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tv   Bloomberg Daybreak Europe  Bloomberg  May 27, 2022 1:00am-2:01am EDT

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♪ dani: this is "bloomberg daybreak: europe." i am dani burger in london alongside manus cranny in dubai. the stories to set your agenda. manus: taking aim at china. antony blinken vows to -- beijing, saying it's regime is the most serious challenge to international order. alibaba jumps after it beat on earnings, giving asian stocks a much-needed boost. plus, staging a comeback. signs of robust consumer spending give markets a risk on mood with u.s. stocks poised for their first week in the green in two months. and coming up later this
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morning, we speak to the u.k. prime minister, boris johnson. don't miss the interview 9:30 u.k. time on bloomberg. it was deals and discounters that gave us a little bit of a lift. a $60 billion deal i would say in the tech space is something we need to reflect on as other pockets opportunity -- pockets of opportunity now for deals. dani: not just pockets of opportunity for deals, but has the market as a whole gotten cheap enough to entice dip buyers back in? let me take you into this equity market. we are on track to break the losing streak that has been the past seven weeks, the longest losing streak since 2001. we are slightly softer today. even if it ends at this level in cash trading, we still will be up on the week. we are looking at ftse 100 futures, those are underperforming the rest of the european complex.
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rishi sunak unavailing a 25% windfall tax in hopes of confronting the cost of living crisis. i won't go too much into this. but some strong earnings coming from alibaba in baidu -- and baidu. manus: buy the dip mentality, they've only got six of 18 bear market indicators. 17.5 on the gse. i wonder how you get half an indicator. you just need to dig deep. 10 year government bond yields, yields rise this morning 2.74%. the japanese can get nearly the same, the same level of return at home in 30 year paper as they do in a 10 year government bond, so why would you do the conversion? bitcoin is a little bit softer this morning. jp morgan says fair value is up
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$38,000. dollar-yen, i think for me, two -year paper and dollar-yen tell me something different about risk. this is the dollar down, yank strengthening. the u.s. rate hikes will not necessarily keep weakening the yen, according to the bank of japan governor. 70% of firms expect 1.20 or below in their outlook on dollar-yen. oil markets up. dani? dani: biden even telling some of those oil refiners to start up again in the u.s. let's get to our top stores around the world. in a moment, we will have juliette saly bring us up to date with that rally in chinese tech stocks. we have bruce einhorn taking a look at antony blinken's -- on china and the international order. manus: paul dobson runs us through this u.s. stock rally and we have crystal tse on the
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deal at the top. let's circle back to chinese tech. the biggest jump in alibaba and baidu, both set the sales agenda but they are nervous about the outlook. let's get to jules. juliette: indeed. i guess the key point is the fact that, is this the end of the bottom that we have been seeing in some of these tech players? a big rally coming through in these stocks after we had alibaba and baidu beat on the revenue front. for march, we saw a revenue rise by 9% for alibaba. they said they will be keeping a lid on costs and moving further into cloud and digitalization. baidu was a beat in the quarter. neither providing full-year guidance. we saw baidu stop that late last year and alibaba did not provide full-year guidance. we have also been asking today, where these results good or just
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not as bad as tencent? let's have a look at what we are seeing on nasdaq gold and the dragon index and hang seng tech index. both of these indexes have failed to break above the 50 day moving averages. there is concern about the impact of the covid zero policy if we do see zero lockdowns and how long it will take for this policy reform to come through. we also heard from uov, saying tech shares no longer enjoy high-growth, there will only be range bound trading going forward. that's according to the executive director in singapore. dani: thanks so much. juliette saly there. we will be speaking to jinny yan later in the program. u.s. secretary of state antony blinken has taken aim at chinese president xi jinping during a speech that laid out the administration's approach towards china. sec. blinken: rather than using its power to reinforce and revitalize the laws, agreements and principles, the institutions
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that enable the success, beijing is undermining them. under president xi, the ruling chinese communist party has become more repressive at home and more aggressive abroad. dani: blinken went on to call beijing the most serious long-term challenge to the international order. he also said that washington will seek to influence china's behavior by shaping the world around it. we are joined by bruce einhorn. this is some pretty strong linkage. what do we make of it? bruce: you are right, it is strong language. there are no new policies, no new initiatives in this speech. this is more secretary of state blinken laying out the u.s. overall approach to china. among the harsh statements that made, he also accused china of pursuing asymmetric decoupling. he said china is seeking to make
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china less dependent on the world and the world more dependent on china. he talked about how the u.s. wants to work with allies to d eepen economic ties. that follows up on the recently announced indo pacific economic framework that was announced while president biden was in asia recently. he did say that the u.s. seeks to work with china on some issues, climate change, iran, north korea but overall, the tone was pretty confrontational. manus: now meanwhile, we've got contradictory statements between the leadership in china and this is what some people say is causing paralysis between xi's zero covid policy and premier lee's guidance in terms of the severity of the slowdown. are we setting the stage for a very public difference? what are the consequences of these two different guidances?
