tv Bloomberg Daybreak Europe Bloomberg June 23, 2022 1:00am-2:00am EDT
dani: this is "bloomberg daybreak: europe." these are the stories that set your agenda. manus: powell says the r word. a recession is possible is steve interest hikes will make a soft landing challenging. using ping pledges to meet the economic target by slamming sanctions. eu leaders have laid out the path for ukraine to join the block in brussels. good morning, back in the chair,
back in dubai. that r word is monumental. there is a cacophony of recession chorus. dani: they are saying it is inevitable. this morning, there is a feeling there will be a soothing balm for the market. let me take you into the equity market. we should seek oil declined more than 10%. even steeper for euro stocks futures. at the same time, asia is looking for for a rally. they are doubling down on china tech.
valuations will pay off so they are buying at 1.8% higher. manus: abby joseph cohen tells the world that that era is over. duration hunters unite or they may be the most anxious about recession. the street they were saying basalt bonds up, crude is following. 80 bucks on crude and the fourth quarter. it will continue on the recession arbiter. -- recession, omiter. there is a bitcoin. around the world, the report on
the fed, recession and the chinese economy. dani: maria tadeo will talk to us about the e.u. membership. laura wright will bring us issues on tessa's plan. manus: let's talk about the r word. when he was questioned by the banking committee, take a listen. >> perspective of interest rates, going to height too fast, it could drive us into recession? >> it is a possibility. it is not our intended outcome. over the last few months, it has made it more difficult for us to achieve what we want. a strong labor market. manus: let's bring in our
correspondent, edna curran. a soft landing is not the central goal. edna: using this language shows you we are not only with the u.s. economy and fed rate hikes. it may pull off the soft landing that we have been talking about. you could say the trade-off accelerating unchecked would be very damaging for the economy. there will be a potential head. do not deviate from the message but interest rates are going up. it will probably move at a rapid clip. some of what is happening in the u.s. is set up not just by fed hikes. dani: what does it mean in terms
of whether the fed, if we get a slow down or if they are committed to get inflation in check, or that lack of soft landing that they have to keep going to get inflation down. edna: charles evans from the chicago fed was talking about 75 basis points. for the moment, the fed is going hard and purification becomes, what kind of recession with a full into? may be six months out from now. there is a debate going around that banks are in good shape and the broader labor market is strong. by all accounts, the fed are acknowledging the recession. the moment, no sign of hitting
the brakes on those rate hikes. dani: don't go anywhere, we have to talk about china as well. it is all about the president this morning. he has pledged to meet economic targets even as zero-tolerance approaches with a weak housing market putting the growth further out of reach. enda, when it comes to china, what is the likelihood we could reach this target, what is a message? edna: very interesting message. china is determined to hit those terms. they have not talked about the targets since april. plenty of economies are skeptical. especially when you have the economic slowdown and
destruction, from covid. he did not say what they would do to achieve it. he did not change the script on covid. i think there is a fair degree of skepticism around. manus: those covid zero targets in place, it is hard to get the population out there to crank up the economy. great work as always. to the european union, leaders will gather in brussels, a little bit later on. for more, let's get to maria tadeo. good to see you today. a potentially historic move for ukraine. what would granting candidacy status mean in the timeline? maria: it could be a historic
day. ukraine alongside moldova say it will be granted eu candidacy by the union. this is the full desk first step. -- this is the first step. they have said for years that they wanted the shift into the west. as we talk about the shifts, the war in ukraine, this is an example of that. it would not be happening had not been for the war. it has accelerated everything. they are sending a strong signal to the people of ukraine that they belong in the european family. even though this may manifest tomorrow, they're still dealing with the problems in ukraine. there are two new questions.
it still looks complicated for ukraine. it will be an energy. they have to talk about some emergency plans, particularly into the winter. and their storage going into winter. dani: thank, maria tadeo. elon musk says tesla's new plants are losing billions of dollars. for more on this we are joined by laura wright. laura: tesla is training to the downside. this is after a video interview was released were elon musk stated that austin, texas and berlin are down to money furnaces.
