start of cash equity trading. i am tom mackenzie. outflows mount. ubs reports weaker than expected profits as the investors poll money. -- pull money. gazprom-- plus, china tech lives stocks as alibaba announces plans for a primary listing in hong kong. let's take a look at futures. the corporate story in asia is around alibaba and the inflows they could see from the mainland on the back of that decision to list in hong kong. futures pointing lower by .2% after modest gains yesterday. the gas story in front as well as the earnings stories.

the ftse 100 futures pointing higher on the back of higher energy and basic resources. the ftse 100 taking up marginally. as we weigh up the impact of the pricing around energy. it was the decision by russia to further restrict the gas flows yesterday. it will kick in from wednesday. from 40% to 20% and the european ministers are meeting today for an emergency summit on the response to that risk. earnings front and center. we had a beat from unilever and easyjet. in terms of the ftse 100, .4% and the ibex lower by .3%. we will keep an eye on the rest of the major indexes. futures stateside, losses of .2%. a mixed day for the u.s. equity session yesterday. a big tech day with alphabet and

microsoft reporting later today. u.s. 10 year currently at 1078. the twos and flags -- a flag of recession rest. the corporate debate is a cute on where we stand in the markets. in terms of the bloomberg dollar index, range bound with a little movement. natural gas prices shot up yesterday. winked the russia story. we will unpack that and the implications from it across the hour. earnings day including unilever and the company says it is still pushing up prices as it faces the biggest cost surge in decades with inflation hitting many of its key markets. we spoke with the ceo a short time ago. >> we see peak inflation coming sometime in the second half. we are not there yet. we will expect some time

probably towards the end of q3 and beginning of q4. we will see the full flow through of commodity prices into retail prices of the market. tom: that was the ceo of unilever. he was speaking to us a few minutes ago. we will have more from that interview later in the show. let's bring in mark cudmore. you are laser focused on the gas story. mark: laser focused might imply more wisdom than i expect to provide. but we are trying to catch up on what is going on with the gas dynamic. it is a bigger story in europe for the second half of the year and going into next year. this is the chart of the supply via the main pipelines into europe. the white line is the main line via poland. the supply there has disappeared since earlier this year. the green one is the you can

transit which has been slashed. the main one, the pink one was shut for maintenance last year and shut again this year and we have reopened at lower levels. it is a real worry. it is the overnight story. they are cutting the supplier. and the turk stream that has been less disrupted. we are only getting about 100 million cubic meters a day of gas when we used to get more than 4 million cubic meters of gas your ago from russia. this is a big supply problem. the next chart shows you the price impact and how major this has been for the european market. this really is critical to the economy in europe. the yellow line is the benchmark. the blue line is the u.k. natural gas prices and the white line is u.s. natural gas prices. you can see back into mid-2020,

they all were at the same level and made sense. oh -- over the last couple of years, u.s. natural gas prices have risen a lot but nothing compared to what we have seen in europe. they remain elevated. for more than a year now. a broken market. it won't be fixed anytime soon this remains the biggest story for the european economy into the second half of the year. tom: a well-informed macro tourist. breaking down the gas story for us. let's get into some of the key market drivers with paul jackson from invesco asset management. a lot to talk about whether it is earnings, the fed and gas. let me start with gas. how much of this gas shock is priced into european equities at this point? paul: i think not a great deal to tell you the truth. i think markets so far this year

have priced in the turnaround from central banks to moving towards aggressive tightening. i think there is some element of recession risk that is starting to get in there but frankly if supplies are cut abruptly from russia to europe, i think that will mean a serious recession and i don't think that is being christ in yet. tom: a serious recession. i wonder the implications for the ecb. there is an expectation that you get another 50 basis points. can they pursue that rate hike cycle in the face of those risks? paul: i am surprised the ecb has chosen this moment to get aggressive with rate rises. it should have done it much sooner. last year was the opportunity. now it is doing it at a time when the economy is slowing. last week we so manufacturing

