tv Bloomberg Markets Bloomberg June 20, 2022 5:00am-11:00am EDT
♪ >> good morning, welcome to a special edition of "bloomberg markets." our top story today, locked-in. janet yellen says higher inflation will remain for the rest of the year while the fed said he would back another 75 basis point hike. emmanuel macron losing his absolute majority in parliament after an unexpected surge in support for the far right. in the airline industry looking
to bounce back from unprecedented pain. we will speak to jetblue's ceo from the international air transport association general meeting taking place. welcome to the program, everybody, we are two hours into the european trading session and so we have a slightly positive picture for you across risk assets. no cash trading on treasuries because it is a public holiday over in the united states. that is why matt miller and kailey leinz are both off today but i am taking you through what is happening here in europe. a little bit of underperformance by the french market. some sectors and little bit down , and losing his absolute majority. last week, we saw the gas prices in europe jump by the most since the we will resell russia's invasion of ukraine and all of this because russia is slowly dialing down the amount of gas that it is to europe.
the major pipeline nord stream operating at just 40% of usual capacity and the same is true today, so as a result we see natural gas prices going higher. that will matter more in the winter than now, but it matters now because european companies are trying to restock those stores. this is iron ore, we saw it down by more than 7%. in a lot of concern about what is going on in china. that continues to weigh on iron ore as they are tightening by the head and ongoing expectations. bitcoin back about 20,000. it was a wild ride over the weekend, then managed to bounce back up again. they seem to be getting a little bit of support around that 20,000 mark. let us get a multi-asset
conversation, and let us talk to the chief asset strategist at hsbc for joins us now. max, ongoing concerns about interest rates, about whether we get to a recession and how quickly. we heard from janet yellen, she says there is nothing certain about whether we get to a recession. what is your latest assassment how likely recession is in the u.s.? max: in terms of the recession, wherever we look, they all look pretty recessionary for the next 3-6 months. the problem is we don't the see that one big factor driving it. normally you'd be coming up with top prime rates, mortgages, the housing market is the next big thing to watch. this time around, we see the
inventory overhang last year that is now driving down growth. we see very definitive indications of demand really going down quite sharply, particularly from the regional. expectations haven't been rated that much yet. the problem really is received very broad-based weakness. if we plug this one whole, there's almost too many holes to block. anna: right. you see demand disruption, evidence of demand disruption. is that what you witnessed? max: over the next three to six months, yes, we will be starting to see that. you still continue to see this pent up demand on the consumer from this very high level of savings, but i do wonder how
long that can continue when you see private credit sort of being on the -- in the last couple of months. we are still fine by now, however, looking at the second half of the year, not only manufacturing, but also consumption. i think we will be seeing quite a few nasty surprises and that is for risk assets across the board. anna: and what prices equities? is that the future that you see as we head into the second half, things getting more difficult for consumers and for businesses? what is already priced of that? max: i think if we look at equities standalone, we probably be closer to pricing a recession, we know obviously asset classes don't function in isolation. credit and equities are interacting.
we are a bit further than halfway there. midcycle slowdown pricing that we had occasionally in the last session, we are not even at these levels yet. equities standalone might be fine but cross asset pricing is extremely, exuberantly bearish. in particular, also on the credit side, within the space of high yields, there aren't any sort of recessionary concerns priced in yet. we are getting closer to it, but it is not get at the levels where we think this is the definitive buying territory now. anna: what about what you see in the dollar? for quite a while there was talk about whether we would reach
peak inflation in the u.s. and that turned into "maybe bcp's dollar.: then we got -- maybe we see peak dollar." this matters for so many assets and so many geographies. max: on the dollar i would still expect a bit of strength over the summer months. i think that is consistent with some downturns of prices and global growth. in that instance, you wouldn't really be investing into currencies that are going away from the dollar, and that is much more going back into the dollar. i do have a problem with the view of ok, we have peak inflation in the u.s., if that turns around that is peak dollar. what about the other currencies? are they suddenly becoming more attractive? if we talked about recession
risk in the u.s., and indeed recession risk in the u.s. is becoming absolutely heightened in the second half of the year, that means the u.k. or the euro zone going to completely immune from that? or might they be actually worse off so that the dollar still remains fairly attractive over the next couple of months? anna: right. thinking about the other side of some of these, with think that european assets more broadly. the ecd clearly pivoting toward something more hawkish, but they are behind some of the other countries in terms of the speed at which they are doing this, and fragmentation of bond markets, maybe something that holds them back a little bit. we heard some saying that they will not allow fragmentation to hold them back. how quickly can we get this rate hikes, and can they keep that bond market under control to prevent expected fragmentation? max: ultimately they probably
can. the problem with the ecb is almost that they have a mandate of proportionality, so they need to show that their actions are proportional, otherwise they are going to get into legal trouble. there are some problems now with the proposed program with the reinvestment that might be violating. you might get into trouble with the capital key. we don't think that has just been the endgame. similar to risk assets more broadly, probably closer to the point, so far i think the details of the program have been very, very scarce and that is not the point where i would want to be putting my money into the periphery. anna: difficult to come up with
those details with the legal concerns. what about u.k. access at this point? we are going to get inflation data from the u.k. on wednesday. as we keep track of that, what is in the driving seat for u.k. assets? max: the pound still remains vulnerable because of its very, very challenging growth picture in the u.k., and then of course means for large camps of liquidity. that is actually quite good. that will mean a bit of a boost for u.k. large camps, but on the other hand, if we look at the mid-caps, the companies much more geared toward the domestic economy, they will probably remain under pressure, particularly relative, but sterling to us, there is a bit more downside. even this challenged growth
picture and number two, the bank of england being a hawkish, dovish outlier, toward more rate hikes, but having more downside risk compared to the fed and the ecb. anna:anna: you talk about a challenged growth picture in the u.k., that takes us nicely to china. you think it is possible for the authorities to balance out the headwind for the economy created by their own policy, by the covid zero policy? how much should be expected that they try to balance the effects of that with other policy impulses? it seems almost daily we get talk of "maybe that will be support coming for the chinese economy." max: there will be more fiscal and monetary interest. the difference is that there is not going to be the big bazooka,
it is probably going to be much more gradual not to harm the currency too much. given that the fed and other major banks are just in a completely different hawkish trajectory, that probably means not a big bazooka in terms of fiscal and monetary, but more like slices of more broad-based stimulus. what we have seen in china already, the credit cycle, we are seeing the credit impulse already going into the bit higher. it is a bit too early for that just yet, that is probably a story toward the fourth order first half 2023. once we have seen peak dollar and once the tailwinds come through, then that is 3, 4 months too early to reposition for that. anna: a headline across bloomberg, anxious to get your
thoughts on it, the ecb governing council member, speaking in an interview saying the ecb will act with a cool head on market volatility, saying the current problem is the speed of market repricing. it is interesting to see, how effective you think the words used by the ecb has already been in coming down the bond markets. -- calm down -- calming down. max: that has been very effective. in terms of the effectiveness of the verbal intervention, when he said the ecb is going to keep a cool head, i think the bigger issue is that the market investments are not really having a very cool head.
the issue is the magnitude of the speed of the repricing. my fear is that there might be another test on the periphery, on the ecb before we get to more attractive levels. anna: what about spreads and where you think the trigger point will be for the ecb to take action? what is the spread that triggers this, or is that too crude to say just the number? who decides when the spreads get right? max: i don't think it is a definitive number. i think it is much more a couple of things playing out in tandem.
it's that is really pointing to upcoming funding conference. those are the sorts of things that have real economic implications. those are the sorts of things that really affect the real economy. that is the sort of stuff that the ecb doesn't want to see. stress and credit markets, that is the sort of thing that ecb wants to prevent. anna: max, thanks so much. thank you for joining us on the program. coming up, oil prices steadying after plunging almost 7% during friday's session, so where do we go from here? we will talk energy, we will
let's get a quick check on these markets, and european equity markets are up by 2/10 of 1%. u.s. futures are pointing a little bit higher. some of the same buoyancy listing the stoxx 600. a bit of underperformance in the paris market as a result of the parliamentary election in france. natural gas prices on the move higher, geopolitics listing the former. those are both in focus with bitcoin also managing to get back about 20,000 after losing 15% of its value during saturday. a volatile weekend, of course, for bitcoin. let's get to the positive conversation now, and oil will be steadying after plunging on friday. remind us what has led to such a big move in oil prices.
are we factoring in more tightening from the fed, what that might do to u.s. growth, is that what has been weighing on sentiment for oil as of late? >> there hasn't been any change in fundamentals and friday's move came on the back of ready much no winds. delayed reaction to the fed raising interest rates by 75 bits, but equally, i think the oil markets have really not responded nearly as aggressively as other markets, particularly the equity. someone of a delayed reaction, but we would also argue that announcements are premature. we are still seeing very, very strong numbers not just out of asia, but also that of europe. strong growth and now back above covid levels. some of this is just jitters and sentiment weakening at the time
when liquidity's are within the u.s. holiday, but we still don't see any changes in underlying fundamentals. anna: a really big move on no particular news. we saw commentary from u.s. energy secretary talking about what the driving season might look like, saying that we know this is going to be a tough summer because driving season just started and we know that there will be continued upward pull on demand. how much upward pull for we see demand disruption -- before we see demand disruption? >> that has really been the only place we have seen some form of a reaction in manta to prices, has been in the u.s. the national average in the u.s. is about five dollars per gallon, that is almost nine dollars and europe on average.
but even in places like asia, india, it is also five dollars per gallon and you are not seeing any sign of demand slowing down californian particular with six other gasoline prices, definitely the momentum slowing down even, if not seeing double digit decline. yes, they will be a seasonal increase. the one thing that i will say is there is still a lot of pent-up demand after almost three years for there's no restrictions, but i will also mention that those who may not be driving are absolutely choosing to fly. demand is flying right now. and you can see that across flight numbers, and the price of jet fuel as well. even if it is not gasoline demand, overall travel demand will still be very strong. anna: the pull to travel is great.
a totally different dynamic for european gas prices, natural gas prices at the moment. how close do you think we are to some form of rationing of gas either later in the summer or as we go into the winter in europe? amrita: we've been calling for the need to ration in europe and particularly now with the latest move, freeport disruptions in of energy that reducing to europe and the maintenance coming up in mid july. we absolutely think the balance this market you will require some rationing in the winter. having said that, we seem germany come out and state they are going to bring back plants from their resorts, so there will be measures like this taken from the government to keep the lights on. that is where the biggest policy uncertainty lies. to an extent, this is the biggest risk around trading some of these markets. i don't think we've ever been
exposed to such a level of quality risk. you have all of these climate goals from the very short term. it is as simple as do we get to keep the lights on? anna: thanks very much for your time. a quick check of the markets, you can see what national -- natural gas prices have been doing here in europe. energy prices have been pushing higher once again, the biggest gains in the national -- natural gas prices. the biggest weekly gain last week as a result of gas turning down the amount it sends to europe. let's get the french president emmanuel macron losing control of the national assembly at the far left and right made a strong showing.
caroline, what do you make most of? the surge of the far right to become more of an established voice in french politics? what is the biggest take away? caroline: this is an earthquake because emmanuel macron is going to be stuck between the far left wing and on the others, the far right wing who actually was the biggest surprise last night. this is actually historical. they have never had so many seats in parliament, and will be able to have a group in parliament to influence a lot of the agenda and some of the decision-making process.
in a nutshell, and then, crone fell short, meaning that he will have to build a fragile alliance , and fight on every single bill and reform. anna: also talking to another guest earlier, talking about how this will have an impact on european politics, making it more difficult for emmanuel macron to get his domestic and european agenda through. we will get back to the markets in just a moment. this is bloomberg.
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anna: welcome back to a special edition of "bloomberg markets." is a holiday in the united states for juneteenth, so matt miller and kailey leinz are off today. i am taking you through what is going on in europe and beyond. european equity markets are over. european stocks making gains, up by around a quarter of 1% this morning. natural gas prices, we just discussed this with amrita. once again is what russia is doing with the lack of supply of gas to europe, and that limits the ability of europe to increase storage going into the winter, so that is pushing up
natural gas prices here in europe. prices down by 7.7%. bitcoin has been on a really wild ride over the weekend, down by as much as 16% during saturday's session, prices now jumping back up to over 20,000. guy johnson has been -- well, is joining us now for an exclusive interview with the jetblue ceo robin hayes. good to speak to you. guy: thank you very much. let's dig into the conversation. robin, there is so much to talk about. congratulations on your status as chair which has come to an end. let's talk about what is happening in the travel industry
right now. everyday we are seeing problems being caused at airports, they might be weather-related, but they are all staff related. robin: it is great to be here and great to have everyone together. the aviation ecosystem is still, as you say, suffering from the same staffing challenges that we are seeing in other sectors, too. the aviation industry is such a finely tuned machine that when you don't have all the right resources in all the right places at the right times, they can get challenging very quickly. we made a decision, as hard as it was at the time, by about 10%. we looked at what was coming up and we were concerned about our
ability to reliably operate. guy: we are not even into summer yet. robin: for me, the most important thing is when things go wrong, people start pointing fingers at each other. the customer doesn't care. the regulators, the air traffic control system, ground handlers, the airlines, we all have to work together to do that. if we don't think we can operate, whether it is airports or airlines, and a reliable way, we need to bring things down. you need to do it early. customers don't want their flight canceled the day before. we have to act now. however we do it, we have to do our best to make sure that we can operate reliably. guy: the fed is raising rates aggressively, 75 bits coming through. we are expecting more of those
hikes, maybe even more further down the road. the objective here is to crush demand. how long is the current demand going to last with the possibility of a recession coming down? >> we certainly expect to see more fed rate hikes and i think there's two things about aviation that are unique. first of all, there is a pent up demand. a lot of people having traveled for two years -- haven't traveled for two years and they're not traveling the summer because where they want to travel is not available. in the average price of airfare will go up when there are less seats. i do think you are going to see that demand flow into the fall. secondly, business travel is still coming back off a very low rate because business travel is going to be bigger this year than it was in q4 last year. guy: 2016, you are in the
running. most people in this industry talk about being overpaid for their assets because of the fact that you were pushing pretty hard. are you worried that you might be getting into that kind of territory with spirit? robin: if you look at the value of the deal that we have on the table, it offers great value when you compare it with an opportunity like virgin america. having said that, we are very excited. it is a premium of the competitive deal and we have a lot of conviction to get it done. guy: what are you buying here? a lot of aircrafts on order. what are you buying? robin: and has great
similarities, so there's a lot of commonality there. it is assets and infrastructure, markets like lax, it has been very hard to do that. you're buying access to skilled people. pilots, in-flight maintenance. we just talked about how we are all struggling with this. you take the jetblue team and the spirit team, bring them together, it is going to allow us to continue to ramp up much more quickly in my building this national airline, just appealing to a bigger group of customers. our vacations program, all of these products we can bring to more people. guy: what are you prepared to give up to get it across the line? robin: i've been doing this a long time.
we've already put that on the table. guy: you could argue that would be a bargaining chip in this situation. is that how you are seeing it? robin: a combined jetblue in spirit must be one gate, one flight bigger than we were before. we've offered other slots so that we can really make sure the status quo. guy: i'm not sure if that was a yes or a no. if you had to pick, which are you going to pay? robin: we are not going to pick, we can do both. look, you've got four large airlines in the u.s. with 20% shares.
as a smaller airline, we have to find ways to grow and give customers choice. a bigger jetblue really could be a game changer. guy: if you don't do this, then what? robin: this is speeding up. if it doesn't happen, we will end up doing most of the same thing. guy: london, how is it going? we've got problems with u.k. airports as well. you've also got aircraft delays. how quickly can you recover all of that, how quickly can you get to where you want to be? >> i've got great news on london today, this may be breaking news, but there is a second term in the growth law and they are
also mounting additional flight delays from new york. that means as we come into 2023, we will be offering free flights to new york, -- three flights to new york and two from boston. guy: consumers continue to take this level of prices. just kind of the economics of the industry, are beginning to the point now where we are going to see demand disruption? anecdotally. how do you answer that question? robin: we are in a very unique time in the market because i've never seen an environment where fuel is incredibly high, there's a lot of demand, and there are capacity constraints in the system. i think it is an immensely challenging time in all of us have to appreciate that and do what we can, but i do believe as
we get through the summer and into 2023, it will become much more what we are used to before the covid pandemic. guy: always a pleasure, thank you very much for your time today. robin hayes, ceo of jetblue. anna: thanks very much on the ground in doha talking to many voices, really interesting conversation from the world of aviation and robin hayes of jetblue, clearly optimistic about his european plans. coming up, bitcoin struggling to hold above the $20,000 mark. we will get more on the crypto market next. this is bloomberg.
