equity trading. i'm francine lacqua in london with tom mackenzie. tom: stocks gain as jay powell could signal a higher peak. flight risk. sam bankman-fried is denied bail in the bahamas as he fights extradition to the u.s.. meanwhile, binance downplays concerns after record bitcoin outflows. plus, loosening its grip. apple will allow rival app stores on its iphones to comply with new eu rules. sources say, getting shares rise. tom: futures are range bound. the backs down .2%. the focus will be on the fed and inflation seems to be coming down not a huge amount, but maybe we saw peak inflation. tom: recalibration by markets after big moves across fx, bonds and the equity space yesterday on the back of that 7.1 percent

from 7.7% cpi the focus shifts to the commentary from jay powell. the market pricing a terminal rate of 5%. watching the commentary on the steer of rate hikes, the future essentially priced and by markets. the ftse currently down .3%. inflation moderating. the cac 40 in france down 17 points. in spain, the ibex down under a tentacle percent. oil is five and focus today on the back of opec+ downgrading its forecast of expectations of demand. we have the iea report out in under an hour. that will play into the commodity space. brent at $80 a barrel. a modest move lower but holding on to $80 a barrel.

and what transpires in china will be key. very high infection rates particularly in the capital. futures stateside range bound, sitting at these levels until you get clarity from jay powell. 3.47 on the 10-year, a move down two basis points. yields came down sharply on the back of that cpi print. the ecb decision on thursday, alongside the boe. francine: big one at that. a lot will rest on what andrew bailey thinks, or how much they should raise by. this is the picture for sectors. have 19 sectors that make up the s&p 600. all on the downside apart from energy, gaining .1%. the biggest losers. if you look at the ones falling the most, basic resources down .7%, technology and consumer down .8%. let's get to our mliv managing

editor, mark cudmore. you are looking at the s&p 500, good morning. mark: the two month relief rally in u.s. stocks is over. that made talking through the argument. i am not a big manafort technicals -- this one does. the price action yesterday was terrible. u.s. cpi print was unambiguously good news. it was softer than expected across the board. we got a rally in e-mini fu tures, broke the beautiful four touch line. we have still got to cpi and recession coming next year, and that is not properly priced in stocks. so we have what is called a gravestone which is pretty bearish at the top of the two month trend, and a failure to break that trend line. if you look at the s&p 500, it is the same.

we opened about that trend line, enthusiasm after that cpi print and then fell steadily throughout the day as we realized the outlook for u.s. stocks is not good next year. they are not priced the macro environment. these technicals fit my macro bias and what is that? that is the fomc won't surprise hawkish lee, but not dovishly either. two swallows don't make a summer, you need multiple soft cpi print before they relax. bite and has reiterated today the fed must handle inflation. the fed will reiterate they are focused on inflation, they are not going to react. they are not yet convinced about a pivot. i don't think it will be particularly hawkish, but they will probably downgrade their growth forecast. and next year, it will be a bearish message for stocks so those betting on a center really might be disappointed year end.

tom: giving up for potential disappointment on the back of concerns around loosening of financial conditions. maybe jay powell will want to pushback. mliv editor mark cudmore using the technicals i should say to support his macro thesis. there is a redhead crossing right now. just pointing to what is unfolding in china in terms of the disconnect between the rampant pace of infections, particularly in the capital and how officials are reacting. this is china deciding against postponing a key economic possible -- economic policy meeting. setting out their agenda in terms of how to address the economy. they had reported it would be postponed because of the rapid increase in infections. now china saying they have decided against postponing that key economic policymaking meeting. but real questions to what extent officials have a grip on

