here are your top stories. u.s. equity futures a slip and asia bonds gain as ongoing growth concerns weigh on sentiment. larry summers says a recession could hit by year-end. german unions worn the gas crunch. wipe out entire industries. chancellor all of schultz signals a lufthansa-like bailout could be in store for gas giant uniper. walkouts and personnel shortages hit travelers across europe as -- flyers do not escape unscathed over july 4 weekend. wall street friday ending in the green but the action today will be somewhat different because it is the independence day holiday stateside. currently, still pointing

lower. stoxx 50 futures with gains of 15%. in china, more covid cases being detected over the weekend. and the plight of the real estate developer shimao. just a reminder that chinese developers remain a risk area for the government. gains of .9% across the cac 40, .8% on that ftse 100. the spanish ibex gaining .8%. we are waiting for turkish inflation data in the next few seconds, it is currently out in fact. prices rising 78.6% year on year, the estimate was 79.95%. the central bank of turkey has not raised rates for the last

year and the turkish lira is the worst performing em fx currency year-to-date. you are seeing -- on turkish lira and dollar. just a reminder that inflation now nearing 80%, a 25 year high in turkey. let's look at the other assets as well. we will not see trading on u.s. treasury fees -- treasuries or equities. futures pointing lower on those recession concerns, manufacturing and consumer data pointing to put agility -- fragility in the u.s. euro-dollar 1.04, strength of about .1%, gains on crude and in the oil complex after weeks of pressure. we continue to look ahead in terms of what is happening with the president's visit to saudi

arabia. pressure again on iron ore and copper. stocks to watch, we had that story about the german chancellor looking at a live concept style bailout -- leptons a -- lufthansa style bailout. currently gaining .7% on the back of that. still waiting for details from german officials. tesla getting about 1% on the output of a share buyback plan worth 750 million pounds. techchip energies winning a contract in norway, getting about 1.5%. let's get to our mliv managing editor, your focus is on currencies this morning. mark: very much so on the back of that energy story you mentioned. over the weekend i was reading

about the energy crisis and what it might mean for the german economy, talking about whole industries potentially shutting down, rationing of gas and shortening the production week. this is the base case but it looks like we are heading to increasingly dangerous scenarios. the threat specifically around germany is underpriced. the immediate term reaction is to say it is about buying goons, -- bunds, the one problem with that trade is christine lagarde made clear last night in conversation with francine lacqua that they are very focused on inflation and they need to keep on hiking rates. also, because of the fragmentation risk in europe, the ecb might be selling goons to buy peripheral bonds like btp's. even though bonds are rallying as we trade this energy story, it is complicated in the second

half. european equities, bridgewater have doubled their massive short bet against european equities that does seem logical. they are unlikely to fall in isolation and are already in more discount to u.s., but volatility might make that difficult. when we look at the euro, i think on a volatility adjusted basis we could see europe continue to grind lower. is the euro index, a trade-weighted version of the euro, it has been going lower all the past year but it really accelerated when the war started around here. we had another like lower recently and i expect it to break significantly lower. even though the dollar euro is a significantly liquid traded pair, we could be heading much much lower than parity if the

gas crisis gets as bad as i fear in germany. tom: mark cudmore on further weakness for the euro-dollar, gains of .1% at 1.04, parity seems less than ambitious according to mark cudmore. let's get to this week's pulse survey which says don't let optimism among equities analysts fully. the key concerns were inflation and recession. >> high inflation is probably worse over the very long term. >> inflation rules the game. >> that's why the fed is committed to curtailing inflation right now. >> this risk of entrenchment where inflation fears are in your head, and you just expect it to keep happening is elevated. >> i think it is recession

risks. >> markets are not sure but actually we are at this tipping point. >> inflation is probably thin now, we are all aware we are in a higher inflation environment. >> i think people are going to talk themselves into a tizzy about recession. >> the strategies used and the last economic cycle cannot be the strategies that you go full force into when inflation is high. tom: let's get into the key market drivers with our mliv editor ven ram, and the head of emea investment strategy at jp morgan. your three scenarios when it comes to inflation, the potential impact on the greenback. >> yes, the dollar has done