♪ anna: keeping you up-to-date with news from around the world, here is the first word. president zelenskyy says ukraine is facing a historic week as you member states are asked to sign off on a potential candidate status to join the block. meanwhile, grain harvest gets underway. output may shrink by more than 40% this year because of russia's invasion. president emmanuel macron's centrist line has lost its outright majority in the french parliament. he was short of the 289 seats needed for an absolute majority, the second-biggest block at the far right national rally claiming 89 seats. the result means he will struggle to pass legislation putting much of his economic agenda in peril. the uk's bracing for a week of
travel disruption after efforts to avoid -- avert the planned rail strike failed. 4000 staff hold the country's biggest train strike in more than 30 years. londoners will be hit by a walk out of the cities underground network in another labor dispute. the german government is to step up efforts to bolster gas storage levels after russia reduced flows to the country. a state owned wonder omega available addition credit lines to guaranteed gas injection. they will also reduce natural gas need to head of the winter months. china is sending teams to central and eastern parts of the country as soaring heat in their lack of rainfall threatened to have the summer planting of corn and soybeans. temperatures as high as 40 degrees celsius are drying up soil. this comes after many chinese
harvests faced issues with wheat. 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. this is bloomberg. anna: thanks very much for that. this is a special edition of "bloomberg markets," a public holiday over in the united states. we got european equity markets in action, tepid risk appetite this morning. natural gas prices still very elevated, linked to what we've been hearing from laura, the flow of gas from russia still only 40% of what it would normally be this time of year and that is having a positive impact on natural gas prices, although raising big concerns about what happens into the winter. other prices weighed down by concerns about growth in china.
bitcoin around that 20,000 mark. bitcoin has struggled to hold above that $20,000 level. michael sailor spoke to bloomberg's emily chang on friday about his view of bitcoin. >> the bottom line is the bitcoin strategy is 10x better than any alternative so no, i don't regret it. we've got $2.8 billion worth of bitcoin on the balance sheet right now. we feel like we are positioned well for when the markets turn around, and our only other choice would be to give all the capital back to the shareholders in which case you have nothing, and we would be struggling to get by without any assets. anna: let's get more from emily nicole. he is clearly a bitcoin bull. let me ask you what you made of the weekend price action.
such volatility top, talking nearly 15%. emily: i think traders were on watch for most of last week as it struggled to stay above it and then it sank quite quickly below that point on saturday before regaining the position again yesterday and now it is hovering around the $20,000 mark. bitcoin is definitely staying volatile. anna: and what is the latest news flow surrounding bitcoin that adds to the understanding about where the trouble spots are? every week ceased -- seems to bring another name, another part of the crypto sphere that got itself into trouble. emily: today we are looking at a crypto lender and while that is obviously a different crypto than bitcoin, a wide variety of assets, so bitcoin is no
exception. that proposal was actually a few minutes ago, and a lot of chaos happening over there as well. anna: for a lot of people, the volatility, the fast drop in the bitcoin price really raised concerns about not just where we're headed in the short-term, but the long-term case, if you previously saw a bull case in bitcoin, is your result being shaken as an extent of the selling? emily: for sure, yeah. i'll leave heard is that bitcoin
is a hedge against inflation, and obviously in this climate right now with interest rates," has proven it is no different than any of the other assets that we trade. what we've been seeing over the last few days is that the point of that $20,000 level is because bitcoin was below that. you now have not made any more money than you would back then, they want to look ahead to the long-term, so not be able to do that anymore, that is really one that you can hearing anybody say. anna: hold, or you might spell it differently, but still hold. thank you very much for joining
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♪ anna: welcome back to this special edition of "bloomberg markets." the french market underperforms a little bit. politics very much at fault there. netflix has a new documentary called "civil," about ben crump. bloomberg spoke to ben crump and the documentary director. >> when we started making this film, it is a question we asked ourselves. we knew that we would be with been for quite some time and really wanted to explore that. at the thing that we filmed was post-george floyd murder.
you see the killing of daunte wright happening during the trial of derek chauvin. you see the killing of andre hill. so while people were very quick to rush and say things have changed now, george floyd was murdered and people care and they are taking to the streets, i will get my personal opinion based on what i've experienced working with attorney crump: not a whole lot has changed since that in terms of police excessive force murders. >> i'm probably a little more optimistic, i see the glass as half-full because i see how much the consciousness level america has been raised. consciousness level since george floyd, that people are starting to believe black people now when we say they've realized this.
before, they didn't really believe it, they thought we were just infatuated. but when you watch that documentary of george floyd being tortured to death, you can't un-see it. i think we're making significant progress. it is progress all the same. president biden signed the executive order, over 150 cities and states passed laws that say we are not going to allow police to use the chokehold because it was legal in both cities in america prior to george floyd, and they were only using it against black and brown people in the state of minnesota. 85% of the time when they used a chokehold, it was against a black person or a hispanic person. black people only make up about 10% of the population in the state of minnesota, so you
wasn't choking white brothers, but you were choking black people. the last thing i will say is that i've tried to be a student of history and i go back and i look at the civil rights act of 1964 and the voting rights act of 1965. they did a study after those laws passed and in 1966, the metric america was the same. then they did a study 10 years later, the voting rights act of 65 had a profound impact on who is getting elected. the first time you are seeing mayors being elected, 10 times as many black congressmen in the united states congress.
it is a holiday over the united states, juneteenth. here in london, we see stocks moving a little higher. natural gas prices go higher. russian supply in the extent to which russia will be able to supply that. i on china and growth dynamics -- bitcoin drop below this weekend. a quick look at these markets. let's get them up-to-date picture of global news. >> ukrainian president says his country is facing a historic week. the french, italian and german
leaders have already given their blessing. they will reach a decision later this week. president emmanual macron has lost his out white -- his lost his outright majority. a left-wing alliance will be the second-biggest -- and third claiming 89 seats. china's spring outbreak of covid-19 continues to subside. nationwide china is reporting the lowest number of new cases since early february. the country continues to pursue a zero-tolerance strategy that's kept it isolated from the rest of the world. the airline industry should return to profitable -- next
year. that is a prediction of the international air transport association. a meeting indo hard today, having to -- 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 am alice atkins. this is bloomberg. anna: asset management senior analyst. let's start with the big picture. expectations for recession or otherwise. how likely do you think a u.s. recession is there and over what
it should have a positive event. they are afraid of turbulence ahead. you have tremendous amount of credibility. we don't really know. the odds of infection -- the odds of recession have increased. because the savings are declining. anna: what i the balance u.s. companies -- those are three covert levels, but we will be in more dangerous position. sebastien: certainly right.
the point midway -- the government will manage it and as months go by, we don't really know. our ceos in the united states more depressed because there are more of a democratic lane. a lot of things can happen which are uncertain. it is more likely we have a slow growth relative to high inflation. we probably would avoid a recession. we don't have the data to back of the answer. anna: clear all point there, everybody is taking a view. what are assets telling you?
what are equities telling you? are they priced it at any type of recession? are you looking for any clues besides that? sebastien: if you look at the valuation, it just doesn't work. the reality is there to elevated. and the price has to adjust. we cannot say that u.s. equities in general -- coca-cola is some, part of the tech remains very expensive. that depends on the odds of recession if people really believe it is coming or not so. it is still touching go in the united states. some of it is quite rational. some of it --. anna: do we see another
irrational behavior to say we could capitulate? sebastien: when you look at the bottom of the stocks, you look it valuation, momentum, how things moved together, look at positioning's, sentiment, many different directions to have a sense working with a banker. big hedge funds are big access -- big assets and you get ice view. it is time to buy. we are getting closer to these levels but hasn't had -- it hasn't happened yet. once it materializes, we will have massive amount of clarity. we saw that example of the italian curve last week. we see rally on the balance of
hope. anna: what do you see in commodities edge is helpful? we see large moves on the back of seemingly incremental news flow. something similar, in today's session. we have big concern about china's growth in the property sector for some time. what do you see in commodities? sebastien: the winning strategy for commodities because it is so leveraged and momentum, it doesn't take much to get -- oil prices are down. it tells you the supply curve is elastic. it doesn't take much for prices to increase or decrease a lot
because there is too much demand for now. it hasn't slowed down get enough. prices could be up another 7%. anna: in terms of expectation, do you think the market can understand we may see rationing of gas as we going to the winter months in europe? neither of us has a christian -- has a crystal ball to say if that will happen, if that was to come to pass, would that be a surprise? sebastien: natural gas has built up in terms of reserve in europe. how far we are, we are not going to build up these natural gas supplies fastener. in europe, there is a war,
possibly between europe and nato. in the coming months, -- other companies will have difficulty being able to produce. they want to see this because they work -- ever were getting excited about oppressive recession. in recession people are more focused on themselves and it becomes more difficult to help the ukrainians. it is very expensive. people are just concerned about their own future. anna: if you're looking for places to protect yourself from inflation, sebastian, real estate for some people has been a good place for people to go with low interest rates authorized. kobani the are very crowded by some people's distinctions -- some people's decisions. sebastien: using canada, europe,
short duration from temperate positions. they can keep it attractive, knowing the market. companies like coca-cola chief evaluations with -- they are able to an interpreter a steady cash flow. they remain as a -- hedge. anna: sebastien galy, macro strategist with the things that we do. a quick check of the markets. stocks in europe up .5%. elsewhere, we continue to see better per server -- better performance for european stocks.
we are seeing some gains. that is having a positive impact. we are seeing some buying of the -- it is incredible the extent to which we saw this last week along fragmentation of the tools they have to fight that. how that has managed to put a lid on btp's. how long that will last, we will wait to find out. still i talk point for european bonds. we have been bringing you headlines coming through from the ionic covers.
europe is up in trading about .44%. without that volume and influence, features pointing higher at this hour. geopolitics buyers being weighed down. bitcoin back over 20,000 per struggling to keep his head above 20,000. airbus is seeing record demands from airlines. supply chains are still recovering from a two-year shutdown. skype johnson had that conversation with the airbus.
guy: where are the biggest concerns? is that where the real concern lies? marrying of engines and supplies? guillaume: engine makers are facing the same problems we are facing. this is an important role. we see across the globe, the same problems on supply -- which she -- we see shops that were close. you don't find the people. that is across the board.
to resolve. you are a ceo that has manufacturing bases. the policies of europe seem to be getting more and more complicated. it looks like it is not going to have the majority. how are you thinking about the politics right now? guillaume: the landscape in europe is very complex. europe is complex but we see complexity in the country.
but that doesn't make our lives easier. anna: that was the airbus ceo talking about inflation. european equity markets making gains. it is a holiday in the u.s. for juneteenth. possibly finding it a little heavier. they stop here at 600. the first is up by nearly 100%. we have some decent gains coming through. we heard guy talking about the outright majority.
bloomberg markets are trading today. even without the u.s. players. alice: he said it was the war current causing prices to soar. in the philippines, president-elect has appointed himself agriculture secretary. the president challenging the administration. the last time incoming data assumed a current role.
the u.s. economy will likely fall into a recession by 2022. the company warns financial conditions. energy and food supply distortions the european central bank must also be prepared to look through turbulence -- negative interest rates. 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 am alice atkins, this is bloomberg. ♪ anna: the swiss national bank
always raised -- the swiss national bank raised rates last week. an emergency meeting held to prevent fragmentation. >> we believe it was necessary to increase rates today. if we look at the forecast, it shows inflation is now higher. >> we see greater evidence that the current high level of inflation is becoming embedded in pricing behavior by firms and wage setting behavior i workers, that would be the trigger. >> this rate increase will depend on the immediate outlook. >> if we raise the yield ceiling, we expect to see long-term yields rise above .25 percent. that will weaken the effect of monetary easing. we are not planning on doing anything like that. >> by the end of the year i
expect inflation to get to 10%. at that is a very high number. we need to be try -- we need to try to plus back to three-pronged -- to 3%. >> if the median term inflation outlook persists or deteriorates, a larger -- will be appropriate by our september meeting. anna: joining us now, sonja -- chief economist. the u.s. economy, how far in the tightening cycle do you think the u.s. is? what else are you looking at to see how much the fed will tighten before they bring down the man to match supply? sandra: the federal reserve is
taking the steps that are needed to bring down inflation and stop the innovate. 75 basis points that were taken will be followed by another 75 in july and gradual lower hike in step until the fund rate goes to about 4% around february 2023. the reasons for that are clear. inflation keeps rising through the upside. long-term inflation by consumers . also which growth is not as high. it is not very high.
that is driving more medium-term inflation. the other thing is the current hikes seem to be more priced into the markets. anna: how certain are you that we see some kind of recession in the united states. if we do see one, when will it be and how deep? nobody knows and we are all taking our view. what would be your view? sandra: i would agree with that statement. our base case is it is not a recession yet for the u.s. but the risk of recession are superhigh. we look at -- and compare that
to our notes. the fed expects unemployment to go up over the course of 2023 and growth to come down. his it is a bit understated so we think unemployment will go up stronger and growth will go down stronger. the commission -- stronger than the commission is projecting themselves. we think over the second half of 2023, there will be quite enough room for monetary policy by the fed again. maybe even 100 basis points towards the end of 2023, in order to deal with potential recession in depth. . depth period. anna: let me move to europe.
