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00:00Good morning from Middle East headquarters in Dubai. I'm Manus Cranny. This is Daybreak Europe. Here with the stories that set your agenda. Recession on the horizon. U.S. equity futures slip. Oil drops on ongoing growth concerns weighing on sentiment. Former Treasury Secretary Larry Summers says the recession could hit by year end. Energy fears oil could be facing demand. Destruction according to Asia's had a veto by German. Unions warn the gas crisis could wipe out entire industries. Chancellor Schulz personally weighs in on a bailout for Univac. Plus recession. Russia takes a key eastern Ukrainian city. Moscow showing no signs of a slowdown on as kids allies like to unveil a plan to rebuild the battered country. A warm welcome to the show this morning. Larry Summers is calling the chance a 50 50 chance. Just a little bit less than a 50/50 chance of a recession this year. Nomura say that you're gonna have recessions in the US UK the euro area and Japan. It will last five quarters. These are the futures the equity futures as they trade right now. The second half. Bonds would be a haven according to Mike Wilson at Morgan Stanley. We're not done with the bear market. We've not had the concluding chapter. Equities are lower through the trade this morning across the assets. As I say it is about the narrative of recession. How long how deep and how painful a moderate will your recession be. Let me show you across the assets. Dr. Copper trades at the 17 month low. We're now beginning to consider a hard landing. Let's have a look at some of the commodity boards in terms of the pricing that we have across the market. So you have copper. We are also trading lower this morning crude oil a flat one hundred eight dollars JP Morgan a huge note that where they talk about the risk and the risk being something of a stratospheric nature 380 dollars a barrel vetoed in a Gulf intelligence podcast. Talk about demand destruction in the energy markets at the moment. Dollar yen is useful at the short end. In the United States of America. So the yen strengthens. The dollar rose over ever so slightly on the dollar yen trade. That's the state of play in the markets. You're seeing futures trade on this Fourth of July the equivalent of white to 88 in terms of yield in the cash market. Let's get to the reporters around the world. Juliette Saly joins me in Singapore. She wrap up all the Asian market session. Kirsty Hong is with us in Hong Kong to discuss the very latest on the Chinese developer default situation. Andrew James has the existential risk that threatens the German economy from the industry the power industry as a result of the war in Ukraine. Well Asian stocks have been actually turning green relative to the US. So a little bit of a different there for the first time in four sessions. Let's get to Jules. She's got the differential from Singapore. Jules. Hey Matt. Well it has been a tough time and a tough start to the year for Asian markets as we know. But a little bit of a reprieve to start the new trading week as we see gains in the likes of Japan Australia. Still worth noting though you do have these recession and growth fears very much hitting the tech players Taiwan in that bear market territory extending those losses that we saw from Friday. And Hong Kong of course playing catch up because it was closed on Friday as well. We're continuing to get bullish calls on China's market particularly as we head into the latter part of the year. This time from Jefferies turning bullish on the CSI 300. Forward looking indicators showing some upside momentum in terms of the economic data. And you've got a bit of upside coming through in China's market in the afternoon session. And of course we're looking ahead to the RBA. Two we could get the first back to back 50 basis point hike from the central bank as they try to get ahead of inflation. You've got bonds rising their yields lower the three year debt two point nine per cent. Let's have a look at the forward looking momentum though in terms of what we could expect from regional stocks for the remainder of the year. When you look at my chart. We are expecting to see an upward momentum when it looks at bottom up. Stock price target data there suggesting a 30 per cent gain on the MSCI Asia Pacific Index X Japan over the next 12 months. We've started the year with a loss of around 18 per cent. And you mentioned that call from Nomura pointing to the likes of recession in Japan also South Korea and Australia. Of course China is going to be the outlier here as we start to see more positive momentum in its economy. And that's been backed up by the Securities Journal one of the national newspapers today MENA saying that more policy support is likely. Just thank you very much. I beg beg Nomura. Note in terms of the risk of recession this year when the Chinese developer Shi Mao says it didn't pay a one dollar billion note that matured on Sunday and after a record year of offshore bond delinquencies in the sector. Joining me now is Christy Young who has one of the firsts was one of the first to raise the red flags on she ma's liquidity problems. They began last year Kristie. Good to