pretty well and the first half. the second half will be predicated on inflation. ironically, in high inflation the dollar is bound to do better. the higher the inflation, that that is more likely to keep raising rates and that will buoy real interest rate differentials in favor of the dollar, and the dollar will advance if inflationary pressures prove as strong as they have been in the first half. if inflation and's, the dollar is probably falling. >> tom: and yet we saw last week u.s. 10 years following the most since about march of 2020, but in terms of the connection between yields and dollar, that has not broken so how does that

impact the outlook? ven: the currency markets are saying the rally in treasuries is overdone and that is how i see it. it is not so much the nominal yields. those real yields are favorable for the u.s. dollar relative to other currencies and that would prop up in the short term. tom: the rate differential between the u.s. fed policy and other central banks and how that underpins the u.s. dollar. that's bring you in at this point, grace peters, you also are considering the risks of recession. what are the odds based on your analysis and what kind of shape of recession are we likely to get, and how long is that duration going to be? grace: the risk of recession has risen as we gone through the

year. at the beginning of the year we put the risk at 25% over the next 12 months. we know that recession risks always rise in central bank hiking cycles. but now i put the risk of the u.s. more like 40 to 45%. it is getting to be a bit of a coin flip. we have seen a marked deterioration in economic momentum through the second quarter. that extent, if we see a recession, it could come at the back end of this year. we will see growth step down in that scenario for a couple of quarters in the minus two two -4% range before rebounding middle of next year. but with that range about,, i think -- range of outcome, investors need to position for tail risks as well as the base case for a softer landing. tom: if we don't get that 45%

chance of recession starting in the first quarter or fourth quarter, what is the fed's reaction because the market has priced in an aggressive rate hikes? grace: we would agree with the market, there are 150 points of rate hikes as the fed focuses on inflation. therefore, that's one of the reasons we have been with yields about 3%, adding to treasuries and high-quality fixed income u.s. investment grade because we think that gives you a good range of outcomes. given the rise of yields year-to-date, you can still get a bit of a coupon, but in that recessionary scenario where yields fall materially as the market prices out rate hikes you

could make actual gains and that makes an interesting risk/reward. tom: fixed income looking interesting for you. we will get more calls from grace peters after the break, emea head of investment strategy at jp morgan. the performance treasury secretary larry summers sees a rising recession danger for america before the end of 2022 but is confident central bankers have inflation under control. this is bloomberg. ♪

>> i think the risks of a 2022 recession are significantly higher than i would have judged six or nine weeks ago. tom: larry summers warning of the rising risk as easy as it of a recession this year. he went on to add that this would cause an early reduction in inflationary pressure meeting central banks may have to change course. our best base case is still a sawfish landing for the u.s. economy. still with us is grace peters, head of emea investment strategy at jp morgan, we were talking about potential reckoning with

earnings when it comes the second quarter, what and where will you be focused when it comes to earnings? grace: while markets have been falling for six months, that has not yet been reflected in consensus forecasts for earnings. consensus is looking for earnings to grow for the s&p 8% next year which is optimistic. the forecast next season will be the start of that reckoning moment. earnings i feel are not too much at risk but we need to focus on the outlook statements because i think numbers for next year look too optimistic when it comes to topline demand and also margins. it is going to be tougher for companies to maintain pricing power and manage input costs whether they be labor or raw material. tom: where do you expect to see corporate resilience pulling up, -- holding up, which sectors

will have that balance sheet and margin? grace: i think the classic defensive sectors, health care and utilities would be two of our preferred sectors. these sectors have outperformed market volatility, they are looking cheap on a relative basis but that is still a good place to hide. technology, particularly enterprise focused, focusing on businesses rather than can tumors -- rather than consumers. then thinking about cyclicals, not just what the next six months to hold, but one of the drivers of growth over the next 10 years. when we the about automation, decarbonization or reorientation of supply chain, there is a lot of industrial businesses that can benefit from those seismic shifts. tom: you have one that you describe as a close your eyes and buy for the s&p, there is a

