china becoming less appetizing as an investment destination? how serious is this conversation now amongst your members about whether they want to be committed in the long-term to this economy? michael: it is a good question. our members are here and have been here for a long time and are committed to china. it is one of the reasons why when we had a meeting last monday that we raised the concerns that american companies

have. we certainly want to continue to be operating in china. if the investment environment is difficult and travel to china is difficult, it is our job to let the government know that it makes china less attractive of an investment destination. tom: american chamber of commerce in china president, michael hart, thank you for joining us on how u.s. companies are weighing the covid zero policies in china. we have talked all about this gdp forecast from nomura. the context is remarkable. anything below 7% in china was not acceptable for the communist party because of the risks around social stability. now you have got nomura coming out saying that you could be around 4%. francine: this is in an economy where you are seeing a lot of employees as well. there is a difference between who is in the city and in rural

china. coming up in the next half-hour, we speak to our guest about biotech in general. this is bloomberg. ♪

>> we are ready for some of the

sanctions on russia. we strongly support all of the sanctions which isolate russia politically and economically. we have to consider which sanctions hurt and hits putin, and which sanctions in the short-term hurt us more than him. all sanctions which now and for this foreseeable future help more on the international community, we are in full support of. when it comes to coal, oil, commodities like rum materials and natural gas, you have to -- like raw materials and natural gas, you have to differentiate where: and oil are far more possible.

-- where: and oil -- where coal and oil are far more possible. >> is it possible to freeze the oil or putting the funds into an account? >> there are thoughts within the european union. we are focused on the prefixed sanctions package on financial areas, on oil. we are in open debate. for us it is crucial to hurt putin more than the effect of our own people and economies. >> so you are open to oil being included? >> it depends on the timetable and the question of how can we reduce our dependency on russian oil imports?

the faster the better. tom: germany's finance minister speaking there. let's get the first word news with laura wright. laura: central bankers have condemned what they call russia's unjustifiable war in ukraine. they will work to isolate russia from the global economy. the g7 also told international organizations they should not conduct activities with russia in the usual way. russia says it testfired a new intercontinental ballistic missile. putin says this will defend the country against outside threats. this follows normal procedures before the lunch. the u.s. justice department will follow a ruling on removing mask requirements for public transit. many airlines have now dropped their own mask rules but some transit officers -- transit

operators have their own mandates in place. the european central bank could have three rate hikes before the end of the year. that is from pierre wunsch. the members said they are ready to consider a rate hike in july. wimbledon has barred russian and belarusian competitors from this year's tournaments in response to the war in ukraine. the atp, which governs the men's professional tournament, said that wimbledon's entry should be based solely on ranking. -- a three month netflix bet. ackman folded its netflix holdings after the company

reported an unexpected drop in customers. shares dropped 35% on wednesday. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine. francine: thank you very much. now what's to talk about netflix and what a story. this is the stock that has lost the most in's the beginning of the year. tom: it is back to early 2018 levels and bilk -- and bill ackman said this was an opportunity. he said he learned from his mistakes and i'm going to cut my short-term positions on fx. 430 million u.s. dollars. francine: it is not just evaluation and it is not going to go away. when you price in this much and it is something going like interest rates and subscribers,

then -- tom: valuations clearly taking a hit for now. that is it for "bloomberg markets: european open." "bloomberg surveillance: early edition" is next. stay with us. this is bloomberg. ♪

>> i see an expeditious march to neutral by the end of the year. >> we have to consider which sanctions hurt and hit putin. >> the policy will only wreck the global peace framework. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning and welcome to "bloomberg surveillance: early edition." the ecb's hawkish moves. the latest