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00:00This is Bloomberg Daybreak Middle East our top stories this morning. 322 roofs are significantly higher than I would have judged. Six or nine weeks ago investors way recession fears against inflation. As markets enter what's shaping up as a turbulent second half. U.S. futures retreat while bonds advance to start the week. Commodities also under pressure amid growth risks and the war in Ukraine. But J.P. Morgan says oil prices could reach a stratospheric 380 dollars a barrel. And Shemale fails to pay a billion dollar note adding to a record year of bond defaults for Chinese developers as goes a dam across the Emirates. Welcome to the show this Monday morning on Manus Cranny in Dubai dropping yields dropping stocks. If you thought the pain of the first half was over you're wrong. This is going to be in everybody's estimate a low long moderate but painful recession. And we may already be there. Spoons are down by half of 1 percent. Larry Summers I think encapsulates the pivot. He has moved from the risk of a chance of a recession this year 2022 in the space of six to nine weeks. Consumer discretionary stocks are down 33 percent. The consumer is already in pain. And Morgan Stanley cracking interview with Jonathan on Friday. We're not done with this bear market. We've not had the concluding chapter. What's the size and the scale of the concluding chapter. When I'm looking at the commodity board Dr Copper is at a 17 month low. Oil is down by an eighth of one percent. You are looking at iron ore also down 4.5 percent. China is having a mini recession in April according according to the Goldman Sachs team. I can tell you that you're looking at various positions here from Goldman Sachs on the copper market. Iron ore the second half they've cut their price 110 from 115. You've got a sluggish economy and you're going to need some pretty resilient demonstration from China that they're going to push stimulus measures. So metals are under pressure this morning. But let me take you to the bond market. This is what's happening. Three year paper crash by 13 basis points on Friday. The belly of the curve demolished by 25 basis points at one juncture. Let's have a look at the. There you go. Actually let's just move on from that. We have got cash trading at the moment even though it is Fourth of July. We'll show you the futures in just a moment. The break evens however are rolling over. A five year break evens sub 2 percent. We haven't seen that since the beginning of the war. Let's check in on the markets now with Juliette Saly. She's in Singapore. Hey man. Well we did have a positive start to the trading session and Asian stocks are actually higher for the first time in four sessions really led by those gains you're seeing in Japan. But certainly some of the earlier gains being pared and we started to see some weakness coming through on these recessionary fears that you were alluding to. And as we continue to see commodity prices coming under pressure too. Goldman slashing its iron ore price forecasts as well. Hong Kong remember is playing catch up because it was closed on Friday. So that market on the lunch break down by about six tenths of one per cent. And have a look at how the recessionary fears are hitting some of the emerging markets the likes of Indonesia the laggard in Asia today down by over two and a half per cent dropping the most since May. We did have though Vicky Cho for Rebecca on earlier saying she actually likes the Indonesia story because it is strategically positioned to receive a lot of the foreign direct investment as a supplier of some of these strategic commodities in the region. You mentioned bonds advancing. We're seeing that in Australia ahead of the RBA decision tomorrow. We are expecting another potentially jumbo rate hike. If you can call 50 basis points that it certainly won't be the 75 basis points that some in the market had looked for. And let's have a look at my chart because you mentioned what is going to happen in the second half. Is it going to be as turbulent as the first. Certainly some projections are suggesting that the MSCI Asia Pacific Index does have some potential upside x Japan over the next 12 months of around 30 per cent. The index lost more than 12 per cent in the quarter. But Nomura another one sounding a warning about a recession in parts of Asia as well. They're saying that you could see major economies including South Korea and Australia into recession as well minus. Jill thank you very much. Great round up there. Recession is the word of the markets. Well investors are entering the second half with a view for turbulence. I am. I've contributed Garfield Reynolds is with me now. So this R word is pervasive now isn't it. Larry Summers What I find interesting about Larry's possession is Garfield that he's pivoted in the space of six to nine weeks of a recession this year. And it depends I suppose how long and enduring that recession might be and how big a risk is it that it dominates the upcoming quarters. Well to some extent it depends on how the inflation data comes in. If you remember just two weeks ago we had the inflation data come in and it was very strong in the US. And inflation was the watchword and yields soared while stocks also crashed. Then two weeks later bang yields are back down to lower than their starting point from before inflation. And that's helped generate this narrative that inflation is set to peak. We got break evens down. As you mentioned. We've got some declines in