they will be cutting their workforce by 10% within the next three months. it is taking more time and effort to bring them fully on. in austin, texas, they are specializing in model wide production. the plan is that trucks will be made. the company is still reeling from covid lockdowns, shutting down their shanghai plant for three weeks. investors do not want to see tesla's goal of 50% average vehicle delivery growth impeded, especially when share prices have had a difficult year because of elon musk's other business adventures. manus: gigantic money furnace. thank you for the update on
tesla, laura. just take a look at some of the other things. 10:30 a.m., eia will publish the latest will report. we will also have a u.s. jobless claim around 1:30 p.m., an import narrative. dani: a lot of volatility in this market. will unemployment pop-up? you also have the eu summit at 3:00 p.m. in brussels. membership application is also on the agenda. 9:30 pm, the fed reveals results from their annual stress test. later today, jay powell will testify again. manus: coming up, the odds of the fed rate cycle extending
recession. >> you really get a deep downturn when things pick a break and the ability to supply people that's impaired. i will expect a recession like in 1990 but not the deep recession like in 1974. manus: former federal reserve bank president says the economy will experience a mild downturn. deutsche bank saying there is a 50% chance for recession. children powell gave acknowledgment. steep rate hikes and a soft landing is challenging. >> that is our goal, it will be
challenging and has been made more challenging by events in the last few months. war, commodity prices, supply chain problems. the question of whether we able -- we are able to accomplish that will depend on factors we cannot control. manus: joining us now is raffaella tenconi. she is the chief economist of wooden company. our fed president there was talking about the skill of slowdown. what you think we will have in terms of slowdown? i heard of growth recession. what is the landing you think we will get in the u.s.? l --raffaella: i think there will be a slowdown.
think it will cascade into a recession. it is triggered by external not so much. manus: -- dani: speaking of external conditions, there is a soothing tonic of oil as a commodity. to believe these prices in terms of helping to bring inflation down or are you skeptical of these moves? raffaella: it will bring inflation down to an average of 6%. it will help. it is not gonna grow to single digits like the fed would want. the real issue is that on one hand, you do not have real control over inflation because of geopolitical conditions. the same time, monetary policy is one of the three factors we
have. at some point, we will talk about genuine impacts to lending. are really what matters in terms of dictating the shape of the growth outlook beyond six months. manus: i think dani has given me a new phrase, a lovely landing, lovely tonic. i think that is more -- i think it is much more aggressive. talking about the slowdown in lending, rates and mortgages, a natural healer for lending? raffaella: it is, but consumer -- does pick up. people need to make ends meet. corporate lending is an important factor of the adjustment as well.
