manus: good morning from dubai. it is "bloomberg daybreak: europe." central bank fears. global slumps. canada's surprise rate hike leaves the feds in question. baseball diplomacy, u.k. p.m. ricky sunak goes to america on a charm offensive. he aims to strengthen economic ties with washington. plus, an indictment could happen regarding classified documents. a federal investigation is underway. very good morning. welcome to the show. i want to show you the reality check that has been delivered. some are playing catch up with the federal reserve.

this is an explosion, repulsion at the short end of the curve. two years, ratchet high. they are about stubborn inflation. you now have the swaps market pricing in a full july fed hike. that is the issue. if you go for the economic peril of a premature pause, you then provoke a response mechanism. this is the very short end of the curve. repricing, what does that do to the rest of the market. nasdaq tumbled. tech stocks spluttered. russell 2000 added more than 2% of that. nasdaq continues its weightiness. on the prospect of higher rates and may be a jolt from the fed, the biggest drop since february. there is a fantastic piece.

there is a heavy fog in markets right now. the bond market was wrong, team transitory was wrong. credit is mispriced. equities continue to drop. cross assets are down for another day in a row. the lire crumbles on the back of that. dollar is up another third of 1%. 10 year yields, the longer end of the curve. we are looking at more discussion around inversion. china demanding that the only thing you should care about when it comes to oil prices. oil is lighter by a quarter of 1%. i love city. the slump in copper will give way to record buying. they are taking $15,000 by 2025.

an unprecedented scale in the next two years. that is what you call putting your money we mouth is. one man the does it every day. paul dobson. valerie tytel is in london. we will start there. global markets have slumped. we have interest rate hikes and a reality check. central banks are far from done. let's bring in paul dobson to that conversation. my last guest said the bank of canada only did 450 and the rba did only 400. this is a catch of game, not the jewel that we are painting it as. this is catch up. >> yes. they may have a point. i think the mark of interpretation is, we are all in this together. each country separately as having to deal with the same inflationary backdrop in its own

way. they are taking that pause in finding themselves back under pressure to raise interest rates again. normally, i would think the market would discount a decision by the rba or the boc for that matter. both of them at the same time surprising to the upside? it is sounding hawkish. it gives that picture that we are in a once in a generation battle of inflation. that is what the market's turned to price in. the fed is even describing it for the european central banks as well. manus: you will get different sites in the market. we know he is a major bull and treasuries. it can be misleading. he is a bond bull. one could say, what has gone wrong? what is your avenue? >> if you look at returns, we

were at the 2%-4% across global. not going that well, the global stock markets which are up when you're high. nasdaq returns are flying way higher than that. so far, bonds are being disappointing. it is that inflation picture that we have not really got. we have -- we have not got the price appreciation that we expected. there is a bit of uncertainty. we are still looking at the economy and wondering if we are headed towards a recession. it is still six months down the line, it has been six months down the line for quite a while. if central banks need to start cutting, those on the back of the yield curve suddenly start to come into play. every time we get up around 2% or 4% around the 10 year at

these levels, buyers are coming back in. each time it goes up, there's still plenty of demand. manus: reflecting on what pimco said, they have not seen any like -- anything like this in 13 or 14 years. we are may be on that cusp or you can gorge on that. thank you very much. paul, market commentary. the equity market. stock market volatility keeps dropping. what is mispriced? vicks dropped yesterday. let's say -- let's see whether valerie tytel can dissect it. we are on the cusp of the bull market. we have dave -- debated breath several times. what is a nuance here. good morning. >> tech stocks have been hurt this week. they have been quite resilient

as to year yields have ratcheted higher. tech stocks have kept outperforming but that has flipped. the nasdaq had its worst session since april yesterday. this was all due to the drag of mega tech stocks. the magnificent seven are seeing a different pricing. that is the biggest drag on the nasdaq index yesterday. this falters nearly 2%. it is not surprising that we see some sort of pullback. what is surprising is what is going on and small-cap stocks. i am looking at the russell 2000 index. it has have some outstanding performance. there has been three sessions lately where the russell index has outperformed more than 3% versus the nasdaq. that is something you do not see often.

