the s&p 500 suffers its worst first half in over 50 years. july begins where june left off did the price conundrum and the question, have we reached peak inflation? the answer could come in a couple of hours with eurozone cpi. plus a quarter century on, president xi visits hong kong to submit beijing's control. francine: we have had lots of talk about risk aversion out there across global markets and if you look at what we are in for these equity features, they are down. the dax is down 0.8%. bolstering some of the bonds out there. tom: what that tells us for the second half, this consumer sentiment out of the u.s. and that also weighing on equities state that. you are range bound on the ftse

100 and a relatively safe haven in the first half. the superlatives include the fact that the s&p 500 fell to it lowest levels in 70 years, since -- i should say 50 years. and the lowest level since 2008. the cap lower by 0.8% and the spanish idea backs -- ibex also lower by 50 points. we look ahead to that eurozone cpi and what that will tell us about where we go in terms of the inflation pressures in europe and the gas component of the geopolitics for that as well. futures stateside pointing to losses of over 1%. recession fears are strung on the back of that consumer data. you are seeing a five basis point move there on the benchmark.

and brent at $108. you saw opec meet as expected yesterday in terms of getting production back to pre-pandemic levels. francine: let me tell you what some of these sectors are doing. they are in the red out of 19 groups. all of them are down. it is technology and basic resources that are losing the most. doing better than expected is telecom and utilities. you see a clear move downwards on the recession concerns and technology and basic resources, but also travel and leisure. chaos across europe and certainly in the u.k. tom: francine, you have lived that disruptions in the past couple of days. a couple of telecom companies in focused for that move. telecom rejecting a bid from cbc

-- telecom italia refit -- rejecting a bid from cbc. bt group has a union of workers will be striking. that is what the unions have decided to do. siemens, we are looking at a 2.9 billion dollar hit on the back of siemens energy, so we are looking at that stock for the next hour. that's now with mark cudmore and you have been you got -- looking at this historic soft. mark: this is definitely a selloff for the history books. this is a chart showing the return of the first half of the s&p 500 index and the bloomberg u.s. treasury index. going back almost 50 years, there has only been one other year in history or both equities and bonds fell on the year. that was this year back in 1994

where a late year rally held returns only a little down. this year, equity markets are more than 20% up the halfway point and bond markets down more than 9%. that is the worst year on this chart going back to jim. can we see a late year rally turnaround? very unlikely for u.s. stocks. we are going to get a juice year yield on that price return, but i still think this will -- juicier yield on that price return, but i still think this will affect stocks. francine: let's take a look at some of the worst performance for the first half of this year. the s&p 500 down the most since 1970. european stocks also have the biggest selloff 2008, following 17% since january. the japanese has become the

worst performing g10 currency year to date. bitcoin has seen its worst quarterly loss in a decade. and the london metals exchange index is down 14%, capping the worst order for metals since 2008. let's look at the next six months. joining us now is patrick armstrong, chief investment officer at plurimi. also joining us is our reporter, lynn. with all of the unwinding, this is a healthy correction come about what can we expect for the next months? reporter: the question is no one knows what will happen in the next six months. expectations will rebound, but the big unknown, are central banks going to get inflation under control? a lot of the actors we have seen in the markets have not been the case for our careers.

there is uncertainty of, will what they do actually work? tom: patrick armstrong, let's bring you in. good morning and thank you for joining us. what is your worst view for market? patrick: the worst is behind us, but it will be a difficult stepping half as well. this will probably work well for the second half, and that is oil companies, different companies that provide cash for today shorting wrong direction -- shorting long-duration. the yield have moved up so much, but the no value earnings and the lower earnings of technology companies, they had multiple stocks and i think those current stocks, under pressure. i don't think long-term investors are in this anymore. i think speculative training gets a lot of -- trading gets a lot of soft pressure. francine: what about this looks disjointed?

it feels like every day traders are expecting a recession and everything will be fine and then you see a bounce off next day. what is the underlying feeling about this? patrick: the most important value are energy stocks for manus: me because you are trading at incredibly low multiple for -- stocks for me because you are trading at incredibly low multiples. and oil prices plummet. i just don't see that happening and i think supplies will be for sale and slowing demand will happen, but we get supply reforms so we will get a boom in energy supplies and we have not have massive explorations in production. that is not happening and despite this, most things are not there to pump as much as they can. they are focusing on another two million barrels a day on the model and i don't think they are trying to do that.