see you this morning. So how widespread. I mean you flagged this this concern. They've missed a number of moments in the debt payments. How widespread a problem are we going to have going into the second half of the year. Right. So the contagion has so far spread from Evergreen to Sinek. And now she might wind down among the top 15 Chinese developers myself. But imagine a lot of the other smaller private Chinese developers are also struggling a lot with their refinancing and you know standing at the brink of potential default. Indeed I suppose the question is this. We've seen the Chinese authorities try to slow dying deliberately slow dying this sector last year. But what do you think they're going to do about this situation. What do you think they will do in terms of liquidity. Do you expect any action from them for the sector. Right. So from a policy standpoint we believe the best timing for the government to step in and help was late last year and six months on a lot of them damage on confidence where there is among the debt market for home buyers or among lenders have been already done. And we believe that the sector continued to face a long road ahead to restore confidence and sentiment. And what the government can do at this point potentially is to extend on shore bonds sells to more private Chinese developers and passed in some cases for the states to consider entering the sticks in some of the struggling players and for the housing market. We expect the room for more mortgage rate cuts in the second half and more policy stimulus on a city local city levels to revive home demand. OK. Christine thank you very much. Christine hung out with the very latest on the property sector. Well the head of the German Federation of Trade Unions has warned the entire German industries could face a collapse because of the cuts of supplies of Russian natural gas. And it comes as the Chancellor Schulz signalled a bailout. A series of bailout tools developed during the pandemic to rescue big companies like Lufthansa could be on the table again. So some big serious warnings here. Let's bring in our energy and commodities added. It is Andrew James Andrew good to have you with me. So what more can you tell us about this warning from the German Federation. It sounds very fatalistic in terms of the core. Hi Magnus will you. Russian gas flows to Germany are already down by about 60 percent. The Nord Stream pipeline goes into maintenance. Later this month in this sort of increasing angst in Germany that the flows might not come back a tool we have the hated the trade unions talking using language like collapse. She specifically mentioned the aluminium industry the chemicals industry and the glass industry. That's kind of also chiming a bit with Robert Harbin the German economy minister. What he's been saying I mean he's he's using phrases like economic warfare talking about Vladimir Putin consciously pursuing a strategy to weaken German unity. He's been warning of steep price rises the prospect of cascading collapses of power companies if they're not allowed to raise prices outside of contracted levels. So the warnings out of Germany definitely have been very dire over the last couple of days. They are indeed. Let's talk a little bit by the oil and energy market. This is a Sunday podcast from Gulf Intelligence and they they've got vetoed on there every Sunday. They are now talking veto on night talking about demand destruction. I think instead of just clarifying where a lot of us were already speculating about. But really Molly talking about the crack spreads specifically. Year minus. Well we have been seeing a bit of demand destruction in the US. We had a rolling average of gasoline demand which has dropped to the first time to the lowest since 2014. We've obviously got the Fourth of July holiday in the US today. So it'll be very interesting to see what sort of driving levels are like compared to more normal years and years. I mean in gas I mean if what the Germans are saying happens you know we are going to see demand destruction. What it will be you know pretty rapid and sudden destruction. Yes it certainly will. Then you've got the JP Morgan note as well talking about the risk. If if we see those taps turned off from Russia you're looking at 380 dollars potentially on the price of a barrel of oil. Andrew we'll touch on those points a little bit later on in the show. Andrew James on the very latest for the energy markets. Let's take a look at the other things the markets are going to be focused on today this Fourth of July. We will have euro area CPI data at then tomorrow. We're going to have the data from the U.S. and getting factory orders. Auto maker Ford posted June sales figures. Let's see how they're doing on their electric vehicle sales. Wednesday the FOMC minutes for June Thursday. What does ECB turn to publish their account of their June meeting and then Friday. It is the big report jobs report including non-farm payrolls. So that's expected to slow ever so slightly from its May reading. So let's see what the June reading comes through. ISE. Coming up the former Treasury Secretary Larry Summers sees a rising danger of a recession heading America before the