Which implies the 10 year has moved significantly today. I want to turn focus to the front end of the bond curve. You see the 2year treasury have moved. Up at 2. 12 the 2year bund up 1. 15 this is about 20 basis points higher what that means is investors are pricing in a higher probability of a bigger move at the next ecb meeting. As it stands, 75 basis point hike in september. All of that is priced in after the german curve to give you more color on what actually was said at jackson hole, jay powell warned that the u. S. Economy will suffer quote some pain from Rising Interest Rates as he vows to use the feds monetary tools to stamp out inflation. Powell said there will be economic costs to the aggressive hiking cycle, but the costs continue to run hot would be far worse. Higher Interest Rates and Slower Growth and softer label or conditions will bring down inflation, but it will bring pain to households and businesses these are the costs of reducing inflation. A fair yolure to reduce stfar g pain jay powell said the conditions will remain restrictive until the 2 target. The comments sent u. S. Numbers pledging dow shedding 1,000 points and s p erased all of the august gains. Lets look at u. S. Futures after the plunge on friday, more red across the board we have bounced off the lows of the morning. All three majors pointing to a weaker start Dow Jones Industrial average with a 190 point drop at the open nasdaq looking to extend the losses powell has markets pricing in now a. 75 point hike in september. Powell said the fed learned the lesson of the 80s and determined to push ahead the longer it waits, the worst economic cost. History shows the Employment Costs of bringing down inflation is likely to increase with delay as high inflation is entrenched in wage and price setting. These lessons are guiding us to bring inflation down we are taking steps to moderate demand so it comes into better alignment with supply and keep Inflation Expectations anchored. We will keep at it until were confident the job is done. As julianna mentioned, officials are calling for more action to control inflation in the eurozone speaking at the jackson hole summit, Isobel Schnabel says they are worried to bring it under control. A. 75 increase should be on the table. And it should add a major hike adding recession is not enough to bring down price pressure strong words from the ecb lets bring in Dominic Bunning good morning, dominic. A lot going on you think for an august bank hol holiday, it would be quiet a lot going on in markets. Lets start with the comments out of the fed chair powell on friday do they strike you as hawkish or did markets just misread the fed chair in the past particularly with the focus on the socalled fed pivot which wasnt the case. Good morning. It is clearly very busy. Powell put a cow among the pigeons. For whatever reason, markets wanted to believe in the fed pivot. They took some of the softer inflation reads we have seen and softer Growth Numbers and extrapolated from that that the fed would turn on its heels. That is different to what the fed has been telling us. What they said clearly is we need consistent signs inflation is back to target before we change our policy. They have not seen that yet. In my mind, it wasnt that big a surprise that powell stuck to the hawkish tone and keep rates until were confident inflation is back at target. I wasnt surprised the market is gearing up for the fed pivot. As you said, we dont think this is happening any time soon i guess investors believe there would be some level in Unemployment Rate it has to get to where bring Central Banks have to feel comfortable raising rates. If you look at the numbers over the weekend, the number one focus is taming inflation even if there is a socalled tradeoff isobel from the ecb introduced this comment from the sacrifice ratio saying the pain from the Growth Perspective may have to be high in order to get inflation back to target do you think the ecb are preparing investors for a very hawkish set of meetings . I think they need to make the right noises in europe there is an inflation problem and that has gotten worse. The difficulty the ecb faces is growth is slowing much quicker and it is starting from worse levels compared to the u. S the ecb wants to talk a hawkish game and think we are going to do the right thing on inflation. We are going to be in rece recessionary conditions later this year. We had a squeeze on higher Consumer Prices and recovery in europe this is the difficult thing for the ecb and the difference with the fed and European Central bank the u. S. Has strong domestic demand and recovery and generated inflation. That is not so much the case in europe where we are seeing much more of an income squeeze and more inflation driven by external external factors the ecb has a bigger issue delivering those they have to talk the talk the next few weeks. Dominic, i wonder if all of the bearishness is priced into markets. It seems investors understand that difference with the u. S. And europe i saw net short position hit the highest level since the start of the pandemic is anybody left who is bullish the euro it is an interesting conversation we had the same discussion with clients for six