commodities. They're not that huge but some decent declines in some commodities. Difficulty again is oil is still pretty high. So as natural gas and there's concern that depending on how the war in Ukraine develops they could get higher still. So I think we're going to have inflation and recession in a sort of arm wrestle over what dominates for at least the next quarter. So I've sort of jotted down a couple a couple of questions for myself. Yes in morning when I was reading through and I thought the stock's down 20 percent and 30 percent respectively. You know bear markets a bind. I wonder to what extent has the equity market already begun to price the majority of a slowdown. Yet the bond market has yet to begin to really price our recession at just sub 3 percent. That that juxtaposition is going to. It's gonna be the tussle for the summer isn't it. Yes it is the difficulty that we've got though is where inflation is. I was looking at this earlier this morning and you you look at the idea that bond yields are crashing down because a recession is on the way. Now over the last 40 years or so what's usually happen as a recession approaches. Bond yields crash down. They continue to decline during the recession and then come back up after it once it's clear that the recovery is underway in the 70s. Back when inflation was at the sort of levels you first got to sort of levels we have now. Something different happened instead. Even in a recession bond yields went up. So that's the danger. That's why I think there's a lot of vulnerability for bonds to go higher. There's also plenty of vulnerability for stocks because one big concern this coming week this coming month is as earnings season gets closer. Are we going to see some earnings write downs. Because earnings expectations haven't really come down much despite all this talk of recession. Yep we could be in for a bit of a jolt on that. Great to have you with me setting the agenda this Monday morning. Our M Life contributor Garfield Reynolds and Goffin mentioned the oil market that we're in slight retreat this morning as investors have their concerns about global slowdown and it could erode demand. The commodity market faces a second half that promises much turmoil pretty much as you saw in the first copper crashing to a 17 month low. Let's get to our energy report. Estimates that Minsky Steven commodities are in a maelstrom this morning. But to the oil markets it's interesting. The podcast by Gulf intelligence you've got veto all had traded. They're talking about demand destruction. So we're not there are we. Yeah I mean you're looking at some of these developing markets you're you're looking at some some even consumers maybe the United States and Europe and the idea that they're not able to pay or afford the fuel there's not enough fuel for them is a real risk. And you're seeing that some countries are unable to purchase any more. You know it's not just oil. It's also liquefied natural gas stressing that Pakistan Myanmar Thailand to an extent it's across all of those fuels because prices are still high. You know we have gone down a bit. You know we weren't we're not at Brent out kind of twenty four dollars anymore. We're more closer to one hundred and ten one hundred dollars per barrel. But there's still much higher than normal for this time of year. And this puts a lot of pressure on consumers. But of course you know those prices in oil look well they look cheap. If you take the J.P. Morgan No. 111 45 on brand this morning down an eighth of one percent. J.P. Morgan are flagging a couple of scenarios which is where G-7 attempts to implement a price cap. Russia switches off its oil Stephen. And in that case we're into stratospheric levels. What are they and what takes me to this trust to the stratosphere. Right. So you said we're at one hundred ten dollars for brand. And if you if oil were to be cut down the production Russian oil would be cut down by five million barrels a day. That means that oil prices could surge to three hundred and eighty dollars a barrel. If they cut down by just about three million barrels a day that could see oil prices surged to one hundred ninety dollars a barrel. Now why would Russia do this. It's because of this cap that Europe and the U.S. are saying they want to pay lower levels for Russian oil to keep the market supplied. But make sure Moscow doesn't get the money. But Moscow might not play ball. They might decide hey let's turn the taps down. We can survive by cutting tax credits. J.P. Morgan by five million barrels a day but it would wreak havoc on the market. Imagine Brent at three hundred eighty dollars. That would be unbelievable. That would cause economic catastrophe. Now there's an absolute worst case scenario but it does put a lot of eyeballs on that J.P. Morgan report. Absolutely. But then of course you take the equivalence in terms of price of gas gas recently trading at the equivalent of two hundred two hundred and twenty bucks a barrel. So we have some measure of that pain. Our energy reporter Steven Septimus gives the very latest on the JP Morgan note on oil. It's a good read. But the Chinese developer Shi Marks says it didn't pay a 1 billion dollar note that matured on Sunday adding a party to a record year of offshore bond delinquencies in this sector. Let's get more with our Greater China senior executive editor John Lou. John this is one of the biggest defaults that we've seen so far this year. Is that is that prescient for the back half. The read forward is very interesting. The threat