end of this year. He's confident central bankers have inflation under control. We'll discuss. Plus another summer weekend more flights canceled. Take a look at the travel chaos around Europe with the aviation analyst John Strickland at 630 this morning. This has been. Yeah I think the risks of a 2022 recession are significantly higher than I would have judged six or nine weeks ago. Look David we've got the first quarter numbers in the bank. They are negative for GDP. There are many forecasters who believe that the second quarter which ended yesterday also had negative GDP growth. It's not really the formal definition of recession but people often say it's a recession when you have two quarters of negative GDP growth in a row. And there's I think it probably close to a 50/50 chance. Maybe it's a bit less than that that we've had two negative quarters in a row. So I think you have to say that the chance that a recession is ultimately dated is having begun during 2022 has gone up. Gone up significantly. Larry Summers our warning on the rising risk of recession this year. And he went on to add that this would cause an early reduction in inflationary pressures meaning the central banks may have to once again change course. My next guest thinks that a US and global economy may slow but avoid a recession while she goes head to head with Larry Summers as Dweck chief investment officer a fellow bank. So what makes you believe that we were slow. I get your point at that that markets are pricing in slow down but not a recession. So what kind of slow. Does the equity market already have priced in. Asked. Good morning. Good morning. Well that's the thing especially in the US. We're starting from a very high level in terms of growth. So yes we're seeing the deceleration but we're still seeing that underlying data should hold up. We've seen it obviously weaken in the month of June. So we'll see what that second quarter looks like for now. It does feel like the equity markets are pricing in a pretty serious growth scare but not an outright recession. And we're starting to see a little bit more revisions to the downside in terms of earnings. And I think that's what's going to come through in the next couple of weeks. So a little bit more pain ahead but then inflationary pressure and pressures are starting to come down as well. And that should allow for a better outlook for the second half of the year. And that chimes with with the charge that we put over the stories that we've created. Earnings estimates are just a little bit too robust and the market needs to play catch up. I say the analysts need to play catch up whereas the most vulnerable sector to an earnings downgrade. At the moment it does feel like the cyclicals are where there's a little bit more downside risk in terms of earnings. Everyone in the market knows that the earnings estimates at the moment are too high. So some of it or some of these expected downgrades are already coming or priced into the market. But we still need to see those. And as we get some of those negative retail headlines like we saw in the last couple of days then that probably is going to weigh on sentiment. But cyclicals for sure. Where you see that the earnings or the spending is going more on your food and energy and less on some of those discretionary items that can have an impact as well. So no recession but a slow dine. Would you take a contrarian view than that the Fed not only is expeditious but continues a little bit more aggressively than the market is now beginning to think because they're pulling the terminal rate forward to the middle of next year to between 3.0 3 and 4 percent. So on the basis of no recession expeditious moves containing inflation where do they go to. What does the Fed get to before they slow SD. No I think that they are going to start to acknowledge that the growth picture has changed. At the end of the second quarter that inflation is coming down and starting to have an impact on growth. And so they are going to at least acknowledge the growth picture for the second half of the year. That might not come until Jackson Hole. We still need to have a couple more data points in terms of inflation ahead of that. But hopefully it does show that inflation is coming down slowly. And that's also why I think we probably avoid a recession is that in the second half or from September then the Fed doesn't have to be as aggressive as it has been now. And hopefully they don't wait too long before acknowledging that the growth picture is changing and that the economy is cooling. Robert. Payback in Germany is warning of a cascade of utility failures and he is talking about economic warfare. When you look at European markets I don't even thing. I don't think that we are remotely prepared for this kind of cataclysmic event. Is this a real tail risk that is yet to be properly priced in European markets. I think we do have a bigger risk to European growth than the US or elsewhere. We know that Europe is so dependent on Russian oil and gas and gas in particular we know that inventory levels are too low. There is a risk that the flow stop although it doesn't seem that this summer would be the best timing for the Russians to do