how they exit covid zero. this is a reminder of the u-turns happening out of beijing. when it comes to inflation, we will be talking about the softer cpi out of the u.s., it was also lower in the u.k. but in spain, rising modestly above the prelim, 6.6% vs. 6.7%. francine: the latest u.s. cpi reading shows that inflation dislocated in the world's largest economy. attention shifts to today's rate decision. cpi slowing down but still very elevated in the u.k. this morning. joining me as scott thiel, g fixed income strategist at black rock, thanks for coming in. i don't know what is price and, i know they are looking for slowdown and recession, is it too soon to call victory? scott: there are two important phases of the bond market this

year. there was the selloff through the end of september. there was a dramatic flattening which makes sense because we will have 445 basis point of tightening if the fed goes 50 again today. but then we had a bull flattening, which was rates were lower but five-year rates were leading the way lower, which suggests to forward to easing is being priced. this is exactly the rub for the fed today. they are going to want to slow the pace of rate increases. they have to deliver 50. if they deliver something else, it would be so out of the context of their communication. it would be too surprising, i think. they will deliver 50 but the question is can how do they manage the forward easing rate? how do they move that, and that is going to be around the communication, the economic projections. but the rate hike is a done deal and 50. but what is more important is

how they affect forward rate. tom: pushing back on cuts that have written -- that have been priced in 2024. how much more work to they have to do in terms of rate hikes in the new year? scott: potentially they go slightly higher than 5%. but they will peak around 5%. i think the market is locked into something around there. it is not so much about the peak anymore, it is about 2023 to 2024, and in our view has a lot of work to do around repricing the forwards. because in our view, inflation is coming down, but not enough for them to start the easing cycle that is priced. francine: i was going to ask, if you stood down inflation excluding not only food and energy, but shelter has dropped significantly. can inflation fall as quickly as it came? scott: to be a little cheeky, it

is easier to go from 10 to five and from five to three. the market is taking out the covid reopening pressure that we've seen, the supply chain pressure. but that rate of change will continue to go down but obviously it will slow. our view is inflation settles around 3%, not 2%. looking at 10-year breakevens as a market gauge of inflation expectations, they are 2.25. francine: are you thinking your call for a session in the u.s. is foretold on the back of softer cpi print and a resilient consumer? does that not open the path for a soft landing for the fed? scott: the impact of rates will take time to work through the economy. we still have for the whole year of 2023 kind of a zeroish rate, we will get negative gdp prints as we go through. we expect 1% contraction of the high point in the u.s., perhaps greater in the u.k. and europe

as well. i think the cpi numbers come down. more quickly than we have assumed but i think that is where they settle, that is where it is important. francine: it feels like the u.k. could be the most interesting, the bank of england with the governor having that attentional deciding vote. scott:market is pricing. but they have that interesting inflation dynamic which i and the u.k. numbers will be very choppy and hard to call. the peak in inflation is summer right now. tom: how much more work in the boe expect the squeeze on households to do to take the battle away from the boe in terms of inflation? there is more significant slowdown in the u.k. than the u.s.? how much can they rely on that in terms of pulling inflation lower? scott: in terms of addressing politics of inflation, they recognize growth will be pushed

out substantially more. they have the additional issue of brexit, and the inflationary and growth impact that is having. that is why we see recession in the u.k. greater then the u.s. on that interest-rate impact. francine: so what's the optimal time? scott: we like to do a little yoga, take a deep breath and a step back. for us, we need to see the price damage. to the comment about equities, they price both an optimistic earnings growth path, but also this really optimistic fed monetary policy path. so there has to be correction in those two for us to be positive on equities. that is an 8-10% drop from where we are now. tom: and you remain underweight gilts because you think there is risk that has not been fully priced into u.k. sovereign? scott: the u.k. market has come all the way back from what we

were talking about a couple months ago, this idiosyncratic risk. the pound relative to the euro, even u.k. rates. added do everything else is this risk premium the u.k. should carry, it doesn't have any at the moment. francine: we will talk more about the bank of england and china. the ecb is gearing up to reverse years of bond buying, are you concerned? scott: the qt program for the ecb is not the qt program of the u.s. and u.k. they are not selling anything, they are just going to slow down the purchase. francine: it's riskier. scott: it is because the markets are more dependent on it. italian spreads which we love to talk about are at the bottom of their recent range and staying there. one of the interesting dynamics is we don't think the ecb gets near that three percent, which is price, we think it is 2.5