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bruce: i think it is too early to say that we are going to see anything close to further, anything close to a power struggle or anything. i don't think that's in the works. that said, we know that there are a lot of people dissatisfied with the covid zero policy that china is pursuing and that it is causing severe economic damage. premier lee in his remit is the economy. we will hear comments from him about economic damage. president xi sets the agenda and unlikely that he will be allowing any sharp departures from his policy, especially with the party congress coming later this year when is expected to get an unprecedented third term. manus: bruce, let's see how that
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actually plays out. our reporter in asia there, bruce einhorn. u.s. stocks have had a bounce. the consumer remains resilient despite the inflationary pressures. that s&p 500 climbed 2%. investors shrugged off negative views from big tech. next up is our executive editor for asian markets. how we vacillate. last week, on target, we went apoplectic over walmart. just because people are shopping in dollar and have been, we are supposed to take leaf. make sense. why have we gone from one extreme to the other? paul: well, macy's as well. it was a range of different retail that had some good news for us yesterday. you know, and so you know, maybe the doom and gloom from last
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week was overdone. i think there's some more subtle things going on in the market as well. people talking about seller exhaustion. people also looking, evaluations once again, still thinking about that. i think what's really interesting here, manus, to pay attention to is this cross as i correlations and a decline in -- cross asset correlations and a decline in volatility. we are seeing a little bit of the volatility in the u.s. bond market just starting to come off. looking at those correlations, looking at the dollar versus s&p as well, we are getting a weaker dollar, starting to give a little more buoyancy to the equity market. feels like everything is cooling off a little bit. yes, we have the individual news about the strength of the u.s. retailer. we could talk about the job market, the weak property market. on a macro perspective, maybe some of those really sharp moves we have seen are starting to
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fade and that's giving people the opportunity to come back in. dani: may be bulls just digging through these crosscurrents, finding reasons to buy. paul dobson, our executive editor for asian markets. speaking of finding value to buy, broadcom has agreed to buy vmware for $61 billion, ceiling one of the largest tech deals in history and advancing the chipmaker's quest to become a force in corporate software. joining us is crystal tse, who is closer to our times on this week. crystal, how much of this is a precursor to more deals in this space, given the destruction we have seen in many tech shares? crystal: yeah, you know, public stock market is coming down, especially hitting tech extremely hard. we have heard that now the shopping list is going to be in the public market. the lower we see stocks, the
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more likely we will see public market m&a. we have seen that with microsoft looking into activision. we have seen twitter, a lot of these deals were optimistic. of course, elon musk has his own thinking. but we can see a lot more people, especially financial buyers, trying to take advantage of this environment. manus: crystal, thank you very much. $61 billion there. let's see one other -- what other mega deals get done. coming up, starkly bound. s&p 500 set to see its first weekly gain after eight weeks of losses. we discuss investor sentiment. have we reached capitulation? daniele antonucci joins us. dani: cryptocurrency taking a beating. is that what continues to send tremors through the market? is there something going on -- something else going on?
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we will have that story later in the hour. this is bloomberg. ♪
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♪ >> inflation is no doubt trending higher and it is higher than are inflation rates throughout the year. >> the costs is a concern. we've had kind of a perfect storm. >> we are going to have more conflict. we are going to have more inflation. inflation causes domestic political conflict. >> raising interest rates is not one to solve the problem of inflation. it's not going to create more food. you will not be able to make the investment. >> the critical thing for us as to not to see second-round effects happening, not to see too much broadening of the thing that are increasing prices. very important to make sure that the inflation expectations
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remain anchored. dani: some executives at the world economic forum in davos this week weighing in on inflation risk. it is something the market has been grappling with, this makes of inflation and growth. part of those peers had sent equity markets down for nearly eight straight weeks. finally this week, we have gotten some reprieve. we are breaking that street, which was the longest losing streak since 2001. citi says buy the dip is our next move. joining us is daniele antonucci from quintet private bank. is it time to buy some of these riskier assets? can you hear us ok? i think there might have been a little video glitch there. daniele: yes, i can hear you. dani: let me ask again. basically, we have had a risk assets selloff. it seems some dip buyers are emerging this week. do you agree with that mentality? is it time to jump back in?