that especially at the moment when I take from their side things are going a little bit better than expected. The market is definitely not pricing in such a dire scenario. Now whether that materializes I think is still as you said more of a tail risk at this point. Commodities this morning are under quite a bit of pressure. Copper is at a 17 month low. I've got various people calling hard landing. It is it is yet to be priced in. Goldman's have a big note this morning to talk about iron ore. That path of least resistance is to the downside. Commodities have been under pressure in the second half. The LME down over 20 percent. The LME Metals Index down 25 percent in the second quarter in a slowdown not recession scenario. How do you view the commodity complex. The fact that commodities have come down is good news right. It's going to help with these disinflationary pressures that we're going to see or that this move towards less inflation pressure. So that's one of the positive points. Now at some point they did become extremely high partly for speculative reasons and not just because the economy was reopening and doing well. We know that there is the China story that plays into the commodity space very heavily. Growth is expected to pick up again after the lockdowns. I'm not sure how much of that is priced in. So if you factor in some lower growth elsewhere some concern for sure about Europe and then some reopening in China we're starting to get closer to where it is. So there could be a little further downside pressure. But I'm not sure how much. Well we can always overshoot to the downside but we do and should have China come back on line a little bit more later in the year as well. I mean the dollar. If we look at the currency story it's very much driven by risk and yield isn't it. As he does the dollar remains still a haven. If you talk about the USA performing on a global basis let's say in this slowdown scenario does the dollar remain remain the strongest currency as we go into the second half. It does feel like we're getting closer to a peak right. We've seen that the dollar retreats a little bit when yields are retreating. So I'm not sure how much it falls though. So we probably see our close to a peak or have seen the peak. I'm not sure how much it strengthens. But yes we're going to have a little bit of that easing in terms of yields and maybe set expectations. And at the same time a little bit more haven flows especially if growth starts to slow more in that in this third quarter and we start to have these growth fears grow even more than what we've seen in the last couple of weeks. So more of this sort of even balance for the dollar. I think it does stay to some extent at least underpinned but we are probably closer to a peak especially if we're going to see those yields come down maybe not from where we are today. We could have another move higher first but those should retreat eventually as well. I see. Thank you so much for sharing your thoughts on this Monday morning as markets grapple with risk on this Fourth of July easy to act. Chief investment officer at Flow Bank. Coming up a little bit later on today we are live from Ukraine. The recovery conference is in Lugano. Was he speaking to the European Commission vice president Valdis Dombrovskis the OCD secretary general Matthias Cormann. That is later this morning. This is Remo. Edgy Monday morning edition of DAYBREAK Europe on Manus Cranny resident in Dubai. Let's get the first word news. She's resident in Singapore. Jules Juliette Saly. Thanks matters. Ukraine says it has pulled its troops from a strategic city in the Lohan's region confirming Russia's claim to have taken control. Russia had earlier declared that it had seized leases chunks advancing its goal of taking over Ukraine's entire don bashed reason that comprises last in Donetsk. Ukraine's armed forces say the order to withdraw was made to prevent heavy casualties. The British chambers of Commerce say more UK firms than ever expecting to raise prices in the next three months. Their latest survey says three in four firms have no plans to increase investment and more than a quarter now predict a drop in profits. Meanwhile the Resolution Foundation think tank says disposable incomes among UK households grew just point seven per cent annually in the 15 years before the pandemic. The European Central Bank is exploring ways to prevent banks from earning windfall profits from subsidised lending program that it launched during the pandemic. Once it raises interest rates later this month. This according to the Financial Times which cited people familiar with the plans. The ECB Governing Council is reportedly planning to discuss how to curb the extra margin banks could earn by placing them back on deposit at the central bank. Danish police say a gunman opened fire in a busy shopping centre in Copenhagen killing three people and critically wounding three others. A 22 year old Danish man has been arrested and there's no indication that anyone else was involved in the attack. Police are still investigating. Gun violence is relatively rare in Denmark. