we have seen a number of ecb officials out of commentary suggesting it's time for the ecb to get on with it. equities are down and bonds are down. >> a similar story stateside. risk off picture when you look at the s&p 500. her if excelling we saw yesterday as well. the biggest moves back to september 2020 when antitrust concerns ahead of the election were the concern. the s&p 500 is down. it has bounced back from the level. keeping an eye on the technicals, they're starting to play a role in some of these moves. was interesting to me is the steepening we are seeing in the yield. if inflation is a concern, chinese growth is also a concern. the semi conductor index is up. the copper story is down hundred those are two assets that usually move in the same direction. today, they are diverging. >> let's get back and talk about the root of the volatility. the central banks are at the center of it all. today, top eu policymakers have been gathering at a special seminar discussing the response to inflation. let me bring you some of the commentary we have had. the bank of france representative,

guy: let's talk about the ecb. pristine lagarde hinting very strongly today that july is going to see a rate hike. the market has currently got july and september priced. the read on the bloomberg, ecb officials increasingly see rates rising above zero through this year. what do you see the ecb having to do here? how far above zero do you think ultimately it will have to get in order to contain the inflation the eurozone is experiencing right now? myles: like the fed, they are removing accommodative policy. they are not even in restrictive territory, and inflation has surprised on the upside. he we have got his the sum around, which will signal whether that is feeding through to higher wages. the central bank governor talks about neutral in europe, and it is something that is not well defined, because the ecb, apart from after the lehman crisis, has not really had a hiking cycle. that is in the order of 1.5%. that is where we make it over time. i think the ecb, they want to start moving rates quickly, and that is w

the ecb has always said it is data dependent. spanish inflation has come in higher than expected, german inflation higher than expected. we will get an idea of where the euro is tomorrow. policymakers are meeting soon and will decide. christine lagarde has already said that after the start of july, rate hikes will follow that month. there is a debate to be had about how big that rate increase will have to be. voices are getting louder about 50 basis points. guy: 50 basis points, how big a shift with that be? would that be 50 basis points and then expecting the market to extrapolate more? what would be the message? jana: it is certainly not the mainstream scenario. the plane has been cautious lately, but if you look closely at what president lagarde has said, she has said left off in july, at the end of negative rates by the end of the third quarter, whether that is zero 4 --, both is possible and will depend on data. guy: how big a concern would fragmentation risk be? you get a big reaction in dtp. jana: that has been a concern f

morris: to ecb leadership is under a lot of pressure. pretty constructive engagement, but the membership are getting restless. wage growth is the highest in decades. you forget that during the period of low inflation, almost zero inflation, the real wages were going up. the pressure is really mounting. we heard that in all the speeches in the may day demonstrations of the trade unions. i think they can hold it back for a little longer, but not for too much. that is why it is pivotal that the ecb is changing inflation expectations by coming out with a whatever it takes type of moment. whatever it takes, you are going to find -- tame inflation. they should not use the same words, obviously, but there has to be a clear commitment that they see this as their only goal, which formally it is. alix: but if they do that, if russian gas supply is cut off, isn't that going to be a nightmare? morris: that is. alix: but they hike and also gas is shut off? morris: if that happens i would be even happier not to be a central banker because he would hav

let's talk about the ecb as well and what's happening there. the jim bullard to the ecb. jim bullard out early suggesting the fed was way behind the curve and needed to start doing 50 and possibly only hinted at 75 basis point hikes. today we got that similar sentiment. definitely the hawkish end of the spectrum when it comes to the ecb. the july 25 basis point hike is certainly baked in. raising the policy report 25, unless new income data in the next three months suggests inflation is broadening further and indicating a bigger increase is not to be excluded either. as a result of that comment and what we saw in the u.k. unemployment data, what we see is a significantly priced in what the ecb could be doing and what the bank of england could be doing. basically you've got her the bank of england, the federal reserve in white. the federal reserve in blue. i will get the cameraman to zoom in. if these go higher here and here that would suggest the market started to price in a hawkish trajectory from both of those central banks, significantly more hawkish this year and next

you can pay the ecb at the moment. they are not making money off the deposits they are hoarding that would make a big difference, but once against into positive territory, it then becomes a question of how much money they can make, but even zero would be a big step. there is a lot of banks that have been highlighting just how much a rate hike would help them. deutsche bank is one that has been continuously saying it would boost revenue by a lot. another which i covered is even more exposed to the euro area. the relative impact for them would the higher. they said recently in a quarterly update that it could be up to $1 million if the ecb continues on the current path -- $1 billion alix: that would be something, but doesn't loan demand to be there? jane fraser said she expects a recession in europe. our banks supporting the demand? steve: that is a concern. no one can predict how this is going to play out. one of the businesses that has been a big driver for banks has been mortgages, people buying houses like crazy. if