because the impact of the recession is going to be significant and europe. and they have this dynamic around monetary policy and the impact it has on peripheral spreads. to your question, the qt program is going to come, but in the near-term the lower policy rate might trump that as we go through time. if anything, we're neutral in european government bonds but we have active debate on whether we should be positive or negative based on the view around the ecb. tom: interesting constraints by what is happening at the peripheries and concerns about greater contraction and the energy crisis in europe. currently looking at the u.s. 10-year 3.47, lower about three basis points, and the italian 10-year at 3.8. scott thiel is staying with us, chief fixed income strategist at blackrock. sam bankman-fried is denied bail in the bahamas. we hear from the capitol hill hearing that has rocked the

crypto world. this is bloomberg. ♪

>> the ftx group's collapse appears to stem from concentration of control in the hands of a small group of grossly inexperienced, unsophisticated individuals. >> appears to have all the

hallmarks of enron and bernie made off blended together named sam bankman-fried. >> this is the antithesis of related markets. >> failed to put in any of the necessary controls that are necessary. >> justice seems to be in process which i think is welcomed by those in the crypto industry. >> as information comes to light, there is a good chance more people will be under the microscope. >> this is unsophisticated whatsoever. this is just plain old embezzlement. francine: ftx executive john ray testifying on the collapse. the bahamas has denied bail for sam bankman-fried. tom: sam bankman-fried has denied fraud. the fed is poised to moderate aggressive tightening today while signaling interest rates will go higher than previously forecast. that's bring back scott thiel,

chief fixed income strategist at blackrock. we want to talk about the crypto space. have you been surprised there hasn't been more systemic risk emanating from this huge collapse of ftx and the business is linked to it? scott: that's the biggest surprise to me overall, without comment on the crypto space itself, the ecosystem has repriced dramatically. we have seen $2 trillion less of worth and before the crisis. and yet there has not been any impact on monetary policy, and it spreads, even on u.s. equities to some degree. so it's a really interesting development and suggests either investors are isolated from each other or there are cross investments, leverage from one market being used the leverage of the other market which is where you would see this kind of pressure. that is the most interesting observation from the fixed income perspective. francine: it could have gone badly wrong if there was some

crossover. is there any other part of the market, we talked about the idea couple weeks ago and treasuries being worrisome, is there any part who worry about not having enough liquidity? scott: for private markets, it's a question how the markets repriced given public volatility. but geopolitics continue to be a relatively important influence, and very hard to price. very hard to make a call on political outcomes unless you are in the room. even if you are in the room, the decision-making is still difficult. with what is happening in ukraine, and china, and the middle east, there are interesting events ongoing that pose potential real threats. tom: when it comes to credit, you are overweight global investment grade. looking at western europe local investment grade, we have seen the most downgrades by moody's since the 2013 debt crisis, are

you concerned about defaults taking up and a recessionary environment that you say is almost recessionary now? scott: there is a difference between u.s. and european credit. talking about european credit for a moment. spreads are very correlated to interest rate volatility in europe. what we believe will happen is the ecb won't be able to get to 3-3.2 5%, therefore we think volatility rates will go down. therefore that is a positive tailwind for european credit. if the spread is more than 1-1 .25%, investors are compensated for taking that risk. remember, these are short maturity bonds we are advocating. so the interest-rate risk is very low relative to the broader bond market. francine: so how difficult is it at this point you understand what china is trying to do? scott: very difficult. obviously, the covid reopening and how they are managing that is the most critical component to taking a view around the