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts see more than 120 countries. This is Bloomberg Markets. Get it. Thank you very much. Coming up on this show another weekend. More flights are canceled. We take a look at the stock of the travel chaos around Europe. Aviation analyst John Strickland joins the show in just a moment. This has been about DAYBREAK Europe ISE Manus Cranny in Dubai. These are the stories setting your agenda. Recession on the horizon. U.S. equity futures slip oil drops ongoing growth concerns weigh on sentiment. Former Treasury Secretary Larry Summers says a recession could hit by year end. I think the risks of a 20 22 recession are significantly higher than I would have judged six or nine weeks ago. Energy fears oil could be facing demand. Destruction according to Asia's had a veto while German unions warn the gas crisis could wipe its entire industries. Chancellor Schulz personally weighs in on a bailout for Europe. Plus Russia takes a key eastern Ukrainian city Moscow showing no signs of a slowdown as Kiev's allies look to unveil a plan to rebuild the battered economy. Happy Independence Day for the 4th of July. Wherever you are in the world if you're celebrating that you may not be raising a glass to the equity market. If you thought the first half was tortured and bruising it starting with a bit of pressure again today. Equity markets dying yields also falling U.S. equity futures are dropping. Mike Wilson at Morgan Stanley says. The brutality we're not done with this bear market. We've not had the concluding chapter. Let's look at U.S. equity futures. I think we're in for a bit about an earnings shock. That's what we're expecting in terms of the catch up. Let me just give you some levels on the US equity futures. Spurs are trading 38 0 4. That's on a six tenths of 1 percent. NASDAQ dying six tenths of one percent and the Dow Jones down by half of 1 percent. The risk of recession according to Larry Summers has shifted quite dramatically in the space of six to nine weeks. I think it's the time frame that is perhaps the most shocking point from Larry Summers. And the second bigger issue will be the commodity complex. Let me just show you what's going on across GMU. Global market map of risk. Yields are dropping across the world. Yes liquidity will be less than normal in the U.S. Fourth of July holiday. But if you hold your sightlines in on sovereign bonds you're looking at Aussie rates dime by 7 basis points. And then the commodity complex really reflects the concern the deepening concern about recession. Goldman's have a big note. They talked about the mini recession in China in April. And the consequence of that sluggish growth will be pervasive. Iron ore is down four point six percent. They say the path of least resistance is downwards on iron ore at 90 bucks is on the ticket for that. How do you. Hedges have actually aluminium which has got a stock inventory getting crushed. That's going to help aluminium on the upside. So you're seeing commodities under pressure. Are they really pricing in a hard landing. So far LME metals are down 25 percent in the second quarter. But does that reflect a hard landing or just a slow slow enduring drift. OK. Those are your markets. Let's talk about one major industry gaining a lot of tough headlines at the moment. Airlines airports both of them preparing for significant disruption to the schedules over the summer at a time when travel is returning to pre pandemic levels. I'm joined now by law right to set the stage for disruption everywhere. How bad a summer are we expecting. And more importantly why. Disruption everywhere. The picture is looking negative. Industrial action threatening to derail that long awaited recovery. Not the industry has been yearning for it since the pandemic walkouts at low cost carriers such as Ryanair easyJet. A strike at Charles de Gaulle Airport in Paris and national rail strike in France following similar action here in the U.K. and British Airways. Ground staff at Heathrow also threatening to strike during the key summer months. The thing that is in common is pay. Workers are feeling their wages being eroded. The latest eurozone CPI reading eight point seven percent year over year. The latest UK reading nine point one percent. And workers want to be fairly compensated against that tough macro backdrop especially at a time when demand is booming in the sector. We've also had announcements of capacity cuts at airports and airlines like Amsterdam Airport in Schiphol. A reduction of 20 percent during the key summer period for Gatwick and British Airways. It's 11 percent and 10 percent respectively according to data from ATA Airline. Worldwide employment was two point nine million at the end of 2019 and it's only projected to reach two point seven million by the end of this year. That still leaves a shortfall of around 200000 many workers that left the industry. They found jobs elsewhere and are reluctant to return to a volatile sector. And certainly we're seeing that everywhere where when you when you when you rock up to the ports there are long long queues from customs through to check in. Look the consequences. Let's see what the short. The very short term impact as they take capacity item was the medium term outlook. In the short term flight