the ecb keep drawing the differences between the u.s. inflation and the european inflation and i think they are quite clear. manus: i like your line on u.s. growth. jamie dimon said the storm clouds are clear. dani and i got excited about the richmond fed. you say there is no real smoking gun on u.s. growth risk. that is a big call, michael. >> i did write that before the housing yesterday. manus: you can't know! >> i'm not going to walk it back. [laughter] the reason i say that is the consumer in the u.s. is still showing really good signs and the consumer has this massive cushion of excess savings. i think that is why you might get an industrial recession or manufacturing recession like we had in 2015 or so, but the consumer is reasonably healthy and that is why you can say that even if there is a slowdown it will be quite mild. manus: ok, we will hold you to that and when you come back in the next time, we will talk about those mortgage numbers and i guarantee you they are not going to look pretty. michael, thank you very much. head o

where will that leave the ecb at how much faster will the ecb have to go. bloomberg's lizzie burden joining us to give an assessment. philip lane was talking about being gradual. it strikes beat when you have a depot rate of -50, you are massively behind the curve. lizzie: this is beating expectations again driven by food and energy costs because of the war in ukraine. yet the german finance minister saying fighting inflation is now germany's top priority. it comes on the heels of the spanish print also beating expectations and that is despite government help. the euro areas inflation surge is peaking. tomorrow we will get france and italy estimates. our economists expect another record for the euro area. it is not as fast of inflation as in the u.s. but we are getting there. guy: in terms of the counterpoint, what are we expecting? it looks like we have superhigh inflation but also a significant growth rest. how will the ecb balance those? it has a single mandate. it's mandate is inflation. it looks like the peak of inflation is further ahead. what will th

more ecb governing council members say half-point hikes should be on the table. president lagarde says there is no rush. >> i believe gradualism is the way to go as long as inflation expectations are well anchored. if we anticipate de-anchoring or a surge in demand that is a different story. tom: inflation is out of control and investors are losing faith according to bill ackman. we get fed minutes tonight. plenty more from the world economic forum in davos, don't miss our conversations with the nasdaq ceo, the chairman of the standard chartered and the ceo of accenture. let's check in on markets. futures pointing to modest upside after lessons we saw on the european markets. within the u.s. session losses were pronounced within the tech space, particularly within nasdaq, ending lower around 2%. the s&p lower by .8%. the markets concerns have shifted from inflation to recession. we are seeing a repricing in terms of the fed funds rate, it had previously been above 3%, you are starting to see that reflected in the bond space. yields moving lower, particularly the

we are doing the same for the ecb. if you look back at the inflation numbers, they look as worrying as the u.s. the trim measures which try to strip out energy they are up at 4% or 5% which is just as high as the u.s. i think the risk is the market keeps repricing the ecb with the pace also critically in terms of terminal rates the market is reluctant to assume the ecb will go above 1%. i think the market is too pessimistic in that pricing. >> why doesn't the ecb see it that way why don't they see the inflation problem as severe as stateside >> i think they are. it is an evolution as it was for the fed. you have seen it from the le garde blog they are not ruling it out even the chief economist phillip lane also the gradualism word which they keep using. it is watered down as the weeks progress as we go into the summer months and autumn, the risk is very much tilted toward even 50 basis points of rate hikes which should be supported off the euro >> what do you think the euro does in the event we get a 50 basis point rat

thinking about european rates markets and how much they are expecting the ecb to move, whilst the ecb is signaling and from negative rates pretty soon, once they exit we could be looking at a dovish pivot. a bit more volatility maybe in the near term, but as we go into q4, well into h2, we might see a better environment for risk. francine: here is what the federal bank governor christopher weller had to say on central bank normalization. >> i support tightening policy by another 50 basis points for several meetings, in particular, i am not taking 50 basis points hikes off the table until i see inflation coming down closer to our 2% target. francine: we were just hearing from the federal reserve governor there. are we going to be in this holding pattern of the markets worrying about inflation, looking at earnings, buying the dip until something happens, and what is that something? >> markets are always looking ahead. at this point with the selloff we have seen, with the s&p 500 learning with a bear market, i think at this point, the market has for the most part priced in the worst of t

our interview with the ecb president later this morning. manus, it is a talk of ecb tightening getting to neutral by the third quarter that did its job. it put a peak in the dollar. manus: a peak and a punch. where is the neutral rate in europe? everyday, where is neutral and the united states of america? but how progressive will the ecb be? you are right, the dollar was wounded, winded and waylaid. before christine lagarde spoke. but that is on the run and on the hoof. she really took the wind out of the hawks's sails. one person still says a 50 basis points could be on the table for june or july. i think that's very contrarian. there's also something else driving the kind of momentum in the euro, and that is that they have been cutting their dollar longs. oil is down, china downgraded. i am amazed about the response mechanism and rick -- in risk assets on such an atrocious downgrade by jp morgan and ubs on the oil market, down 6/10 of 1% viewed that does not stack up for me. yields dropped 2.3. according to jamie dimon, it is not too thou

marc chandler, how does the ecb, in a more conservative block at the ecb as represented by the buddhist bank, how do they respond to what we let -- by the bundisbank, how do they respond to what we have seen this morning? marc: i think the hawks are pressing for a july rate hike. the swaps market had it priced in. at 25 basis point hike in july. this is a different theory in the sense that is all the factory orders and germany. weaker than expected in france. europe as a whole looks like it is headed for a recession. lisa: is that being priced into the euro? marc: i know a lot of people are critical that the fed is behind the curve. i think they are playing catch-up. it is not just that the fed is behind the curve. look at sweden, who said they will hike rates -- the same thing from other central banks. i think all the major central banks are behind the curve. in their defense, it is a pandemic. and then the russian invasion of ukraine, and then the slow down, the cove induced slowdown in china. it is more than anyone would've expected. there's nothing in our experience that would've pr