pmi went below 50. a survey from germany was pretty weak. the reaction in the bond market last week -- on friday we had a collapse on bond yields in europe on the short and long and and i think that is suggesting that markets are starting to believe that the ecb is making a policy error. for them to go ahead with another 50 basis point rate hike would be quite difficult. they may want to do it but i'm not sure they will be able to do so. tom: very interesting. when we look ahead across the atlantic to the fed and the 75 basis points that many assume will come through on wednesday, are you at the point where you are starting to see evidence there is enough coming through in terms of for example falling gas prices and weaker economic data out of the u.s. to suggest we may be getting to the point that we could see a pivot from the federal reserve? paul: i think they will do

another 75 basis points. i think 100 basis points is off the table given the weakening data. another 75 basis points. there i think they will start taking things easier and they will slow down the rate of tightening. i think the u.s. consumer will be showing weakness in the second half of the gear. i think profits are going to be hit the further we go into the year so that has an implication from the investor standing. i think the fed will move from being very aggressive and tightening to more prudent and then as we get towards the end of the year, not too far from fed rates peeking out. tom: we currently have the yield inversion fairly pronounced. you were talking about european yields in the last minute. when it comes to the yield curve in the u.s. house billion is the

inversion we are seeing as the recession risk indicator? paul: i tend to think of the yield curve as being a scent of rather than a predictor or cause of recession. but i think we are at an interesting point for many reasons. i think the economy is slowing. i think there is a reasonable risk of recession in the u.s., less so than in europe. i think the inversion of the yield curve is coming at the moment that we are looking at the recession and maybe we have -- i have been calling for long bond yields to go higher for some time but i think we have seen the peak in those long yields and i think the markets are going to be looking with trepidation towards the risks of a recession and i think that will be a feature in the coming months and quarters. tom: a peak in long yields.

the market is pricing in cuts as soon as the first quarter of next year from the federal reserve. we will get paul jackson back from invesco asset management. stay with us for that. coming up, unilever raises its prices to battle the impact of rising inflation. we will bring more from our interview with the ceo of unilever, alan jope. this is bloomberg. ♪

tom: welcome back to the open. we are 12 minutes into the trading day. losses across the benchmark at .1% pure energy and basic resources gaining giving a lift to u.k. equities on the ftse 100. losses of about .3% on the dax. a similar picture for the nasdaq futures as we wait for those tech earnings from microsoft and alphabet. talking about earnings, let's bring you back to the european space. ubs, stock is falling on the back of the numbers out of the swiss lender. a loss of almost 6.4% for ubs. topline second-quarter income coming in missing estimates.

asset -- they say that private clients are still on the sidelines. we had that interview with manus cranny and the ceo of ubs. uniper is linked to the gas story. we know the russians are cutting gas from 40% down to 20%. utility company in the midst of a bailout from berlin. and unilever gaining 2%. it was a beat for this company. they have been able to press on some -- they have been able to pass on some of the price pressures. bloomberg's reporter has been speaking to the ceo, alan jope. >> we have had a good first half of building on the momentum we saw in 2021. it has been pricing led but with better than expected volumes. our operating profits are up 200

million euros. the performance has been driven by our strategic priorities. our big brands grew 10%. our priority markets, the u.s. and india, grew well. china suppressed by covid lockdowns but we are strong there. e-commerce growing well. our new businesses, prestige bootie is doing -- prestige beauty is going well. quality growth remains our top priority driven by disciplined execution and strategic choices that i just outlined. we are very conscious that the consumer is feeling the pinch and many parts of the world and it is a different picture in different parts of the world. >> how long do you expect inflation to last in the u.k. and worldwide? >> it is a dangerous business to predict the future at the moment but we see peak inflation coming sometime in the second half.