further downgrade from where we stand now, so unpack that for us. grace: you are looking at a 30% peak to trough decline, that is what you would see in the average noncrisis situation. that allows earnings to fall 15 to 20% from here and means you are paying 16 times forward multiple for the s&p. that is maybe not the absolute trough but that is a level we would feel comfortable buying on a medium or long-term view. tom: and you have high conviction within investment grade fixed income, but high yields not yet compensating enough to justify exposure. grace: when we think about what the market is pricing, and also investor positioning around that, our sense is that credit spreads in the high-yield space could widen more if we go down the adverse recessionary scenario, and you are not getting paid quite enough yet to compensate for that risk. when it comes to higher-quality

fixed income, u.s. investment grade, we think the uplift in yield and movement in spreads is something we can feel more confident about both in the base case but also managing for that tail risk as well. tom: excellent as ever, thank you for coming into the studio, the call on health care and utilities as we weigh up the re cession risks. and within fixed income, high-grade not offering yet. shimao did not pay a $1 billion note that matured on sunday. we will get more on the latest property company to default in china. stay with us. this is bloomberg. ♪

tom: welcome back to the open, we are 21 minutes into the european trading day. gains of .8%, the best performing major indexes the ftse 100 gaining more than 1%. gains of .7% on the cac 40. the leading sectors, energy up more than 3% followed by travel and leisure, telecoms gaining more than 1%. three sectors in the red led by technology, down .6%.

in fixed income, a selloff when it comes to sovereign debt. the german ten-year for example up three basis points, currently at 126. u.s. markets are closed for independence day holidays. we are looking ahead to fomc minutes on wednesday and nonfarm payrolls on friday as heated debate continues about whether the u.s. faces recession. to china now, the developer shimao says it did not pay a $1 billion note which matured sunday, adding to a record year of offshore bond delinquencies. joining us for the details is christine young, one of the first to warn about shimao's liquidity problems last year. how widespread is this problem, and what can china's regulators do about it? >> the contagion has started from everywhere and now spread

to shimao. we continue to see the liquidity problem persist going to the second half of the year. the three developers are china's top 15 developers, and there are a lot more smaller private developers that are similarly struggling with refinancing or at the brink of people. tom: so just how many, just in terms of how vulnerable the developers are, and the liquidity squeeze we are seeing, shimao was seen by many others as being relatively resilient. so what has happened, and what is the risk for other developers within the sector? >> we started the warning about shimao in late 2020 when developers stopped buying land. and the fact that we have raised concerns about the off-balance-sheet debt as well

as cash flow pressure. six months on, we have seen more and more developers struggling with liquidity and the policy actions by the government has been deemed as too little, too late. we think the best timing for the government to step in was late last year. six months on, confidence in the market has been significantly weakened whether it is among lenders in banks, or investors in the debt market. and that continues to aggravate would be pressure for that -- liquidity sector for the -- pressure for the sector. tom: you say the response is too little too late, is there more that officials will do now that they see this pain across the sector? they have an interest presumably to ensure that this is not pulldown real estate in china. >> we see that china faces a

long road ahead in restoring confidence as the damage is already done. at this point, the government can consider extending onshore bond sales to more private chinese developers, or the state could -- some of the struggling players. for the china housing market, more could be done in terms of mortgage rate cuts, as well as policy stimulus on the local level to restore homebuying demand. tom: we are seeing falling sales, new units, for example. for the second half, is there any respite for sales? >> the market has been painful when it comes to recovering in home sales. when we look at june, the recovery is skewed towards estate own developers.

state own developers are enjoying recovery but distressed developers' sales are down 17% year on year. chinese homebuyers are increasingly aware of the default risk of developers and may balk at making a purchase from some of these developers, and that forms a negative feedback loop for these developers who have bad liquidity to begin with. tom: sorry, running out of time, great analysis on the chinese property market from kristy. this is bloomberg. ♪