if we look on a month-to-month basis, the russell index is on par with the nasdaq. it has really caught up and extended into small-cap names. a lot of people are saying this is just due to positioning. we are seeing a lot of profit-taking. as the tech trade gets unwound, we see this boost to the small-cap names in the u.s.. it has been surprising and it is catching many people's eyes. manus: that certainly builds on the narrative that banks have done a little better lately. thank you for that. valerie on nasdaq russell and the differential. bloomberg has learned that the u.s. justice department has told donald trump's legal teams at the ex-president is a target into the investigation of the handling of classified documents. bruce horn is with me. tell me more about what the

investigation will hold. >> this involves the case related to former president trump's handling of classified documents and other material that he brought to florida from the white house. the department has informed the former president's lawyer that he is a target in the investigation. this to be clear, if someone is a target, there is substantial evidence to linking him or her to a crime and they are a potential defendant in a future indictment. this is just one of several investigations that the special counsel, in addition to looking at documents is also looking into the former president's involvement or potential involvement in activities

surrounding the attack on the capitol on january 6 and the events leading up to that. manus: what happens next? how sure are we the charges will be brought? >> good question. it is not definitive that there will be an indictment. it is highly likely once there is a letter like this that get sent. there is a very good chance that the department of justice will go ahead with an indictment. that is not certain. we do not know what the timetable is. how quickly jack smith would go ahead with the indictment, in this case. there are other cases in addition to the january 6 investigation. we also have the investigation by the district attorney in georgia, atlanta, who is looking into the former president's involvement in order to overturn the election pressuring state

officials to find votes for him after the 2020 election. in addition to that, there is the case in new york city involving hush-money payments to the adult film star. the legal liability is extensive. this are as which ones come first, we know that new york has already indicted. the former president. it seems that special counsel jack smith is working towards indictment again. nothing is certain. manus: bruce, thank you very much. as you say, there is no certainty of an indictment. bruce einhorn on the latest. coming up, you will hear from leaders at the summit in -- they will tighten the rules around the market and crypto

assets. we will speak to sheldon mills a little later this morning. right here on bloomberg. ♪ for not as good as mine. the queen sleep number c2 smart bed is now only $899 save $200. plus, 48-month financing on all beds. shop now only at sleep number.

>> we are at the beginning of a very classic late cycle debt crisis. private -- >> private credit at a quarter trying dollars is now at 1.4 trillion dollars or $1.5 trillion. a lot of countries will suffer at the way of those interest rates. >> i think there is a reset in value and real estate. now is a good time to be with an active manager in real estate. >> i think the next big opportunity is in women's sports. >> the united states has been a beacon of stability at times.

as discussions go on, everybody gets fixated on it. united states is the benchmark of benchmarks. if things go away accidentally, it is a problem. >> the most important thing is taking care of ourselves. can we get strong? can we be economically cohesive? manus: some of the key voices taking place in new york. my guest this morning is aneeka gupta, research director at wisdom tree --wisdomtree. property market. they are saying everybody was wrong. credit is mispriced. where in the foothills of the next debt crisis according to -- his name has dropped out of my head. that is a pretty dark landscape

from where i sit. why are we so risk on in equities and credit? we are just going on as if there is no risk insight. aneeka: it is interesting you bring that up. it looks like we are risk on but the truth is, we have had 100% of returns from s&p 500 index have come from the 10 largest stocks. that is quite a large outlier. it shows how narrow the breath of the markets are. we do believe in this current scenario where make a cap tech stocks are now trading in the 99th percentile. it will be quite hard for value and the rest of the market to catch up with this scale of performance that they had. manus: what would you make. a couple minutes ago, we were

brought this. idiosyncratic. relative to this. i know the mega seven live predominantly with the nasdaq. i am curious to get your input on this. the outperformance by the russell, relative to some extent in the markets is a soft landing like scenario? aneeka: i would not say that. the reason is, investors are aware that data is beginning to -- [indiscernible] we are going to see that happen. the best place to take solace is high-quality, stocks that are