we are not there yet. i think we will expect that sometime towards the end of q3, beginning of q4, we will see the full fish -- >> you say you expect to improve margin in 2023 and 2020 four but in a cost-of-living crisis is and that your duty to prioritize consumers over shareholders. -- over shareholders? >> we have only passed along 70% of the input costs we have felt through to retail pricing and we have guided the market that our margins will be down this year so we are going to spread out the cost of increases we are seeing over a couple years. we are doing everything in our power to find savings and efficiencies and make sure the pressure that is brought to the consumer is the minimum possible

one. tom: that was the ceo of unilever speaking to our bloomberg reporter who joins us in the studio now. what where the key takeaways from this interview? >> this is a consumer goods business in a cost-of-living crisis. alan jope came out very confident about the results you see that shares up this morning. he is acknowledging the company is battling a sustained inflation crisis. he is conscious about the hit to consumers. he is acknowledging that prices are going up. he says they are only passing along about 70% of input prices. he says margins will be down and they will spread out the cost of increases over a couple years. he is trying to show empathy with the consumer. he is saying they are doing everything and their power to find savings. you might ask if they would not do that anyway but he did say it

was their duty to prioritize the consumer over shareholders in this moment. he said they are trying to be surgical about where to target the price increases. this is a dangerous moment for a company like unilever. customers are trying to pinch pennies left right and center and the dangers they turn to the store brands and never come back to what unilever is providing. tom: top line results showing they are steering that difficult balancing act. room and the question about inflation -- and the question about inflation. tom: thank you for bringing us the interview. let's bring back in paul jackson, global head of asset allocation research at invesco asset management. your take on the earnings season so far and whether indeed the

earnings estimates we are seeing are factoring in the pressure that may come through on these margins. paul: i have been impressed so far this year that earnings have held up as well as they have. we are seeing some negative pressures with the banks. overall, perhaps better than i might've anticipated. nevertheless it is my observation that when you see a slowdown in industrial production growth, you see maybe 6-9 months later a slowdown in earnings. i think there is a delayed reaction. you layer on top of that the margin squeeze coming through with higher raw material cost and in some sectors higher labor costs, i would think there is still scope in the second half of this year and may early next

year for earnings disappointments. tom: further earnings disappointment potentially in the pipeline. is there a sector that stands out to you as an opportunity in terms of the derating that we have seen across some of the equity region? paul: i am favoring chinese equities at the moment. i know they have been out of favor for the last 18 months and there have been good reasons why that has been the case. one of those reasons has been the slowdown in the chinese economy in the first half of this year. part of that related to covid policies. i suspect that just as at the u.s. and europe are slowing down in the second half of the year, the chinese economy may be accelerating. we have seen some signs of improvement in recent data.

money supply, credit growth picking up and the pmi's have been improving. i suspect with the fiscal boost coming along that the chinese economy could outperform at a time when the ratings, the valuations of the market are pretty low compared to somewhere like the u.s. i think the chinese market may continue outperforming as it has in recent months. it may continue to outperform in the second half of the year. tom: an opportunity potentially in chinese equities. more broadly when it comes to what is happening in particular when you think of china you think of emerging markets and that the u.s. dollar. king dollar has been such a theme. is that the starting to peek out? -- is that theme starting to peek out? paul: i have to think so. the yield spread between u.s.

bonds and for instance european bonds has been widening. that typically drives up the dollar. i think we may be coming towards the end of that story. i think we are probably passing the moment to of peak fed tightening. and i think as the fed starts to take the foot to off the gas in terms of the amount of tightening it is doing, then i think the dollar which is pretty expensive now in historical terms, i think this team will come out of the dollar and i think it will be weaker by the end of the year. tom: looking for a weaker dollar by the end of the year. paul jackson from invesco asset management, thank you. valuable insights. coming later in the show russia does cut the nord stream gas flow to europe. it will from wednesday. more on that story and the broader implications for europe