economy. but we have taken the view that economic growth will re-accelerate to greater than 5% for the full year of 2023. but that was based on the view that we thought the government would reopen more quickly than markets had anticipated. we're seeing a spike now and the medical impact of that. so that will be an interesting dynamic. chinese equities are up more than 40%, the hang seng is up 40% the last month and a half reflecting the easier reopening china has implement it. tom: how does that view tightened your call around developed versus emerging-market credit? scott: we are neutral china both from abundant equity perspective. and underweight developed market equities, on the view that developed market equities have yet to repriced earnings downgrades we will see plus this monetary policy pathway. in china we are more neutral, we had an active debate because we think china would implement covid reopening faster than

market participants had thought. francine: scott, thanks as always for joining us,, chief fixed income strategist at blackrock. inflation dips from a 41-year high, raising the possibility that the worst of the cost of living squeezes coming to an end. this is bloomberg. ♪

francine: good morning, everyone. welcome back to the open. it is fed day. we are 24 minutes into the european trading day. if you look at european stocks, under pressure a little bit but it is all about what investors are trying to figure out, which is what we hear from the fed after a cpi that was slightly below expectations. alice get to the bloomberg business flash. alice: i judge in the bahamas has denied bail for ftx founder sam bankman-fried, ordering him to be detained in prison as he is too much of a flight risk. the u.s. has charged bankman-fried with eight criminal counts including conspiracy and wire fraud for misusing billions of dollars in customer funds before the collapse of his crypto empire. in interviews, sam bankman-fried has admitted managerial missteps but said he never tried to break the law. bloomberg has learned apple is preparing to allow alternative

app stores on its iphones and ipads in the coming months. the pivot is an response to eu law set to take effect in 2024 aimed at leveling the playing field for third-party developers. regulars have accused apple and google of wielding too much power as gatekeepers. danske bank is paying $2 billion to end a probe into money laundering at its estonian branch. the danish lender pleaded guilty to conspiring to commit bank fraud, and admitted to serving suspicious customers including in russia. dance cap is working to move past a scandal that wiped out top management and saw thousands of customers leave the bank. tom: ellis, thank you very much indeed. but stay with the story of danske bank admitting to those money laundering claims by u.s. officials, and paying $2 billion

to at least put an end to this scandal. currently gaining 1.68% on the back of that news, paying $2 billion in admitting to fraud linked to its estonian branch. inditex the home of sarai gaining on the back of a feet -- the home of zara gaining on the back of a beat. and watches of switzerland, we will speak to the ceo, earnings coming in line with estimates, revenue up 30%. stay with us, that ceo conversation is next this is bloomberg. ♪

francine: welcome back to the open, everyone. 30 minutes into the european trading day and here are your top stories. stepping down. traders cement a cap point hike

today by the fed read stocks gain even as jay powell could signal a higher peak. flight risk. sam bankman-fried is denied bail in the bahamas as he fights extradition to the u.s. meanwhile, binance downplays concerns after record bitcoin outflows. plus, loosening its grip. apple will allow rival app stores on its iphones to comply with new eu rules, and gaming shares rise. all the focus is on the fed and what markets will do on the back of that. tom: we saw that market rally and yields coming in significantly across the treasury curve yesterday, and dollar soccer on the back of that cpi print. but there has been recalibration and now there is caution, so what does that tell you about what has been described as this bear market rally. is it running out of steam? the benchmark currently down .5%, despite the fact that the cpi print is the second one to come in below estimates and leave the door open to a lower terminal rate. the markets are now pricing a

sub-5% handle when it comes to the terminal rate for 2023. we will get the dot plots later today. markets also pressing a downshift. 50 basis points, that is baked in for today, but do you downshift to 25 in february? that is what markets are pricing, what are the implications for earnings and potential earnings recession into 2020 three. across the european benchmark, losses of .5%. in germany, the dax down .4%. we had cpi and inflation of the u.k., slightly softer than the estimates but still near four decade highs, down on the ftse 100 .4%. let's see how things breakdown across sectors, middle of the week wednesday as we lead up to that fed decision and ecb, and to on thursday. utilities, that defensive shift gaining .1%, energy up as well. still on track for brent and wti to come in with two straight quarters of losses.