i don't think oil and gas prices plummet. tom: lynn, let's bring you back in. had consumer confidence data out of the u.s., a surprise for economists looking at that and then you had a draw down of oil come down for the last few months. is there an argument that that is showing the rhetoric in the central banks as having the desired impact that we are getting to a place where inflation is going to start to come down? can you read a positive story into those things? lynn: you can see the breakevens were modern as well. that would be what the balls tell us is the case for the market right now, but -- bulls tell us is the case for the market right now but increasingly the fed is ramping up the message, saying they are ramping up the pain, so with all of those bearish factors in place, it is hard to tell. francine: patrick, what you

think happened inflation? could it leave as quickly as it came? patrick: it will not bp i think going to the united states, you can see that with commodity prices and having the levels over. i think european inflation will be higher the coming months because of weak currency and a higher energy bills as a big part of the consumption basket those factors will push inflation up and they are starting to still be there. all of the signs are still there, and we get the fed potentially reducing its balance sheet. the flows are slowing down a little year-over-year. we are going to have a slow trend down in inflation. the u.s. economy is not going to be as hawkish as they say they will be. tom: lynn, from the pboc

officials, it is recession today, but it is getting close to a bull market. investors are interested in what opportunities there are in the market right now. where are we as a proposition when it comes to china? lynn: what an interesting question. no one would guess china as a safe haven in the same sentence. there are so many unknowns. are they going to stick to the lockdown policy and will we see a recession hit them as real rest of the world -- as well as the rest of the world? they look attractive to many people and a lot of able are talking about dividends being a big play as well. francine: patrick, how do you play china? patrick: i do not do it by buying chinese equities. the rule of law, there are so

many risks as a foreign investor. i do think china is going to stimulate strong growth in the second half, but the fed blinking and china stimulating, that will affect the second half of this year. i put that in place with semi conductors and one china growth, quantity of demand goes up. tom: patrick armstrong staying with us after the break. we will get more of his calls. thank you for walking us through the key themes and looking at a tumultuous first half for the market. coming up, more from patrick on the energy complex and on china. how to position after this first half round? this is bloomberg. ♪

tom: welcome back to the open. we are 13 minutes into european trading day. the futurist stateside as well looking to further losses after -- the futures stateside as well looking to further losses. nasdaq futures down lower also, down 0.9%. you have seen a bid for u.s. treasuries. currently the u.s. 10 year at a for basis point move lower.

francine: tesco said that u.k. prices are so much that they are just unviable, and they have seen hines to get ketchup. if you like ketchup, this is the big time to buy it at tesco. they just have inflationary pressure. tom: no catch-up, what is going on with this world? francine: between that and the travel chaos, this is not it. tom: it shakes up your travel on friday, doesn't it? francine: it does. laura: bank of america says it is likely to lose its position as the dominant electric vehicle maker in the u.s. as soon as 2025. the annual forecast, they are set to release a barrage of 135 new electric vehicles. tesla's share of the market could fall to 11% by the middle of the decade from over 70%

today. planning to expand into india by an agreement with the reliance band -- brand. this is an ambitious global franchise so far. siemens is taking a 2.8 billion euro hit on the declining value of its stake in turbine makers siemens energy. it is hit by rising energy costs and disruption from the supply of metals. the industrial giant owned just over one third of siemens energy. that is the bloomberg business flash. tom: thank you. european stocks are headed down this morning, for the worst selloff since 2008. patrick armstrong, the plurimi wealth cio, is still with us. there is an argument that us across the household now, given that oil prices are down 10%

over the past month. do you think there is further to go within the energy complex? patrick: i don't think energy prices will move higher, but i don't think they are going to plummet. this would be slightly expensive at $60 oil that would be cheap, and $100 oil is easy money. it should be incredible cash flows for these companies, so i don't oil prices will commit. the bands will roll over a little bit, but no expiration. you find new wells and get some pumping happening. historically you have got to be supplying and you are not going to get that success. francine: i know it is difficult to game theory this, but the only thing we need to prepare for if there is a gas embargo, and we have seen some of those just being sent from russia to

europe dwindle already. if we have a full embargo, what happens to the european economy and what happens to your equity column? patrick: europe going into a very big recession, and we have the german employment situation, we see if that changes. the stoxx 50 has been closing in short positions. your app in recession right now, and i think it could fall into deep recession. that is far at this point. tom: you're taking a short position on bt be, and you have got the theory year -- the three years in italy. this is off of the ecb officials under the collar. is this you challenging their determination to keep yields down? patrick: yes, central banks on they put a capital in place, it inevitably challenges the markets.