of this the full happening has been on the radar for the market for some time. Sure. The developers. In this instance miss the bond payment last month as well. Earlier in the year they missed a payment on a trust product. Concerns about its health have dated back all the way to the end of last year. So the risk with this company has been clear to the market up to this point. Looking forward though the question is what can China do to shore up this property market. The reason we're in this turmoil now is because Beijing wanted to deleverage the market back in 2020. Beijing having seen the pain has pulled back on that. Beijing has actually introduced measures to help buyers. They've asked banks to lend more to the sector. Some cities are offering subsidies for purchases of homes. We've had 11 consecutive months of year on year declines residential home sales. The official data for June is not out yet but the private data indicates that we will have a 12th month in June. And so the question becomes what can Beijing do and when can they do it. Because for developers such as schmutz. Too little too late when it comes to this bond. They've got five and a half billion dollars worth of debt coming still outstanding offshore. And lots of other developers are under pressure as well. So can Beijing step up and help relieve the situation. OK. As you say it was flagged but it could get a little bit more painful from here. Credit China's senior executive editor John you with me. Let's get back to the first world headlines. Juliette Saly alongside me in Singapore. Jules thanks. Minus Argentina has named Sylvain of a Tom Keene as its new economy minister after the weekend resignation of Martin Guzman. She was the economy minister of one of the areas of province from 2011 to 2015. Guzman had come under pressure over the economy's direction with inflation topping 60 per cent. His sudden departure is raising doubts that Argentina can meet the targets of its 44 billion dollar IMF program. Ukraine says it's pulled its troops from the strategic city in the Luhansk region confirming Russia's claim to have taken control. Russia had earlier declared that it sees the city advancing its goal of taking over Ukraine's entire Donbass region comprised of La Hang Seng and Donetsk. Ukraine's armed forces say the order to withdraw was made to prevent heavy casualties. China's Covid cases are climbing as officials carry out mass testing and why province reported 287 local cases Sunday out of 380. For the whole country two counties there are already in lockdown. And in Macao authorities reported to Covid related deaths. On Sunday the first in the conclave since the pandemic began. Amazon founder Jeff Bezos has criticized President Joe Biden for tweeting that companies running gas stations should reduce prices. Faisal says Biden's statement is either a 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. Thousands of people have been forced from their homes in and around Sydney as torrential rain continues. Emergency services say 18 rescues were carried out overnight as three major rivers flooded. Residents have been warned to avoid unnecessary travel while the system which caused the deluge has weakened. Forecasters still predict up to 120 millimetres of rain for Sydney on Monday. 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 Manus. Joe thank you very much. Still ahead on the show some news from the region markets without Rahm's confidence. My one charade. But up next recession fears continue to cast a shadow across the markets. We discuss the outlook for the second half with union Kathleen Hays Norman Vilma. He joins me next. This is Limburg. 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's 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. Former Treasury Secretary Larry Summers on the chances of a recession 2022. No never mind. My gas union up with a CIO for wealth management. Norman great to have you with me sir. There we go. Larry Summers is sort of saying we could well be that this chances of a recession have significantly increased. And I judge six to nine weeks ago. He's pivoted very quickly. Are you on the pivot with Larry. We are on the pivot with Larry I think we've seen this data in the second quarter deteriorate very meaningfully especially from the corporate perspective. But we're also seeing the pressure build on consumers. And so the combination of that is really raising recession risks in the US in the quarters ahead. We think. So this is the question that I scribbled on a notepad. Yes even as reading listening to Larry which was if stocks potentially have already begun to price a recession. If I look at the consumer discretionary is down one point a trillion down 33 percent in the first half. Has the bond market yet to catch up. We won't disagree that stocks have priced for session. Well we think what stocks have done is priced their move and interest rates. Well so for one and a half it's caught two and a half three percent but we haven't seen them move in earnings yet on the bond markets. The yield curve is pricing recession pretty well. It's very flat. Now we've seen inversion fairly recently and we've started to see credit markets priced that with high yield spreads. Now in the five hundred basis point area. So we presently slowed down but not quite recession in the rest. Risky aspects of the credit market at this point. Mohamed El-Erian flags. The risk on liquidity. Talks about high yield issuance. I think part of the narrative that we put together is the issuance of high