cancellations you can see from my board. It is country flight cancellations for the month of June compared to June in 2019. Across the board the picture is concerning. Italy is the laggard with flight cancellations up four hundred and forty two percent. The United States is an outperform compared to Europe with the least flight cancellations illustrating that the disruption picture is less pronounced than in the medium term. The key question is where will demand fall after the peak summer season. Given the pressures and cost of living ticket prices minus our already elevated compared to 2019. Just over the weekend Ryanair CEO Michael O'Leary outlined that current affairs are too cheap at this level because of higher oil prices and environmental charges. Look there have been some really ugly share price drops over the last month and looking forward what analysts really want to see at these levels are the airlines a bargain or still considerably overvalued. Well that's a question we can maybe ask our next guest Laura. Lovely work Laura right there in London on the state of play there. Chaos to come. Or the one that we're currently living in in the airline and airport industry. John Strickland is my guest aviation analyst director of Jihye Lee Consulting veteran of booms and busts in the airline industry. John good to have you with me. Here we are. We are in a perfect storm really in terms of the airlines the airports. And yet we have rabid revenge tourism alive. Set the stage for me. We have just seen all the data from Laura there. In terms of the capacity how big a challenge is it for the airlines to get through this. Let's start there. It's an almost challenge. Said of course we set the context. This is an industry which was pretty well out of action for round about two years with very minimal and frequent appearances zero flying. It was combined with the on off waves at Colgate and many very had restrictions put in place by governments in terms of air travel and quarantine requirements and so on and a lot of uncertainty about when these restrictions might be lifted. There were several false dawns last year when airlines ordinarily would have been gearing up and hoping perhaps to the summer in 2021 or Christmas 2021. Neath events happen to the full extent. When law started to be eased significantly we were talking about February March of this year. But it's way beyond the normal planning time frame for airlines and indeed of course in terms of resourcing up getting the manpower in place and having had these false dawns and being an industry that was being starved of revenues there was no way it could be ready for its peak summer. But I think everyone has been surprised by the strength of which humongous comeback. As you said it's revenge travel pent up demand. Call it what you will. As Lola said in her commentary that we've seen a lot of people leave the sector. There are many stresses and strains in frontline jobs lifting heavy bags or dealing with angry passengers from disruptive flights. Jobs and benefits have gone elsewhere for jobs. That they have. What does this mean for the airlines. I mean Michael McKee. I'm not saying Michael's calling the death of low cost airlines. He'd probably be on the phone screaming at me. But we'll come back to that in a moment. But what I want to deal with is how do you get more people back into the frontline in the airline back in the cockpit. Back to our airlines that desperately need pilots. Is it a whole new regime of costs and wages. Are we under assuming this revolution in costs in the airline industry. That is a bite to come. As you said I've been around a long time. And I think this is a moment of considerable pressure. Not only are we seeing industrial unrest brewing and it's actually manifesting in some cases. I think unions and a large number of cases are simply trying to get back to where they were a pay cut made as well as job losses that took place. It's understandable in the inflation environment they want that. But given this relative competitiveness or lack of competitiveness compared to other sectors maybe that's hassled in the work I do wonder and experience a reappraisal. Especially these frontline jobs relative to other areas of work. While the labor market remains tight because it is an industry that relies on manpower for service for a lot of functionality. And that will put a strain and change the composition of unit costs in airlines and maybe see labor taking a greater share of the total future. I want to get through to other issues so so if we can be punchy and brief on these John. I caught up with you at the end of one of the bigger shows here. We were at the Emirates stand. What what does it mean for the airline industry for Boeing for Airbus. Are you going to see a very immediate uptake in terms of demand which is obscene. 