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daniele: i think it's not a one-way street just yet, but certainly we see some signs of capitulation. sentiment has been extreme positioning, it's another example. plus, they all point to a situation where markets were pricing, are still pricing a significant recession ahead. if you take the view that we are more slowing to normal rates after super strong gains, buying opportunities could -- [audio drop] manus: we seem to have just had one of those small technical glitches with daniele antonucci. the question is whether we have reached an exhaustion point with all the negativity. buying on the uptick, that's one of the charts we have been looking at. the other chart is the credit
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charts. high-yield credit is what we will talk about later. this is the pop in high yields. we saw this material turnaround, the biggest one-day jump in 18 months. dani: exactly. manus: you are looking at four days of a rally here. there is a turning point in credit and this may all come down to fed plausibility, the credibility that the fed will have to pause. what does high-yield tell you? dani: yeah. go ahead. daniele: i think just to jump in here a little bit, i think the fed is not causing just yet -- pasuing just yet. there is a feeling in the marketplace that if the pace of economic growth continues to slow, the fed may perhaps moderate the pace of rate hikes further down the road. there is a bit of tension here. the market seems to be worried
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right now more about the slow down or the growth scare and less about inflation. there is some signs that the peak may be in. this could provide support to those buying opportunities. we have core pce inflation later today. we have the second slowing in two months that perhaps adds to the evidence. marketplace inflation expectations, we had quite a torrid month of breakeven inflation rates this month. dani: let me take it global. we have been talking about the citi call, jump in, buy the dip. they say especially we should be buying the dip in europe and em. partially, it is a valuation call but they are calling it less risky. would you agree with that? daniele: we have a slightly more nuanced view. by the way, at this point, we are moderately, marginally
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overweight equities, over credit, over low yielding government bonds. one of our equity overweight is in emerging markets. we are staying away from europe at the moment. before, you talked about the beta flow. i think one pressure point when it comes to the probability of recession is actually in europe, so we would not have, we would not agree to that position just yet. manus: the other dynamic is about china. we have got this political fracturing at the top between lee and xi. we have an economic slowdown, the worst since 2020, according to lee you worry about. policy mistakes, yet you think we will find our way through. what is it that will define for you, from a macro strategy point of view, that is a reentry moment, a moment to rebuild strategic positions in china, whether it's china tech, china
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builders, wherever it is that you see the biggest opportunity? daniele: ok, sure. we have positions in asia and by extension, china as well, not directly. of course, we know there is a near uncertainty with the lockdown. before, you mentioned also different messaging from the authorities, but we are looking for clarity on the lockdown and possible reopening. that's number one. secondly, we are looking forward to policy stimulus speeding through. that's another one as well. i think it is quite important. and more generally, when it comes to china, we want to get the sense there is support for some of the pressure points, being the real estate market, or some of the [indiscernible] that create uncertainty in the marketplace. we are invested in asia and in
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china as well, even though not directly. manus: ok. thank you so much for your thoughts this morning. the nuances are important, aren't they? daniele antonucci, chief economist, macro strategist at quintet private bank. coming up, we speak to the u.k. prime minister, boris johnson. don't miss that interview. this is bloomberg. ♪
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♪ manus: this is "bloomberg daybreak: europe." i am manus cranny in dubai, dani burger in london. let's get the first word news headlines from around the world with juliette saly. juliette: the u.s. has rejected a plan by russian president vladimir putin to facilitate grain and fertilizer exports
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until the extensions on his country are lifted. the biden administration has blamed the kremlin, with surging concerns of global food shortages. potent did not specify whether he was referring to russian exports or those from ukraine that have been stopped by moscow's blockade. the u.s. and taiwan are ready to announce talks that would deepen economic ties, a move that is likely to be seen as a fresh osha beijing. bloomberg understands negotiations with focus on economic cooperation and securing supply chains. the agreement would be so much of the indo pacific economic framework. it would fall short of a free-trade agreement. beijing's month along covid outbreak is worsening, with 29 new cases recorded thursday, there is growing excited within china' governments about the impact of its covid zero policy on the economy. officials have imposed a raft of restrictions, including work from home mortars -- orders for most major districts. profits at chinese industrial firms shrank last month for the first time in two years.