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tom: welcome back to the open, we are 30 minutes into the european trading day and here are the top stories. u.s. equity futures slip and asia bonds gained as ongoing

growth concerns weigh on sentiment. larry summers says a recession could hit by year-end. german unions warn the gas crunch could wipe out entire industries. scholz signals a live tons a -- lufthansa bailout could be in store for gas giant uniper. strikes hit europe as workers announce more action to calm. -- to come. let's check in on these markets, a little under 31 minutes into the trading session when u.s. markets are taking a break for independence day on monday. the futures pointing lower for u.s. equities, modest gains towards the close on friday. gains of three points on the

european benchmark, the dax is higher .3% and the ftse getting more than 1% as well. oil is part of the upside on the ftse 100. the debate continues about recession and inflation risks, particularly stateside where data is starting to stop and when it comes to manufacturing and consumer purchases. sectors are mostly out of the green, just three in the red including autos, real estate and technology, technology down .8%. yields up in europe, energy getting more than 3%. we continue to watch oil and vitol warning you can see demand destruction in china. let's get to what is happening in terms of ukraine, part of the picture when it comes to the general crisis around energy. the ukrainian government and

global policy are looking to the future. switzerland is this week hosting the ukraine recovery conference in lugano. fame of the meeting is to raise funding and map out the massive task of rebuilding ukraine. for more, we are joined by maria tadeo who is at that conference in lugano. looking ahead to the future for ukraine, there are challenges in the short term as well, how are they looking at the short-term and then those longer-term picture, forgetting the finance in place to rebuild this nation? maria: tom, what a challenge. this conference put together by the swiss authorities as they say that militarily they are neutral, but politically they stand with ukraine. they have agreed to a lot of the

european sanctions on russia. today the ukrainians will pitch investors public funding and private capital, the reconstruction plan for the country. the war continues and russia has been able to sustain gains in the east. we are expecting president zelenskyy to address the conference. he wants to use the reconstruction fund not just to build the country but to set up the basis for a modern economy in ukraine. there has been criticism of the bank monopoly around the oligarchy, this is a country with rule of law issues, corruption. president zelenskyy says he hopes to modernize the country. you are very right. this is in the midst of the war and it does seem at times premature to talk about the reconstruction when you don't even know what piece will look like in this country. the issue fundamentally behind-the-scenes is short-term funding needs for ukraine. this is a country burning cash every month.

the war is incredibly expensive. to stay competitive, this government has the burn cash every month. there is issues that the money they will need will go in crescendo from the deal they cut with the g7. tom: we have had commitments of support from europe and the u.s. in terms of backing ukraine in terms of short-term demands, what are the details of the support that has come through so far? maria: that is bottom line the question. we talk about potentially billions of dollars, euros going into this country, rebuilding the entire ukrainian economy. the real question behind this, not just the numbers because we know they are going to be enormous, the national economy of the united states and the european union, are they going to be able to provide as their own economy suffer?

we asked repeatedly at the g7, nato says they are in it for the long run, but how long as whatever it takes? there is no answer and the mood has really changed over the past week. there was that note from deutsche bank thursday saying we are becoming increasingly concerned about the energy picture for the european union. the market is beginning to price that there will be a cast cut off sometime -- gas cutoff in the winter. the downside risks for german and italian industry are enormous. it featured a lot of discussion on the overall terms of what does it mean to help ukraine ad infinitum for a long time? tom: that political support again questionable for the long-term, and how long europe's population will stomach the challenges as a result of higher energy and the cost of supporting ukraine. maria in switzerland following this important conference, thank