months to be honest it has been very clear to us that European Growth and tradeoff would get worse most people seem to be in agreement. That doesnt stop the euro going lower. There are a couple of other things worth thinking of investors and what they are doing and positioning. Thats important some underlining drivers changed. Europe is running a current account deficit now. Thats the first time thats happened in a decade that is another change in terms of the flows we see and thats something that drags the euro lower through time the other thing i would mention is euro is not cheap from the big picture. Yes, versus the dollar, the euro is low the Effective Exchange rate . The euro is not cheap. We could cheapen another 5 and only then start to get into stretch valuation level. That is why euro has further to go sounds of structure drivers that keep the euro stressed in the months to come what about sterling . Trading below 1. 17. The same question to you the pound here, to my mind, creates more upside risk it is a very similar story to europe we have the same type of inflation pressure and wage squeeze and weak consumption i would say a couple of things relative to europe where the uk potentially got upside im not saying bullish, but in the context of what is happening in europe. We have potential for fiscal stimulus after the leadership election that might do something to offset for the consumer. If there something to help the consumer to alleviate that pressure, that might be seen as a marginal positive. The other thing is with the bank of england, they delivered a fair degree of hiking already. They started reducing the balance sheet. They have more under way the ecb is further behind the curve, i would say the bank of england is playing a better way than ecb. They havent left it quite so late they have been cautious. I think they have a bit more framework for inflation. The ecb is purely in reaction mode at the moment that is never a good thing i still think cable can head lower. Sterling against the dollar is challenging. Euro and sterling, the euro has more down side. Dominic, thank you for joining us and sharing your thoughts we are just gettingsome flashes from the Ukrainian Foreign minister in stockholm. He has called on sweden to provide further air Defense Systems and shells to ukraine. He adds that accepts the iaea that russia violating nuclear proptocols and russia is putting the world at risk for a Nuclear Accident adding russia must withdrawal from the Nuclear Power plant putting ukraine at the center of the catastrophic incident at the nuclear reactor, but the rest of europe the foreign minister is not mincing his words. He is expecting to say russia is violating the protocols and putting the world at risk for a Nuclear Accident i was supposed to link the story to what we are talking about in energy markets. A lot of debate in the use of Nuclear Energy many Nuclear Plants. There is a huge amount of resistance across europe to using Nuclear Plants everybody has vivid memories of chernobyl and it is fascinating these stories happening in isolation. The risk and reason why germany is not a nobrainer to turn to nuclear and keep the Nuclear Power plants going and not cost them here in the uk, a lot of debate. This is a reminder that nuclear comes with major risks from a geopolitical perspective beyond energy. We will certainly see it is alarming to see this happening on the european continent. No one would want it to get into a worse situation. One thing i would say is some people i spoken to think the constant pressure from the russians on the Nuclear Reactors is one way to get concessions out of europe. They know that they are pressing a very sensitive point in the heart of the continent at the time the Energy Crisis is happening. We will see if there is diplomat resolution when we come back, another Major Chinese sector is weighed down by zero covid policies and extreme weather conditions well have details next. Do you have a Life Insurance policy you no longer need . Now you can sell your policy even a term policy for an immediate cash payment. We thought we had planned carefully for our retirement. But we quickly realized we needed a way to supplement our income. If you have 100,000 or more of Life Insurance, you may qualify to sell your policy. Dont cancel or let your policy lapse without finding out what its worth. Visit coventrydirect. Com to find out if your policy qualifies. Or call the number on your screen. Coventry direct, redefining insurance. Welcome back to street signs. Profits at industrial firms across china fell in july as covid restrictions put pressure on factory demand. Heat waves brought on issue as well sam baddas filed this report profits slid 1. 