yield being demolished. Are you seeing any signs of liquidity evaporating. Are any air pockets as it were across these markets. We're starting to see the early signs of that certainly in the dollar markets where it's starting to become a bit more acute. We think as in the euro markets where you are starting to see some pressure emerge in euro money markets and that's just as the ECB is beginning to raise rates and the Fed has just begun shrinking its balance sheet. You have this combination of not only recession risk and recession concerns the need to bring earnings expectations down but there's liquidity. That dynamic underlying the market also presents a risk to investors as we look at the second half. I'm part of that narrative would be Norman of course people are perhaps under assuming the guidance from Legarde which is 25 and 25 in July and September. I want to revert back to your opening statement which was fair enough. It's good to disagree which is that equity markets had priced a rates repricing but not an earnings repricing. I like what Mike Wilson had to say. He says look we're not done. I like to call people verbatim. We're not done with this borough market. We've not had the concluding chapter. What is the concluding chapter. 10 percent lower from here 15 percent lower from here. What is the concluding chapter in the second half on recession risk for equities. Well if you look at the earnings expectations in the US for example right now for 2023 there plus 10 percent or so in a typical recession you would see something like minus 15 or minus 20 until we actually get a recession playing through in 2023. There is substantial earnings risk here. We would say about 15 to 20 percent downside if we get a full recession approached. Do you think the Fed still goes front load expeditious tightening. Does that still hold for the next couple of meetings and then stalled because the rates market swaps market is already beginning to pare back when peak rates come in the middle of next year somewhere between three and a half to 4 percent. Is that the chronology that you see front load heart heavy still 75 75 and then a taper taper taper pause. We do think that that's the language given that Powell has put out there. Essentially people should be expecting certainly slowed down potentially a recession as these front loaded and raise rates in July and then we think again in September. So we think they're on autopilot really through the summer. OK let's see what that auto pilot ad delivers manufacturing new orders obviously dropping consumer spending at faltering. It could be the beginning of a long moderate but painful recession. Those are the words at the top of our big take this morning. One of our big licks. Norman thank you very much. Norman Vilma Union I believe A for wealth management that on his calls on the markets this Monday morning setting you up for the Fourth of July wherever you are you celebrating. Good morning. Let's get a quick check on those business headlines from around the world. Tesla's global deliveries dipped in the latest quarter due to Covid shutdowns added Shanghai factory snapping a two year streak of gains. The automakers shipped almost 250 5000 cars worldwide and the quarter that ended in June. Missing forecasts. Tesla delivered a record 310000 cars in the period before that she mouths says. It didn't pay a 1 billion dollar offshore note that matured on Sunday adding to a record wave of Chinese developers missing their payments this year. The luxury builders says it also hasn't made payments for some other offshore debts and is in talks with its creditors to come up with amicable solutions. If that fails she now says its creditors can take enforcement actions. Quick snapshot of global risk. If you're celebrating Fourth of July around the world you're probably more interested in what's going on in the commodity markets just honing in on iron ore. Goldman's note this morning says this is the one with the most dire inside risk. You're looking at iron ore at the moment. And copper iron ore down 4.5 percent copper down to an 8 percent iron ore target. Ninety dollars as is the call from Goldman Sachs. Equities are struggling this morning. Let me just show you what's going on. I mean Australasian and Chinese equities are in the green. But U.S. equity futures just dipping by seven tenths of one percent. Morgan Stanley talked about a year of fire and ice. You had the FA which is the fight against inflation. Second half of the year is about waning and slowing demand. You are just looking at equities dipping in the US for Fourth of July and upper half of 1 percent in Europe. This is Bloomberg Daybreak Middle East. Your top stories this morning. I think the risks of a 2022 show are significantly higher than I would have judged six or nine weeks ago. Investors weigh recession fears against inflation. As markets enter what's shaping up to be a turbulent second half. Yes futures you treat well. Bonds advance at the start of trade. Commodities under pressure amid growth risks and war in Ukraine. JP Morgan say oil prices could reach a stratospheric three hundred eighty dollars a barrel. And she mouthed fails to pay a billion dollar bond note adding to a record year of defaults for Chinese developers. So these markets are moving. We've got Fourth of July. People will squeal that we haven't got the liquidity. Let's see what Juliette Saly presents as her reasoning for the markets this morning. Jules. Well still a lot of these growth concerns and that is very much weighing into