higher with steady cash flows. i would still say the message -- we are still unsure if it will be a shallow recession or something a lot deeper. manus: you say it is high-quality names with solid revenues, solid dividend policies. that naturally draws me back to buy back which is apple, microsoft and a number of other institutions on the buyback trail. do i search on active ibach -- active buyback? aneeka: you would be surprised. when we think of high dividend ratios and stocks and companies with high buybacks, the first

thing we think of is the u.s.. it is all changing. we have seen japanese corporate's go from a payout ratio of about 54% at the start of this year and now that has increased. it is still rising. japanese corporate have had a wake-up call from the tokyo stock exchange telling them that we need to have a good and tense corporate lead out. those companies that do not ramp up or do something to bring up their price book also face the risk of being knocked off from the exchange. hence, what we have seen from the latest earnings report forget -- or japanese corporate's, they have had some very strong buyback announcements. the well-known myth that japanese corporate's do not compensate investors has

completely been despaired. we still like to pound. i think there is opportunity there. we are cautious on europe now that we are seeing the data in china beginning to deteriorate. i would say not as as strong as initially thought of from the start of the year. manus: let's unpack some of that. i'm just want to show our viewers -- a big shout out to our chart team. this is called a mini dip in japan. you talk about devaluation relative to the u.s., to europe and china, where does it stand on a forward pe basis? aneeka: canada is currently trading at a 15 times basis in the ratio. compare that to peers who are treated -- you have msn nearly 30 times. euro trading nearly 19 times.

emerging markets is a lot cheaper. what is interesting about japan is that relative to its own industry, it is wrote -- trading at a discount relative to its average. that is another interesting price point. not only is it trying to narrow that gap but historically it is cheaper versus its own history as well. manus: what chinese assets do you want to own if you are cautious about the reopening and trajectory? and that has -- for the traditional vicarious trades, the traditional relationships that i think about. is there any part of china that you want to own on a stimulus rate cutting narrative? aneeka: one of the areas that we have seen a lot of promise is in the state owned enterprises.

those were traditionally seen as inefficient, large corporate's that essentially went from one year to the next, providing not very exciting earnings results. i think a lot of that is changing. state owned enterprises are getting a push from the government. they are getting a lot more efficient on how the company is run. i think there is a long transition story there. i think that is one very interesting pocket to look at. another way to play stimulus, whether we do get a high stimulus in china by the government is looking at commodities. industrial is trading at a significant discount at this point. if you look at it, demand from china still remains quite heavy for the industrial space. we are all pretty aware, be a

china, the u.s., europe, they are on an energy transition story. there will be incremental demand for these industrial metals that are used in the energy transition. i think that is another way to play the trade. manus: lovely to have you with me. aneeka gupta, director of research at wisdomtree. thank you for being with me. get long, japan is the message. the post -- baseball diplomacy from rishi sunak. we take a look at the u.k.'s prime minister's visit. right here on bloomberg. ♪

manus: rishi sunak is in america meeting with president biden. what is on his agenda? baseball diplomacy? >> he is meant to be a cricket

man. it has been baseball diplomacy over in the u.s. he was meeting with congressional leaders. many showed up with this game of the national wash and -- national -- and arizona. after the game, he mingles in the stands with executives and politicians. he really tried to shore up economic ties between the u.s. and the u.k. that is the main ephesus of this visit. behind the scenes, what he wants is owed trade in all but name. manus: what is on the agenda? what is the killer blow, the strike in the white house today? >> can he get a homerun? manus: pun, pun, pun. >> ai is what he will bring up in the white house today.

he wants great britain to be like a watchdog. he said britain is number three in the world behind u.s. and china. he announced yesterday that are in is going to host the first global summit in autumn later this year. the problem is that britain was not the table when sweden hosted a meeting between the u.s. and eu officials. it is similar to a whole bunch of other issues. joe biden will have to take some persuasion from rishi sunak today. they will probably talk about brain and china as well. manus: thank you. the price as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network,

with no line activation fees or term contracts... saving you up to 75% a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities™.