-- a cap sin place, it inevitably challenges the markets. the financial circumstances in italy are always under pressure. one it is going to get into a big recession, that is when it gets stressed. long-term, i don't think it will be -- but long-term i think it will spread widely from here. francine: i am obsessed with inflation in the u.k. and we were talking about the fact that hines is trying to split up prices and tesco is saying, no way. we are seeing so many inflationary pressures in the u.k. how downbeat are you willing to see the economy? patrick: the u.k. is suffering stagflation, and that is for equities. the inflation hurts the bonds, and food prices will change

quickly. you have got a very weak euro and it is difficult to battle and inflationary environment when your currency is devaluing against the dollar. inflation is not subsiding in the u.k. for the coming months. tom: that takes us to your fx trade. run us through what you like. patrick: i like the dollar and the fed. i don't look as much at markets, so it will go a lot more than the european side. you look at the u.s. dollar versus the sterling and versus the euro, europe is in a recession. i like the australian dollar. if china really stimulates in the second half, that will push up demand. i also think the russian commodity exports are going to be curtailed for a long time. that is going to be attractive for developing economies under

central banks will be hiking a lot more than the european intro banks -- central banks. francine: when you look at the volatility swings, you look at the pound, and how much does it help having the pound lower? patrick: it is great for my portfolio because everything i buy just looks good. but a weak currency is when things are going great and you want to get to capturing it. a weak currency is terrible when you are trying to battle inflation. i am not sure if currency will be great right now because the big issue for countries right now is inflation. francine: thank you so much. patrick armstrong, plurimi wealth, chief investment officer. coming up, bitcoin has traders looking at wild swings while risk assets struggle to regain

their footing. this is bloomberg. ♪

francine: welcome back to the open. 23 minutes into european trading day. you can see there is about of risk aversion across the markets. european stocks down across the board and the dax.

it is giving a bolstering to bonds. it does feel like every day, this market is saying there is inflation and you worry about recession. the next day, you think we have oversold it, so let's find something because central banks have got this. tom: there is also significant move into bitcoin about 24 hours ago. you are back below $20,000 or so for bitcoin. and 11% move higher in bitcoin may suggest there is where going on there. -- there is buying going on there. a drop of 40%, so it raises the question of utility. it is utility of the hedging function as well and how intertwined it has become now with a risk barometer for these market. francine: what a lot of veteran market participants will tell

you is the uncertainty moving in the markets, if you think that is part of a traditional portfolio. i do not know if we have a longer term chart, but we started the year talking about regulation and how this is intentionally bad for the environment. some of the major crypto players are ranking from -- ranging from hedge funds and others to say that maybe this is a hedge. tom: and the likes of binance saying that this is a healthy clearing out of the crypto space and at some point it will find fundamentals rebound. that is being challenged by what we are seeing. that drop historic in terms of what we are seeing with bitcoin. and institutions seeing this with the likes of fidelity. that raises the risks of stemming -- the question of stemming risks. that is what we watch for the broader markets. francine: in london, all they

ask you is about inflation and ben crump. tom: -- inflation and crypto. tom: and then other things. francine: we get more and the gas flow stories next. this is bloomberg. ♪

francine: welcome back to the open, 30 minutes into the european trading day.

markets bruised, the s&p 500 suffers its worst first half and over 50 years. july begins were june left off. have we reached peak inflation? the answer can come in 90 minutes. worker striking for better pay are the latest pressure point for inflation. >> i'm in hong kong. as the city marks the 25th anniversary of the handover, beijing's crackdown suspended. what about the city's future? tom: let's check in on the markets. the historical context, running through the s&p 500, the biggest drop for the first half since the 1970's. the nasdaq down the percent. european stocks lower by 70% in the first half. -- 17% in the first half.

let's check in on the benchmark, down 0.4%. in terms of the sectors in the green, three of them, retail leading the pack. at the bottom, technology, health care and media. the recession concerns around the data out of the u.s. as we look ahead out of the eurozone for the latest cpi print. we had mixed data when it came to spain, germany and france. we will get to how that ties into the thinking of the ecb. francine: germany is in talks to bailout energy giant, uniper. for more we are joined by our energy reporter. uniper is one of the largest russian gas importers in europe. what is going on with these

companies after russia cut flows? >> uniper plays an important role in europe, one of the largest with a huge trading operation. after russia cut by 16%, it is a big cut, uniper and its energy companies had to rush to energy sources to everywhere else to fulfill contracts they have with clients. the problem is the company -- it is super expensive. gas futures in europe yesterday jumped more than 15%. uniper relies on russia for more than half of the gas it needs under contract. the company is on edge now.