. >>> the ecb warns that rising inflation and growth risks are exacerbating vulnerabilities in the euro zone saying russia's invasion of ukraine only makes matters worse and there's more weakness to come the data out of the biggest economy helps lift sentiment leading european equities higher in early trade >>> we welcome you back and open the show with this, the ecb's latest financial stability review, it is warning that rising inflation and growth risks are exacerbating existing conditions the conditions have worsened since the invasion of ukraine spiked energy prices and the risk of further market construction remains we'll be pouring over the details we'll hear more later on on the details what stands out is yes, the themes you've been talking about in davos, exacerbating the vulnerability, the unknowability of the ukraine war from here however there is a likeness to takeaway from this talking about the surprising resilience of the markets. the markets largely oddly following the invasion and also banks seem to be in good shape which is what we heard from the bbch last hour as well

in the eurozone paving the way for more decisive and quicker action from the ecb. the german 10-year bund is trading 90 basis points. >>> turning to the dollar. the euro trading stronger versus the dollar up nearly 20 basis points on the day. sterling is trading on the back foot down 30 basis points to 1.2226 >>> u.s. futures dow jones industrial average pointing to a positive trade we will see if it continues. that's it for today's show i'm julianna tatelbaum "worldwide exchange" is coming up nex t. >>> it is 5:00 a.m. at cnbc. here is the top five at 5:00 stocks looking to hit the reset button after the rocky trading week >>> and recession warning. comments from the former goldman sachs ceo on the signals he is seeing that a tough economic road ahead may be looming. >>> and the crypto crush continues. bitcoin below $30,000 mark as they struggle with the terra stablecoin. >>> the drama over the twitter takeover bid

alix: i was ecb president you go. guy: weirdly they are pointing the camera at me, so let me pick up. it happens. these things can be confusing. christine lagarde earlier on in dabo's. -- davos. the recession is not the baseline. the pmi data are going to be watched to determine if it will become the baseline. it is increasingly looking at the baseline out of the u.k. my exhibit a is what we saw in the pmi data today. the pmi data on the services side actually holding up. the forecast was 57.4, so we are softening, but it is the news out of the u.k. which is maybe the indicator. u.k. services are absolutely cratering. they are heading in that direction rapidly. 51.8. that is down -- let me get my numbers correct -- down from 58. so, this is a huge move that we are seeing in the u.k. in terms of the deceleration. wasn't that long ago we were up in the 60's. so we are really coming down quickly. the u.k. economy potential -- potentially teetering on the edge of recession. chris williamson is the ihs markit business anal

anna: let me ask you more about the ecb. eurozone inflation expected to peak ask quarter and we have not seen the ecb start hiking rates yet. there are different considerations in the eurozone compared to the u.k. and u.s., but inflation is still high only expect numbers about 8% maybe can't be ruled out entirely for next week. if we have that high level of inflation in the euro zone, how many hikes do you think the ecb will be able to do? >> what the ecb has provided fairly clear plan for the next few months and over the balance of the year, really, as -- largely positive territory. i think exiting negative territory is fair to say, low hanging fruit for the ecb given at the moment probably like a source of additional problems, downward pressure on the currency at a time when commodity prices are really quite high. but then i think the ecb will face some issues and that is because of fermentation problem but also recession risks that fits around the situation with the war in ukraine. alix: continuing the global snapshot, le

the ecb will do the job and as we've seen over the last few weeks, the ecb starting to wake up to the reality that rates need to be raised quickly. we are only in inflation print away and let see what happens next week but we are only in inflation print away from a 50 basis point hike in the july meeting in the market has been so focused on the present -- the fed story it has missed the european story. the european story has a mix of very high inflation but also outperforming growth. it is surprising how pessimistic the market is consistently on european growth. if you look at data surprises, they are moving in favor of europe. consensus gdp forecast for this year higher in europe than the u.s.. i believe in the fiscal policy europe has an important fiscal policy, it has been using policy to offset the energy cross and it will have more defense spending, it has the ngu fund and i think the state has been set for european capex. i'm on the optimistic end as far as the european story goes and i think potentially we have significantly more repricing to have for the ecb. lisa: when you sa

this is something that should make the ecb concerned. the bottom line is, the ecb cannot be as hawkish, because they are dealing with all of these vulnerabilities. this suggests the euro is likely to be weak. lisa: it is wonderful what would -- we were talking about bond yields. one reason yields have gone up is it has been so difficult for european and japanese buyers to hedge out some of this uncertainty in the fx market. do you see it becoming more cost-effective to hedge at this uncertainty and bring buyers back in a way that could be supported in the u.s.? athanasios: this we believe is one. volatility is twice as high now as earlier in the year. it is likely the fed's volunteer -- volatility will remain high. there is still tremendous uncertainty. we have no idea what policy will look like in the u.s. and eurozone in the years to come. all of these are factors that paid a complicated outlook. in such an environment when you have uncertainty, market volatility, but the fed is hawkish, this has to be bullish for the dollar. lisa: wha