opec warning about the demand picture next year. we have the iea report in about 30 minutes that will give further steer on what to look for in terms of oil markets into 2023. at the bottom of the list, travel and leisure down 1.8%, financial services also losses of a full percentage point. francine: watches of switzerland has reported a 31.1% revenue rise in line with estimates. the luxury watch retailer reiterated growth targets for next year boosted by u.s. and european markets. we are joined by the ceo, brian, thank you for joining us, people are going crazy for luxury watches. but we are going through a huge cost-of-living crisis and recession. how are you expecting demand and supply to hold up in 2020? -- 2023? hugh: we get indications of

demand and supply for major watch brands. i have never been let down once the indications are given. so we feel okay on the supply side. in terms of demand, the majority of what we sell is waiting list clients. you are looking at a year of a waiting list, so we do not see that being affected. the balance of the business is doing well, we are gaining client service in market share. we maintained in our statement our gains for the year, and are positive for the future. tom: it is interesting, the stimulus checks came through, no interest rates, we are in a

different environment now of recession peers. we were speaking to blackrock saying recession is baked in for the u.s. next year, can you really maintain that guidance, there will be a squeeze the top end isn't it? hugh: there is no question the economic scenario is pretty negative. our consumer is less affected but most important look, or category affected. with covid, the watch category is underdeveloped in the u.k. and especially in the u.s. also, in europe where we just launched. our leading model in that category is working very well. we are fortunate that predominantly what we sell is swiss watches. it is a conservative industry,

they focus on quality of product and innovation. we have the greatest swiss brands you can imagine. we are in a fortunate situation. we are not being complacent with that. we expect the second have to be tougher, and that has been included in our gains for the year but we are holding. francine: i don't know how much you i have been able to increase your prices, but what is your price perspective for 2023? if you increased prices 20%, with that make a difference to demand? hugh: the secondary marketplaces are way more than 20% above retail. we effectively don't set our prices, we follow the recommended retail that comes from the brand. prices have been up this year.

around 7% or so. we anticipate potential for price increases again next year. we experienced no real elasticity, demand continues to exceed supply. tom: and as i wait for the daytona on my waiting list, i wish, give us your top $310,000 watches as we head into the -- top 3 $10,000 watches as we head into the holiday season. hugh: the diving watches, rolex has been hugely popular, the santos from cartier is a wonderful choice. we have them all at watches of switzerland. francine: think is a much, brian

duffy, chief executive of watches of social and. in the u.k., inflation dipped from a 41-year high in november, raising the possibility that the worst of the cost of living squeeze is over. joining us now is lizzy burden, tomorrow is a big day for the bank of england. inflation is lower but it is still very high. lizzy: this is bittersweet for the bank of england. it doesn't really move the needle after all the data we have heard. inflation looks to be past its peak as in the u.s., but it is still five times above the bank of england target. so it might embolden some doves on the committee because it has fallen lower than expectations. they are worried about the recession risks of a big hike when there is a 18-month lag in monetary policy, and the hike

would take place right in the eye of the recession. but the hawks are saying how high this will become so it looks like a half point tomorrow as we expect from the fed and ecb. tom: and it looks like tightness in the labor market remain significant here. lizzy: we have had a bold report from the chairman of the treasury select committee overnight. the committee says that perhaps the benefits that have been given to deal with the cost-of-living crisis are putting people off work and contribute to labor market inactivity. when there are labor shortages it adds to the pressure on wages, which as of the inflation problem itself. this is something i have heard behind the scenes from economists, but it is bold and controversial to hear from the treasury select committee. they want benefit spread out over a longer period of time. they want the new worker pension

secretary to look at this in the so-called stride review on labor market inactivity, and i understand he is looking at that. but i look forward to questioning harriet baldwin about this on bloomberg radio later this morning. tom: how to compel people to get back into the workforce, as he barton with a previ -- lizzy burden with a preview of the boe decision on thursday. opec slashes its oil demand outlook, citing mounting global uncertainty while urging "vigilance and caution" to its members. more on the energy space next. this is bloomberg. ♪