a lot of the AMS. Have a look at Jakarta's market today. Medicine Indonesia the JCI falling the most since May and certainly a laggard in the region. I guess that equity index really not reflecting the full picture though because as you mentioned a few minutes ago we are still seeing some upside in the likes of Australia the likes of Japan as well. And that is actually sending the regional benchmark index higher for the first time in four sessions. But you can see a lot of weakness in the likes of the Thai ex extending its bear market. Hong Kong also playing catch up because remember it was closed on Friday. Elsewhere we're seeing a little bit more upside coming through in some of these currencies particularly the one up there by about a tenth of 1 percent. Jeffrey is turning more bullish as many are on the overall China story and certainly on the CSI 300 when it comes to the commodities market. We've heard that call on Goldman from iron ore. It is dropping by more than 4 per cent today. And then of course watching bonds being bid particularly in Australia. Head of the RBA a decision tomorrow not expecting 75 basis points of market though certainly expecting that we will see a 50 basis point hike from the central bank. And that will be the first time on record that we've seen two back to back 50 basis point hikes from the RBA minus. Well I mean we're both grappling with what recession is and we're asking gas that same question. Nomura warning many major economies could hit a recession next year. But when they talk about it what sort of shape and scale of recession are they referring to. Jules. Yeah absolutely and they're saying it is going to be on the fact that we're not only dealing with these rising prices but because central banks are earning too much on the side of tightening. So they're saying the depth of recessions will vary amongst nations in the US. They're forecasting a shallow but long recession of five quarters starting from the final quarter of this year. In Europe the slump could be much deeper. Of course that relies a lot on what we're seeing between Russia and Ukraine. And if Russia entirely cuts off gas to Europe when it comes to some of the economies in this part of the world they're also forecasting some downturn for the likes of South Korea Australia as well risk of deeper than forecast recessions. If interest rate hikes there really trigger a burst of the housing market as well. Japan though forecast to have the mildest recession according to Nomura. And of course as we know China is a different story altogether. And we heard from the Securities Journal as well today suggesting potentially more stimulus coming through from authorities in China. That will of course continue to aid the overall economic picture there. Magnus. And that could well be what saves some of those commodity implosions that we're seeing at the moment. Joe thank you very much. Juliette Saly that with the very latest calls and direction on the Asian markets. Well competition between Iran and Russia to sell crude oil to China is heating up. Both countries are trying to export more oil to the east as the U.S. sanctions impact their ability to sell to other markets. Bloomberg Simone Foxman has more on the details. So Simona this is a question of how much can you discount your oil. And that's for Iran to China. But that's going to spark a few reactions maybe inside OPEC isn't it. Yeah absolutely and certainly when we look at the magnitude of the discounts the traders have told Bloomberg about they've in fact doubled for Iran since the invasion of Ukraine. So they were four to five dollars a barrel. Now they're looking like ten dollars a barrel against crude futures. And frankly there are limited markets overall for Iranian crude in particular but for Russian crude as well that seems to be impacted by these U.S. sanctions. And a lot of this specific oil going to what are called Chinese teapots. They're independent refiners. They can't take a lot of their products outside the domestic market. And therefore they're very sensitive to price. So board's understanding that this is sort of a small piece of the market. But as you mentioned and as you alluded to Manus this could have broader implications for the traditional trade ties between consumers and suppliers. Russia surpassing Saudi Arabia in terms of providing the most crude to China for the first time in May. I think if you're in the Gulf for if you're even Iran you're looking around and saying hey wait a second this might be reshaping the global crude market as we know it. And what do we have to do to respond to that. Indeed. And you know you've also got veto kicking in there where the peak demand or demand destruction kicking in on the crack spreads and the products. Let's pivot and talk about inflation. Never far from our agenda is it in Turkey. We've got the data today. What are we expecting. Another another tough reading. Yes. And even worse reading than we saw for the month of May we're expecting 80 percent year on year inflation for the month of June that indicates a five point seven percent increase in prices on a month on month basis. Deutsche Bank describing the situation as spiraling inflation saying that it sees no anchor for prices so only escalating as we head into the month of July and likely to add to this dynamic going forward. So we're not going to see this in June but we are likely to see it in July. Is the announcement of an increase in the minimum wage by 30 percent. Twenty nine percent. Just over the past couple of days 40 