mortgages will take a slowdown. they will have two thirds of the market that will drive the adjustment. dani: i guess, what we have been debating and something saying that soft landing will be difficult. is there a point, if inflation does not come down, that the fed will have to stop the rate hike because of damage done to the economy and employment? raffaella: absolutely. i think the market is already price to perfection. 375 policy rate is as much realistic. that is the other element that
really influences outlook. in cases of u.s. and particular, you will have fast rate hikes. i think the shrinkage that powell is promising, as a stabilizing mechanism, next year you probably have a holds. there may even be a reversal into 2024. manus: that is interesting. part of the narrative is that balancing or the current pace is the equivalence of 50 basis point hike. when you look at the high-yield market, are ready we are signaling 50% probability of a recession. when you look at that kind of blowout, is it reflecting the type of slowdown, that the
market is price to it or are we waiting for a more explosive level on yield spreads? raffaella: i think, if we did not have to uncertainty in russia, i would say it is already priced to perfection. i think we will see disruption in the supplies. you probably have not seen the peak in this. i think the magical moment depends on the ecb. the ecb wants to make clear where they will intervene. they are a little bit behind. the market will be able to find its equilibrium again. dani: you are right, it is time
to be the bond market, you see that portion of bonds as a workable haven? raffaella: absolutely. this is the time to look at bonds again. these bonds are already priced correctly. i think they still have 100, 150 basis points. as i said, -- manus: do think the ecb will allow the 100 basis point spread , that they will tolerate that? raffaella: with a 12 month horizon yes. in the near term, no. it needs to be gradual. with that magnitude of change had, there is no reason why they need to be that low. the 10 years probably need to
dani: welcome back to "bloomberg daybreak: europe." oil retreated as concerns over economic slowdown intensifies with fed chairman jerome powell warning that a recession is possible. joining us now is our energy reporter. is this enough to hammer oil given that the market is still tight? >> the biggest issue is that
prices rose a bit too much too fast and when people start to take into account that the fed has a more hawkish tone, fears of recession pull-up of investors out of market. there could be a larger hit on-demand. there will be just enough supply to meet demand. there are some bullish fines out of china. there other nations as well. russian output really getting hit by eu band curves. oriole could go higher. this move is part about wider commodity selloff, due to fears that a recession could be in the cards and if other central banks
follow what the u.s. fed is doing. manus: good to have you with us. we have been talking about gas in the past few days. they believe it is a dollar war premium. in that it is gone. to me, that is the most inappropriate pricing. $80 on recession risk. our wheat misguided to think it is gone completely? >> i will not be taking out a crystal ball but what hi, my name's steve. i lost 138 pounds on golo and i kept it off. so with other diets, you just feel like you're muscling your way through it. the reason why i like golo is plain and simple, it was easy. i didn't have to grit my teeth and do a diet. golo's a lifestyle change and you make the change and it stays off. golo's changed my life in so many ways.
manus: this is "bloomberg daybreak: europe." dani: pulses that are red. his says a recession is possible -- powell uses the r word. he's is a recession as possible. candidacy status, you put leaders plan on laying out a path for ukraine to join the block at a summit in brussels today. it is all about recession. at some point we are going to have to get a jar to put my inevitably set. the market does feel a little relief because of that. manus: it is amazing how we go from the extreme, the inflation, which hasn't got away, to this r word that has dominated it this
week. elon musk, jamie dimon, those voices about the reality of recession. it is about the shape of the recession. money is coming into bonds, they are neurotic about the prospect. the oil on the drops of commodities coming up aggressively. the lme under pressure. duration hundreds coming in. some say a hard landing is coming. crude is down 15% in 10 days. copper drops again. it is predicated around this hard landing. that is going to be delivered. of course, you have bitcoin, managing to find a bite in the
middle of all of this. above 25, how long will it last? dani: you mentioned this idea that the momentum chasing it is over. fundamentals are back. you do not have these big buildups of markets going higher and higher. the s&p 500, was down just moments ago. european stocks also off, but still down this morning. a pretty sizable rally in asia, england by two -- being led by attack. this cooling off in regulation -- you mentioned bitcoin let's dig into it. finance is the world's biggest currency today. he may now face looming
regulatory crackdown in a brutal crypto winter. is it a crypto winter? for that story, for conversation on the wider crypto market, let's bring in charlie morris, founder of bite tree management. --bytetree management. is the worst of the worst over? >> it's gotta be. this time, i called at 30. the end of bitcoin -- we're still looking at the best-performing asset cycle. from 10 pre-covid to 20 today. they haven't matched bitcoin.
manus: charlie morris, good to see you again. back in the land of crypto. you say this crypto train wreck is perhaps over, i want to know what structure this market is now. half billion dollars flowed out of the etf's, what is left? who is left structurally supporting your 20? manus: charlie: this is one of the costs. $68,000, it was costing three times more to support the bitcoin network. when you are mining 900 coins a day, you are about $6 billion.
