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00:00Let's talk about the markets then in three minutes Mark. And we probably should mention New Zealand and the ambience and what's been going on there. Because yes we've got a hike is expected but then some more hawkish language and expectations of further hikes. That seems to maybe fly in the face of the. Are we moving from inflation concerns to growth concerns. Now we're seeing this dominate very much. So it's complete contrast to the very recent theme of that. We're trading stagflation and therefore we're going to probably have to trim down the amount of hikes because it's more about the growth concern. This is very much like hey the peak of rates will be much higher than people thought previously. And I think as you say that's good. That's kind of put the cat amongst the pigeons a little bit of market this week. I should emphasize that I think this is part of this idea that I think stoke inflationary concerns probably reach a peak around this week maybe next week short term. I think that's something we're gonna trade again later on this year. But I think pretty soon we'll kind of go. Wait a sec. The economy's not going to go into recession that quickly. I will go back to focus on inflation. If we talk about the U.K. though I mean we saw some PMI data the composite number I think losing well five points lower than was estimates then dropping substantially versus the previous month. Now we do have investors asking and I saw some one piece of research from one analyst asking you know when are we going to go into recession in the UK. Yeah I was probing on. I was thinking very much of the US that the UK absolutely has a stagflation issue. I mean look we've been told that by the Bank of England already. So we know that UK is probably in the worst case scenario here and it is going to have a stagflation dynamic. OK. And let's get back to the US I suppose but also think about global bond markets. What do we what do we learn from the movement that we've seen in Treasury markets recently. I was looking at some commentary around the three month 10 year spread. It's been flattening through the month of May. And apparently this is something that the Fed watches every time we we we talk about it. We mentioned that this is something that the Fed watches for clues. What clues are you looking at in Treasury market sentiment. I think that you know we got real excited about a curve in which curve we should pay attention to a couple of months ago. I think we have moved on if not for a couple of reasons. What is we know is that the the curve has been massively distorted by the monetary policy of the last decade or so. So people are maybe giving a little less credence to some of these signals. I think second of all we know now we have an inflation problem and we don't need to be looking at the curve for some secret signal. We also know we are slowing growth. It's more about a timing issue of when that recession hits us. What this means the curve I still think that ultimately the Fed will do more at the front end. That is price. I think over the next year there's going to be more and maybe the two years can go higher. And I think that the 10 year probably will will be volatile but ultimately won't sustain higher moves. I think we'll probably get you know a whiplash back end but that the curve will flatten or invert even further. But in the very short term of 10 years down two point seventy five percent I think I can get another 50 basis points lower. Yeah. Yeah. Which you point them for. And we on the 10 year. So that 3 percent three point one percent seems to be a mark. We keep pulling back from briefly on the ECB then that we've got a lot of different voices now then at the ECB speaking out quite openly. I can't believe we're already talking with the fact that we might take 50 basis points as the first like. I mean no one I think is really believing that yet. But the father even having that conversation it's incredible how quickly that narrative has changed. And you know again it's one of these. How much is that narrative is priced. I don't think it is fully priced in the euro yet. I think the eurozone has more to rally in the short term. We'll probably get overexcited. And then the ECB ultimately will maybe not hike quite as aggressive as the price. We're pricing more for the ECB than the US over the next year or so now.

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RBNZ Rate Hike, Treasury Yields, ECB: 3-Minute MLIV

Mark Cudmore and Anna Edwards break down today’s key themes for analysts and investors on “Bloomberg Markets Europe.” For up to the minute market intelligence and insight, click MLIV. (Source: Bloomberg)

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