what assumptions do you think people are making about how much gas will be available, whether gas rationing will have to take place in europe? sandra: we need to wake up to risk that is not priced in yet. there is fierce debate going on in europe about what the economic impact would be from fool gas stoppage from russia side. two groups of economists, one focused on what will happen to the german country. the discussion on the one hand, economists saying the german economy would -- a gas stoppage shrinkage my 3%. of the other group is saying it
will be our demand to three to 7%. it is interesting to look at the differences between the two studies that try to model the economic impact. key differences are the question. to what extent that other economies are sourcing the globe for alternatives. which would increase prices enormously and therefore no longer growth. what kind of strategic moves can economist take while waiting for this stoppage to occur? very reasonably is the news by german minister who has decided to very quickly wind down the usage of gas for generation is start using coal-fired power
plants in order to keep those gas storage is fueled for the coming winter. it is a sad piece of news for the energy transition. energy security is really at stake here. that is going to affect the economy. anna: how does that fall in with the power projects and investment that we see in europe? sandra: we are approaching a perfect storm. we have the strategic autonomy agenda. we also have energy transition ambitions and those are not a
voluntary exercise. that is an exercise that is increasing backup by litigation cases in court. which are forcing governments to do the orderly zero transition. that is going to bite in an extreme way with the current situation. -- the current situation in the war. the probability that coal-fired power plants or nuclear power plants, all would have to be used to prevent energy security to become a victim is very likely. anna: one of the headways that faces the european economy. also i focus on the ecb is the risk of fragmentation. the risk of peripheral spreads low out.
do you think the ecb d will be able to get on with tightening central bank policy, tie-in interest-rate policy the way that it wants to? and will be able to use the tools to face fragmentation concern? sandra: that is the question. what will the fragmentation instrument? that is important to keep in mind. so far the signaling has already caused a little bit of going back up the spreads so far. let's see how this plays out. the real question behind it, what will this mean for the normalization of monetary policy?
in the end, whatever way you turn it, these are two policy instruments that don't go well together. the fragmentation instrument is basically looking at the reinvestment of bonds european economy, but the level to which that can be done is limited. if you want to make that more effective, that is the difficult balancing act the ecb is facing. anna: thank you so much for joining us. sandra phlippen, chief economist. coming up, the dollar falling as risk assets stabilize. this is bloomberg. ♪
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edna: this is interesting because it suggests policy makers are in a wait-and-see mode at the moment. they want to see how the economy gets moving. the worst of the shanghai lockdown, that side of things. policymakers already have brought down interest rates, put some money into the economy. they want to see how that flows. the policy sector in china wants to put rates lower because of that deepening divergence with the fed.
anna: it sounds like the steps are not monitoring. there are other things we should look for. edna: almost certainly. the issue in china is not about price or credit available for banks or households to long. the problem is the ongoing mass testing. for the best part of two months. all these problems for consumer and manufacturing and logistics.
bringing down interest rates isn't going to offset those problems. that would require direct government spending or direct government support. lower interest rates are not going to turn that around. the appetite for borrowing isn't there. it does get some relief. the authorities have already taken steps to stop property demand as well. when we add all that up, the reinforcement is on -- with the economy can do to turn it around. anna: is there any expectation of any change, any relaxation of the covid policy? any important meetings to take place in autumn in the fall? edna: shanghai has pulled out a very severe lockdown.
there silicon valley rolling mass testing in china, beijing, there was another mass testing rolled out. all indications are the authorities are still sticking to the policy. economists are warning --. anna: edna curran, thank you so much. >> it is pinned up demand being fulfilled at the mormon -- at the moment. all the research we are doing reaffirms people want to get back flying again. i am not going to ignore the fact we are facing some challenges. the outlook remains very positive. >> you're not worried about a recession? >> we have seen this before.
you go back to thousand eight, 2009, 2010. we saw a deep crisis in 2009. we saw strong growth in 2010. one of the great things about this industry, we adapt and apply the learnings in new better. i prefer to avoid these. i would prefer if we did not see these. the industry knows what we need to do in this department. guy: there are significant problems in the industry right now. a lack of supply of staff. headwinds coming from lots of different donations -- directions. when do you think this is going to be fixed?
william: some of these problems are structural. i don't think this is going to be resolved easily --. that plays into the possibility of being restricted airlines are recognizing they are not able to build up as fast. that is why you see a more cautious industry. all of the headwinds you are referring to will play into decision-making. there is excitement about recovery. airlines will take full advantage of the strong demand that exists. we will see the possibility because of external factors. airlines won't be able to -- the capacity they want. anna: conference taking place in
denmark. good times and excitement. the extent to which it is sustainable is a question. also the extent to which the aviation sector can make the most of the size. aviation itself but also the supporting infrastructure that goes along with that. coming up on bloomberg tv, global sector by divergence has been emerging with the fed. the s&p raising rates. we will dive into the different paths ahead for central banks. to take you through expectations for timing and otherwise. a little bit of over -- underperformance in france. this is bloomberg. ♪
it is a national holiday stateside, juneteenth. around .7% on the s&p. almost 6% for the week last week. markets continue to reassess the risks of inflation, the risk of recession. pivoting of those central banks. when it comes to the breakdown, we continue to watch what is happening in terms of those spreads in europe as well. a yield three basis points.
we continue to listen out for the ecb later today. 2/10 of timber there. bitcoin, as well as --. voluntarily -- volatility concerns. let's get you a check on news from around the world with first word with atkins allen's -- at kid -- alice atkins. alice: the french, italian and german leaders have already given their blessing. president emanuel has lost his outright majority in the french parliament.
the result means they will struggle to pass legislation. china's spring outbreak of covid-19 continues to subside. a single case to that -- detected over the weekend triggered lockdown. they should want china is reporting his lows cases by early february. the country and -- continues to pursue a structure that keeps it isolated from the rest of the world. we should return to profitable times next year. let is the provision of the international air transport association. at its meeting indo hard today,
--. 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 am alice atkins, this is bloomberg. tom: we begin with angst of inflation. the bank of england, more than 70% of residents cost of living and said to increase over the next 12 months. in majority of investments for the u.k. is tumbling towards recession. >> a great deal of enthusiasm for u.k. assets. >> the biggest grabbing 70 years. >> a mixed is going inflation growth. >> there is scope for it. >> we need the dollars to
turnaround. >> i think that will be an opening. >> something we talk about at this point, extreme. tom: joining us now to discuss, jeremy --. the statement interpretation was that it was more hawkish than anyone expected. the markets pricing itself within more than 25 basis points at the next meeting. do you think that is overdoing it to some extent? jeremy: you're totally right. we should remember the bank of england had never hiked -- the height rakes fund. that statement, we talk about
acting forcefully. he have seen another move up in terms of the anyone -- annual inflation is wing. under those circumstances, they cannot spring now. the other factor, we are being charged by some of supply. it is particularly challenging. we may see pure mark continue to retreat. a combination of fast acceleration. that leaves the country looking rather vulnerable.
tom: is there data around that cpi, inflation on wednesday out of the u.k.? is there a number that would change your view and make you more on where you see that going. jeremy: the if we were to see inflation coming in at a double-digit pace, the impact of the price cap. if we were to see expectation, we would see -- u.k. acids
seemingly much more will not be 50 basis points or more. when you look to the postbank, leading it to be price. the bank of england can step up. still imply over the three year -- inflation will be a trend. they still expect inflation will be headed back across towards the horizon. tom: before i let you go, as you wait up all of the uncertainty,
what is your view? are you able to give us your view to get down to 115? what is the level? jeremy: i wouldn't be surprised at 116, 117 or the next few months. the question then implies, what is happening on the dollar inflation? that might just take a little bit of pressure off. that will probably mark -- heading back to 118 towards the end of the year. tom: has the ecp done their job without giving all the answers of fragmentation? jeremy: it is enough.
when it comes to the argument, will they outline a detail if it is effective to raise rates may be higher? do you buy into that? jeremy: i think it can preclude the risk in terms of policy dynamic. pushing the strength of resilience and you're getting back into the dynamics relationship to the world and ukraine. we can see edging roots higher. that is an important dynamic.
we would like to see that would allow -- i can see the euro to bit of it. tom: your favorite currency there? jeremy: the dollars probably the easiest way in the short term. tom: jeremy stretch of the cibc. thank you very much for your analysis. i have a very great rest of the day. ahead, we get a look at the rest of 2022 with the ceo --. the markets. as we just took it to break, you're looking at stocks ecb
goes down for basis points. bit training 105. -- bit trading 105. this is bloomberg. ♪ ♪ don't like surprises? [ watch vibrates ] proactive notifications from fidelity keep you tuned in all day long. so when something happens that could affect your portfolio, you can act quickly. that's decision tech, only from fidelity.
special edition of bloomberg markets. in france, the politics of that country -- moves that parliament. with the markets reopened stateside, the juneteenth holiday -- a number of investors say it is going to take time to get back down to that. let's get back to the question of inflation. oil pledging normal 7% on friday. let's start and recap it last week. almost 60% drop on where things stand now.
will: people are not getting the gas they have normally been getting. natural gas prices in europe up another 8% this morning. there doesn't seem to be any change in the situation. and to miss the prospect of serious inflation. tom: we discussed this on programming. members of the great have announced it is time to get started again those power stations in germany to account for or at least to make up for what they see for energy shock. what do we see about the plans to contend with this drop? will: germany is very dependent on russian gas. the economy was built on that
supply. having to adjust -- having to adjust very fast. you have the amazing outcome of a greater cardi b minister having fought most of his political career to have to get rid of colds who is now say we are going to use more coal. back into production. to have that power production this winter, if it is not enough natural gas. it shows how energy security is trumping large parts. the u.k. also making plans. tom: what do you make of the drop we saw on friday? does it suggest that maybe we are starting to see --?
jeremy: -- will: that means you often see more volatility in some of these prices. adjusting to what the fed was saying about getting inflation under control. people are taking some of these are the table. when you look for people's demand and finding crude, you look at how hard -- that is a sign the market is clear -- is cooling down. this is a futures market. trying to figure out what is going to happen, i think it is
too early to say. tom: you have done a great job of pointing out how those prices are climbing. those prices remain elevated. what is happening in the refining space? will: this is a peak time of year. people have taken back to the skies advising. those refineries are working very hard. even for this time of year, how much capacity is being used in the u.s.. tom: what else are you looking for in the common -- in the coming weeks? what is keeping your focus at this point? will: we are going to be looking for signs among destruction, whether we have seen a rapid demand in fuel, whether the
economy has started to weekend. you see those elevated levels come up a bit. there are a couple of things. the u.s. would like saudi arabia and -- to provide more oil. it is not clear they can produce a game changing amount. that will be a focus as we work towards -- and another thing to keep an ion is libya where we lost -- where the market cannot afford. at the time were the european market looks to be very tight, this is adding to this picture of marked uncertainty. tom: looking at -- 7% today. a lack in demand lockdown, you see further in shanghai.
if china comes back, what kind of demand shock would that pose for this already tight market? will: six weeks ago, in the late spring, we estimated a high high takedown. if you think back, that is quite a big change. the petroleum reserve has -- you could really get a situation where you see million. we don't know how strong the chinese economy is but it
potentially swings in both directions. tom: is that a moot point at this point? will: you probably are going to see -- people treat those barrels of oil. the u.s. is slightly not willing to worry about it as much. tom: will kennedy of our global for forms to coming up, we discuss -- this is bloomberg. -- this is bloomberg. ♪
tom: welcome back to a special edition of bloomberg markets. i'm tom mackenzie. modest gains across the benchmark. stoxx 600 seeing gains of .6%. we continue to watch the sovereign yields in europe. madame lagardere the ecb will be giving testimony to the european parliament later today. yields off by about three basis
points. some comfort after blowing past 4%. the italian 10 year, we await more details about this anticrisis talk. brent crude trading at $113 a barrel. the other commodity to bring to your attention is iron ore, which is significantly, off of news of demand growth in china. a pretty volatile a couple of days for cryptocurrencies. currently up .6%. particular concern about what is happening in the dvi space. let's get you up-to-date with news from around the world with alice atkins. alice: joseph burroughs slammed russia's production of ukrainian grain as a war crime. the head of a meeting in luxembourg, he said it was the more, not eu sanctions that are
causing prices to soar. he says millions of tons of wheat remain blocked in ukraine while elsewhere people around the world are suffering from hunger. ferdinand marcos, jr. has appointed himself agriculture secretary. he has pledged loans and modern machinery for workers to boost food supply and bring down prices. the last time an incoming leader assumed a concurrent role as minister was 1998. the u.s. economy will likely fall into a mild recession by the end of 2022 as the federal reserve raises rates to tame prices. nomura warned that financial conditions will tighten and the global growth outlook has deteriorated. the european is ready to come bat.
speaking after an emergency meeting, the ecb councilmember said it is natural to see some increased uncertainty and volatility and that the bank needs to act with " a cool head and steady hand." 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 alice atkins. this is bloomberg. tom: thank you. divergence among central banks. the federal reserve, boe, s&p all raise rates last week. the ecb held an emergency meeting to prevent your fragmentation. >> the committee decided a larger increase in the targeted range was necessary. >> we believe it is necessary to increase rates today. inflation is now higher. >> if we see greater evidence
that the current level of inflation is becoming embedded in pricing behavior, weight sitting behavior by firms and workers, that will be the trigger. >> the calibration of this rate increase will depend on the needed medium-term inflation outlook. >> if we raise the ceiling in the current circumstances we expect to see long-term yields rise above 2.5%, weakening the effect of monetary easing. we are not planning on doing anything like. >> i expect inflation to get back to 7%, and that is a very high number. >> either a 50 or 75 basis point increase is likely at our next meeting. >> if inflation persists or deteriorates, a larger increment will be appropriate at our september meeting. tom: joining us now is the
capital economics head of global service. jennifer, thanks for joining us. loretta mester said the risk summer session are higher and it will take a number of years to get that down to the fed's target of inflation. do they have to reassess what the target has to be? do they have to adjust the inflation target given levels at 8.6%? 2%, when do they get there, is it realistic? jennifer: adjusting the inflation target right now would add to the issues. that would reduce your credibility. there are a lot of transient forces keeping u.s. inflation and other economies high, notably commodity prices. if commodity prices start to ease off, and even if they
don't, the strong statistical effect small drive inflation down quite a long way. the key risk is whether underlying inflation, wages, stays relatively high going forward. that is where we will start to raise rates even further. tom: you would make the case that inflation will fall quite sharply toward the end of the year. is that a headline level, how much of that is down to comparisons jennifer: a lot of it is down to comparisons but we also expect commodity prices to ease up later in the year as global growth starts to soften. that should tick some sheet out of commodity markets. you have really got to go some way to keep inflation at current highs. the question is whether it comes down enough. the average rate in advanced economies is about 8% at the moment david even at 4%, it is
much too high for central banks. core inflation pressures are likely to remain a bit too large for central banks comfort. tom: the fed dot plot sees 3.4% by the end of the year even certainly in tightening restricted territory if the neutral is 2.5% in the u.s. what is the lag from getting from 3.4% to getting that core rate eroded as a result of higher rates? jennifer: the transition into real activity is long, very hard to know just how long it will take to see-through. but we are starting to see some signs already because of policy tightening, anticipated tightening affecting spending in the u.s. retail sales have been weaker as of late. some tightening of financial conditions, which is having an effect on economic activity,
will help to bring core price pressures down. tom: blackrock says they are not buying the dip until they see the fed having to slow down their pace of rate hikes. they think the markets are over their skis here. what do you think the rate hike cycle is looking like now? some are saying another 75 basis waits at the end of july. is that looking unrealistic given the growth concerns? jennifer: i think we do get that far and probably close to 4% next year. i think there is, beyond that, we will start to see more signs of the economy weakening, growth softening. it may not be that long before the fed changes tack and we see a cut coming in 2024. you should see financial conditions easing before that as people start to price in that
loser policy, assuming those trying to toy price pressures come off. tom: the bulls say the strength of the consumer, the household balance sheets in the u.s., corporate balance sheets are resilient, and that will prevent any significant slowdown. ultimately the consumer can come to the rescue in this. what is the data telling you about that? jennifer: it is giving us some signs of concern. i mentioned the retail sales data. car sales data has been weaker. there are some signs of consumer is starting to weaken a love that in the face of policy tightening and very high inflation. but it is right that has come down. lending is also on relatively long-term, so the hip to the u.s. consumer shouldn't be too dramatic as policy is tightened.