coming out. this is bloomberg. ♪

>> the ecb is ready to do whatever it takes to preserve the euro. >> i have committed to staff not to say the famous three words. [laughter] tom: ecb residents -- ecb

presidents then and now. mario draghi credited with saving the euro with his famous speech. less frequently remembered as what draghi said immediately after those famous three words and he said -- "believe me, it will be enough." can the ecb pack the same punch as we weigh out the risks around gas, recession risks and the political crisis facing italy 10 years on from those famous three words. let's get the bloomberg business flash. alice: barclays will try to buy back as much as 70 -- 17.6 billion -- it accidentally sold more than what was registered. the six-week repurchase period

should determine total losses from the error. barclays has already put aside more than 500 million pounds. coin best -- coinbase is said to be facing a u.s. investigation. sources say the sec has increased scrutiny of coinbase since the platform expanded the number of tokens it offers. the chair has previously said trading platforms should do more to protect retail investors. it is your bloomberg business flash. tom: coming up, europe still faces the daunting challenge in the event of a cold winter. we discussed the implications of a further reduction in gas close -- and gas flows from russia. stay with us. your

tom: welcome back to the open.

30 minutes into your trading day. your top stories. outflows mount. ubs reports weaker than expected profit as the global selloff season. gazprom curbs flows through nord stream as the eu draws up plans to reduce consumption. china tech lives asian stocks as alibaba announces plans for a primary listing in hong kong. let's check in on these markets, range bound across european equities. optimism in asia on the back of the news from alibaba. they will be exposing themselves to mainland china. in europe, range bound. weighing up a bit of a mixed earnings picture. beats from jetblue and unilever but a miss from ubs.

the dax is down .4%. the gas factor and the decision from yes shut yesterday -- from russia yesterday that they will further reduce flows should kick in on wednesday. the ftse 100 gaining .5%. it is all about the energy story. oil and brent and wti are getting a boost. energy is up. oil prices are higher. a linkage with what is happening in gas. and a jump in iron ore prices. energy gaining 1%. at the bottom, retail, financial services and real estate. we are looking ahead to the decision by the federal reserve. fully expect 75 basis points. more data out of the euro zone and the u.s. about inflation towards the end of the week.

let's get back to the gas story. russia sharply reducing the flow of gas to germany and reminding europe of the daunting challenge the continent faces to build up its energy stockpiles before winter. eu countries are set to tussle over an emergency regulation that could force 15% cuts in gas consumption during colder months. for more, let's bring in our reporter from brussels. how significant is this an announcement from gazprom? >> it is very significant. european union which has relied on russia for 40% of its asset supplies before has seen this gas supply continuously reduced. there are 12 countries that already have experienced disruptions out of the 27 member states. the most recent announcement from gazprom yesterday flagging

that as of tomorrow the gas flow through nord stream, the major conduit of gas to europe, will also be reduced 20% due to a technical reason. and this is happening at a time when european nations are working really hard to fill up their gas storage is for the winter. we hope -- we heard today from the energy commissioner, simpson, that the gas storage is now filled to 67% and the target is 80% in november. there is a lot of work to be done and there is no certainty whether this gas supply will continue. the commissioner said we have to be ready for a gas tax at any moment. she said this before a meeting of energy ministers in brussels today who are discussing that situation. tom: gas prices up again.

dutch prices up .3%. what will the focus of the energy ministers' meeting be? >> so far, it is not compulsory. a proposal that came from the european commission last week is looking at it as a voluntary reduction of 15% in the next eight months. there is a trigger mechanism. if gas is cut off completely, that kicks in. this is something that energy ministers are going to discuss today, very shortly. there are a lot of different positions. there are a lot of different starting points and geographical specifics. each country will be bringing to the table their own concerns but in the end, they hope there will