you. we are now joined by artem shevalev, the alternate board director at the european bank for reconstruction and development, also a member of the supervisory board at private banks, so he can talk conclusively about the needs for ukraine. thank you for joining us, outline what you would like to see in terms of these commitments from europe, the u.s. and others in terms of supporting the bill back in ukraine? artem: as you've said, we have seen huge amounts of support put on the table bilaterally by g7 countries and other global economies, as well as institutionally from the imf, world bank, ebrd etc. at the same time, what lugano is critical about it finally putting this into a coordinated effort and making it into a more

specific roadmap. the commitments and numbers due stack up and look good. the thing is actually getting them in state coffers in ukraine. the budget in ukraine so far has seen some inflow, but still not near the actual needs of the ukrainian budget. tom: as ever, the commitments often look good but the devil is down to the detail and the ability of those donors to actually put the money to work. where would you say the priorities in terms of reconstruction, where does the money need to be directed in the short-term? artem: it's the short-term and the reconstruction. many international stakeholders say major reconstruction cannot begin until the military action stops. on the one hand yes, it is clear that we cannot start major

multibillion or dozens of millions of investment while russians are flying over. there are at the same time immediate needs. these are primarily state budget needs. as maria alluded, ukraine is spending in a month as much on finance as it usually spans in a year's time. that is number one, to ensure that those commitments to finance generals funding --general spending comes within weeks, not months. we do see the private sector during up for that. it will require a lot of coordination. the roadmap, the recovery plan that the government will present in lugano does look good. it does identify key priorities and talks about reforms and

critical items in the fight against corruption, in terms of the reform efforts, and business environment. but it also highlights critical needs in physicals reconstruction of residential areas, which would also in turn ensure energy security for europe. tom: there is a lot to unpack in this great take on where things stand. you say they are lining up the private sector to get involved, where are you seeing the most appetite for getting that capital on board to fund some of these projects in ukraine? artem: i'm actually quite hopeful that it would be an unprecedented marshall plan, probably bigger than the ppp effort, a private and public sector partnership where you would see a financial institution coming together with

major private-sector investors and companies. because again, we are talking about tremendous construction material industry, machinery, insulation material, energy. it's literally almost a boundless investment opportunity. tom: and you touched on the need to ensure transparency around the way the funds are deployed, and the moves ukraine has made. we have seen reconstruction after natural disasters and wars, so this is an opportunity for individuals to take advantage of that funding. what does the government of ukraine need to do to ensure that there is transparency and that corruption will be curtailed and that these funds will not go where they are not meant to go? artem: the presentation that hopefully will be presented

today is very explicit about that. it presents the steps on denting corruption that will have to be taken within weeks, not longer than that, in order to address key concerns from the international community. on the other hand, you see throughout the presentation that three keywords are there but transparency, efficiency and accountability. it talks about a critical need to make sure that funds, when they come, are used in a transparent way, efficiently for the benefit of the ukrainian people and that there is accountability both to the gradient and international community. tom: fantastic insights, artem shevalev, alternate board director at the european bank for reconstruction and development on the long-term and short-term needs of ukraine. a stark warning from the head of german unions, cuts in russian

gas supplies could result in the collapse of entire industries. we have more on that story next. this is bloomberg. ♪

tom: welcome back to the open. 45 minutes into the european trading day.

gains across european equities of .6%, the ftse 100 outperforming, gaining more than 1%. the like art is the dax, just clinging onto the green. energy draining -- gaining 3%. four sectors in the red. you also have some money moving out of sovereign debt, yields up when it comes to germany, italy and greece. let's get to the first word news with laura wright. laura: the british chambers of congress as more u.k. funds than ever are expected to raise prices in the next three months. three out of four firms have no plans to raise investment and more than a quarter predict a drop in profits. a think tank says disposable incomes among u.k. households grew .7% annually in the 15 years before the pandemic. argentina has named a new economy minister after the

weekend resignation of guzman. she was the minister of the buenos aires province. the sudden departure is raising doubts that argentina can meet the targets of its $44 billion imf program. the european central exploring ways to prevent banks from earning windfall profits from the subsidized lending program it launched during the pandemic once it raises interest rates. that is according to the financial times. the ecb's governing council is reportedly planning how to cut the extra margin banks could earn by placing them back on deposit at the central bank. a gunman opened fire at a shopping center in copenhagen, killing three and critically wounding three others.