>> on june 1 of this year, the cost of all damages was $350 billion but now they estimate all our losses and damages in the amount about $700 billion. tom: ukraine's prime minister speaking exclusively to bloomberg about the estimated cost of damages to the country's energy infrastructure from russian bombing. francine: staying on the energy

story, opec has slashed oil demand outlook exciting mounting global uncertainty while urging vigilance to its members. joining us as carole nahkle, chief executive of crystol energy, grade you have you on the program today. when you look at supply and demand especially with china, how are -- or when are you expecting peak oil at this point? [no audio] francine: i think we have audio issues, a very 2019 problem. carole: can you hear me now? francine: perfect. you unneeded. carole: i was saying the reported headline sounded more pessimistic. i saw a touch of optimism about the elephant exterior, for example, china which saw a decline of 187 barrels per day.

for next year, the opec monthly report talks about a rebound in chinese demand because of relaxation of covid rules. that was more of a positive message, there would be maybe less demand on opec production compared to expected before. but compared to the supply side, there is more supply coming to the market primarily from the u.s. but interestingly, they acknowledge the decline in russian production though it was interesting to see how the numbers compared to the iea. the iea talks about roughly 2 million barrels a day, but opec and the report talks about almost 800,000 barrels a day decline in russian production. that means they are more optimistic about next year and feeling great about a very tight market. tom: i have a question where that leaves pricing. currently brent just over $80 a barrel, down .1%.

goldman sachs did cut their brent forecast for the first and second quarter of next year to $90 and $95 from $110. goldman sachs were very bullish on commodities at the outset of this year. they are now downgrading their forecast, does that sound realistic, $90 to $95, do you mean some hundred dollars for brent next year? carole: these revisions highlight the uncertainties we are facing. we were overexcited perhaps about china reopening, and relaxing its covid policies, i collect it the china roulette because there are lots of uncertainties about the impact of this relaxation of covid policies. is it going to be greater operation somewhere else? so there is a huge question mark about the outlook for china. then you bring in the geopolitical uncertainty. to go back to the report of opec, they also shed a more --

shared a more optimistic outlook about geopolitical developments, saying that would not escalate further. but that is also a big area of uncertainty, the impact of sanctions on russia. we see a reflection of the level of uncertainty you are facing next year, including the macro economic outlook. francine: there is a great piece by one of our oil experts. it basically argues that if you look at the latest report, it should have given opec time to reflect and oil traders should have done the same, but actually it has emboldened them. it is the market overall too bullish about where the price goes? carole: maybe, but again, i'm just talking about what's happened today and what can happen in terms of the data on the macroeconomic outlook with inflation easing. and that could signal a more

relaxed monetary policy because that by itself was a big worry in the market. very aggressive monetary policy, tightening of interest rate. we cannot say from one month of data whether inflation has peaked and we are heading towards a slowdown. i would remain more on the cautious side about the outlook of next year. tom: what is the outlook for russian oil next year, given the price cap that has been agreed across europe and the g7? how much does that erode demand for russian crude? carole: interestingly, opec sees clarifications around the price cap as easing supply concern. that was by itself a hidden kind of message to say this price cap is not worsening the situation, is not going to have major impact on russian oil. the lack of investment and impact of sections on the economy, we cannot say it is not going to have impact russian