be an alignment and a political agreement that will show solidarity of the european union. tom: we will see gas story. let's stay with the threat of a russian gas -- it could reduce the continents gdp by 1.5%. joining us is janet henry. wmov% in terms of russian gas flows to europe, what is the economic impact across the euro zone? janet: it is a direct supply shock and we are already seeing the pricing pressures coming through. the numbers you mentioned -- our european economist came up with an estimate that it would lower the gdp by about 2.5 percentage

points but there would be country differences. italy and germany being more affected. the imf publishing numbers suggesting that polish gdp would be lower by six percentage points. that is why these discussions are so important. to what extent is the burden going to be shared? tom: 6% as remarkable as a prospect for poland and what that means for the ecb. what do you and the team assess as a response from the european central bank if you do at a full cut off of gas which we cannot rule out and the ability for the ecb to continue the rate hike cycle in the face of sharp drop-offs of growth? janet: it is an additional challenge and part of the broader debate between inflation and recession. so often people talk about there

being a recession and we can stop worrying about inflation. if a recession is being caused by a supply shock, the recession will not lower inflation particularly quickly. the ecb already faces a number of challenges. we are still forecasting 50 basis points at the september meeting. it would not be the first time the ecb's plan was to continue to tighten -- it would not be the first time the ecb's plan to continue to tighten has been called to a halt. but inflation is a lot higher and at this point we still think the fed and the ecb will have to continue to tighten at least over the next few months. tom: and for the fed, we are looking at 75 basis points on wednesday. how far into restrictive territory does the fed have to go at this point? janet: 75 seems like a done deal

from the fed. that would take it to the 2.2 to 2.25 which is broadly in-line what is seen to be the long-term rate. how restrictive will they have to go? we think they will slow down the pace of tightening. they will keep more options on the table. it is a different inflation story in europe. less supply driven. we see rates peaking a bit higher than the market is currently pricing in. tom: a number of the guests we get on talking about a potential pivot of the fed, strategist looking at this as an opportunity. what are you looking at to get a

sense of when the pipit might come -- the pivot might come? janet: we don't have a piv ot. the fact is the fed has got a big inflation challenge on its hands. it will have to go restrictive. they need to see a sharper slow down and they need to see wage growth start to slow. peak inflation is not enough. they will be mindful of what happened in the 1970's and 1980's when they did not tame inflation enough. tom: we are working through the

earnings this week. we had a warning from walmart. in europe unilever doing pretty well. that brings me to a question about the health of the household balance sheet. janet: clearly globally we have some different stories. a number of economies is a housing story. new zealand, australia, canada and sweden did not have a big deleveraging during the global financial crisis. some of those, notably new zealand, we are looking for a recession on the housing market. in the u.s. it is a diversion picture. half of the households are getting by on savings should they have to. half cannot. which is why you are likely to see a divergent downturn in the same way that you sell quite a diversion upturn across firms.

big divergences coming through and quite a complicated inflation backdrop. tom: janet henry, thank you as ever for your insights. coming up, tech titans at reporting this weekend we will preview what is in store for the sector with an outsized presence on the s&p 500. this is bloomberg. ♪

tom: welcome back to the open. you are range bound across european equities. a lack of conviction as investors weigh up the energy story and the energy crisis. european ministers meeting on that issue. the upside you are seeing -- the ftse 100 is gaining .5%. unilever is having a pretty positive affect across the european stocks. ubs on the downside dragging the overall index lower. ubs down six quite part percent. second-quarter earnings are in

and the net income for the second quarter missed the average analyst estimate. we sat down with ubs ceo. >> what bothers all of us is that it is so unclear what is happening. the next two months will continue with a lack of clarity. i think the central banks are very hawkish and looking at the inflation numbers and reacting. in our view, our last case does not expect a significant downturn in the u.s. but for europe, for example, we don't also expect a significant downturn unless -- unless the price of gas goes up. manus: is that your top concern for europe? >> the top concern is being cut off completely from the gas supplies. it will increase gas prices and will render a couple industries