that sounds like a lot, it really isn't in the scale of things. it is a global macro asset these days. it was at very high cost. this is something i was complaining about last year, can this really afford to billion a month of just $2 million a month of inflow. for while, there was a shortage of bitcoin. that is over. i think we are going to have to settle down. how much is the bitcoin economy gdp equate to each week. that is 3040 -- $30 billion to $40 billion of consistent transaction value. dani: i like your explanation of how to prices. if i could take masses question further, beyond the minors, the other structural support, we don't see companies the gorge
during crypto for their balance sheet. there was fear they are going to face margin calls. there's going to be pinned there. where's that threshold we do need to start worrying about some of these corporate? charlie: i think it depends. case-by-case. people talk about crypto is if you know everything is up there thousands of companies, 20,000 tokens. no one has a handle on all of it. you have a handle on the bit you focus on. there are so many of them. it is like oil. where was -48, -- what was $140, that was good for the oil companies. obviously, most companies will be sensitive to price. not just because they are a
miner, but reflection of levels of activity. the biggest threat is not the price of bitcoin but the evaporation of venture capital money. we are greeted with unicorn valuations, i would be watching that. manus: with that in mind, the question is, how did bitcoin perform in a recession? if we are going to have equities under pressure, some say another 15% lower on equities, some say 30% to go on equities, in a recession, and equity market that implodes, what happens to bitcoin? charlie: my hope is that it
proves itself and people wake up to this bear market. just like they did in bold -- with gold in 2001 to 2003. people got comfortable with gold being an alternative asset. bitcoin is a risk asset. in 2021, -- dani: to the point of gold, we must mention, you've got your gold paperweight behind you, gold this week barely moved. if anything, down slightly. what does it take to get that bid into the precious metal
haven? charlie: it takes expectations to rise, which hasn't happened, despite the signs you keep seeing. the breakeven rates seem not to move. there actually under negative pressure as well. one day, if we wake up in six months and cbi still printing these high numbers, because of rents and wages, not just energy, the bond market has been wrong all along and that price of gold will be higher. on the bitcoin side, it is the valuation framework. if the network holds up, and the price holds up, nothing can counter working like it has been for 12 years. manus: thanks for being with us
this morning. as charlie morris, founder of bytetree asset management. let's get back to singapore she's got the first word news. >> venture jay powell has given his most explicit acknowledgment -- fed chair jay powell has given his most explicit acknowledgment that recession may be possible. ensure high inflation does not get entrenched in the economy. the taliban supreme leader has made a rare public appearance to plead for international aid after a devastating earthquake hit afghanistan. at least 1000 were killed, after the 5.9 magnitude earthquake hit the southeast of the country. it risks a new humanitarian crisis to a country already facing hunger and a crumbling economy. j.p. morgan is laying off hundreds of u.s. staff who work
on mortgage lending and reassigning hundreds more this week. the total will be more than 1000 workers. rapidly rising u.s. mortgage rates have driven down demand and what had been a red-hot housing market. 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. dani: coming up, chinese president xi jinping, kicking off this week's summit. this is bloomberg. ♪
dani burger in london. we been criticizing sanctions for stroking economic pain in speech kicking off this year's bric summit. >> weaponizing the world economy using a dominant position in the global financial system to wantonly impose sanctions will only hurt others as well as oneself. leaving people around the world suffering. dani: i know we are both enthusiastic to hear from tom mackenzie. what did we learn from his speech about growth in the wider geopolitical story? >> there's speculation to
whether officials and beijing will stick to their growth target of 5.5%. the pressures been put on the economy from this covid zero policy. he did reiterate this. it's the first time we have heard on senior officials on the growth target. stood up. the vast majority of economists think it is going to be a significant challenge for china to meet that growth target. most have downgraded the growth target to 4.1% for the year. it is not just covid zero, but the crackdown. you're still a long way away, from building up the consumer and exports that we saw in 2021. if you get a recession in key markets, like the u.s. and europe, it becomes more challenging for china's exporters. manus: i think that is going to be a huge impact in the commodity market. probably the most difficult call