we think the economy on the hall will bend rather than break. tom: your base case is that the u.s. avoids a recession in .23? -- 2023? jennifer: that is our base case. the parts that are most interest-rate sensitive, it doesn't look like consumers are overstretched to the extent that you would see a very sharp downturn in the face of policy tightening. tom: with europe, the question of energy is back in focus with that cut of gas supplies. 60% cut last week. if we were to get a 100% cut in terms of gas to europe -- it seems hard to imagine given the damage it would do to own economy -- but one with the impact be across the euro zone? jennifer: it would be pretty bad reticular clearly for german industry, which is an important part of the industry, very
energy dependent. that is why you are seeing strong policies to build up inventories of gas in europe. it is good that those plans are being put together already ahead of the winter season when their energies will be much higher. there is some encouragement there. tom: can europe avoid a recession even if that doesn't happen? jennifer: we are forecasting recession in the euro zone. we are forecasting recession in germany partly on the back of these gas restrictions but also on supply restrictions more generally which are quite intense. tom: question on china and the potential to be a catalyst. there are serious concerns being reflected in the price of iron or today. lockdowns, covid zero. if policymakers have outlined their desire to be more reactive , if we get to a point where china reopens and you have this policy support, does try to become a catalyst again to the
global economy? jennifer: our view is that actually the recovery will not be as strong as most expect. the policy support will not be anywhere near as strong as we see what's coming out of the initial stage of the pandemic. it is unlikely that you'll get the snapback in china, not least because policymakers are trying to take some of the heat out of the product remarket -- property market. i think it is more likely china will support on the downside. tom: policymakers would like them for them to undo the hard work to do you economy. thank you very much for breaking down your outlook for the u.k., the u.s., and china. the head of global economics service, thank you very much. the airline industry is looking
to bounce back from an unprecedented pain. we will hear from the jetblue ceo at the international air transport association. that meeting is happening in doha. guy johnson has been speaking to executives. the markets in europe, you are looking at a gain of six point -- .6%. in the u.s., a national holiday. currently, in italy, 3.58. bitcoin, 20860. still hovering around that 20,000 level after a volatile 24 hours. we will see it bitcoin can hold about what many see as a key level. plenty more, stay with us. this is bloomberg. ♪
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tom: welcome back irina shares in jetblue have continued to face pressure this year as airlines head into the key summer travel season. guy johnson spoke with the jetblue ceo robin hayes earlier today at the iata conference in doha. they talked about the challenges ahead for the aviation industry and when they could be fixed. >> the system is still suffering through some of the same challenges that we are seeing in other sectors, too. the aviation industry is such a finely tuned machine, when you don't have all the right resources in the right places at
the right time, it can get challenged quickly. we saw this back in march and we made a decision, as hard as it was at the time, nobody wants to take flights off the schedule, we reduce capacity by 10%, and we were concerned about our ability to reliably operate. >> can you step up and say, we all knew to reduce by 10%? we are not even into the summer. >> the most important thing, and you are seeing it now, when things go wrong, people start on her fingers at each other. the customer doesn't care. the regulators, air traffic control, and the airlines, we all have to work together to do that. if we don't think we can operate airports or airlines in a reliable way, we need to bring things down, but you need to do it early.
customers don't want their flights canceled the day before. we have to act now. however we do it, we have to make sure that what we are saying we can do so reliably. >> how long without demand be around for? the fed is raising rates, 75 bps coming through, maybe even more coming down the road. the idea is to crush demand. how much is the current demand going to last with the possibility of recession coming down the pike? >> we expect to see more fed rate hikes bring things down. two things about aviation that are unique. there is still a lot of pent-up demand. we know there's a lot of people that have not traveled for two years and they are not traveling the summer because what they want is not available. we are all pulling flights down, there are less seats available. i think you will see that demand
flow into the fore. business travel is still coming back very low levels. business travel will be better in q4 this year that it was last year. >> about the spirit deal, 2016, emergent on the blocks, alaska wants it, you are in the running. most people talk about the fact that alaska probably overpaid for the asset because you were pushing harder. are you worried that you might be getting into that kind of territory with spirit? >> we are very excited about this new national low-fare challenger. if you look at the deal we have on the table, it offers great value when you compare recent opportunities like virgin america. having said that, we are excited. it is an all cash offer, 6%
premium to the competitive deal, and we have a lot of conviction to get it done. >> people have talked about you are buying spirit's order book. what are you buying? >> it is an order book, has great similarities to ours, so a lot of similarities there. it is access to gates, infrastructure, airports that we want to be bigger in. we have wanted to get bigger in lax, which has been difficult to do. combined, we will be a better competitor against legacy airlines. getting access to skilled people. pilots, in-flight, maintenance. we all talk about how we are struggling with this. you take all of our teams together, it will allow us to ramp up more quickly. also by building this bigger national low-fare airline,
appealing to a bigger group of customers, loyal programs, vacation programs, all of this week and bring to more people. tom: that was guy johnson speaking with the ceo of jetblue robin hayes. guy johnson is still with us. fascinating signs if you look at the industry. what are some of the most salient points that executives have raised with you? guy: i think they are all worried about a recession but they are trying to balance out this idea that they have superstrong demand at the moment from consumers, but they know recession is probably coming toward them, particularly for those in the states who are feeling that pressure a little bit more. how do they bring back capacity, how fast can they bring back capacity, how deep will the recession be?
they probably have vision for about six months, and then the crystal ball gets opaque. i think they don't understand what the dynamics will look like in 12 months time. airlines tend to be optimistic, and they are trying to be at the moment. they think the consumer will hold up but they all recognize that the fed is raising rates aggressively, trying to clip demand. they know that is a risk for them. for the moment, most of them are focusing on the near-term challenge, trying to get capacity back, bring staff back, manage high jet fuel prices. they have a short-term series of issues they need to deal with. every day we are same stories about the fact that people's travel plans are being disrupted. that is where they are focusing their attention now. tom: they are spending a lot of plates. when it comes to pilots,
engineers, where are they in addressing those shortages, how does that play out in the timeframe you are looking at, that six-month horizon? guy: i think probably six to 12 months. this will not be fixed this summer, that is clear. robin hayes is talking about the fact that you are probably going to have to see some regulatory intervention here. you are already seeing in the u.k. heathrow stepping income you need to reduce capacity. we need to have that clarity so that customers are not turning up at the airport and having their flights canceled. that is the stage they are getting at. it will not be resolve the summer. they are trying to bring people back as quickly as they can but we are in june. july and august will be busy. it will not be fixed by then. i think it will be a very bumpy
summer. this is where life gets interesting from the consumer perspective. fares are expensive but the experience is not living up to the expectation. people are paying top dollar but then are having huge problems getting to the airport, getting on aircraft, all of those things will be with us for a while. tom: a fascinating conversation. it has been two years since the death of george floyd. we will hear from the attorney who represented his family in the wrongful death lawsuit in the city of minneapolis. stay with us. this is bloomberg. ♪
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edition of bloomberg markets. i'm tom mackenzie. it is 1:00 in london, 8:00 in new york, 8:00 p.m. in hong kong. gains of around .7% in europe. maybe investors starting to way up that possibly a lot of this action by central banks have been priced into the markets. christine lagarde speaking and addressing the european parliament later today. euro-dollar in focus. gaining .2%. continuing to keep an eye on italian vpp's. yields are up by about three basis points. more of a comfort level for european central bank officials as they work on this talk. iron ore pressure out of china. code zero lockdowns. currently down 8%.
.7% gains in europe. a national holiday stateside. let's get you up-to-date with news from around the world with first word and alice atkins paving alice: ukrainian president volodymyr zelenskyy says his nation is facing an historic week as the european union decides whether to approve its bid to become a candidate. the french, italian, and german leaders have given their blessing but all member states must agree. emmanuel macron central alliance has lost their outright geordie in the french parliament. his group won 245 seats, short of the 289 needed for an absolute majority. a left-wing alliance will be the second-largest block with the far right in third. the results may macron will struggle to pass legislation,
putting much of his agenda in peril. china's outbreak of covid-19 continues to subside but a case detected over the weekend triggered a mass testing and neighborhood lockdowns. john is reporting the lowest number of cases since early february but the country continues to pursue a zero tolerance strategy that left it isolated from the rest of the world. after two years of covid, the airline industries should return to profitable times next year. that is the prediction of the international air transport association. at its meeting today, they say airlines have emerged leaner, tougher, and morganville -- and mourned him go. 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 alice atkins. this is bloomberg. tom: thank you very much.
let's get to the european markets. stocks seeing gains following last week's selloff. joining us is bilal hafeez, head of research at macro hive. what we are seeing in the european markets this monday, is there any conviction in this turnaround, modest as it is for european stocks? bilal: the conviction has been low. to some extent, there should be can some consolidation with the u.s. holiday today. most people are probably looking for some kind of consolidation. this week people are looking for sideways moves but i don't think this is a sign that the worst is behind us. tom: when it comes to the question of politics, i wonder if you think the markets are not pricing in enough political risk when it comes to the u.k. here with boris johnson, or in france with macron losing his
majority. are the markets right to look past potentially a stalled agenda in france? bilal: in general, markets are under appreciating the risk. at the moment, as we have seen from french elections, likely to see in the midterms, if the house flips to the republicans, it will be harder for governments to enact any kind of fiscal response if there is further instability in the economy. we have seen various measures being put in place around the world to do with inflation. if you have gridlock, it is much harder to do that. that adds to this risk, there will be less policy support in the event of further shocks to the system. tom: crossing the terminal, the russian ruble has risen to 55.47 per dollar, the highest since
2015. you have to wonder if the central bank steps into address that. it is not easy to trade for foreign investors if they want exposure to the russian ruble, but i want to tie that to the question of gas. you saw that cut of gas from russia into europe. how much of a morning was that for you, reminding us of the vulnerability in europe of those gas inflows from russia? bilal: all of these things tell you how much power russia still has in the overall economy, european economy. europe has been debating what they should do for a long time about russian energy imports. russia is leading the charge there in deciding whether it pulls from europe.
it adds that additional risk to the european economy, adds to inflation pressures to europe. also suggest that the europeans are kind of acting in a more reactive way to russia rather than being proactive. instead of they themselves deciding whether to cut off supplies from russia. tom: how does this inform your geographical presence to russia when it comes to your exposure to stocks? bilal: in general, my bias is to be underweight, not belong in any particular region. i think we are in a very negative environment in general with central banks, which cost pressures that lead into profit margins. this to me is more of a global phenomenon rather than a regional one. growth dynamics in europe are worse than in the u.s. but
overall given that rates are so high, and this continued environment of higher volatility, that tells me that one should generally be underweight equities across the board. tom: tie that into your view of earnings. 3.4% by the end of the year, 3.8 in 2023, should we be bracing for earnings downgrades as we look ahead into 2023? what do think it will do to evs? -- eps? bilal: for now, still positive. much of what we have seen this year is due to ratios falling rather than earnings expectations falling. the next shoe to drop will be downgrades to earnings. this goes into the larger question of recessionary risks, is the market correctly appreciating the risk to growth
overall. i think this is the big story right now for the rest of the year, how much earnings estimates will be downgraded, what will be the profit margins. overall my sense is there will be significant declines in eps expectations going forward. tom: let's unpack that a little bit. what sectors do you see most vulnerable to those downgrades? bilal: the clearest sectors is tech, will come under a lot of pressure. that is skewed more toward the u.s.. tech generated the most from a low rate environment. what we are likely to see with higher rates, the tech sector will come under pressure and companies will scale back on their expenditures of software and so on. the other one is the consumer side where we are likely to see rates go up as we get more recessionary responsibilities.
the consumer side will come under pressure as well. on the flipside, you have the commodity related sector, energy, lng, oil companies that will do relatively well in the overall context. tom: those are examples of where you can hide out in this environment. does energy still work if we get into a recessionary environment? history would suggest that mary comes under pressure once growth starts to slow significantly. bilal: at the moment, we have significant supply issues which will keep energy prices. for now, that will be enough to support, but further down the line, when we get into the real recessionary zone, energy will be hit. at that point it will start to
hurt. my reason for being more cautious around calling energy lower, it seems very easy to call for energy lower. prices have been relatively resilient this year. we have had a huge amount of spr releases of oil, speculation of increased supply. but oil is still about $100. i think the significant structural issues on the supply side are likely to keep prices elevated. tom: we saw some significant moves in the credit space over the last few weeks. is there much more to go with discounting and credit, anything looking attractive? bilal: the credit is following the general de-risking we have seen over all. corporate balance sheets are relatively healthy compared to earlier periods of credit
stress, going back to the 2000's. corporate balance sheets are looking healthier than when we had serious credit distress. less visibility on credit risk and private markets have expanded significantly over the last 10 years with private equity, venture capital. that is where we will likely see more significant and meaningful credit related unwind. tom: bilal hafeez, head of research at macro hive, thank you for that analysis. currently seeing gains across european equities, around .7%. the cac around is up .2 percent despite the fact that president macron has lost his majority in the french parliament, posing questions about his agenda particularly when it comes to
pensions and taxes in the country. here in the u.k., decent returns of 1.2% in the trading session. the s&p in the u.s. going at poignant percent. those markets reopen on tuesday. continuing to monitor the sovereign debt space in europe. christine lagarde will be talking to the european parliament, no doubt facing a grilling about her stance. we continue to watch the italian bpp's. the italian 10 year currently at 3.55. iron ore battling demands from china. 105, up .2%. in the crypto space, bitcoin trading just about 20,000. up a little bit of .1%. coming up, the bloomberg
complex transition. we are in the home of gas. the qatari subs just signed up more partners in their megaproject northfield. it is the energy complex. the energy crisis where you are is real. they are being asphyxiated by russia. so how does this qatari gas along the long-term holes? we will be talking about recession risks, hard landing according to the fed. stocks are rising at the moment but are we pricing in the worst case scenario? and there is one final e, elon. you can imagine the conversation. apparently he's been trying to raise funds from the qatari's.