percent of the workers in Turkey rely on this minimum wage. So that could continue to boost prices. But right now it just looks like there's no end in sight for this period of perhaps hyper inflation. Turkey could have one of the worst inflation readings for the year according to the IMF. And then what does that do to the Turkish lira which has weakened substantially against the U.S. dollar this year. And finally DAX rounded off monetary policy decisions. Got the RBA tomorrow we've got jobs report on Friday and then mixed in the middle of all of this. We've got the Israeli decision. What do we expect the. We expect yet another aggressive move by the Bank of Israel a 50 basis point hike this unseen in more than a decade and really continuing sort of an aggressive pace of hikes. This central bank kind of confined by two tasks here. One try and keep up with central banks elsewhere in the world which are even moving more quickly in part because they have higher inflation readings. We're look again at and Israeli inflation of 4 plus percent year on year. But the second one is actually very interesting in terms of what happened politically in the country last week with the collapse of the government. So the Bank of Israel no longer going to be aided by fiscal policy. So essentially going to have to carry this burden of trying to keep inflation under control by itself. You know typically we've seen markets not really react to Israeli politics. There's just been so many governments coming through there in the past couple of years that we haven't seen a major move. But now we're looking at a shekel that's the weakest against the U.S. dollar since May 20 2020. Do we see more volatility ahead with only the Bank of Israel really there to try and keep inflation under control minus. OK well let's see what they all deliver. Someone thanks very much Simone Foxman CAC Financial Center in Doha. We've touched on this story a few times. J.P. Morgan and the big oil note calling for prices. Well they could hit stratospheric levels of 380 dollars a barrel in a worst case scenario. This amid Russia's war in Ukraine and ongoing recession concerns. Our next guest says that if oil stays at the current levels hundred and ten bucks it's gonna be a big benefit to the US GDP in the medium term. Goodness knows what 380 dollars might do for us. My one shrub is executive vice president and head of high net worth retail equities at Rahm's moment. Thanks for being with us. I mean you're seeing your overall growth trajectory and your equity narrative on or around one hundred and ten dollars a barrel. Do you think we hold this range and can you even contemplate oil at 380 dollars. Do you think we've naively underpriced what Russia might do. Let's kick off your base case first of all. I think a hundred and ten dollars is reasonable but three hundred dollars would be obviously much much better for the Jews to see but nevertheless much worse also for global economies. And it would be a catastrophe for obviously poor economies on a global level. And for consumers Internet and the whole world. So I don't think this is something anyone would want to see. Nevertheless what we're living in today is positioning the decency markets as the safe haven of investments going forward. And you look at all markets across the globe facing inflation facing recession fears. This is all putting pressures on the markets. Yes we are also facing some pressures today. But as you see global regional markets are expected to see further growth for the year. Valuations here are actually at very attractive levels single to low double digits in terms of P E ratios or price to books. And that gives a stronger appetite for a long term investment story within the GCSE and the Middle East which we never we didn't have to have a growth. I mean I get the base case scenario. I get the base case scenario from you in terms of hundred ten dollars a barrel. If that process what does that do for GDP here in the UAE. If I've got rising interest rates a steady GDP and steady oil price whereas the biggest exposure that you want to take let's say within the UAE. It's gonna be more towards the bank sector and the cyclical businesses of defensive based and we're expecting GDP growth in the UAE and in the region around 5 percent for 2022 and seeing stability across to 2023. And that's actually in a time where all global economies are expecting a recession or a very low growth numbers in comparison. Now on those. Key areas that you want to be exposed to. I'm just looking at some of them obviously Daiwa Young site and Taka again. Yeah. Yes. Excuse me. In terms of the call on these. Is it about balance sheet and dividend. I was just looking at the downward the trailing dividend payout on the to Darwin two point four percent with the dividend payment payout on the on the UAE equity market be stronger relative to the to double. As we stand today European markets have arranged between 4 to 5 percent on terms of different yields and the names that you have said. You said they're all defensive names very strong cash flows balance sheets are very healthy and expected to continue with a distribution policy that you have throughout into 2023. And that gives you a yield of around 5 percent on a defensive side. So today as we see further markets seeing contraction in terms of yields we're seeing here in the UAE actually expansion in terms of yields and valuations are some points above. My one. Let's see what the second half brings. To quote Morgan Stanley we haven't seen the final