is whether the crackdown on tech has come to an end. jp morgan is wrapping up there bullish position on alibaba, and others. we look at this reconciliation of what chinese capitalism looks like. they calls for j.p. morgan on the invest ability of china into a zero covid policy are critically important. how important is their call? tom: there's now a growing sense that after prolonged crackdown in the tech sector, things are starting to improve. officials in china realized that sector is key for driving growth and jobs. you seen a softening on jobs in the younger generation. there is now an alignment on views. even if officials are not taking their feet off the pedal when it comes to scrutinizing the tech
sector, the environment is becoming more positive. you have the president, xi jinping, holding a meeting where he talked about where the tech sector can better align with the economy which many read as a positive symbol. focusing on what is happened, he seen 11 straight months, as a record since the market of the 90's. -- 1990's. the commodity structure and that demand going forward. dani: what other measures does china have in place to support the property sector? >> we are starting to see come through from -- saying we need more support. not just the real estate sector, but particularly for the consumer. he met with officials on wednesday and said you need to pull out every tool in your
arsenal to support consumers and boost consumption. he and his team are staying new tools to support the economy. goldman sachs saying, it is possible for them to reach this growth target, they would need massive support that we haven't seen. does china really want to undo the good work many people have said they've done in terms of deleveraging the economy? manus: thank you very much. that was the latest on china and their big issues. good to see you this morning. coming up, jp morgan, jamie dimon talks. hundreds of staff and what has been a red-hot housing market are to be let go. more on the story here on bloomberg. ♪
from their annual stress test. later, we have jay powell testifying before the house financial services panel. it is going to be how much further and deeper they push on the scale of slowdown. if you look at elizabeth warren's comments, talking about be careful what you do before you drive this economy off a cliff. some pretty aggressive language from congress toward the fed. dani: you have to wonder how much larry summers talking about 5% unemployment for five years, how much d.c. is looking at that and sing, we want to get inflation in check, but in the midterm cycle, the political implications are large. manus: the other narrative is the tax caps helping the average
american is again should driving season. the question of whether you get bipartisan support today. dani: mario is on in the middle of the night to come on for us. -- maria was on in the middle of the night. we have a bunch of pmi data today, among that, we are going to get the u.k. composite, bloomberg intelligence says they expected to drop more than consensus because of the diamond jubilee. i have nothing else to add. i feel like that is a sad consequence of celebrating the queen. manus: no, you can't have that. you couldn't get enough of that. let's talk about the impact on
inflation. it is not just consumers, but the banks as well. jp morgan laying off hundreds of staff in the u.s., is rapidly rising mortgage rates drive down demand it what has been a red-hot housing market. tom has the latest, is this the hurricane that jamie knew was coming? what does it tell us about the u.s. economy? >> the real-world effects of the interest rates. jp morgan, one of the big get minutes -- lender in the u.s.. probably 500 going to be laid off. as interest rates go up, fewer people are going to look at mortgages, doubling in u.s. mortgage rates in the last year. dani: as soon as you said that, that is the impact for the wider
economy, what about jp morgan itself? how big of a part of their business is this? >> this is something that basic shareholders rely on. it is one of the bellwethers of the economy, if it does well, jp morgan does. higher interest rates to feed into other parts of the business. manus: thank you very much. the latest on the hurricane that may be coming down the pipe for the u.s. banking sector. we've got to talk about the bond market. rate step by 14.5 basis points, japan down by 1.8 basis points. u.s. treasury yields declining, the bond market has voltage from inflation to recession myopia. copper has moved three standard
deviations. dani: got a black box on your gmm. it is that commodity move, yesterday 13 to 15 basis point move at the front end. this feels like a market undergoing yet another major repricing. a lot of whiplash. manus: the personification of what -- whiplash, great to be back in the studio with you. bloomberg markets: european open up next. it is good to be back in the same time zone.
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