manus: a very good morning. it is "bloomberg daybreak: europe." i am manus in dubai. asia bond yields a trade is reconsidered. stocks and futures drop. rishi sunak meets joe biden today in the white house. they are seeking closer economic ties with the u.s. and a leading u.k. role in ai regulation. donald trump's legal team is said to be notified by the justice department that the former president is a target in a federal investigation of classified documents. reassess the trajectory of rates and implication for the magnificent seven on the equity board. mastec dropped by 1.8%. it continues its stop this morning. they are down by another 1/8 of

a percent. we have here are various warnings. the best -- the best is from weinstein. everyone has been wrong so far. credit and volatility are underpricing the risks ahead. it was the rates redux that shifted the narrative. let me just show you what is going on with the short end of the curve. it is that shock. what does that do? at the short end of the curve, they have spiked higher. we are looking at a hawkish memo from the boc. therefore, it begins to push the narrative from the u.s.. lira trades to a low. down the 13th day in a row. we have lost 13% since the election. rent is softer. the devil is in the detail.

you have stockpiles rising for the seventh week. refinery rates are high as we go into the heavy driving season. copper is down at 82.89 flat. the message from city at the moment is, you want to get in there, pile in, by it at an unprecedented rate. you will need copper for everything, that is your translation. that is everything on markets. flat offer on equities and a solid reassessment on where we are on rates. is it really that credible? two france. french i.t. company is splitting into. the new entity is focused on the climb and expected ipo. meanwhile, revenue headwinds. the ceo joints me now.

good to have you with us. you have raised the guidance on estimates of growth and revenue in the legacy business. i am curious where, how, what size? good morning. nourdine: we are moving tomorrow markets that have it there. hear what are looking at is between around $700 billion, what we were presented lester was $400 billion. point number two, we are exiting some activity. some lower level activity which was generating revenue but not real cash. third, we have launched an unprecedented program of margin expansion. by your headcount production, by 15%.

third, you have seen over the last .75, we have been beating our targets. manus: 15% of the legacy business will be lost in job cuts. is that the worst case scenario. when you talk about divesting some businesses, what size of businesses what you have to let go? we have to take a hit in terms of a loss on businesses that you sell? nourdine: no. we already put that in our trajectory. last year we said by 2026 we will reach 26. yesterday we upgraded the guidance to be between 6% and 8%. on revenue we said -- we would be around 400 billion dollars. yesterday we upgraded to 5 billion. in the cash aspect, last year we presented at 150 million by the

end of 2026, if they we upgraded. regarding of the question on the activity, we are exerting all business process outsourcing and past business where we were buying for our customer as we move into the cloud. we are exiting that part of the business. manus: you have some interest. and investing in the legacy business. is that any further advance. what are you going to have to give him to incentivize him to close that deal. i have lots of numbers. you tell me. nourdine: i am sure it is a lot of rumors. at the end of the day, where there is value there is interest. we have received several months of interest. the bond and chairman, i am

fully aligned with them. we are evaluating the best options moving forward. in due time, i will come back. manus: is daniel at the front of that group? do you clarify him or would you describe him as a most serious interested party? nourdine: unfortunately, i cannot comment. manus: ok. is it corporate's that are showing the most interest in investing and what size are the interested parties? nourdine: there are several interests. manus: i can tell we're not going to get any further on that point. i will give you an easier one. splitting the business into, how assured can the market be that is on track?

will it happen before the end of this calendar year? what kind of interest have you had? have you had any pillar investments approaching you? nourdine: on the first point, the strategy of splitting the business, putting the right management framework because we are addressing different markets. we are addressing different buyer profiles. we have been able with the entire leadership team to demonstrate in 2022 and q1 that it was the right strategy to rebound the business. he saw that we are finally back to -- which was well ahead of our guidance. is the right point at the right decision. operationally, we will finish the operational split the summer and we will communicate it. operational it will be fully

operational by the summer. the listing will happen when they have assessed all of the options, including all of the market context. manus: you are optimistic that will be before the end of the year? you have all your ducks in a row? nourdine: for now, the communication, we're trying to do it before the end of the year. manus: excellent. come back and talk to us when that happens. we wish you well with the listing. my guest this morning, the atos ceo. hildebrand's warning that central banks still have more to do to bring down inflation. he spoke exclusively to bloomberg tv in singapore. >> you need to see significant slowing of economic activity, of