we have the hawks on the ecb telling us they are going to raise rates in july. but we still are forecasting a bit less in the way of rate rises than has been priced into markets. tom: we saw the spread on the italian btp's versus german bund's get to 200 basis points, how much of a straitjacket is that for policymaking for the ecb? are they concerned about a potential blowout in spreads? janet: this is one of the factors that has concerned us over recent months. gradually the spread has widened and hit that 200 basis point level. we think it is something they be concerned about. what we will all be looking for is how are they going to address this potential fragmentation. how flexible are they going to be with their reinvestment program? can they use it more flexibly to target the spread to some degree ? i think potentially it will become something of a straitjacket, but we're not there yet in terms of being willing to start the process of normalization. it might limit how far they are actually able to go. manus: we've got two major stories coming from china. a

or b p pick apart the ecb of the i don't think it is based really well on the economic outlook >> and something le gard is saying it is based on the economy. the global economy not going well the ukraine war not going well for putin. miss mi miscalculation. >> it is important to stress the issue that we can disagree on the outlook. we don't know. what i should have said more clearly on my concern about the ecb is i think the odds are skewed to making policy mistake by tightening. who knows? it is -- the thing with the war in ukraine and what it means for the european economy, there are two things the commodity prices, but what share of the higher commodity prices are due to the sanctions in the war and others due to the investment of the last ten years? research suggests half or more than half of the excess of commodity prices it is a smaller part to what we are looking at for the war and uncertainty. and the sentiment and you saw the german consumer sentiment numbers last week hit the lowest on record. people are worried and businesses are worried there is a society around it and it

what it means for the ecb. anna titareva, ubs pan-european economist, joins me shortly. ♪ what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha! or you could use workday. omaha. the finance, hr and planning system used by over half of the fortune 500. for a be-agile-like-an-mvp world. workday. for a changing world. manus: welcome back to the open. we are just 23 minutes into the start of european trading today. let's get the business flash headlines, alice atkins is with me in london. alice: softbank's top executives have seen deep cuts to their paychecks. the japanese conglomerate reported a historic loss to the year end march. the ceo kept his pay unchanged at ¥100 million, however some top executives saw big drops following a record $20.5 billion loss. the u.s. dropped market manipulation cases against glencore has shed light on two e

they expect the ecb to respond shortly. having said that, i think we have always been conservative in terms of risk management. if you look aside from the russia risk, we remain solids, we saw very little risk. we are looking at a scenario of stagflation in 2022 as we continue to be conservative in our risk management. ing has managed its spread quite well. cox even so, when you see days like yesterday, how much more conversations with clients, with peers, what those have been like in terms of the sense of fear you are seeing out there? >> it is a lot of concerned by both retail and corporate customers. i think what we have told them is that rates are rising, we've gone into a rotation from a benign market situation, very low and negative rates, to more positive right. and our customers need to get use to structurally higher levels of inflation. we do help our customers to make sure they can adjust so that new reality. and ourselves as well, terms or a that we have adjusted it for rising rates. manus: he the word stagflatio

the ecb will be looking at that one very closely. but it is ugly and equities on both sides of the atlantic. alix: ugly here as well. nasdaq 100 now up by a full 3%. we want to get to bloomberg's kriti gupta with those moves. kriti: guy just stole all of my thunder, but that's ok. i'm going to start with the nasdaq, down 3.3%. this is really important when we are talking about what is getting hit the hardest. the stocks that took you to those record highs are the ones taking you to some pretty scary lows. take a look at what is actually performing well. similar to the conversation guy just had in terms of those bunds, treasuries get a bit of a bid, not enough to offset those major 16, 17 basis point moves we have seen. but still, four basis points lower on the 10 year yield. bloomberg's dollar index is really where all the action is. this was weighted very heavily towards the euro. when you start to see the dollar strength or euro weakness, here is where it shows up. 0.4%. remember, that feeds back into the stock story as you have a

we have priced in a lot over the last few days back into the ecb. if got plenty more hikes priced in. but as we start to see growth slowed down, the ecb has made this mistake before. i would have thought if anyone was going to back off more aggressively it would likely be frankfort rather than washington. >> i think you are right. i don't think it's just going to be a yield or interest rate story as to what moves currency. it's going to be the geopolitical story of what's going on in ukraine and china with the lockdowns. to get that positive global growth story, we are going to need to see supply chains and china open up. we heard the cisco chair this morning basically say we are not catching up anytime soon. that's going to be a broader story than just in the tech space. and we need those lines to open up to see inventory come up. if you look at where inflation has gone and you map it against m2 money supply, you would see that money supply grew almost a year before cpi reacted. and that was due to the fiscal stimulus. so what you have now is monet