tom: is there any doubt at this point the german government will step in to help uniper? they will have to take some measures to support this company. >> they said the government is ready to help this company. they were talking about measures. uniper is asking for a bailout from the government and suggesting increasing loans from a development bank here. it even suggested investment. the government must worry because this type of company, if they cannot deliver, there is a danger of a spillover. local companies deliver to

millions of customers. francine: is there anything that would save these companies from getting into trouble? >> there are a couple of measures. energy companies in germany are lobbying to get reimbursed from the government for the extra costs they are facing when they need to buy expensive gas on the market. a levy imposed on consumers will cost everyone. the additional burden would have to be shared by the consumer, that would help, of course. europe is already facing high inflation rates, and the industry has already been squeezed. the situation now is pretty tense.

francine: thank you very much, our energy reporter. ole sloth hansen, vp / head of commodity strategy, saxo bank joins us. looking at the complexities surrounding this, how do you model a gas embargo from russia to europe? ole: basically with unitive high prices is forcing suppliers, forcing demand to a level unsustainable with the supply we have now. it has been a horrendous month. and with the u.s., the export explosion, we are getting reduce supply from the u.s. as well. we are in demand destruction territory. demand is coming down, but given what we know, it would have to

come down even more if we are going to get through the next winter. tom: to what extent of demand destruction are we seeing, what does that mean for prices at the end of the year? ole: we can see that coming winter price and the one after is trading at the same levels that the stock market is trading now. it is a tenfold increase before these spikes started to occur around a year ago. if you have a long-term contract, these spikes are hurting you immensely. francine: is there anything now in the commodity space that is easier to predict? ole: no. we have had so many developments this past month.

if you are looking at this correction in commodity, we also have to remember we are down around 18% on the year. we also have to remember we are about to hit the beaches around the northern hemisphere, taking holiday after a choppy first six months. traders are looking at reducing exposure rather than adding, and given the positioning of the market, that will add downward pressure in the markets. the whole metal space is chaos right now. tom: just to be clear, you think this is relatively short-term? demand will relieve pressures in the commodity space? this is good news but you think the bull run has more to go? ole: what we have forgotten the

past month is the supply side of things. no supply is tight in the oil market, and that needs demand destruction to balance for 2023. some of the other markets, the metal market, the inventory levels in london and shanghai, even though we have seen a drop in prices. that tells me once we get through this nervousness and readjustments, the market will be looking at structural issues that will underpin prices. i'm not throwing things overboard at these levels. francine: what happens to commodity prices? ole: that is the big question. we saw a bit of an appetite a month ago we had the first attempt to reopen especially in

industrial metals, which will be the main beneficiary because of the dependency of demand from china. that will be an interesting one to watch. at the same time we have u.s. indicators pointing to a technical recession. we have a lot of moving parts that need to be taken into consideration. long term if we do not have investment going into tomorrow, we have a problem down the line. we could see this market underpinned. tom: do you have to give up your bullish view on gold? it is down 12% since march. ole: absolutely not. if you bought hold of the beginning of the year, you would be very happy at these prices, because you were down 1%.

in dollar terms you are up 8% in euro terms, and that is a strong performance compared to losses in stocks and bonds. on a relative basis, it has done well, absolute basis, not so well. we have to take into consideration what is happening now. the gold-civil ratio is the highest in a year. we keep a close eye on that, and in the short-term that needs to hold to avoid further worsening in the short-term. we have geopolitical risks, financial risks that are very relevant. that will continue to support the prices. tom: ole sloth hansen making the case for gold and arguing that the bull run for commodities has not come to an end as we see demand destruction. ole sloth hansen, vp / head of

commodity strategy, saxo bank, thank you hear it coming up, hong kong marks 25 years of chinese rule. president xi jinping defends the crackdown on pro-democracy activists. more on that story, next. this is bloomberg. ♪

tom: happy friday on welcome

back to the open. losses of about 0.3% across european equities. a number of sectors turning into the green, and a couple of indexes straddling on the positive side. the spanish ibex is up 0.3%. still looking for direction in the markets amid concerns about inflation. xi jinping has hammered home the importance of one country, two systems as the new chief executive was sworn in on the 25th anniversary of chinese rule. >> hong kong enjoys a unique position favorable conditions and broad space for development. the central authorities fully support hong kong and seizing the historic opportunities from our country's development and aligning with national strategies. tom: we are joined by yvonne man. you have lived the experience,

the changing dynamics within that city, what were the key takeaways with that context for you? yvonne: we are coming from a stormy hong kong. we marked the 25th anniversary of the handover. then we were swamped with rain as well. in terms of the political turbulence, president xi jinping trying to set hong kong on a different path, saying after the storm hong kong is reborn again from the ashes. we have entered into this new stage from chaos to governance, a sideswipe on carrie lam and her tumultuous term where we saw political dissent and political protest that have been crushed. pro-democracy lawmakers on the opposition side are in jail awaiting trial. two years to the day we saw this national security lock come into effect, plus an overhaul of the