it is timely that he appears here at this bloomberg economic form to have a discussion. maybe some passing thoughts on bitcoin, dogecoin? but the big conversation is on energy and risks. tom: we want to get some more thoughts on elon musk with john micklethwait, but let's first get some more on the energy complex. where do things stand with the qatari's to meet that demand? the europeans are desperate for the stuff. how much spare capacity do the qatari's have at this point? manus: there is the differential between capacity choice and keeping your allies happy. my take is that the big add in terms of natural gas, lng from this region is a five-year
trade. they supply plenty to asia and other markets. it's a question of political will, driving supply to europe. that is an economic position where you keep your customers happy with the political will to be closer to your g10 allies, and the united states of america. mohammad bin salman on is the leader of the saudi arabia region. president biden is coming to the region. there is a big fascinating conversation in terms of how does europe plug the gap? what do the american do with the rapprochement to the saudi's?
somebody said to me, this can be a very -- moment for the qatari's. tom: before we let you go, we have to ask about oil and then elon musk. you monitor these markets on a daily basis. there is a question, demand is so strong, this is likely to be short-lived in terms of demand for brent prices. you talked about the saudi's and the u.s. president visit. what is the oil component in this energy crisis? manus: let's call it $100 for cash so we don't mess around with this. the consequence of the horrors of what is going on is war. that premium is $50 on the
upside. take your choice on the offer. the downside, what you saw was the market trying to grapple with, what does the global slowdown look like? the bottom line is china is not back online, they are not backing off of zero covid. they are not back in line in terms of gas, oil, products. when they ramp up through the back half of the year, how much pressure will that put on the oil and products market? 7% to 10% is the recession obsession versus a much bigger horror of war component, which is in a shorter and tighter market. options are trading around 1.40. tom: a million barrels a day is how they quantify that lack of demand. when it comes to elon musk,
whether or not he pursues twitter, if he can come or whether he can pull back. what are we going to be listening out for in that conversation? a somewhat rare interview from elon musk with a member of the media like us. manus: it will be interesting to see jon interview elon. i have no foresight on what questions he will be asking, but it must be an incredibly difficult conversation to run one of the leading electric vehicle companies in the world, the battery storage and the technology she has developed, yet at the same time, taking on the rise and the concept of what is free-speech in many ways, what twitter is. it is an incredibly complex
deal, in terms of financing, who's on your roster, who is on your side, what needs to happen to get the deal over the line. i am really looking forward to it, a very british editor-in-chief with a south african global entrepreneur. tom: it will be colorful. conversation around bitcoin, maybe spacex, the boring company, twitter. we can see it now, $37. manus: i wonder if he will give dogecoin a shout out. tom: anything else that you are looking for? anything that you will be focused on for the next several days in qatar? manus: there are a host of other
panels taking place here. if you think about where we are geographically, in terms of the nexus of where we are, i'll be catching up with the namibian oil leaders, ethiopian oil leaders, in terms of is this a moment for africa to rise in the eye of a european energy crisis? tom: manus cranny on the ground in doha ahead of that forum. coming up tomorrow, john micklethwait sits down with tesla ceo elon musk. stay with us. this is bloomberg. ♪
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these are relative gains. in terms of futures stateside, where it is juneteenth, the markets are closed today. they will reopen on tuesday. in your currency space, euro-dollar remains in focus ahead of likely comments from adam lagarde to the european parliament. the italian 10 year, 3.56. a long way from the danger levels. brent at $113 a barrel. we continue to watch gas prices in europe given the reduction flows, significant reduction flows we saw last week. bitcoin has not moved a lot in the last 24 hours. 20,499. just holding above that 20,000 level which seems key for many investors in the crypto space.
let's bring you up-to-date with news from around the world with alice atkins. alice: prime minister boris johnson underwent minor surgery to fix an issue in his sinuses this morning. he was under general anesthetic and unspecified national health service hospital in london. johnson is recovering at his residence and dominic raab is in charge until tomorrow, when johnson is expected to return to work. ukrainian president vladimir his nation is facing an historic week that his members 27 nation member state meeting to determine if they should become a candidate. they will reach a decision later this week. china continues to snap on russian energy products including a record quantity of crude oil. it may purchases of $7.47 billion, $1 million more than april, double the amount from a year ago.
chinese demand started to show some improvement as restrictions were loosened, allowing industrial production to rebound. more than half of consumers and major economies did not build up savings during the pandemic, that is according to a new survey of 18 nations. it is delivering a blow to the idea that households have a cushion against a deepening cost-of-living crisis. if you want percent of respondents failed to add to their savings during the pandemic. the lowest rate was germany at 39%. the u.s. and canada also sought results below 50%. 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 alice atkins. tom: joining us now for more market reaction is the baird investment strategy analyst.
where do you think we are in terms of the pricing in the equity markets of the central-bank action that we saw last week, the central-bank action forecast by these markets going forward? >> i think we are fairly well priced for the central-bank side of things. we have seen a 20 5% selloff in the s&p 500, worse in the nasdaq. the market at this point is pricing done a pretty aggressive slow down. now the question is recession in 2023 or not, whether that is mild or pretty deep. the next ball to drop will be earnings. we will get some guidance that will allow us to know what the earnings picture will look like next year. today it has been multiple contractions and earnings estimates have held up well. those will have to come down. the question is how much and that will dictate where we go from here. tom: you think earnings expectations are a little bit too rosy at this point?
ross: i think so. medium earnings drop in a recession is about 20%. even given the consumer position and labor market strength, estimates are still up double digits, and i think it is too rosy. companies have done well managing cost pressures to date, but at a certain point, that will start to weigh. at a certain point, the consumer who has been resilient domestically, there has to be some cutbacks as gas prices are over five dollars, food inflation is spiking. earnings are probably a little bit too rosy. they need to come in a little bit, but where is the ultimate landing point in 2023? tom: where do you expect to see -- this has been the discussion of the year when it comes to equities. the margin spread.
where do you continue to see that margin strength? ross: what's interesting about this cycle, all we hear is input prices, wages, transport costs. throughout this, u.s. company profit margins have been at record highs. they are rolling over and still maintaining highs that we had not seen in the prior couple of decades. at the same time, productivity metrics are waning. there have been some impressive productivity gains, or at the least, workers are working more and carry more burden. we see this across sectors. i think it will come in but there has been a longer, secular trend of rising margins as businesses get more asset-light, shift to the consumer sector.
i think you will roll over and see some of these pressures weigh on the bottom line but companies have gotten good at managing this. even with all of these pressures, it will hold well. tom: you are weighing the risks around recession, keeping an eye on inflation, earnings. where do you want to be hiding out at this point? ross: you can take a barbell approach. we are heading toward a slow if that recession, so you want to be in higher quality stocks, defensive sectors. what does higher-quality mean right now? the higher-quality balance are concentrated in the sectors that have been hit the hardest. big cap tech. those are really strong balance sheet companies but they have sold off as interest rates have risen. companies that are generating free cash flow, returning to shareholders in the form a buybacks or dividend, that is a good way to play quality.
on the flipside, energy has taken it on the chin as there are concerns about recession, but that is still a structurally tight supply. china has not even picked up because of the covid-19 policy. if we continue to see these pressures on the supply side and demand gets stronger in the near term, you could see another leg up for energy commodity prices. that is a big boon to the energy and commodity plays. we think that will continue. tom: is health care looking attractive to you? almost always a consensus trade. shelter, health care, energy. does that align with your views? ross: health care is pretty defensive along with staples, utilities. i think you can collect some more yield in the market than average. there is always more political volatility in that sector,
especially in a midterm election year, where some of the legislation being kicked around right now -- drug pricing and other health care aspects that could be concerning. but in the end it is a good sector to be hiding out in. there is some stability in earnings in aggregate, nice yield for defensive posturing. not a bad place to be. tom: do you have a regional preference, ross? ross: that is a tough one. you can look to pretty much any region in the world and look for something that you would want to go elsewhere. i think the domestic picture still makes sense because of the strength of labor market, strength of the consumer here. there have been cracks in the story, the fed is about as aggressive as they have been in the last 25 years. that is contributing to a strong dollar which will only further weigh on u.s. company earnings. there is still an underlying
health in the economy in the near term that will continue to provide a floor to the market. europe, because of the sector makeup, there has been more of a proximity to the geopolitical concerns. concerns in the eu right now with fragmentation. but the sector makeup there is more along the lines of what we want to lean toward in an environment like this. you just have to manage all of those other concerns. pretty much anywhere in the world, high quality, em will struggle with the stronger dollar, so there are probably better times. but u.s. and developed europe, that is a good place to hide out as we head toward this slowdown. tom: u.s. and developed markets a place to hide out. what would you need to see to turn you more optimistic? would its only be on the focus of the fed starting to rethink
its rate hike cycle and the inflation numbers that align with what is happening with the fomc? ross: i think you are absolutely right. this will be a boring answer because that is all the people talk about. i think inflation comes first and foremost. figure out the fed reaction function even in a way, the market thought that inflation peaked, it is ok that it was high, but that is aggressive but they are as aggressive as they have to be. the may cpi report popped that bubble and i think the bar is hired to clear to see that we are on the backside of this episode. it will not just be one or two see guy reports that come in below consensus. i think there needs to be a very convincing argument across a lot of data that inflation is on its way down. that will be what the fed needs
to see before they feel confident that they will pause. they have never really committed to this hawkish path. i think they are starting to see they have to wear those vulgar 2.0 shoes. the last meeting was extremely hawkish. i think they are worried about their credibility, worried about the fact that they are behind the curve. inflation comes first, and it has to be convincing. tom: do you look at the crypto space? valuations are changing in the crypto space. how much is video goo -- idiosyncratic to what is happening in the sector, or is there linkages to the broader financial sector? ross: that is tough to say. i don't know if it has been around to see truly systemic risk. but we have seen in each of
these cycles, institutional adoption, the sheer amount of capital and money in the space is multiple times bigger than it was even in late 2017. any time that happens, the linkages build and there is more of a risk of a systemic failure stemming from that. at this point, crypto is to me just a high beta risk asset. it sold off alongside some of the risky tech stocks. it is a liquidity play. it is kind of getting hit their first. i am where would you say it is not a systemic risk. i think the adoption being brought in has increased those odds, but right now i think we are probably fine. next time around, though, anybody's guess. tom: great insight. ross mayfield, baird investment strategy analyst. it's been two years since the death of george floyd. we will hear from the attorney
tom: today, the u.s. observes juneteenth. netflix is out with a new documentary called "civil" about benjamin crump. he represented the family of george floyd in civil court and won $27 million against the city of minneapolis in a wrongful death suit. bloomberg spoke to ben crump and the documentary's director. >> when we started making the film, it's a question we asked ourselves. we knew that the defense needed time and we wanted to explore that.
everything that we found was post george floyd's murder. you see the killing of daunte wright happen in the film during the trial of derek chauvin. you see the killing of fred cox, andre hill. so, while people were quick to rush and say things now, george floyd was murdered, people care and they are taking to the streets, i will give my personal opinion based on what i experienced working with attorney crump. not a whole lot has changed since then in terms of police excessive force murders. >> i am probably a little more optimistic, see it as more glass half-full. i see how much the consciousness level in america has been raised, consciousness in the world since george floyd.
when people are starting to believe black people, when we say they brutalize us, before they didn't believe us, they thought we were exaggerating. but when you watch that documentary, you cannot on see it. i think we are making significant progress, incremental progress, but progress all the same. the fact that you have president biden signing an executive order. over 150 cities and states passing laws to say we are not going to allow police to use the chokehold. because it was legal in most cities in america up until george floyd. and they were only using it against black and brown people. the state of minnesota, over 85% of the time when they used a chokehold, it was against a black or hispanic person.
black people only make up about 10% of the population in the state of minnesota, so you are not choking your white brothers and sisters. the last thing i will say on that, i try to be a student of history. i look at the civil rights act of 1964, the voting rights act of 1965. they did a study after those laws passed, and in 1966, the electorate in america was the same. they did a study 10 years later. the voting rights act of 1965 had a profound impact on who was getting elected. for the first time you were seeing black mayors getting a lot did. for the first time you had 10
times as many black congressmen in the u.s. congress. i believe we are going to continue to make a better world for our children. tom: that was attorney ben crump and 90 whole-grain, rector of "civil." new signs are emerging that european stocks are potentially prime for a rebound. joining us now is ben from our markets team. the modest optimism we are seeing across the european equity space, volumes are like given that it is the national holiday stateside. what do you make of the gains we have seen so far this monday with the backdrop of last week? >> as you mentioned, we are seeing volumes in the u.s. market down. it is to hard to read into
action today but markets will be moving in the coming week. this will support equities to some extent. beyond the quarter it is hard to see it development for stocks that is optimistic for two reasons. one, the federal reserve continuing to raise rates. the other is the concern about the backdrop of a slowdown or recession. a slowdown looks much more reasonable. based on present indications, what does that all add up to? based on my model, it adds up to about 9% to 10% decline on the s&p, slightly more on the nasdaq 100. my models are available on your terminal, viewers can always look them up for more details. tom: and they should check those out. modeling suggesting another 9%,
10% downside for u.s. stocks. with the question of the euro zone, vulnerability of italy, btp's coming off. essentially the rhetoric from the ecb, the promise to unveil this anticrisis talk have so far done its job and softening the concern about the vulnerability of italy, spain, greece. how long does that last? >> i think until probably the second week of july. the third week of july, that is when the ecb meets. investors will want a sense of how it is that the ecb plans to go about supporting this bond. at the moment, indications are they will be inviting btp's, biting spain, portugal, all of these indebted nations, and to counteract that affect, they
will be selling bunds and other higher-rated debt securities. the impact of how that will actually work out is something to be seen. definitely, we have parliamentary elections coming up in italy soon, as well. so there is not only the credit risk that investors will be considering but also the political risk that investors will be weighing up in the coming months. tom: political risk and once again for the eurozone. the political risk is very different in japan, you have been writing about this, bank of japan holding to its ultra dovish policy stance. i was speaking to an economist who said, you understand the politics in japan is very different. there is not the pressure on the boj to change policy. they are not concerned about where inflation is heading. do you buy into that, they can sustain the yield curve control? >> i think they can sustain the
yield curve control but at a very high cost. they have already spent about 80 billion defending the yield curve control they have in place at the moment. also the question is how far they are willing to tolerate the yen slide. if they are willing to let the yen weakened further, they can continue with our policy. tom: 134 the yen as things stand. more on fx after the break. this is bloomberg. ♪
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>> from the financial centers of the world, this is bloomberg markets with alix steel and guy johnson. ♪ alix: this is bloomberg: it's -- >> this is bloomberg: markets, i'm dani burger, the markets are closed for the juneteenth holiday. here are the stories this hour. the fed goes all in against inflation, rising odds of a recession. secretary yellen seeing a slowdown over contraction with unexpected developments.