for the ecb, i think that is what many are grappling with right now going into june. this is the story they face right now, an economy that, in the words of an official from the ecb this morning, this economy is facing stagnation and and inflation print heading in the wrong direction still. that is the problem that the ecb and the boe have got that maybe the fed does not have. the fed might have the comfort of getting some inflation prints year-over-year that start to decline in the months ahead. governor bailey is telling you today that he does not have that luxury. tom: a bit of history here. i rumor the moment where catherine mann became acclaimed in economics. she's one of the rare people who has done not one, but to come about three giant things in academic economics. a monograph, unafraid to say how many years ago, she was like 15 when she wrote it, is a trade deficit sustainable. that speaks to the trade balance reported by the u.s. yesterday and the challenges that dr. mann and governor bailey have. jonathan: sterling just about clinging onto 1.24, the pound a

guy: buddy think the market is overpricing the ecb? karim: when thinking about the ecb moves, we are starting to shift the dialogue towards rates moving as soon as july. i'm not saying that is not on the table. when thinking about markets pricing, we are looking at a quite tight market pricing of rate hikes from the ecb, which when constrained some of the growth shocks and the growth downside risks that are specific to europe, it is hard to see how the ecb will move that far. guy: the inflationary risk could be there as well. you could end up with a stagflationary environment. inflation remains very elevated. you end with second-round effects many people are so worried about. karim: absolutely. i do not think we can discount inflationary risks. it is important to think about the drivers of those inflationary risks? are they supply driven or demand driven? a lot of the shocks we are seeing in europe, and i know it is well after the -- i know it is one after the next, are still supply driven shocks. could this become a self fulfilling pr

that's going to filter in two ecb policy. the 2023 ecb rate has moved by 150 basis points this year, that's a lot. where we're more cautious there is the impact of energy on the european economy will be substantial because of the dependence on russian gas. there's going to be interesting dynamics that develop between central banks. right now rates are low so central banks are being aggressive. we saw that in emerging markets last year. now the developed market central banks are doing the same thing. i think as time goes on, there are going to be some important divergences. the bank of japan is another example where you still see them in the yield control mode. tom: the believe that we saw when it came to btp's and what that meant for the euro zone crisis. do they have the tools now to address pain on the periphery once they start producing stimulus? scott: one could argue that interest rates is the strongest of the central banks in europe because of the pervasiveness of the purchase program. the ecb's purchase program has bee

can the ecb be orderly when inflation is at 8%? patrick: i don't think they do much to markets if they bring it up to zero. it's still an incredibly low interest rate by any historical standard compared to those previous years where we had negative rates. i don't even know if it helps the economy, it is punitive towards banks and i don't think it changes investment decisions. in times of panic it maybe shows that the central bank is there but having a prolonged negative interest rate i don't think it is even fulfilling its purpose anymore. guy: with the market extrapolate? with the ecb they think that everyone is going to extrapolate and think like the red. 50, 50, 50, priced in. patrick: that would be the risk and they could manage that, it's not like they do things quietly. they say this is the plan, we get to zero and see how the economy reacts, how moving away from russian oil impacts the economy, all of those kinds of things. you can set the tone without setting a precedent that this is a wave of hikes to follow. guy: what wou

the ecb coming into view. jonathan: this has been a tough trade so i'd like to catch up in the next couple of weeks. this one has been difficult for a lot of people. looking for the stronger euro and that has been a massive struggle recently step lisa: there has been positive signs in the fiscal spending. we are getting an acceptance of spending money that has nothing to do with the pandemic for military spending, green energy spending and this is a new shift which should be justified by the pandemic. jonathan: president lagarde rejected calls by staff at the ecb to leave their salary improvements. she understand yet she understands it they are disappointed but the adjustment must be reasonable. tom: you wonder how they are writing in the same letter. the wage negotiations in europe must not be underestimated. jonathan: remember the line from governor bailey? he said perhaps don't ask for a big pay rise. lisa: because basically you get a pay cut. jonathan: it's uncomfortable when central banks have to talk abo

the only offset would be that the ecb has been passive until now. almost deliberately sending ambiguous signals about what their intentions are. were they to say we are the ecb, we target inflation, we are going to do this, that would be enough. i think they would regain some credibility. tom: where is the big figure trey radel peshmerga there is so much going on and so much volatility, where is the pear where i can make some money? steven: that is hard to say. there is no sign yet that we are at the bottom in terms of sentiment. so we could go lower. but if you ask me what is most in the price, i think given where the economies are doing fine and they are in real interest rates that have matched that of the u.s., terms of trade are great, it is to settle down. it is over 30 where can come back with a normal rating. jonathan: awesome to catch up, great work, i have enjoyed the read. steven englander, bloomberg intelligence is just out on a nice set of stats, 39% of the s&p is down 20% plus since the market peak. versus 50% in the last three major se