3 5 year order books are the order books going to suddenly explode on the back of revenge tourism or is it just not as easy coronated as that quick one on that. Yeah I think it's not so easily correlated. Audiobooks were already heavy especially for short haul aircraft. The Airbus 320 family Boeing 737 which of course is off shore airlines where we see a lot of research and travel coming back Emma Chandra low cost carriers. So they may get a change in the composition of the order book where some airlines have dropped out of this current space. Long haul is harder to call because airlines have downgraded that size of too many of those flights that there is a struggle for Boeing for example. How's the new 2 percent ex. Not even yet. In production. Not finished. It's fantastic. We don't really know what shape of long for travel in terms of aircraft size. Yes we order books and a strong looking robust short will side. The next few years. Let's just square it all factually with Michael Barr comments to the FTSE Michael O'Leary of Ryanair. Of course he built his business model on JetBlue. Airfares are too cheap. They were 18 percent of the CPI. Not many facts stick in my head these days. But they were 18 percent of the CPI basket. Airfares are too cheap. I've I've made you know I've made it on the back of this. This narrative is the difficult. It has been my doing. I made a lot of money doing it. And I don't believe air travel is sustainable over the medium term. With fares at 40 euros are we calling some kind of a Damascene moment a pivotal moment in the budge in a low cost airline industry. Is this the death of that model. easyJet Ryanair or is it just challenged. I wouldn't say the death toll is something to take no time for in my. Size. DAX has been a master RTX events that size. I think what we'll see is relative fare that was will go to low cost carriers will continue to the lead. And of course one thing that the low cost carriers and most of that time more than anybody is using fares as an attempt to get people board aircraft continents selling the other non ticket revenues considering that Ryanair getting up to high double digits 20 30 percent was for example that's at 60 percent of its revenue. So if they can find other ways to generate money from us such for ticket price they could at least get us onboard with those lower fares. But yes. Right. It might rise to say 40 euros to 50 years. It's still affordable for many many consumers. But as fuel prices are not currently that's of course a challenge that has to be Covid in terms of bringing the cost back. John thank you very much for being with us the best value for money and the addition of the additional ancillary services is fast track from Ryanair. I can assure you of that. John Strickland my guest this morning are our aviation analysts director of Jihye Lee Consulting. Coming up a stark warning for the head of the German unions. A cut in Russian gas supplies could result in the collapse of entire industries. We have the story on Bloomberg. It's your Monday morning edition of DAYBREAK Europe on Manus Cranny. In Dubai the head of the German Federation of Trade Unions has warned the entire German industry could face a collapse because of the cuts of supplies of Russian natural gas. This comes as the German chancellor Olive Schultz signalled during talks with the energy giant Unilever that bailout tools which would develop during the pandemic to rescue big companies like Lufthansa could be on the table again. So pretty cataclysmic cause our editor Andrew Janes is with me now for Bloomberg Energy and Commodities. Andrew what more can you tell me about this warning from the German Federation of Trade Unions. I mean it's broad reaching and it's science pretty cataclysmic if it comes to pass. Yeah well that's right. Madness that is pretty dire. She singled out aluminium glass and chemicals as the industries she was talking about. But it's very it's not a lone alarmist voice here. It kind of chimes with what the German economy minister Robert Hobby has been saying. He's talking about the risk of sort of cascading fatalism among power companies if they're not allowed to pass on costs to consumers and industries. But in the back story here. So Russian gas flows to Germany through the Nord Stream pipeline are already down about 60 percent. That pipeline goes into maintenance later this month. There's a lot of concern in Germany that maybe those flows won't start up again. So that's sort of prompting these warnings. Yeah and this is like the rolling the rolling hits from Russia in terms of where they will allow gas to flow through to. Let's talk about Mr. Monroe. He's the head of trading at Vito. He's on a podcast every Sunday with Gulf intelligence. Now it's interesting that he's referring to demand destruction at these levels. Can you imagine how much how much more would come to pass if Russia turned off the taps completely which is the JP Morgan note. Yeah that's right. So we're already seeing some demand destruction in the U.S. we're seeing it happen in gasoline. Gasoline demand on a four week rolling basis is at the lowest since 2014. That's excluding 2020 at the height of the pandemic. So we're already seeing that. And of course it's the Fourth of July today. So it'll be interesting to look at driving activity there. And yes we had these very eye watering numbers from J.P. Morgan. I mean they're talking about if Russia turned off three million barrels per day about what they're talking about oil at 1 90 and if it turned off five million barrels a day. They're talking