and president macron's is an absolute majority after a surgeon far right support. u.s. cash markets are closed but volumes certainly later this morning, here comes the cash market, up by.7% -- .7%, fears over not just the fed but a global central bank hiking cycle. underperforming this morning. we will get into the stories later with mccrone -- macron losing the absolute majority. iron ore getting crushed. i decline about 3.5% at the morning, -- at the moment, fears of china at a general concern over metal. steel also taking a hit this morning. the dollar down .2%.
but speculated traders showing the most long the dollar in about five years, the tightening cycle, the bed going 75 basis points. while are saying he is willing to go 75 basis yet again. inflation remains enemy number one. let's continue the fx story, joining us is james foley, head of fx strategy. thanks for joining us. i want to start of the dollar, a little weaker this morning but your view is that there is more strength to come in the dollar. why? >> those two parts of the story, the first really played a blessed week. the one about interest rates. the markets are of the view that the fed is going to frontload interest rates with more to come. but we got the story link to -- linked to that, interest rates, surely we have the elevated hard
landing in 2023. for most currencies that would be currency negative but if we are talking about recession in the u.s., that's not going to do anything. we could also coincidentally be talking about the recession on slow growth. the eurozone is the most high prices of energy again and the china story, a policy that could lapse into next year. we think risk appetite in 2023 is going to be at the low for the most part, perhaps the market begins the hope and the fed interest rates counting cycle, but until that happens with the risk appetite, that is safe haven dollar could remain supported. dani: i find this fascinating, the idea that it is not just to the point of putting the u.s.
economy and a possible recession, i was looking at a quote from seth carpenter, a note from morgan stanley, he said the choice is cause a recession and bring down inflation in the near term or engineer at potential slowdown but shy of a recession. i want your take on this. is this the way to look at that, it is a trade-off teaming inflation or -- causing a recession or no recession and inflation remains high? >> i think there's also a mixture of both, elevated inflation. we have been accustomed to this have the pandemic and a lot of the issues we have got with inflation are supply-side. it takes a long time for china to get into the policy that we still have with supply-side
issues and that could mean we have to become accustomed to this era where we have more inflation than we would perhaps like after the targets. and slower growth because interest rates are higher than they have been. it is not necessarily an attractive proposition. dani: it is not, and there's also this danger of the eurozone falling into a recession as soon as this year. what does the euro look like in that scenario? jane: part of the strong dollar outlook is perhaps the risk we have not seen euro-dollar at the low. we are not calling that, our call as we could see 103 incentive -- and we do see recession. that is linked to energy prices and what if we do get a scenario
we fluctuate with gas prices again and this could be controlling that supply. that is the scenario we are fearful of if we have that scenario, we do have recession or close to it, we have to come back and face the view of the technician again. one of the biggest industrialized nations of the euro zone, a gas price hike, oil price hikes affect its economy. in that slow growth is a factor. dani: i love how you put it, if we were not awake to the risks of fragmentation, we are now. are you called by the emergency meeting by the ecb saying there going to reinvest tech in there is another tool out there? does not give you confidence? danny -- jane; it does. rather than wait and allow the markets to test the widening of the unspent come up before
coming back in the middle of last week, but yes they do have something there. we say they will have more detail. but if you do go into the recessional place, -- this is about to elevate and the financial sector exception, so the ecb does need to stay on the prompt to try to prevent some of those market fears and if it does not show back well, that is the scenario in that recession. that could potentially bring this. it is not a central view but we could see the outline of the scenario in which that could happen. dani: as we have been talking, lagarde is speaking to european lawmakers, she said concessions -- conditions are not safe to keep the economy going. she saying there is a new tool
to underpin commitment to reach inflation goals and wage growth is picking up, remaining moderate. not too different from what we have heard from adam lagarde in the past -- madame lagarde in the past. how likely is zero parity to the dollar? jane: again, it is not -- put i think it can happen. a lot of this is what happens gas prices as we go into the winter and that is the big risk, but a recession is a risk and we have got to assume more concerns about fragmentation is a risk. here's a decent probability aleppo densely happening -- of that potentially happening -- at
the same time they are exposed to concerns. dani: thank you for laying those out, trouble bank -- rabobank jane foley. >> foreign policy chief slamming the ukrainian grain exports, calling it a war cry. speaking to reporters ahead of a falling meeting in luxembourg, he says it will support sections that are causing prices to soar. and the rest the world people are suffering from hunger. british prime it is a boris johnson underwent nine surgeries this morning. he was under general anesthetic for the operation for his sinuses. he is recovering at downing street and someone else is in
charge until tomorrow when johnson is inspected to return. how come health team not inspiring companies and residents, facing the quizzes of its strict policy. they say they want to contain zero covid policy but they softened their tone, saying all the mainland policies are right for hong kong. there are some hong kong can reconnect to the international committee and mean that china. after two years of pain brought i covid, the airline industry should return to profitable times next year as pent-up demand for travel sustains. that is the production of the international air transport association. in a general meeting until half, the ihs said airlines have emerged leaner, tougher and nimble, having defied expectations for bankruptcies and failures.
plane right now but it is heavily constrained. not just airline, but what is happening with air traffic control and back handlers. that is part of the equation. when do you see this shifting back into balance? >> i don't know. it is interesting seeing the huge increase in demand around the world. united airlines, we have been a little different. we have been moderating. we are smaller than we were in 2019 despite the increase in demand. to your point, there are a lot of infrastructure out there,
traffic control being the biggest that are causing. guy: you are trying to run your airlines. how significant are they? scott: the biggest bottleneck as air traffic control. >> we have had weekends recently -- but they had their own perfectly clear sky day. it is a nightmare for customers, employees for the airlines, but air traffic control in the united states is big and there is no margin for error. a little whether can cascade.
>> they are paying top dollar, at some point do you think high prices and the chaos putting people off-line? >> because my moderating the capacity, it is not perfect but mostly good. newark is perhaps the wanted does one exception. the newark airspace's ability to traffic control, that is one area in the country, we are not as exposed to that. we feel good about how we were operating. we hope we are going to be back at that level to a normal level of air traffic control soon. guy: do you think the government needs to say -- the faa needs to step in and say everybody take it down by 15%? we are not even in the summer, it is going to be full on and a few weeks time.
does the faa have a window of opportunity to step in and say we need to do something about this? >> there are some airports, we are on record in new york airport for example. even a good times, the faa used to manage its owes only 79 operations per hour and any bad weather meant a delay. they are now scheduled to 89 per hour. that is on a perfect day, everything goes perfect, those flights are going to get delayed or canceled and you do that hour after hour, the delays backup. we are on record begging them to do so the good about it and i am hopeful they will. you combine that with staffing shortages and traffic control, it really is a recipe for a bad situation. guy: the industry has inflation, the economy has inflation, the fed seven on the brake hard and may have to step on it harder. 75 basis point hikes, we are going to get a few.
are you worried about a recession? what kind of trajectory are you expecting demand to take if the fed keeps doing what it is doing? scott: it's different for our business and for some. i am where they everyone we could talk ourselves into a recession, demand seemed strong. what's happening for us as we have two structural trends going up, the slowing of the economy, it will slow whether it gets a recession or not i don't know. that will impact demand. what we are still in the middle innings of recovery from covid, united airlines in particular because robe is -- europe is early in recovery. the mystic leisure, visit -- business travel is recovering. as a has not started the recovery. so contrasted with demand impacted by the economy, my guess is our revenues are going
to continue -- ransom -- our die for second quarter is what 5%. guy: tell what it is. >> it is total revenue divided by amount we are flying. guy: let's talk about prices, they have come up in long way. clearly it is going to be hurting hearing narrow. but you -- do you think your purses will level, is this the new normal? >> yeah. fuel prices is driving inflation more than anything. united airlines, fuel prices right now, if a state level, $12 billion incremental expense compared to 2019. 2018 would have been something like 12 to $14 million. that is what is driving it in our business.
we are preparing for this to be the new normal. i hope it is wrong, but if you look to the doctoral issues, that the structural issues, more oil is not going to solve the refining capacity in the short term. we are planning for this to be the new normal for a while. guy: so they are going to stay elevated. scott: certainly if that forecast of jet fuel prices is correct, i expect this will be the new normal. guy: 30 -- you are one of the optimistic ceos about the industry. how do people change around traditional jet fuel, kerosene at these lows? scott: the short answer is it is more economically with jet fuel,
the more jet fuel prices go up. the real answer is the issue is government policy. we need to have fuel on a level playing field with renewable diesel and ethanol. because there is no government credit to turn into a renewable diesel, diesel for road transportation, we need to be on equal playing field. guy: the industry is buying every molecule looking at right now. scott: the real key is the government policy. if you look at what is billable today, it is minuscule -- and the reason is if i take that stock i can triggered into diesel and get paid two dollars a gallon by the u.s. government as a tax credit, or i zero. in the u.s. we are producing 15 billion gallons of renewable fuel. we can turn a lot of that into this and a lot of that that used to be use on the road can be electrified.
we can't electrify aircraft so we need to get on a level playing field. guy: gravity is not working for you. scott: gravity does not work. guy: let's talk about the broader industry. the ceo of jetblue talked about this, he is going to have to give up a bunch of slots at various airports. where would you like to take advantage of that and where could you? scott: certainly the place -- whether through jetblue or somewhere else, we would like to get back into jfk in a big way, particularly in this market. so we can get back to serving san francisco and los angeles particularly for business customers, having another real option for business customers on those margins, that would be our priority. but also the whole new york airspace, the three new york
airports, laguardia, jfk and newark, on a level playing field. to schedule all those airports like everywhere else in the world with the amount of capacity they can handle and not a rescheduling. right now one of the three is dramatically overscheduled. guy: newark in particular, what is there? >> the total would be so much better for customers, we can't put 10 pounds into a five pound bag. right now they're trying to put 10 pounds into a five pound bag and even on blue sky days, there's a program essentially 100% of the time at the airport when there is perfect weather is there more flights scheduled to land at the airport then the ability for the airport to arrive. guy: we appreciate it, scott kirby, ceo of united. denny, back to you. dani: thanks, he is preparing for inflation about to be the new normal. coming up, director says airline
dani: welcome back to bloomberg: markets, i'm dani burger. let's check the markets today with the u.s. close for the juneteenth holiday, volumes are much liar -- later. the s&p and cash markets closed, however futures and cash markets up .7% despite the hard landing, deutsche bank increasing -- saying they will happen at the end of the year. the pound losing steam, it was of versus the dollar now capable of dropping. the policymaker of the boe says they need the hike in order to have a stronger pound and stop
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dani: let's get your check on markets this morning with the s&p 500 cash market up in trading. the cash markets up 0.7%. france underperforming after a parliamentary election that saw micron lose control. concerns around there and the political volatility. we are also seeing other commodities take a hit this morning. all of those dropping lower specifically about concerns on china. what does it mean if demand is going to be dropping not just
for that region but the global economy? also see some pain when it comes to european sovereign debt. german 10 year yields, those moving higher by five basis points. moments ago, speaking to parliament, saying we are sticking to the plan of the ecb. we have the tools to fight any economic downturn. but still, that is not putting us in a position to buy european bonds. those underperforming. the euro continues to move higher versus the dollar. we were talking to james foley earlier who said in a worst-case scenario, you see a recession as soon as the end of this year. in that scenario, you could see euro parity. that is not the base case. she continues to see the dollar strengthened because of the hiking interest rates but
also concerns about risk. the rest asset story. the story is investors flooding into the dollar. investors at their most net long in the dollar in about five years. stocks in europe trading higher. investors weighing whether last week's selloff has gone far enough. a look at the week ahead, which is hopefully more calm. when you look at last week besides i am sure that many cups of coffee which you had to drink to stay on top of this market, where there any signs of capitulation -- were there any signs of capitulation? >> that is a question, whether we saw the last of it. is hard to tell, especially with today's action with the u.s. holiday. it is interesting to see when people come back tomorrow whether the selling comes back in force or you start to see a stabilization. from my perspective,
it looks like we are getting capitulation, especially in crypto coming down to really strong levels and talking about potential liquidations in the industry. dani: crypto, i mean, it was hard to keep track of this weekend. at one point, down below $18,000. how much does that trickle into the wider markets versus this is just a corner of the market and we don't have to worry about this? lynn: it plays into the sentiment. you look at global markets overall and nowhere is that in crypto. i think it speaks to the sense of the animal spirit, risk appetite is really gone. bitcoin went from $60,000 to now about the $20,000 mark, a perfect example of the fear across anything that has the hallmark of speculation.
it is absolutely in the depths right now. dani: over at the ecb, we have maxine lagarde currently speaking to lawmakers, saying they intend to hike rates by 25 basis points at the july meeting. this is something she said in a blog post not long ago. how does the project of tightening rates and at the same time trying to make sure the spread in italian bonds does not blow up? can the two happen at the same time? lynn: it is going to be really trying to thread the needle on that one. everyone we talked to speaks to the balancing act that will be. on the one hand, they want to keep spreads from not blowing up but also tightening policy, as you said. at least from the people we speak to, the detail will be in what comes out with that tool they announced last week. what are the details like? how strong will they be able to implement it? will it be as wide-ranging, or will it be a lost cause?
that could have a big direction in where markets go. dani: thank you so much. that is lynn in london. joining us now is richard. richard, we were just speaking with lynn about the wildness that was last week. when you look at a selloff as steep as march 2020 in u.s. stocks, how do you react? richard: honestly, it is concerning. that is for sure the case. it was not quite as violent as we saw in covid, march of 2020. but we hope it does not get any more violent. it is returning this year because of inflation. we are just returning to some normalization in ratios which we have not seen in a while. the reason why we have not seen that is the state of easing, which was huge and great for
creating growth and i guess inflating the ratios in equity markets, particularly the u.s. dani: if you are at 30% cash right now, how much of that do you keep on the sidelines versus look for opportunities in these types of deep selloffs? richard-mark: we are looking to add as we see moves on the dips. kind of not quite as extreme as we did in 2018. we don't think it will be that sudden, but we are adding and hope we can get a lot of that 30% invested by the end of the year. recently, we bought in shipping. cisco and a german chemicals company. dani: i know you also own cisco. earnings were stronger, especially compared to the rest
of tech. you have this cash generating dividend paying company. in this environment, is that the only kind of tech that can perform? richard-mark: not necessarily. tech companies pay lower dividends relative to other companies. we were to build with better metrics. whether we have intel or cisco, they are yielding 3% to 4%. we want to have text in our portfolios. we think it is an important part of the future. tech is slowly but surely becoming better valued. but there are still some huge disparities in valuations out there between amazon and google. i know which of those two businesses i would rather have. dani: at what point do you look at some of these multiples and say, ok, this is an entry point
to get in? richard-mark: in an environment of inflation, what we kind of look at is businesses with business models and pricing power so relatively high market shares to their competitors. there is a lot of headwinds out there. to be successful in this environment, being able to raise prices when your costs are going up across the board, you need to be in the position where you can do that. some businesses can do that. some businesses cannot. we screen the simple value opportunities but all the metrics of the businesses we invest in to see now versus themselves and competitors and what we think the likely path is going to be in terms of sustaining for the rest of the year and 2023. dani: it is interesting. was talking to someone last week and private markets.