output, in order to get inflation anywhere near the target. even that will be difficult. if we assume that inflation can settle by year end, that will require a significant slowing on the real side. whether or not it will be a technical recession is hard at this point. i would expect that we probably will see a shallow recession if we are going to get inflation down. it is one of two scenarios. either you get inflation down to a level that is close or at a level of price stability. or you fail in doing that and then you can avoid the kind of impact we are seeing on the real side. yes, i think it will require something like a shallow recession to get inflation down to levels where we don't have to worry about long-term inflation expectations. >> are u.s. and china relations

at the moment giving you guys a bit of a re-think to plans in china or doing something similar. i know you are in different business areas. >> the fragmentation of global geopolitics in a sense, the core is the tension between the u.s. and china means that you are in a very different set of assumptions when it comes to allocating. what might have been an obvious kind of play now has a different calculus driving it given the increased risk premium. the market is going to have to figure out how much risk to price in and to what extent that lowers the allocation that you would otherwise make in china. in addition to that, china is slowing down. both cyclically and structurally. if we think about having gone from 10% to now 5%, we may well

be at 30% by the end of the decade, given some of the demographic trends that you see in china in a pronounced fashion. i think all of this means that you have a short-term fragmentation problem and on top of that you have a very significant demographic challenge that leads to a much slower growth in china over the next years to come. manus: the vice chairman, philipp hildebrand there speaking to bloomberg. coming up, u.k. financial authority is tightening the rules around marketing of crypto assets. we speak to the executive director director sheldon mills, right here on bloomberg. ♪

the sleep number climate360 smart bed is the only smart bed in the world that actively cools, warms, and effortlessly responds to both of you for up to 44 minutes more restful sleep per night. save $1,500 on the sleep number climate360 smart bed. shop now only at sleep number. manus: the uk's financial

authorities are tightening the rules on marketing of crypto assets. that includes a ban on bonuses. and they are popular in the industry. we have the executive directive sheldon mills. good to have you this morning. counseling or banning refer a friend. i have a 24 hour cooling off. this is light touch, soft touch. this does not deal with anything, does it? sheldon: we have seen the number of people in crypto assets double. we think it is important in the way that crypto is advertise to consumers is clear, fair and not misleading. these are tougher standards. they are seeking to ensure that we treat crypto assets like high-risk investments and the firms are not able to just put

out misleading efforts. things like quite high returns. manus: here is the thing. and clearly said that those who invest should be prepared to lose all of their money. i am just wondering what the benchmark is. if you said, invest in credit suisse, you would say, that is much less risk than crypto. here i am with zero in credit suisse, how brutal does the message need to be around crypto or do i need to level up and me more -- be more brutal around equity? sheldon: we had a choice in banning crypto or going without any messages.

you will see common messages, this one is much stronger. it says, you must be prepared to lose all of your money. it also says, you have to wait 24 hours before you can complete the transaction, in line with other at risk transactions. it will be introduced the eighth of october. manus: if i look at the actions with binance and coinbase over the past number of days, is that going to impact how you as a regulator tackle crypto going forward? sheldon: it is really important to understand it. at the moment we only have powers to look at money laundering and counter terrorist financing. the government is looking to bring in stablecoins into regulation hopefully later this

year. we have not authorized binance under aml regulations because it did not comply with some of our standards. we are looking with interest into what is going on in the u.s.. we have the best relations -- relationships with them and understand what is going on. manus: we had brian johnson on invest yesterday. he said it was difficult, frosty at best. how open are you and engaging with johnson? i know you said you have not regulated them at this stage, how much dialogue you having with coinbase? would you sit down and have open regulations? is that how you want to do business and understand how to regulate better? sheldon: we are very open as a regulator. we want to see crypto become safe and effective. to do that, the crypto

businesses really do need to be transparent and open and start to engage in regulation. with some of the firms that you mentioned, we will continue to do so. once we get powers, we will be able to have much more active conversations to see whether those firms get through the regulatory framework. manus: where is the biggest lack of transparency? sheldon: i think it is important for any regulated firm to ensure were management sits. to ensure that there are open book standards that we are able to go in and look at who has control, in terms of where money flows and how the business is set up. that is important. we have strong standards in the u.k. which apply to all of the firms. we are confident in some of her discussions with some of the firms that they understand that. we will be seeking, once we get