will that move more as the ecb gets hawkish? steven: it is the credit side, the sovereign credit and corporate credit. the big part of the policy has been containing the spread. they could do it through the reinvestment policies and also other devices they could come up with. that is an incredibly important part of policy because it is a transmission mechanism is in economic steps. they cannot allow the spread to go too far. it is already front page news. francine: talk to us about r-star. as it moved higher? steven: this is unavoidable. you could observe it with hindsight using the model but even if you have an estimate, the confidence is huge. 100 basis points may be decided. but there is no evidence that it has gone up. maybe the risk around it is increasing but none of the central banks have revised their estimates higher yet. i would suggest that the drivers of the r-star, which is near the longer natural rate, the drivers are about demographics and debt and technology, wealth inequality, globalization. these are things tha

a slightly more hawkish view from the ecb. markets now pricing in a july hike. let's check in on some individual stocks on the move at the open. a couple of deals to enlighten you on. air france-klm gaining 2.4% on a cargo alliance with the shipping giant. they will sell a 9% stake in the container line as part of that they'll -- that deal. siemens gamesa gaining 11% on the news that siemens is planning to buy that company in an all-cash deal. this is the spanish wind turbine maker. burberry up .2%, flagging concerns around demand out of china. francine: andrea orcel is leading unicredit through inflation and the war in ukraine, we spoke to him exclusively about their russia exposure. >> when i look at russia, there are two orders of fx we look at. one is the direct shock from our exposure to russia. in the last two months, we have reduced is meaningfully by about 2 billion. it has not because the bank anything, which was not expected. we have understood with the risks are, in q1 we took a conservative set up provisions to insulate ourselves from further deterio

i think 50 basis points is still too aggressive for the ecb. but it cannot be discounted completely. i think the bulk of the tightening is coming through the bond market. especially for the euro zone, including bunds, still another 50 basis points needs to happen. and of course, the other leg of tightening will be over time, qe, in the next few months. unfortunate, the ecb is even more constrained than the fed because of the war with russia. if the ecb goes and triggers a credit crunch, it would be a massive loss for the european union and it will even flow down to transition. i am afraid you have to live with higher inflation. this is also why it will be a reinforcing mechanism, because the wage pressures in the euro zone are largely still muted. with inflation that isn't coming down, of course public sector wages -- manus: but if you listen, we reflect back, you have very clearly defining a study -- a steady pace of 25 basis points and fairly intractable if you listened to christine lagarde last week. then you have clouse on the number of oth

tom: the ecb in the background. we have heard more hawkishness. the italian governor coming out and saying that the eurozone is in stagnation but also saying the special measures that have been put in place should be unwound. kristine: it is going to be interesting. the ecb is probably in the same boat as the other central banks in terms of being caught between a rock and a hard place. those two things are growth and inflation. they are trying to get ahead of that, or in some cases getting ahead of it after behind the curve. it is difficult for central bankers to navigate this. for the ecb in particular, they have been slow and deliver it in minding some of these measures we have seen over the past decade. they may have to speed that up a bit but it will be at the cost of growth. tom: kristine aquino on the central-bank action and the earnings coming through from the european banks. coming up later in the show we will continue and get into the market dynamics with mark abramovich. let's get back to the bank of england. the boe expected to raise in

is very spread management issue that will emerge for the ecb. we will talk about that in the next hour. so much to talk about with our next guest, the former ecb president be joining us to talk about what is happening in the economy and how the ecb is responding and the communication strategy and what it should do for the core periphery management story. all of that is something we need to talk about. if we get to --, how important will that be westmark all of this in light of the fed and the bank of england. we will be counting down for the european close. that is coming up. this is bloomberg. ♪ xfinity mobile runs on america's most reliable 5g network, but for up to half the price of verizon so you have more money for more stuff. this phone? fewer groceries. this phone? more groceries! this phone? fewer concert tickets. this phone? more concert tickets. and not just for my shows. switch to xfinity mobile for half the price of verizon. new and existing customers get amazing value with our everyday pricing. switch today. so many people are ove

the next ecb meeting happens june 9. sri lanka's new prime ministers proposing to raise tax rates as conditions for a bailout by the imf. the government is trying to convert to race that existed before they were cut in 2019 and failed to stimulate the economy. sri lanka has to raise revenues and this is as the economic crisis that deepens, with inflation rising close to 40% in may. taiwan says china has made the second-largest incursion into its air defense zone this year. the defense ministry says 30 jets entered the area, including more than 20 fighters. taiwan deployed air defense missiles late monday in response. it came as u.s. senator tammy duckworth arrived in taipei to meet the taiwanese president. 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. i'm su keenan. this is bloomberg. ♪ kathleen: coming up, we hear exclusively from an indonesian conglomerate as the company pivots from mining into renewable energy and electr

it reports tensions among ecb officials could be growing. she spoke to bloomberg exclusively at the world economic forum. >> we have been going through eight years of negative interest rates, special accommodation and we are clearly now at a turning point. and i thought it was appropriate at this point to explain what the direction of travel is the traditional term and what is our end point. >> if you are hiking, you want to hike why wait for july? >> we are not in a panic mode. we've started that journey thinking about it very carefully, back in december with steps along the way. we're now at a stage where there is every certainty we will stop negative purchases very early in july, deciding in june, which will then clear the way for a rate hike that will come shortly after. >> is there a danger that because of the timetable which goes to the credibility of the ecb -- which is we unwind that -- that you miss the curve on inflation? >> i don't think so. anybody who is very careful about analyzing realizes that we are in a situation which is v