new electoral system were only patriots are allowed to hold position of power. xi tried to say the look ahead to economic develop, and housing that needs to be alleviated, the wealth income gap in hong kong, and focus on prosperity. he spoke about the balancing of government and markets, the recurring theme we heard in speeches before, hong kong operates and allows a their -- a lot of questions what this means for the freewheeling capital city here. francine: the music is a little faint. how did hong kong react to this? it is significant resident sheet is in hong kong, but what is the mood like? yvonne: you could say it is calm, stable. you could argue it is because of

the national security law that came into effect two years ago. we have seen political opposition silenced. the apple daily has been shut down. underneath that there is the sense of uncertainty among the people, what this next chapter holds, and in the second half of this 50 year experiment of one country and two systems. president xi defending the crackdown and trying to sell one country two systems. people here say there is no reason to change that. even before he stepped into hong kong, his itinerary was scant on details. it was a mystery if he would show up are not. the fact that he has after five years and 900 days since he left maine then china, he wants to send the message of strength, domestic support and how

important hong kong is to him, and stability is that keyword. tom: you touched on the divisive nature of carrie lam, the former chief executive of hong kong. we now have a new chief executive, what are his priorities going to be? yvonne: for those who do not know him, he does not have a track record when it comes to the financial world, economics, the business community. he has a lot to prove because he is coming from a career of law enforcement. he was the former head of police, top of security in hong kong before. there are questions on what approach he will have. we have heard from the chamber of commerce that has said he is a pragmatic guy. in terms of priorities, he may be willing to listen to the business community. the one thing president xi hit home was about the social

issues, housing. the last four chief executives failed to address the market here. it is a warning for the real estate tycoons that have a tight grip on the real estate market and the land supply. they need to do something to tackle this issue. when it came to covid zero, there are questions whether hong kong can chart a different path from china's covid zero policies. we have seen about 2000+ cases on a daily basis. a few months ago we would have seen these restrictions, bars closed, quarantine measures heightened. we have not seen that, and there is talk of easing the quarantine time. a lot love questions whether hong kong can have autonomy in some ways when it comes to these responses we have seen in

mainland china. francine: thank you very much, yvonne man. we will have more from her throughout the day. coming up, we focus on inflation. central bankers grapple to bring prices under control. this is bloomberg. ♪

tom: welcome back to the open. 53 minutes into the trading day, losses of about 03%. equities, a little turnaround in sentiment. a little less bad. u.s. futures lower. francine: brace for more bad news on the inflation front, big indicators with the italian and eurozone cpi. joining us now is bloomberg's executive editor. i have a million and one questions, can central banks engineer a soft landing, or has that ship sailed? >> i think you saw the message from the central banks is they see a new era of inflation. they do not want to see inflation expectations pickup,

so they will focus on beating inflation, and that may come at the cost of recession. they think they can deliver a soft landing. wall street thinks there is a 50-50 chance of a recession. that is a 50% chance of a soft landing. it will be hard given the inflation pressures. the data from the eurozone is looking at about 9% inflation with a target of 2%. that will be a crunch. tom: talk to us about the clarity or lack of clarity around wage pressures and how that plays into the inflationary picture? a 50% hike in wages. workers are going on strike. others are calling for other measures. rail workers are calling for higher wages of around 5%. how does that feed into the wage pressure conundrum for central banks? >> u.k.'s is seeing similar

forces elsewhere. many make the point that labor markets are tight, profits are up, inflation is up. we have had two years of covid. workers are in demand in many economies, and wanting to adjust salaries in some cases. for the central banks, they have a role to play here. andrew bailey at the bank of england has struggled to communicate. it looks like he is lecturing. what they want to avoid is a wage price spiral were prices get bid up, as they increase prices to pay for wages. the alternative thought is that this is a price-wage spiral, and wages have to adjust to prices going up. you see that in the u.k. and

elsewhere, and that will be a headache for central banks. it is a pr challenge to explain to the people why they are paying more at the gas pump and the checkout counter. tom: thank you. that is simon kennedy. looking ahead to the euro zone cpi, and a question around wage pressures. we have copper dropping below $8,000 a ton, that is for the first time since early 2021. the electrical vehicle market is impacted. coming up, "bloomberg surveillance: early addition." this is bloomberg. ♪

>> inflation is a bigger risk because it is here. >> inflation is very high. >>