about 380. I think it's important to just consider that this is very much a worst case scenario because Putin would of course be denying his his own war machine of a lot of funds if he if he took this step. Absolutely and then if you think from from a market construct point of view we've only got what one point seven million barrels of buffer or spare capacity in the system according to Bob McNally and other analysts. Andrew thank you very much. Andrew James there on the very latest. Oil and gas markets Juliette Saly standing by in Singapore. She has very latest First World News Jules. Thanks Magnus. Tesla's global delivery has dipped in the latest quarter due to Covid shutdowns at its Shanghai factory snapping a two year streak of gains. The auto shipped almost 250 5000 cars worldwide in the quarter that ended in June. Missing forecasts. Tesla delivered a record 310000 cars in the period before that. Amazon founder Jeff Bezos says criticized President Joe Biden for tweeting that companies running gas stations should reduce prices. Faisal says Biden's statement is either a quote misdirection or a deep misunderstanding of basic market dynamics. In response the White House stated that elevated gas prices are not basic market dynamics but a market that is failing American consumers. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in more than 120 countries. This is Bloomberg Markets. Thank you very much. Snappy riposte. Backwards and forwards on Twitter. Bitcoin. I love bitcoin over the weekend because you can see everybody go in. I quite like coming home having look at bitcoin and trading. We made it below at nineteen thousand down towards the nineteen thousand dollars over the weekend down one point six percent. Ether down by at 2.8 5 percent. And this is as you know you've got these crypto currencies on the move. El Salvador President Kelly buying more bitcoin despite the 57 percent drop in the price. So as we start July don't forget you gave up 41 percent in June the steepest drop in data going back to 2000 and TAM. But these crypto spaces under pressure this morning bitcoin and ether drop coming up. Don't let the optimism among the equity analyst fool you. And his forecast are likely to be slashed as inflation and interest rates rise. We give you the Life Pulse survey view this Monday morning. I'm Linda. High inflation is probably worse over the very long term at this point. Inflation rules the game. That's why the Fed is committed to really curtailing the inflation. That's the bigger problem right now. This risk of entrenchment where inflation fears are in your head and you just expected to keep happening is elevated. Now markets are shifting away from inflation worries. I think it's recession risks. Markets are not yet sure. So that's why you see these CAC going on in the markets. But actually we are at that tipping point. I think recessions are a bigger risk by now. Inflation is broken now right. We're all aware we're in a high inflationary environment. People are adjusting their budget but that's recession. Could confirm that market over. I disagree on their to was good to them. I think people are talking them over. Isn't there a about a recession proof strategies that investors used in the last economic cycle. Things like cash and high grade bonds and treasuries. Those just cannot be the strategies that you go full force in in a time when inflation is high. How to survive in an inflationary world. The respondents at the Like Pulse survey this week. Joining me now is Mark Cranfield I am alive team with the analysis Mark. So we're getting ready for an earnings downgrade. The question is are we already in a queasy recession. If you look at the way the bond market performed last week especially the major ones like Treasuries German bonds even in the Australian bond market as well. They seem to have decided that recession risk now is by far the most significant factor which will affect major assets in the months ahead. We saw in the two year German bonds for example it was the wildest week ever on record in terms of the high to low point for the German year. It's as extraordinary even more than the global financial crisis. And we also saw Treasury yields as you know collapse across the curve. So bond traders seem unconvinced. Of course we're not sure that inflation has definitely peaked so they could still be a few wrinkles to come in that direction. I'd like to take a few wrinkles to come in the inflation story. Monk thank you very much. Mike Cranfield on the AM life team there. And it is a big week for markets RBA decision tomorrow FOMC minutes on Wednesday and then it is the jobs report on Friday. And that that number is going to be critically important to 73 is what we're looking for versus 390. Will the wages slow. Happy Fourth of July to our American viewers. We've got a blockbuster day ahead right here on Bloomberg.

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'Bloomberg Daybreak: Europe' Full Show (07/04/2022)

"Bloomberg Daybreak: Europe" live from London, tracking the breaking and top business news stories in the lead-up to the opening of European markets. (Source: Bloomberg)

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