that is where he wants to be because he wants to bet on the growth story, which feels at odds with what the market is doing. that growth story, can you still stay with it for the long haul at this moment, or has it been thrown into doubt? richard-mark: to be honest, it has been thrown into doubt because inflation has risen to levels which were unexpected by many. we see inflation levels of 8% in europe and the u.s. our biggest concern that comes with that is that central banks are waiting to they have to raise rates and are behind the curve and have to raise rates quite sharply. there is no qe anymore. in fact, we have the reverse in the u.s. we have qt. there is nothing to stop the yield curves steeping anymore. what concerns us as you look at
the valuation of global markets, but if you look at the evaluation of global debt, which is trillions of dollars, that is immense. consider it has always been there but it did not matter when interest rates were zero. it was like an iceberg attached to the north pole and it was fine. but now we are coming into the shipping lanes with this iceberg. have to look at navigating around very carefully. to put some numbers on that, if interest rates were to rise by 300 basis points or 3%, $300 trillion worth of debt, that is more than $9 trillion. dani: but is there not some degree to which the global debt story is safer because you have very well-capitalized companies and balance sheets look better? this time around if there is a recession, you expect a type of
defaults we have been prior crises? richard-mark: if we look at effort stock indices of the s&p 500 with a debt to equity ratio of 100%, it is actually higher than it has been. just to go back to the statistic, google rates raised by 3%, that is $9 trillion. that is 45% of u.s. gdp. one of the factors we have in our thinking is because that would be so dramatic and would cause a recession nobody would want that central banks are not going to be able to neutralize inflation and neutralize real interest rates. so that is actually quite a positive thing in terms of interest rates cannot rise so steeply at the short end simply because of the damage it will do to the global economy now that we have so much more debt and doubled the amount of debt compared to what we had globally in 2007. that is a positive thing.
it means inflation will probably stick around and the curves will stay very steep. dani: right. stick around with us. he will be sticking around. keeping you up-to-date with news around the world, here is the first word. >> ukrainian president volodymyr zelenskyy says the nation is facing a "historic week" as the european union will decide whether it can become a candidate. the french, italian, and german leaders have already given their blessings. all member states must agree. china's spring outbreak of covid-19 continues to subside, but a single local case detected over the weekend triggered mass testing and neighborhood lockdowns. should, china is reporting the lowest number of new cases since early february, but the country continues to view a zero tolerance strategy that left an isolated from the rest of the world. emmanuel macron's alliance lost
his outright majority in the french parliament. 245 seats, short of the 289 needed for an absolute majority. the left-wing alliance will be the second biggest block claiming 89 seats. the results mean macron will struggle to pass legislation, putting much of his economic agenda and peril. more than half of consumers of major economies did not build up their savings during the pandemic. that is according to a new survey of 18 nations. it is delivering a blow to the idea that households have a cushion against a deepening cost-of-living crisis. 51% of respondents failed to add to their savings during the pandemic. germany at 39%. the u.s., u.k., and canada also below 50%. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in over 120 countries. i am alice atkins.
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dani: secretary janet yellen they are discussing the outlook for u.s. inflation on abc's "this week." joining us is richard-mark. before the break, you were discussing this idea that it is either recession and inflation comes down or inflation stays high and no recession. in your estimate, policymakers choose the latter. if we are heading into this new world where inflation stays elevated, what does that mean for your strategy? how much of a re-think is this for portfolios? richard-mark: i think it is quite a structural re-think in terms of how we manage. we have seen as well the whole 64-40 model not working this year. but a large part of that is because of quantitative easing and central banks were behind the curve in terms of where they were managing inflation.
it is a huge issue for a lot of people of how we go forward in terms of managing risk and managing investments. one thing we particularly look for in terms of our investments is not only relatively high dividends that give you something akin to a bond yield and strong cash flows and low levels of goodwill. are the things to survive the future tsunami of inflation. dani: perhaps the u.s. survives by putting up with higher inflation. what about europe? should we be preparing for a recession? richard-mark: we hope not of course. the difference between europe and the u.s. is there is a lot of people who are on the minimum wage in europe. there are 30 million people on the minimum wage in europe. they have not yet benefited from the wage increases a lot of people in the u.s. have seen.
we have seen wages in the u.s. rise by 50% to 70% the last three years, which is a great thing because a lot of people have to deal with the higher costs in their daily lives. the question is really, what happens in europe? we have to accept that people, particularly those on the lower wages, need to have pay increases. that will be something which creates and sustains part of inflation. but our whole view on inflation, part of it is structural. we had all of these deflationary forces, which a lot of people don't seem to understand, especially central bankers. we had a lot of e-commerce driving the whole process in 2010. amazon's market share, the e-commerce market share was only around 9% to 10% of global retail sales, and enduring covid, it went to about 30% and
is now correcting to the mid-20's. these drive up the costs of competition, which cause a lot of deflationary forces and forced everybody to up their game to compete with people who had very efficient supply chains. as part of the process, we had not globalization but china-iza tion. in 2010, most of the world's goods were manufactured in the u.s. dani: i am afraid we are just about running out of time. i will have to cut you off there, but thank you for joining us. coming up, president emmanual macron made history in the french elections on sunday, just not in the way he helped. we will have that story for you next. this is bloomberg. ♪
markets." french president man u micron losing control of the assembly. for the impact, we are joined now by a guest who is outside the national assembly in paris. what did the results of this runoff put simply mean for macron? >> the night was described as an earthquake, a massacre for the majority of the manual micron. clearly, this is the first time in 20 years that any french president is elected and just two months later does not have a majority at the assembly. in fact, micron's party -- macron' partys and coalition came short. the main opposition party at the assembly, this is a party who is the exact opposite of emmanuel
macron. for example, he wants to lower the retirement age when emmanuel macron wants to raise it. he also wants the debt held by the ecb to be transformed into zero coupon bonds imminently. clearly very different views from emmanuel macron. the biggest surprise of the night perhaps came from the far right wing. we almost forgot about her in the presidential elections because it was difficult for her to get a lot of mp's to the national is some way. yesterday, she got 90 seats. as a historical record. dani: how different will 2022 be for emmanuel macron than 2017? caroline: the beginning of the second monday, it was over already. difficult for him at first because he was elected only to
block marine le pen. then you have this embarrassment with one of his ministers being accused of sexual harassment. and then the chaotic night at the stage for the champions league match. it was a chaotic beginning to monday. the election now is going to make it very difficult for emmanuel macron. people have to find some compromise, build some very fragile alliance with the traditional right-wing republicans. it will be difficult already as the far right at the far left are fighting to lead the national commission for finance at the national assembly, which could have an influence over the next budget. dani: thank you so much. caroline live in paris.
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♪ dani: it is monday, june 20. u.s. markets closed for the june 19 holiday. the fed is going all in against inflation with rising odds of recession. unacceptable high prices continuing. in france, emmanuel macron loses his absolute majority in parliament after an unexpected surge from the far right. from london, i am dani burger. guy johnson is in doha. you are having great
conversations with aviation leaders there at the annual meeting. guy: yes. we just hopped over from the sheraton to the ritz-carlton, where we will be having the bloomberg event, the qatar economic forum, later in the week. we had a really interesting morning i have to say here in delhi. talk to a lot of airline ceos, who by nature are incredibly optimistic people. but you ask about a recession and they all know it is coming but don't know how bad it is going to be. dani: i really love your conversation with united just moments ago saying they were preparing for inflation to be the new normal. if i am the fed, how much does a blunt alessi rate to a like hiking stop it if that is entrenched in the minds of these executives? guy: that is the fear, isn't it? that it does get entrenched. the fed has to do more than currently.
it is different but not that different. clearly, there is a new sense of purpose when it comes to traveling. we all learned we don't like being kept in. but airports are congested. you have super high jet fuel prices and they will stick around for a while. the sense i have had this morning is inflation will be sticky and it will be hard to get out of the system. these guys are certainly anticipating demand will hold up. if the fed is in the business of blunting demand because i think that is the only game it has here, the airline industry sees dement continuing at a fairly decent rate, but as i said a moment ago, these guys are super optimistic. they are always super optimistic. they have to be super optimistic because it is a tough business to be in and is incredible cyclical so who knows where we will be in six months?
things are looking good. international travel in particular has yet to come back in a big way. dani: as someone who has been traveling internationally, and i know you have, the airports are slammed. let's move onto the macro picture. after the 75 basis point rate hike, support for another move continues to be growing. >> the fed is all in on reestablishing price stability. part of that effort involves understanding the forces that have boosted inflation and examining how policymakers respond. dani: joining guy and me is ben evans. during the break, we were talking about how there is a lot inflation data coming. a lot of central-bank speech as well. how much volatility are you expecting around these events? >> you can expect some volatility.
if you watch the gauge and are looking at german data this morning, we are not in a stage where we have a consistent klein . -- decline. the markets are feeling it is a global issue, not just homegrown domestic specific issue. everywhere has the same reaction. every central-bank is fighting fast and hard to get this under control. this is what we are in for. guy: what is inflation under control? is it 2%? is it 3%? i am getting mixed messages from central banks. powell last week pointing at 2%. if it is to protect, defend will
have to step on the brink much harder than if it is 3%, and it will have a big effect in terms of asset prices. >> i would agree. what we are learning is 2% is price stability long-term, not in the medium-term. therefore, you have to accept the inflation rate you want to get to is higher. which leads you to a second cycle that is not so aggressively slamming on the brakes. if you listened to the fed last week, powell left it open. i think markets got the feeling that you are projecting 3.5% to 4% rate, but we are not going to get back to 3%, 4%. i think it is a high inflation rate, not the 2%. dani: part of the confusion i
feel is this idea the fed is now targeting headline inflation, which of course is driven by commodities. i saw people joking about it, saying the fed is trying to raise unemployment in order to reduce gas prices. to that extent, can the fed get inflation under control if it is driven by commodities without engineering every session? is that the trade-off, or inflation but a recession or higher inflation and no recession? ben: it is a different dynamic. commodity prices can affect it one month only for that to be reversed. you have to allow under plymouth to go up more to get inflation back more under control. i think this is causing the uncertainty in the markets. think of the headline. if it is higher, if not a 50
basis point hike, it will be 75. we have to deal with this. that is the uncertainty. guy: are we thinking about this wrong? we are buried the fed is hiking to a slowdown, but that probably made be the case, but is it the danger that the fed blinks and blinks to early -- too early? if it doesn't get inflation under control at this point, this can last a really long time and i am not sure that is something that is priced right now. ben: i would agree it is not price. you don't want to go on with hiking and it causes too much friction. the recent diagnostic turned out to be premature but you saw how the market reacted to it. it was a pretty steep rally on that. guy: yes, but is the rally the
wrong reaction? you look back historically, and neil ferguson wrote a great piece about this over the weekend. if you look back to the 1970's, the fed equivocated it did not stamp on inflation hard. we went through a whole phase where we got some rate hikes and the fed backed up because it was worried about the market reaction and then the fed had to step on the gas again in terms of rate hikes. is the danger from a market perspective that we do not deal with it quickly and we let inflation fester because the fed does not go hard enough? ben: it is not priced in terms of going even harder than what we are doing currently. we went from 25 to 50 basis points and now we are edging towards maybe pressing one to three series of 75. no, we are not at the point of having to really slam the brakes . it is still very open.
i think it is unclear from here. there is a chance that indeed they are not going fast enough and therefore there is realization inflation will become like what we experienced in the 1970's and ends up with intervention. we are not there yet. this is why markets are on edge. dani: we are on edge. it is hard to know what the market is at the cycle has been known for the inability of economists to call what is happening, what is happening with recession. what is a sure thing in this market? what can you invest in saying i know this will perform despite what inflation does? bonds, who knows? is anything left in this market or is it time to get low to the ground? ben: i think there are opportunities always. even bonds have opportunity. energy is dominant, so the energy space has performed quite
until you get a more clear direction of the economy, that is what we are waiting for. we are waiting that we will go to a recession. until that is clear, you can make it more value. guy: we are going to continue the conversation. ben is going to be staying with us. we will dive into that story next. bitcoin managing to hold just from where it was. we will talk about it next. is it going to continue to hold? this is bloomberg. ♪
dani: welcome back to "bloomberg markets." dani burger in london. guy johnson in doha. volatility has been rife but really example find the fear of what it means to have such a banks pulling back in the quiddity and pulling out of the system. is this the excess that needs to be pushed out? in the past to, bitcoin slid 25% -- week, bitcoin slid 25%. at one point on saturday, bitcoin dropped below $18,000. of course, markets closed over the weekend but bitcoin did not. we saw corners of the market and lending issues being frozen for different suppliers. we had left with a situation
where bitcoin has been really pummeled. the question is, how much of this is a piquant specific issue , or how much of it might translate into a wider and more systemic issue that leads to other risk assets? guy: i think regulators will be watching this really carefully to figure out whether it will ultimately be systemic, whether or not it will transfer to other assets. let's continue the conversation with ben to get his take. any thoughts on whether or not this could be systemic? if you are a regulator, would you be worried? ben: i still think it is systemic based upon it is not a secure product put into balance sheet structures and go across the world. we just don't have that type of backdrop. there is not a lot of leverage built in terms of the banking
system itself. limited to that extent. it is clearly a liquidation phase to go along with people are worried. that is why i think the psychology is what it is in crypto. dani: talk to me about the degree to which a crypto selloff titans financial conditions. how important is it? ben: i find it interesting that the correlation between bitcoin and the broader situation has increased. as a balance sheet, asset, crypto services, or anything like that. as a result, it now shows up in financial conditions in bitcoin as a correction.