manus: you turn to the ecb and you got the floating jumbo rate hikes of 15 basis points. i say it's much more about hikes by the end of this calendar year. the oil market, the u.s. easing sanctions on venezuela in one of the big stories. inventories have dropped by 5 million barrels. we will ask our next guest, through your paper ratcheting yesterday in the bond market. the position on the bank of america survey is short treasury 25%. quite an extreme position. the dollar back at flat this morning as we again debate whether powell was really that hawkish yesterday. the vix down by 5% at the close of business last night. that does not smell of capitulation. dani: friends don't let friends quote the vix in percentage points. manus: we will unclick the monitor and then maybe we will have the basis points. dani: i am looking at the msci asia pacific. was yesterday a bear market bounce in the u.s.? hong kong tech did not do very well in the u.s. session. adrs did well, but were looking at european stocks futures index moving higher .2%. also looking at s&p 500 futures, losing

the ecb will have to do something to give us guidance on that. yousef: strong views there. we really appreciate that. it is a key part of the program. that is christian kopf, the head of fixed income and fx at union investment. juliette saly has your headlines. juliette: euro nations have failed to agree on a revised package of sanctions over moscow's invasion of ukraine ahead of a leaders summit in brussels. hungary is refusing to back a compromise, despite proposals aimed at ensuring oil supplies. eu officials say a deal is still possible in the coming days. ukraine's president bilotta ms. zelenskyy visited -- volodymyr zelenskyy visited troops this weekend. it was his first publicly known trip out of the kyiv area since the invasion. he handed out awards to soldiers and was briefed on the operational situation. ukraine officials say more than 30% of residential buildings in kharkiv have been damaged by russian attacks. civil servants in the u.k. have reportedly warned the government that around 6 million households could face power cuts this winter. the times newspaper c

the ecb is going to start raising rates soon. they will get ahead in terms of locking and those stable rates, so you can see the difference there in terms of the central banks. i think when you look at some of the technicals as well, obviously there is been a limited supply in the u.s.. i think we are far short of where we were this time last year, and when you look at the hood, there has been a little more insurance in financials. i think there is dispersion among the different sectors that are shooting, but there is a huge amount of dry land out there. there is a huge amount of cash sitting on the sidelines. investors want the yields. they need to get bonds back in the portfolio. they are offering the return yield. so now, it is relatively attractive valuations. matt: they need your help. with that kind of dispersion, investors are going to rely more on you. on troy and amanda. is that good news for the industry? marilyn: i think it is very good news for the industry. i think for a long. of time, given the suppression of fixed

ecb officials after ecb officials are talking up higher interest rates. the euro-dollar is short. lisa: giving some stability to market that is in flux but fragmented. how the euro breaks is how people are focused on. we have the april jobs report, and we are probably going to get unemployment rates that are at the lowest going back to the early 1960's. we of course have john speaking with u.s. labor secretary marty walsh at 9:00. i want to hear what he has to say about how wages are going up. what is needed to bring it down. how much unemployment rates have to go up in order to stave off some of the momentum. some of the froth, i would say. a lot of people have been observing that in the labor market, including jay powell. we have a slew of fed speaking, including that minneapolis president, atlanta, jim bullard of the st. louis fed, mary daly of the san francisco fed. how do they respond? what is the markets response to jay powell easing financial conditions. could it be followed by a reversal in decline? at 4:15 p.m., this might be the most interview of the date, to me. michael

and ecb official, after ecb official, talking out the higher interest rates. lisa: is there anyway to hike into weakness? that is what the bank of england had to do. in my point -- it might be more of a move coming up. jonathan: just ask the fx strategist. euro positive or euro negative? lisa: it's a great question. does that slow growth and lead to an even lower euro? at that seems to be what a lot of people are seeing in the near future? jonathan: just short of the dollar. 106 to 105. tom: that is the one pivot point we've seen. i went to go back to sterling. as you wake up across america, as a general statement, sterling doesn't have a paid yet. jonathan: we criticize them for not being honest enough, but they were pretty open and transparent. they have no idea what the future holds. they are not going to try and tell you they do. that is a huge division on the committee about what is going to happen next and what they should do about it. tom: we welcome you today. we are considering a six hour surveillance this morning. the news extraordinary -- is extorte