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covert's and lockdowns disrupted factory logistics and sales. data from the national bureau of statistics shows they felt 8.5% in april from a year earlier. global news 24 hours a day, on-air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani? dani: juliette saly in singapore, thanks so much. i know we have been talking a lot about the recession risk, about consumers as well. retailers really gripped our attention last week with abysmal results. the results this week i wonder give us nuanced appears to be the word today, a more nuanced view of the consumer. macy's strong earnings thing that more people are buying luxury goods. airliners like jetblue, southwest, they have strong earnings, too. i wonder if it's just a different type of consumer, a consumer spending on different things. manus: the shift to services is what was always predicted. dani: totally. manus: that may well help stem
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off the inflation narrative or the peak inflation narrative. one chart that i simply love, it is hard to use the word in a completely juxtaposed context, because of course, you can now get yourself 30 year paper in japan for the same right, and this is incredibly important for the biggest buyer of u.s. treasuries. could they be falling out of love with treasuries? i love this. the biggest fans, a important reasonn to buy them, it's gone. you can get 1% at home in japan versus 1% on a hedge basis in the u.s. i like this chart from the narrative of a float. dani: tokyo tina, you have outdone yourself in chart titles. that is absolutely excellent. manus: she is ripping it up. what have we got? the u.s. secretary of state does not hold back on the criticisms on china's president, accusing xi jinping of oppression at home and ag as a business owner, your bottom line
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manus: this is "bloomberg daybreak: europe." these are the story setting your agenda. dani: taking aim at china. alibaba inviting ♪ a jump after a ♪ much-needed boost. staging a comeback. signs of robust compute -- consumer spending, u.s. stocks
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have their first week in the green in months. we speak with prime minister boris johnson. don't miss that interview. with the destruction we have seen in risk assets, is it finally julie chen, the filing of time when they see those evaluations? manus: $61 billion where there is a roof -- a width of dealmaking, maybe that is how this is delivered. alibaba, save the world, and they went to macy's and go shopping. had more money to spend. yields are following this morning. i is about flow. they still need to load up on bonds? dollar drops, in bid, a lot of
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corporate, i don't need to say anything more i do not shop at macy's. to the equity market, or we on track to break the longest losing streak since 2001. -- i think -- manus: i think you are more do. dani: you arrested that overestimate my class. we are seeing them say to buy the dip. i will not say much more there. these are underperforming. we have that windfall tax. get into that later. course, asia-pacific that -- pacific in next. let's dive into the china story. talk about politics.
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manus: to came at the biden administration's approach towards china. >> rather than using his power to reinforce and revitalize the laws, institutions that enable their success, beijing is undermining them. the ruling chinese communist party has become more aggressive at home and abroad. dani: they call them the moser's challenge to international order in washington will seek to influence their order by influencing the world around them. they have their own issues. let's dig into it with jinny yan , strategy and economic stat icbc.
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jinny: the pressure is on. never have we seen this kind of uncertainty about china's economic growth. there is definitely a lot of debate internally with what is the pathway ordered? -- pathway forward? with figures telling us that not only now but in the coming months will see continued pressure, and a negative rate, that data in particular on top of that statistic coming in in april tells us that every part of the economy is seen pressure in that debate has been intensified. i think going forward investors will be keen to see where it directionally china is heading. manus: good to have you in the
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studio. i want to know whether you use urgency which reflects on growth. do you think they are in panic mode but is it that would say to you that we are moving from necessity of urgency that they are in panic mode jinny: i don't think we are yet in panic mode. i think it was a frank exchange of how much pressure there is on the economy we have not yet seen the full set of tools being implemented. that is both on the monetary side but also the fiscal side my premier frustration that so many of these policies have been ruled out march but not enough have been channeled to the real economy and implemented by local governments. dani:? ? what would that look like jinny:
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more and more sectors getting those guarantees in place. it looks like enable markets become tighter because getting jobs. it would look like consumerist -- -- -- -- consumers consumers -- manus: do you think the worst has passed of the credits here in the first -- far right hand side of? this chart?
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how debate -- boost this --?
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manufacturing is the driving force of the economy and the sign of how labor market is doing and coping. the logistical side of the story is not yet constructive for us to town that there is a positive upturn in turns of sentiment and momentum. manus: when you talk about that, that has been cut recently. it is incredibly in port to the chinese market. we can see that the steepest decline, because everybody is locked in.