a 22-year-old danish man has been arrested, gun violence is relatively rare in denmark. global news, 24 hours a day, on air, and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. tom: laura here in london, thank you let's get to germany and the energy space, top union officials warned that the country's industries could face collapse because of cuts in supplies of russian natural gas. the government is continuing talks to provide a to gas giant -- aid to gas giant uniper. what do you make of this morning from the federation of trade unions, is this realistic, are they being extreme with this morning? -- this warning? >> fairly stark words from the head of this federation, saying

that collapse is possible and that a permanent collapse of energy intensive industries like allie many of --aluminum smelters that use a lot of energy. we have heard this before and for several weeks that there is a real fear that should the gas flows get smaller scale or stop outright, that is a real prospect. industry will be hit first. the other side is the consumer side, and there is a lot of concern on what it means. the scenarios we have heard so far that the government is working on our that industry first needs to russian and only then -- ration and only then will it hit the consumer. tom: a stark warning indeed, underscoring the fears about a further cut in gas flows from russia to germany.

what is the german economy minister saying about further response to support the industry or the consumer? >> the economy minister said we are looking at a tight calculation for this winter. right now, we are in a race to fail the guests -- fill the gas storage sites. they are about 60% fall. it is the daily number everyone is fixated on, it's a bit like the corona numbers a couple weeks ago. and it is right now 60%. we need to get to 90% plus if we want to have any chance of making it through the gas heating season. and we are only about 100 days away from that. there is another important date, july 11, that is when nord stream one will shut off for

planned maintenance that happens every year when it is warm outside and you cannot -- do not need as much gas flow. the concern is that this temporary shut off will turn more permanent and that is a real concern out there. july 11 is an important date to look at and the government is trying its best to look for alternative sources. they are looking at stabilizing companies that are in dire straits. uniper is a utility that relies heavily on gas. a lot of wheeling and dealing behind-the-scenes to avert a collapse of the industry and the cascading effect it would have on consumers. tom: the key dates, and the key data in terms of storage for gas in germany. coming up, more flights canceled. we will take stock of the travel chaos still engulfing europe. this is bloomberg. ♪

tom: welcome back to the open. we are 54 minutes and 30 european trading day. gains of .5% across the benchmark, we started off about .8% higher.

futures stateside pointing to losses of .8% ahead of trading restarting tuesday. it is the july the fourth holiday stateside today. let's get across to the travel sector. airports are preparing for significant disruption over the summer just as travel returns to pre-pandemic levels. terrible timing. laura wright is across the latest, what are we expecting to see? laura: terrible timing indeed. carriers such as ryanair and easyjet, a national rail strike in france mirroring what we see in the united kingdom. the common denominator is paid, workers feeling their wages are eroded by inflation.

workers in the sector want to see that they are fairly compensated against a backdrop of booming demand. to add to this, we have received a number of capacity cut announcements from airlines and airports alike. schiphol in amsterdam this summer will see capacity reduced by 20%. for gatwick and british airways the drops will be 11% and 10% respectively. a number of workers left the industry during the pandemic and are reluctant to return to such a volatile sector. tom: what are the medium-term implications for us, the traveler, and for the industry as well. laura: in the medium-term, flight cancellations compared to june 2019, italy is a notable laggard, cancellations up 442%. the united states is in

outperformer, cancellations up just 22% for the period. disruption is less pronounced in the united states compared to europe. the key question is where will demand fall after the key summer months given the pressures on cost-of-living crisis? we have seen share prices significantly under pressure the last 12 months. tom: thank you for breaking that down for us, the worries within the travel sector. the markets in europe just paring earlier gains, .5%. futures stateside .2 losses of .7%. surveillance: early edition is up next. this is bloomberg. ♪

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>> i think the risks of a 2022 recession are significantly higher than i would have