. -- more flexible ecb. seema: of course, you have to give a big caveat to the supply chain issues, but our concern for the u.s. is that inflation comes down very gradually. by the end of this year, we are only exciting headlines to come down to around 5.5%, so this is very slow. the difference for europe is that the peak of inflation is probably still ahead of us, but the ever difference is that for europe, most of that is from the oil and gas sector, whereas for the u.s. it is really a second-round effect with a considerable broadening out in prices. so there's a lot of different dynamics to consider. guy: do you think europe will have second-round effects as well? once it gets embedded in europe, it is much stickier because of the way the labor market works in terms of collective bargaining, etc. seema: up till now it has all been about the first-round effect. it is one of the reasons why people have questioned why the ecb would be hiking in this environment when it is driven by some of those more volatil

bob: i think the consensus is the ecb will raise rates three times this year. that takes their deposit rate to plus 25 basis points. it's clear the monetary tightening by the fed is going to be more significant than monetary tightening by the ecb. if you look at risk factors in europe, one major risk factor is gas supplies are cut off from russia to europe, and that would have a recessionary effect which would push back the ecb from raising interest rates. it is not the central case. i think the eu forecast of 2.7% growth, that is going to be revised down. it is entirely possible this year will only see eurozone growth close to 2%. tom: are you finding any pockets of value within equities? bob: the answer is that valuations have come down significantly. i think the japanese market right now represents low risk value. i think it is too early to go into the chinese market. if you look at some of the latin american markets, which rallied significantly, they have adjusted significantly downwards in the last few months and i think there are opportunities there. part

the ecb is a little behind the curve in terms of delivering the rate hikes. it has yet to start ross's so i think we have seen record after record high terms of inflation and reading in the euro zone and you can feel that rhetoric from the ecb coming to a christian doing terms of emphasizing the need to address that it will be interesting to see the next couple of ec meetings and whenb they start to telegraph that timing for that first rate hike we which we have yet to see. you can understand why inflation does not keep ramping up. alix: in the meantime, a relief rally in the u.s.. thanks a lot and coming up, we will take the market view of the question of the day. had a you position for it if you're asking it today? >> marketplace has embraced the possibility of a cause -- of a pause in september but the only reason the fed will pauses because demand has come down fast. alix: that's mohamed el-erian joining us earlier today. has inflation peaked or caused? we will ask the head of u.s. equity strategy. >> our economic scene has been optimistic that we will ge

that june meeting for the ecb will be huge. lisa: they cannot just say that they will stay the course, they cannot say that they will not raise rates. the euro is definitely depreciating to a point where it is getting their attention. they are dealing with an economy that is not just energy. energy is the driving force, but the recent inflation data shows it is elsewhere. jonathan: i say everyone is raising interest rates, but that's not true. the bank of japan wants nothing to do with this. tom: if i am christine lagarde this afternoon, i will focus not on euro-yen but on dollar-yen. 118 to 130. that is a weak yen. maybe that is a litmus paper to follow. jonathan: coming up, a conversation you don't want to miss. paul romer, the nyu professor and nobel laureate. this is bloomberg. ♪ jonathan: your day ahead looks a little something like this. 2:00 eastern time, a federal reserve rate decision. shortly after, you'll hear from the president of the united states. then you'll hear from the chairman at 2:30. your 10-year, 2.96. c

joining that perhaps maybe a little bit behind is the ecb. we did speak exclusively with the president, christine lagarde, about the bank's path forward. her answer helping to fuel recession fears out there, but she says july still maybe set of for that rate hike. president lagarde: we are not in panic mode, and we started the journey thinking about it very carefully with steps along the way, and we are not at a stage where there is every certainty that we will stop net asset purchases very early in july. yvonne: kathleen, your take on christine lagarde's comments here. obviously, they have to balance not just inflation concerns but for in ukraine as well. kathleen: certainly, and they are worried about the impact on the economy. basically, christine lagarde is speaking with the consensus. the consensus is looking for a 25-basis-point rate hike in july and another one in september. that would get their negative right back to zero. at the june night meeting, that is where the big debate is going to occur. they are expected to officially end on

lisa: the ecb president did not want to address that. they tried to deal with it as it comes. it clearly makes it more challenging because it's not a additive vantage. it's a potential headwind because of the inflation they will be importing from the u.s. and in china. jonathan: we do not target the exchange rate but it could be proper for the medium-term outlook. the next time they come out with forecast, there's got to be an adjustment is on what's happening with the currency. kailey: a euro at $1.05 we were talking about the euro north of 120. it's interesting how quickly this has changed and it's not just a story in europe. there's been a weakening against the dollar in general. it was reinforced by the data over the weekend. lisa: did he answer that question? jonathan: he said it would change the forecast at the ecb and they would have to take into account what happened. how much can they push back against that without raising interest rates? it's not about the first hike but how much further we go but they are ready to go and they have told us that. that got to wind down

the ecb has been more accommodating lately. the messages we have to raise because inflation is strong. to help this recovery plan, we sought strong leadership from europe government. the french election. we have more visibility. it is about being on the ground, with the right people. romaine: with the companies you are invested in, is there direct or indirect exposure to energy shock? mathieu: obviously we have. this megatrend of energy transition we have been working on for years already. we started with the paris agreement, the objective we set. romaine: is that transition still intact? mathieu: oh yes, it is accelerating. that is the silver lining of the situation. people realize the dependency, countries are very different. germany, russian gas. in france, it is accelerating. romaine: what areas of that energy transition do you find most attractive? mathieu: companies working on de-carbon icing the economy. access to markets. it is about injecting capital. it is not about buying companies. it is about fueling the transition