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does the long prim
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erate ? dani: start to mean something in there will start to be in impact. idc that playing out?
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jinny: these pockets may still spur. what we see is in terms of the bond rate market, benchmark interest rates will be kept relatively stable. we are exercising are those market interest rates. manus: thank you so much. come from intensive discussion. let's get -- back to -- that was
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the last day of trading. apple is a parts supplier in shanghai. they have clashed guards. the reports over the last years of frustration was workers who are trapped in a bubble. representatives declined to comment. south korean business newspaper says that samsung has notified suppliers -- citing an undefined official, they plan to reduce to hundred 80 million units from their initial target. they are blaming we demand with rising inflation and the ongoing war in ukraine. alibaba shares surge in hong kong after rising 9%. investors are trying to come to grips with the economic cost of
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the lockdown. alibaba refrained from offering the regional outlook for the year. global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. dani: wherefore for you, coming up next. this is bloomberg. ♪
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manus: "bloomberg daybreak: europe." "bloomberg daybreak: europe." this is it is friday. despite volatility, we have the impact of the tariffs. it is not a bearish market, there is a wealth contagion this month. recent pressure highlights the need for better regulation around these instruments. >> we have just seen, in the last few weeks, exactly the kinds of risks of open talking about for some time. but collapsing value of stable coin. stable coin moving off of its one-for-one value because of lack of transparency.
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manus: looks like these coins are manus: manus: taking a beating. don't know how to explain it, but you will. >> it is dropping in price. it is taking a little bit of a beating when you have terra been a couple of glitches you are looking at that with a little bit of concern. thanks affect the are progressing but there are a lot
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of things in the background with development of the area and the other altcoins versus with happening with bitcoin. dani: just taking a beat here. what does that mean going from proof? of work you have people that puzzles and makes that >> happen. proof of stake >> is where you have people validating it is much less intensive. there are a lot of things that are good about it. it is also a big change for the network and that means that you are watching to see when it is going to happen, are things going to?
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go wrong was a bug that hit the thing for a while and 2020. we will be working over the next. manus: where are you between scott minerd and, jp morgan. my osteopath is buying bitcoin, when your osteopath starts to tell you he's buying for point, we have to wonder more ready for the next approach? >> there has been a lot of discussion about how accurate hismonerd,, rentech been. -- how accurate his comments have been. it is tough to tell. with cryptocurrencies, they can be volatile or what. there are a lot of metrics of people buying that look like
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they may have stayed out. jp morgan does do a fairly robust analysis. a coin is around 29,000 right now. mostly thinking momentum. -- we will see if it gains momentum. dani: thank you. joanna, walking us through everything. coming up, returned to the chancellor will announce a support package, to help combat the cost of the cost-of-living crisis. we will have the details. this is bloomberg. ♪
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manus: this is the u.k. government has unveiled a package to combat the cost-of-living crisis "bloomberg daybreak: europe." -- let's take a look at how some of the newspapers are dani: days headline. let's get to our economy reporter. everyone is saying everything in
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the newspapers. how big of a shift? is this -- make of a shift is this? >> this is in the fourth quarter when energy bills are set to rise. this is big for consumers and the economy. they expected this will be spent. they should avoid a recession but it does keep pressure on the bank of england. it adds to the inflation risk. the bloomberg economics have not seen any more training in the second half this year but economists have changed the call. they seek for rate hikes before the end of the year. this really does change the calculus for the economy. manus: other briefings this was very much, could beat one off.
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this will be a one off. it does come down to, why do oil companies not put more money into the transition? was milton freeman. as a temporary government program. 25% windfall tax. has been brave enough to speak out against it? >> has been controversial on multiple fronts. the government has gone further than they said it would. is now the highest tax bill since the 1950's. it does not look like the tax cut that he ordered to before --
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present himself as. as well as raising the with all tax, there have also doubled the investment allowance for energy companies which means that conservatives are telling businesses how to invest. that is not the conservative way. this is ideologically tricky for the conservatives. is causing an up for among energy companies. manus: lizzy burden there on the windfall tax. or johnson were drawn the bloomberg team. conversation will want to watch for date relief rally for the moment. dani: especially in asia.
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manus: up next is "bloomberg markets: europe." this is "bloomberg daybreak: europe." ♪
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