powers to go forward. manus: thank you very much. new regulations as they go into effect, you will wait to see what the government will come down with in terms of regulations. good to have you with me this morning. the fc executive director, sheldon mills. let's stay with crypto. over in u.s., the coinbase ceo says regulators started to change their tone. brian caught up with us in new york. >> we have been in discussion with the fcc for a long time -- with the sec for a long time. even before public, we shared with them how we list our business, how we think about staking. we had a lot of dialogues back and forth and they allowed us to become a public company. we had many discussions with them in the last year where their tone started to change and they start to come to us with more questions about the business.

we were very forthcoming and had very -- had several conversations with them. we asked for feedback. we want to become a robust crypto program. the ones we trade we believe our commodities, what feedback do you have for us? how can we come into register? how can we work together? we were met with silence and really got no feedback. the first meeting where they were scheduled to give us feedback, they canceled it a few days before that. we got a wells notice a few days after. it is unfortunate. we work with regulators all over the world. i think i am a reasonable person to get along with. unfortunately the sec under this chair has taken a regulation by enforcement approach instead of creating a rulebook that would allow the industry to be created in a safe and productive way. >> when was the last time you

personally met with gary gensler and what did you say? >> when he first came in as the chair i flew out to new york. i reached out to him, our team reached out. i tried to make an effort to connect with him in person because that is what attention do when a new regular comes in. unfortunately, we were not able to connect. i'm not sure why i cannot get on his calendar. i followed up a few times in the year after. we eventually got a meeting that was virtual. it may have been covid related. we were able to get a virtual meeting. unfortunately, it was a pretty icy reception, i would say. we came in cash in hand and said gary, you asked people to come in and register, we are here to register. what would you like us to do, what process would like us to go to through? this process was, talk to your lawyer, i'm not here to advise you. manus: coinbase ceo brian armstrong. a quick snapshot.

lost it all on monday, to get back on tuesday. here they are trading at an eighth of 1%. cathie wood at arc brought another chunk of coinbase on -- bought another chunk of coinbase on the dip. coming up, a slump in saudi arabia. messi, we discuss. this is bloomberg. ♪

manus: football is the top game. we brought our sports reporter and producer from behind the counter to front and center. good morning. greg, expert in football, baseball, all things sport. what do you make of messi backtracking and going to miami? >> i think it is a huge deal.

both in terms of the sport in america. for major league soccer, david beckham, one of the co-owners of the miami team. signing the most famous football player in the world, fresh off of a world cup victory his team won the local league. it is big for the sport and from a business perspective. the athletic reporting, there will be a deal with adidas. that could set a precedent for contracts going forward, not just in football but sports. manus: this is where longevity looks a little different from what he was offered in saudi arabia. we don't have full details but that tie up with adidas and apple, do you think this is a knock to saudi arabia? they have rinaldo -- do think it is a little bit of a sting? >> a little bit.

as we have reported in recent years, it has been win after win after win. soft push of investing in sports around the world. they had new cars and united, they had their own f1 race. there hosting joshua and the like for boxing matches. then not getting the most famous football player seems to be the first roadblock they have encountered on this soft power push. manus: everybody has a price. [laughter] we did not get to manchester united. the fifth bid is in. we will see whether that runs and whether he wins manchester united. greg, sports reporter at large on bloomberg. ♪

when i was his age, we had to be inside to watch live sports. but with xfinity, we get the fastest mobile service and can stream down the street or around the block. hey, can you be less sister, more car? all right, let's get this over with. switch to xfinity mobile and get the best price for 2 lines of unlimited. just $30 a line per month. i should get paid more for this. you get paid when you win. from xfinity. home of the 10g network.

♪ ♪ every day, businesses everywhere are asking. is it possible? with comcast business...it is. is it possible to help keep our online platform safe from cyberthreats? so we can better protect our customer data? absolutely. can we provide health care virtually anywhere? we can help with that. is it possible to use predictive monitoring to address operations issues? we can help with that, too. with global secure networking from comcast business. it's not just possible. it's happening.