chapter in this market yet so let's hope the defensive hallmarks that you refer to Barrow. Well my guest this morning on Middle East markets Marwan Shery Ahn executive vice president head of high net worth retail equities at Rams. Any more ahead on this Monday edition of DAYBREAK. Middle East for the Fourth of July. Wherever you are a very happy Independence Day. High inflation is probably worse over the very long term and 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 and fears are in your head and you just expect it 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 hit CAC going on in the markets. But actually we are at a tipping point. I think recession is a bigger risk by now. Inflation and pricing now. Right. We're all aware we're in a high inflationary environment. People are adjusting their budget. But recessions with confirm this market over. I disagree on every recession risk in another state. Frankly I think people are talking themselves and reducing their buffer about a recession. They're 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 into in a time when inflation is high. Some of the respondents that I am live pulse survey this week. Let's get to our analyst managing editor Mark Cudmore. Mark 629 respondents. Sixty five percent of them of course saying that analysts are behind the curve. I mean when you look at the data one could say we're already in a mild slow dying. It's just a question of how do you define recession. That's very fair amount and I think a lot of people are actually starting to realize that the definition of recession is maybe a little bit different they thought. I think the consensus has generally been that it's two quarters of consecutive negative growth there but actually it's a much more subjective definition from the NBER in the US than not two quarters of slowdown. And they basically defined by the extent and how widespread the growth slowdown is. We're definitely heading towards recession minus. It's just a matter of when we're going to get there. So as you pointed out we asked our clients what's what's the situation between the massive divergences here between equities forecasts going higher despite this growth slowdown and the fact that equities have traded pretty terribly. And there's a theme that's largely global. That kind of divergence is not in every single country but most the major economies. And as you pointed out months out of six year. Twenty nine respondents 65 percent said hey look it's equity earnings that are wrong. They need to come down a lot. And that's going to add extra pressure to equity prices right there. We also asked a couple of other questions which is the greater risk for equity markets isn't recession or inflation. And it was quite clear the answer was recession 57 percent. But as you heard in some of those comments just there among us there is the idea that these two things can't be entirely untangled. Yes recession will cause a much more significant repricing but that's conflated with the whole problem with inflation and why we're getting higher yields. And that's what equities have repriced for in the short term. The fact we've got higher yields they've not yet priced in the recession. Now we asked a couple of other questions. One of them was the direction the dollar. And the reason we asked this is the start of the third quarter at the start of the second quarter. We asked the Fed of the dollar. We'll get the graphic up here in a second. And at the start of the second quarter we asked the fate of the dollar. And our clients were very much bullish and they are apt to spot on was the start of April and the dollar surged about 5 percent in second quarter. So assuming our clients who have consistently been right on the Emily Chang pulse get my pulse of being one of the best leading indicators for what's going to happen in markets yet again they're relatively bullish on the dollar. Now it is true the majority said unchanged but way more said the dollar will rise in the third quarter than full. And that means that was not yet close to the turn in the dollar and not as a tightening of financial conditions for the whole world. That is why many countries are having problems with this tightening of the dollar. Now we did ask about whether this strengthening dollar is is kind of an under hyped or overhyped or under appreciate dynamic for stocks in the US on a not issue. We are completely divided so I'm afraid that's the one little bit that does not loads wisdom. But for more on this Read and I space and life pulse on the terminal to get all the info what clients think is going to come up next. Get that get that plug and it's very interesting. I think the one thing that caught my eye this morning Mark and from Robin Brooks and I f as well he talked about if there's a recession. In other words if these yields keep dropping in the United States of America dollar yen turns. Right yen strengthens. And that begins to really waken up some of the carry trades and the affects markets could be a lot more punchy as we go into the second half. That's definitely a dynamic. I'm worried people are being a little bit preemptive looking for that yen's strength. I don't think the DOJ is going to capitulate in policy just yet. None of the recent data shows that NFL in the short term we've seen 10 year yields pullbacks not point to 5 percent 10 year level which the DOJ is of course defending. So they've won that the defense in the short term. It is true that you know I was wondering whether there's a point of the dollar turn. But