very inefficient. and increasing prices. and with that, generating further inflation and making inflation stubborn which is the real danger. that inflation is here to stay. manus: is that inflation coming through with the risk -- with the respect -- with the request for pay rises? >> in some businesses there is still some tension in the labor markets. that has not gone completely away. it is a mix of inflation and labor market circumstances. if inflation continues to be here, it will be reflected elsewhere. manus: you talk about the hawkish mood of the central banks. do you materially uplift that

number from when we last spoke? >> the $1 billion we indicated last time was the balance sheet we had at the end of the first quarter. going forward, we see about 400 million of that already in our p&l. we still think that. tom: bloomberg's manus cranny speaking to the ceo of ubs. that stock down 6%. let's get under the tech story. many of the giants poised to declare earnings. both alphabet and microsoft reporting later today. to preview what is ahead for investors and that embattled sector is the tech analyst with bloomberg intelligence.

how much of a direct line can we draw from snap and twitter last week to the big beast in the room this week? matthew: i think there is a question about whether snap and peter were suffering more from stock specific questions or a wider malaise. google to some degree benefited from some of the changes we have seen by apple about privacy. overall, the market is expecting the rate of growth this quarter to 11%. what we are seeing from some of the big brands is a confused picture. tom: how much can they rely on cloud businesses? that applies to amazon. is that a pillar of support for these companies?

>> for google it is relatively small. about 10%. they are still growing a lot. google expected to grow 36% this quarter. an important future profit driver for them. if growth slows, people want to see them get profitability. and for microsoft it is a much bigger business. market expects to see a slow down this quarter, maybe 20% growth. still strong but slower than what they have seen historically. most people think the cloud business will be relatively resilient through a downturn. corporate's are spending strategically on technology for the mid to long-term. on the margin there could be some volume pressure. tom: we will have to see if the

resilience for cloud comes through. watching the advertising's peace as well. -- watching the advertising pace as well. let's get back to the u.k. politics. blue on blue. this is what we will be looking at after the break. richie sunak and liz truss have trashed each other's policies during last nights debate. stay with us. this is bloomberg. ♪

>> your economic advisor has said that would lead to mortgage rates going up 7%. can you imagine what that would do to everyone watching? it will tip millions of people into misery. >> everyone thinks putting up texas at this moment will hurt the economy. you cannot put up taxes and get growth. tom: that was liz truss and richie sunak going head to head on the television debate. let's bring in david merritt.

our news director. it was the economy that was central within this conversation. >> it was the lion's share of the debate on the most heated discussion. you heard the main dividing lines. it is about tax and when to cut taxes. liz truss wants to do it right away and she says if we don't we are heading to a recession and sunak said if we cut taxes now, it will boost inflation. they really went at it on this issue. it is quite a divergent vision for the economy. sunak was really adamant that the conservative approach is to balance the books. and liz truss called that being counting at one point as an insult. being the chief being counter used to be -- bean counter used

to be a top position. tom: it points to the broader divergence within the conservative party. in terms of moving the dial, sunak is behind in the polls. >> it does not look like he landed any big blows. the initial readouts quickly after the debate showed the general public was evenly split. crucially, we do not all have a vote in this contest. it is about conservative party members. there was a poll for conservative members which showed liz with quite a lead after the debate. the need to cut taxes as a priority has been winning the day so far. tom: we have another debate unfolding later today. we will see if that moves anything forward.

walking us through the u.k. politics as a leadership contest eats up. let's check back in on some of the corporate's. we are in the thick of the earnings season. a message for ubs. the stock is feeling the squeeze. down 6%. the standout line is asset management outflows down 12 billion. we spoke to the ceo. you know -- uniper feeling the pressure. and unilever was a beat. we spoke to the ceo. they have been able to pass along some of the input costs. alan jope spoke to us and unilever is up 2.3%. that is it for the european markets. surveillance, the early

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