production. but as long as we have the biggest buyers of russian oil, namely turkey, china, india and even in the middle east where i am sitting, some of the countries. the couple of millions lost of russian supplies are unlikely to materialize. that was the fear of the beginning of this year and it did not happen. now we have moved our forecast for next year. but as long as not everybody is coming on board in terms of joining the price cap, which is not prohibitive at $60 a barrel, i don't expect to see major loss of russian supplies. tom: carole nahkle, ceo of crystol energy on that opec report, looking ahead to the iea. currently brent trading at $81, sunday five dollars on wti. following a softer cpi print out of the u.s., traders calling for a half-point hike today. that is a given by the fed but we are focused on the commentary

from jay powell and the outlook for the terminal rate. this is bloomberg. ♪

francine: welcome back to the open, everyone. we are 52 minutes into the european trading day. you can see pressure on equities read in europe, down .4%.

stocks opening lower as investors debate whether inflation having eased yesterday is enough for the fed to slow monetary tightening down. tom: that cpi print showing inflation is indeed slowing in the world's largest economy. attention now shifting to tonight's fed rate decision and what jay powell has to say. let's get more with gina martin adams, chief equity strategist from bloomberg intelligence. let's take a step back. the pricing action yesterday on the back of the cpi print was remarkable. bonds, equities with sharp moves but ending the day up 4% for the s&p. the ship was remarkable, what is the sentiment within markets as they assess the softer cpi print and look ahead to the decision today? >> it was more moderate rate action, the last few cpi print have resulted in some of the most extreme reactions in the

equity market we have seen in u.s. history. to see a move of less than 1% in the end is a modest reaction, but generally a more optimistic tone that yes, we can feel better about the outlook for fed policy. we are likely to get a 50 basis point hike tomorrow. there is a decent amount of uncertainty as to where policy goes next year. yesterday, the bond market took 20 basis points of hiking out of the terminal rate. so the bond market certainly reduced expectations. that creates a little near-term uncertainty going into the fed meeting. i'm not sure the fed is going to confirm what is now priced in the bond market for the terminal rate coming in may 2023. francine: what part of the cycle are we in? is it because we are also getting rid of 10 years of easy money? >> and the u.s., the other interesting thing about the globe is the cycle is not all

coincident. what has happened in china has been extreme relative to the rest of the world which has been growing over this year. so there is this decoupling going on, which is new for the global economy which for the last 20 years has been moving in tandem. nonetheless, within the u.s., it looks like the u.s. is slowly falling into some form of recession. we will continue to debate whether we are already there or not throughout 2023. most economists say we fall into recession in the middle of 2023. that would suggest to the equity market that you start looking for early recovery place. the equity market tends to lead the economy by about a year. so it would make sense the equity market will start looking through the weakness, trying to figure out what the next cycle looks like and what the recovery ultimately looks like. tom: that ties into the debate about when to get back into growth as you look at where we are in the cycle given how much that has repriced, particularly mega cap tech.

that brings me to the story around apple, changing its rules in europe around its app, and you can -- who can publish and what that means for game makers and companies like spotify. how do you read that decision broadly for the tech sector? >> it is not particularly consequential for the tech sector at large. i said that because of the price action we saw yesterday, apple has such a gigantic market cap dominance, it has a big share of the index and the overall sector. so the stock price was fairly flat. when you look at the grand scheme of things, the app store is responsible for about 6% of apple revenue. overall even any slight redistribution, europe being 25% of overall revenue as well, probably benefits some tinier companies which get a big benefit when something changes for apple. but it doesn't really change the

dynamics of the u.s. tech, because that is so dependent on apple. so you want to be on guard for regulatory action creating a shift in margins. this one, and terms of the price action and our analyst's opinion does not move the needle for apple at large. which to me says i don't want to be too excited about what it might mean for the tech sector in general. francine: thanks so much. we also have some great interviews in the next hour, including the smiths group chief financial officer. that is a conversation of technology but also the future of investment in the u.k.. this is bloomberg. ♪

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>> this is "bloomberg surveillance: early edition" with francine lacqua. guy: good morning everyone.