the survey says no we're too early looking for a dollar turn. I also think it's too early to look for proper yen's strength. Maybe the risk have become more two sided. But the fundamental story for yen weakness this year is the idea that you've got a central bank which is keeping extraordinarily easy policy when the rest of the world is raising yields very very aggressively. And that story has not changed. It's just as entrenched now as it was a couple of months ago. So I'm actually in the camp. There's a lot more yen downside in the second half of this year even if it will become more volatile to a fashion. Oh let's see who breaks the Bank of Japan. Mark thank you very much. Bob Cudmore their managing editor at 4 AM Live. Jump on the I'm Like blog. All the details of this survey are their feet to mull over as you go into the study. Trading day on Independence Day 4th of July. This is Bloomberg. RTX us the crypto exchange co-founder and billionaire Sam Backman Freed has agreed to inject capital into Lock VI. Now it's a deal that includes an option to purchase the crypto lender for as much as two hundred forty million dollars. And we spoke to bank men freed in an exclusive interview ahead of the deal's announcement. There are synergies between the business as a whole. I know if you look at what what qualifies built out I think they have a loyal customer base. I think they have a real business model. They have a hard program that that people love is a strong strong leadership. And I think that we have been focusing on a lot of the backend infrastructure right. On you know everything from the exchange in matching engine risk engine and everything else. And and there is notch up somewhat nicely. And so I think that there are a lot of ways that our products can work together and can mesh together in a way that's better than either would be independently. And I also say that you know they've been working really productively with regulators on building out. I regulated yield products and license yield products which which we're excited about and excited that they've been doing it in a regulated way. I think that's a healthy way to do it. And I think that's going to serve them well. No long term. And it's something that you know work sage work with as well. You know you told Politico that RTX was looking for opportunities to bail out you know places where customers would otherwise be underwater. But are you worried here about moral hazard at all that bailing out a company you may not actually be what's best for the industry at large. That's a good question. And you know and I'm guessing what you're getting out there is like does that bail out a company that really should have failed. And teacher is the wrong lessons for that company. And I think what I would say there's two things. First of all I am way more excited to bail out customers than shareholders. Right. And so the focus of this is not how do we deliver as much shareholder value to troubled assets as possible. Right. It's how do we protect customers. And I think there is implied pretty different things. I said that that's that's one thing that I'll say. And I think that one of them is way more important for the ecosystem and the other is the one that has the biggest moral hazard. The other thing is that I said you know we are trying to find who were the responsible players who were building out you know a good business had a sustainable model and you would use short term liquidity and that that could help protect customer funds. Bill you know a a real valuable business that I think you had something real to offer to customers rather than you know which companies honestly should never have existed probably. And and you know as of today you know maybe we should just let. Let them sort of you know die a quiet death. I think that's something that we have been thinking about. RTX co-founder and CEO Sam Bank Men Freed speaking to Bloomberg Sonali Basak. Let's take a quick snapshot of where we are on this Fourth of July. There's gonna be a lot less cash liquidity. But the futures are trading. I can tell you that you are looking at yields on 10 year equivalent here. You've got 10 year bonds trading 1 19 and 3 point 3 7. So prices are rising the equivalent yields by 288. I mean bond vigilantes. In terms of trying to take us up to the 325 350 level they have been battered into retreat. And this goes down to where you see the terminal rate. In other words if recession is alive and present danger what does that do to the terminal rate. Terminal rate pricing has collapsed. So futures are rising. Use of falling equities are under a little bit of pressure this morning. The market NYSE peak rates in the United States of America and the middle of 2023 somewhere between three point 3 and 4 percent. By the way the break evens are also rolling over. And to a certain extent that suggests the Fed's medicine is beginning to work. Now when it comes to dollar yen you seen just ever such a small incremental amount of yen strength and specks of copper bearish bets for seven weeks in a row on dollar yen. So are you at the top of dollar yen. U.S. yields are falling at the shorter end of the curve that may give a little bit more yen strength city. Talk about the stickiness in the U.S. yield. Really quick snapshot of GM and you're seeing use around the world repricing to the downside as we go into RBA. Commodities under pressure. I'll take you through the next hour of DAYBREAK. Europe. This is Bloomberg.

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