people take notice of it. you cannot hedge it or trade the dollar or anything, but it has a broader effect. guy: this it elite indicator, and if so, of what? ben: on the weekend, nothing trades but bitcoin. people are betting on it monday morning, they will be some ancillary action. did not happen today. saw better openings. i think as a sentiment indicator at this moment, yes, it is a bit of a leading indicator. dani: of course, part of the debate that happened around piquant before the selloff is whether or not bitcoin was an inflation hedge. i want to have that debate because we can see it playing out and it is not really. how much of this no longer works
when valuations and prices are as elevated as they are? not just bitcoin, but throughout markets. ben: you cannot really say bitcoin is that element. it never really was. just an alternative. it is based on the economy of digital systems. as you say, inflated price with equities and bonds being corrected. the only reasonable question hedge is turning to cash or energy. it seems to be original back -- be a reasonable bet. guy: you had a bumpy ride last week. bitcoin, $10,000 or $30,000. where do we go next? ben: i would say close to
$30,000 again. but the depression remains. there is a strong link. assets like bitcoin are highly sensitive. $30,000 i would say. dani: thank you so much. still ahead, president emmanual macron making history in french elections but not the way he was hoping for. we will get the latest from paris, next. this is bloomberg. ♪
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saying they intend to keep their plan of hiking rates 25 basis points come july. that means the euro is still strong, up zero with you percent, saying the issue of fragmentation, they are finding it. it is at the core of their mandate. but the market tensions are not derailing the fight against inflation. she is also saying in order for that to be effective, that is what they are aiming for and a recession is not the baseline scenario for the eurozone. lagarde speaking there on that. guy: there she is. we have whatever good friends speaking somewhere else. catherine man, now of the bank of england, also now taking questions following a speech she has delivered. in the q&a, she basically indicated the bank of england hikes are not about defending the value of the pound. she is saying that actually the
value of the pound is going to have an impact on inflation. she is aware of the weaker pound for an important inflation point is having a negative effect in terms of the inflation out with them. we will get inflation data out of the u.k. which is not likely to paint a particularly attractive picture. she said she is looking at it but doesn't say the hikes are basically aimed at it. you could argue the macro economic outlook that the bank of england is painting is having a fairly depressing effect on the british pound. let's talk about another aspect in europe. french president emmanuel macron losing control of the national assembly after the far left and far right significantly made a strong showing. for the impact, we go to paris now joined by someone who is light outside of the national assembly in paris.
i found this an absolutely fascinating subject. what i am reading is most people believe this is going to be a workable parliament, that this parliament is so divided, left, right, center, that it is going to be hard to good policy. i am already starting to here talk of the fact that we can have more elections, fresh french elections within a year. is this a workable parliament, a parliament that can work? >> it is going to be very difficult for emmanuel macron to govern. last time, he had 350 seats. you need to hundred 89 for a majority. he is going to have to find some compromise, which might drag the image of jupiter, this nickname, that he is governing alone and not try to find any compromise.
now at the national assembly right behind me, you will have more than 130 mp's from the far left coalition and they have a very different view compared to emmanuel macron, pretty much everything from taxes to wages to retirement age, even to the debt held by the ecb -- even to the debt held by the ecb that they hope will be transformed into coupon bonds. last night, the surprised came from someone we had almost forgotten. marine le pen from the far right national rally got nearly 90 seats in parliament. it is a historical record. their last record in 1986, they only had 35 seats. clearly, marine le pen will weigh a lot on this picture for good far left and the far right are fighting to get a job
in the assembly that goes to the opposition. very important because that also plays in the next budget. dani: what does this mean as macron as the centrist? if he has to start building coalitions and compromise with others. caroline: clearly, the republicans, even though they only got 60 seats last night, they are going to play a key role because it seems like they are the only ally that emmanuel macron can turn to. they agree more than the far left when it comes to the structural pension reform. this is very important because this is a guarantee from brussels in order for france to keep the high debt level. 110% of gdp. clearly, this is the only way to find some fiscal thing for france. dani: thank you very much.
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dani: since last november, the total value of the cryptocurrency market has dropped by two thirds. the route in the digital assets will hit minority investors. that is from a new report which last found that black and asian and hispanic adults are more likely to have bought tokens than white counterparts. joining us is hill harper. thank you so much for joining us. i do have to wonder, the volatility we have seen over the weekend, bitcoin at one point dropping below $18,000, does that change your thinking or approach over there at the black wall street digital? hill: not at all.
we see it as an opportunity. we see it as an opportunity to get in at a lower cost. the central thing about the asset itself is from its inception there were 21 million bitcoin. today, there is between you and million. for its life -- today, there is 21 million. for its life, there will be 21 million. there are 35 million gold mines and we have had a few trillion dollars printed. the supply on those different assets have to medically changed with actual supply of bitcoin not changing. over 15,000 or 20,000 tokens out there. most of them do not have a fixed supply. there are a lot pump and dumps and things that are bad news for people.
but with things that have underlying value and underlying set of supply, that is why education is key in this space. guy: what did you make of the pew research that suggests black and hispanic investors are far more exposed to the crypto market than white investors? what do you make of that? hill: i think there is a great deal of interest to a higher degree, particularly among communities that have been locked out or sort of mistreated by traditional financial systems. the systemic reality is when you look historically around redlining or when you look at credit scoring algorithms that treat people differently, when someone looks at blockchain technology, which is this inherently a fair technology, they are attracted to it because this may sound revolutionary come but for black. , something that is there --
something that is fair is revolutionary. since we are talking about volatility, folks have to approach it differently. guy: i hear what you are saying about the blockchain. but bitcoin and the blockchain are not necessarily the same thing. whether or not ultimately there will be fairness here remains to be seen. this has been something driven by a huge amount of liquidity thrown into the system by the federal reserve and other central banks. that will be withdrawn. there is a danger you could see significant volatility, and the volatility could put a live investors underwater. hill: sure permitted -- sure. that is if you are getting into the asset class to trade. that is why we recommend downloading the black wall street app and digital wallet and watch the digital content
because we talk about this all the time. you are investing agnostic to price at a set tempo and therefore either if the price drops you are getting a lot more of the asset for the same investment and we want you to have at least a 10 year time horizon with that investment. we want you to think of your investment in this space more like you would a real estate investment than a trading style investment. that is why folks unfortunately joke a lot with the saying that robinhood is robbing the hood. robinhood put itself out there as encouraging people to be traders, which we know they are professional traders. we are talking about holders getting into the asset class and holding for a 10 year time horizon and therefore only putting in assets or money that you believe you wont have to touch for the long-term time horizon. dani: probably for a lot of folks who are new to crypto, who
perhaps just joined of the black -- joined the black wall street digital act, this is the first time they are seeing the drawdown. what have you seen? do you see the panic and fear filtering through? hill: there is always chatter and people being afraid. what i am excited about, a lot of folks have been listening and learning on the app and listening to my co-founder, who has a daily show on kbla out of los angeles that goes across the country nationally. they are excited actually permitted people saying they want the price to drop because they understand the fundamentals , the fact that the supplies and chains of the asset have not changed. that is what makes it a powerful piece for folks who understand that. yes, there will be short-term volatility. the beautiful thing about dollar
cost averaging is it starts to mellow out your volatility if you stick to it. the thing we do not want folks to do is buy at $69,000 and sell at $18,000. that is catastrophic. we want people to continue their same tempo even though it is lower right now, significantly lower. this is the time to even think about doubling down or tripling down as the price goes down, but that is a much deeper conversation. if i am doing five dollars a day , five dollars a week, or five dollars a month and that is my tempo, i do not change. i am making that investment. guy: a moment ago, you suggested this could be on alternative to risk investment. is that how people should perceive it? a lot of people within the black committee have complained they are often not allowed to get involved in that market. if it is basically one or the
other, do you think people should not be doing real estate or this or vice versa? hill: no, i did not say alternative.i said they should think about it as real estate investment or treated that way in terms of the long-term time horizon. if you want to think about buying a piece of a share of bitcoin, you are buying real estate on the blockchain. you are buying real estate in this block of 21 million bitcoin . a finite supply. think about it in the same way, not as an alternative, but i am a huge proponent of everybody owning real estate. real estate historically has been the number one wealth foundation for building for families for people. real estate is a critical asset. guy: hello appreciate -- hill, appreciate your time today. founder and ceo of the black wall street digital app.
greatly appreciate it. thank you very much indeed. coming up, the airline industry looking to bounce back from an unprecedented pandemic. how do we recover from this? we are struggling right now. my interview with the jetblue ceo from the international air transport association meeting in delhi. that is next. this is bloomberg. ♪
central bank's delay in raising rates is partially to blame for increasing recession . her views were shared by janet yellen, who told abc that unacceptable high prices are likely to persist for the rest of the year. british prime minister lawrence johnson underwent minor surgery early this morning. he was under general anesthetics of operation at an unspecified state run national service hospital in london. johnson is recovering at his residence and dominic raab is in charge until tomorrow, when johnson is expected to return to work. after two years of pain brought on by covid, the airline industry should return to profitable times next year. that is the prediction of the air transport association. airlines have emerged leaner, tougher, and quicker.
global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in over 120 countries. of course, also in doha is our very own guy johnson. guy: of severely. -- absolutely. i have been at the conference. i spent the morning there. nimble is not a word a lot of passengers will ascribe to the airline industry right now. facing a few issues in terms of scaling up after the pandemic. huge demand but struggling to deliver on the supply side. we have shortages of just about everything, not only as airlines but air traffic control. anyone who has been to when airport recently has experienced one or two issues. the airline street is looking at this and figuring out how it will handle it. shares of jetblue have been
under pressure this year, not only because of what is happening in terms of recovery, but also because this is an airline looking to make a major acquisition. earlier on, i cut up with jetblue ceo robin hayes -- caught up with jetblue's ceo robin hayes and we talked about what is the challenge that lies ahead in terms of wanting supply and demand and when that will happen. robin: the aviation system is still suffering from some challenges we are seeing in other sectors too. the aviation industry is such a finely tuned machine that when you don't have all the right resources in the right places at the right time, it can get challenged quickly. what we saw at jetblue back in march, we made a decision as hard as it was at the time, no airlines want to take down capacity by 10%.
we looked at what was coming up and were concerned about our ability to reliably operate. guy: you stepped up and said, enough, guys. we are not even into summer yet. robin: for me, the most important thing you see anyway seeing it now, when things go wrong, people start pointing fingers at each other. the government doesn't care. the regulators, air traffic control system, airports, ground handlers, airlines, we have to work together to do that. if we do not think we can operate, whether it is airports were airlines in, a reliable way , we need to bring things down. we have to act now. at an airport level or however we do it, we have to do our best to make sure when we operate we can do so reliably. guy: how long will demand be around for?
we are expecting more rate hikes and more further down the road. we are talking but a man. how long will the current demand last with the fed doing that and the possibility of a recession coming down the pike? robin: that is a good question. there are two things i will say about aviation that are unique. first of all, there is a lot a pent-up demand. we know a lot of people have not traveled for two years. what they want to do is not available. it will make less seats available and the prices go up. i think you will see that demand flow. business travelers are still coming back at a very low rate. business travel will be better in q4 this year than it was in q4 last year. guy: 2016, you coverage on the
block. alaska, you are in the running. probably overpaid for the asset because of the fact you were pushing them pretty hard. are you worried you may be getting into that territory with spirit? robin: no. we are very excited about the national low-fare challenger. if you look at the value of the deal we have on the table, it offers great value when you compare recent opportunities like virgin america. having said that, we are very excited. it is an all cash offer. we have a lot of conviction to get it done. guy: what are you buying here? you are buying spirits order book. they have a lot of aircraft on order. what are you buying? robin: it is 4 things.
it is in order book that is exciting. there is a lot of commonalities there. it is asset engagement, for the airports we want to be bigger in. we want to fly into lax. it is hard to get in the gates to do that a combined jetblue and spirit will be a better competitor i guess legacy airlines. and access to skilled people. we just talked about how we are all struggling with this. you take the jetblue machine and the air machine -- their machine and put them together and it will be better. our vacations program, all of these products we can bring to more people. guy: the ceo of jetblue robin hayes. this is bloomberg. ♪
>> russia's unjustified aggression towards ukraine is severely affecting the euro economy and the outlook is surrounded by high uncertainty, but things are in place for the economy to grow further over the medium-term. guy: christine lagarde testifying to european lawmakers within the european parliament within the last few minutes. alex weber joins us now from frankfurt to dissect what president lagarde had to say. she indicated she doesn't think the recession is a baseline at this point in time. nevertheless, she is currently hinting on that we will see an economic slowdown. she will tell us what this new
spreads to will the ecb is hinting at will look like. what are we learning at this point about how the ecb is going to control spreads? >> the details on this are somewhat scarce. lagarde basically said, trust us. we will handle it. it will be effective. it will calm down to bond buying. the big question is, what conditions are going to be attached? what will trigger a new reaction from the ecb? will it be open-ended or have a fixed size? those are the questions we are looking to ask. dani: lagarde also sticking to her commitment to hike 25 next month, the same thing she said in a blog post, but can the ecb afford to go at 25 when we are looking at 75 basis points from the fed with more hikes from other central banks? alexander: the ecb has so far
set at least for the first interest rate hike, which will be the first in more than a decade, they want to take it slow and see how the markets react. in september, they have already flagged it could be bigger, meaning probably 50 basis points. they want to take a sort of snow, but it is important she reiterated those plans today, signaling the ecb will not get derailed by the market moves. it is essentially sticking to its plan. that is the big news from today. dani: thank you very much. alexander weber there. u.k. stumbling to a recession as inflation spirals and the pound is on course to retest its historic lows. then according to a new bloomberg survey. i love in the survey that
someone said that u.k. looks to be in one of the worst positions. just how negative is sentiment around the region right now? >> a lot of economies are facing the problem of stagflation, but i think for the u.k. it really is particularly dire because you also have the political aspect to it. the u.k. is moving to rewrite the northern ireland protocol, and there is still the lingering effect of brexit and political uncertainty. of course, as you and i both know, the cost of living in the u.k. is high, even by the standards of what we are seeing across the developed world these days. guy: catherine mann was talking minutes ago about the hikes delivered thus far and she went on to talk about the fact that the value of the pound is having an impact on inflation in the u.k. are we going to get to the point where the bank of england needs to defend the value of the pound because of the inflation?
justina: at least according to this latest survey. the vast majority of them are seeing a weaker pound and possibly even to the early pandemic lows. that is a problem for the u.k. because the pound is weakened more against the dollar than the euro has. that is another problem for infection given the u.k. imports a lot of it's goods. dani: what expectations around the hikes in the vle? can they reverse if a recession is coming sooner? justina: that is what they are grappling with along with the fed moving at a faster pace so far. at the same time, they have to worry about economic growth as well. at the same time, people are expecting a worse time for u.k. stocks as well. so far, it has done better with value stocks and more energy shares, but it seems like people think they might give away some
of that outperformance for the year. dani: thank you very much. justina lee with the latest survey. a quick look at where markets are heading as we close the hour. the u.s. cash markets closed for the juneteenth holiday, but european stocks moving slightly higher this morning, up almost 1%. perhaps take that with a grain of salt. just because volumes are light, tactical moves after having selling last week. the biggest drop in u.s. equities since march 2020. you and i have been talking about france much this past hour with micron losing the majority or as much of a majority as he had when it comes to national assembly. that is affecting french assets. the 10 year yields higher by 10 basis points. at the same time, faang stocks sinking. stronger euro after lagarde speaks. she will not say what the tool
dani: it is monday, june 20. risk assets bid in europe. christine lagarde committing to 25 basis points next month. the countdown to the close starts right now. we are looking at europe moving the fire. volumes are light. juneteenth holiday in the u.s. france underperforming. french stops up just under .2%. yields moving higher. guy,