1 reversing the 1 gain from january to june there were a few factors weighing on which were covid problems and a heat wave with Power Supplies manufacturers had been suspending production as provinces prioritize power for residents. That is impacting lithium and chemicals raising questions of the auto sectors car sales jumped 78 in july that was put down to improving supply chains and tax breaks manufacturing of Raw Materials was the biggest rag. Numbers were bad for steel makers profits falling 80 . The theory is further evidence of the headwinds of the economy and recovery and building the case for more policy support it caps off a month of disappointing numbers which showed the recovery momentum losing steam investors eyeing the august data for wednesday with the latest pmi. The poll by reuters is expecting factory activity to shrunk in singapore, im sam baddas, back to you. And investors are increasingly pricing in an opec output cut after reduce production to balance the market you have brent trading higher. Wti below 94 a barrel on the day. French Prime Minister elizabeth borne is not ruling out a windfall tax they will continue to work with house households with rising costs lets turn to german utilities. Germany filling 85 of the Storage Capacity a month ahead of schedule. Reservoirs are filling up faster than specified he said companies will access reserves during the winter months we do have at the same time the positive news when it comes to germanys storage facilities. We have staggering news with the german power prices. The power price risen 5 this morning. We are above 1,000 euro per megawatt hour. New record extraordinary moves in the german power price space norway will cut gas exports due to heavy maintenance this comes as nord stream 1 supplies is falling on thursday. Gazprom says that is due to maintenance. And the director of energy says the country is doing whatever it can to maximize gas export the most important functioning of norway with the Energy Picture in europe is the supply of gas and we are doing everything we can to export as much gas to the continent and uk as possible. We increased export in 2022 with about 100 terawatt hours of gas. That is important. We will continue to be a stable supplier of gas in the future as well also, our electricity function as important balancer in the electricity system we have a lot of regulated hydro power that can be used in difficult hours when supply is high and production in europe is low to stabilize the system to be able to play that role in the future is very important to us is 2030 still your target particularly regarding your high Gas Production are you planning to keep gas protection at these levels we are working with being a stable producer also in the future we see now there are large interests in searching for new Gas Producing fields on the norwegian continental shelf. We will continue to develop our Gas Production in a post 2030 picture. Are you feeling pressure from other Global Leaders with regards to the supply that perhaps you should be doing it indifferent areas . Has it become a huge political hot tpotato we have a lot of leaders interested in talking to us on gas in the Important Role that we play. I do feel we have good dialogue with colleagues in european countries. To ensure we are playing the utmost Important Role in the Current Situation with respect to doing everything we can to supply in europe with gas in the difficult situation. All right we are getting comments from elon musk in the european time zone he is speaking in norway here is what he is saying which is interesting coming from a man who has essentially been a trailblazer in the electric vehicle space. He is saying we need to provide oil and gas to keep civilization running. We need oil and gas in the shortterm and some Additional Oil and Gas Exploration is warranted. He adds north sea wind power combined with Stationary Battery packs could be a Strong Energy source in winter these are interesting remarks from elon musk he has a very interesting observation about the state of the world to put it mildly in this case, his Business Model is centered around building electric vehicles and helping facilitate that transition he said we need to also be real realistic. It takes time. I think many will interpret these comments as pragmatic. We are facing the power crunch and will we see major repercussions . That seems to be what he is saying i think it is interesting the same time these comments come days after big news in the u. S. Days after california voted to ban the sale of petrol powered cars in 2035 ill add one thing. We ended the previous segment. There are so many analysts saying we will only get to the net zero targets if we introduce Nuclear Energy as one of the Transition Energy tools available. Without that, it will be difficult to fully rely and get the Renewable Energy and grid necessary from Renewable Energy up by 2030 or shortly after that that is something to think about. Elon musk knows a lot about that topic. Lets push on. I believe we are going to another field and he is now joining us from suffolk. We are talking more about Food Security, right . We certainly are one that Food Security has not run away from. We are getting nearly 1 in 3 people in the world access to adequate food. That means 2. 376 billion people around the world dont have access to adequate food. Makes things difficult and with the drauought and Energy Crisis, Food Security is a tough one well unpack all of that right after this policy you no longer w you can sell your policy even a term policy for an immediate cash payment. We thought we had planned carefully for our retirement. But we quickly realized we needed a way to supplement our income. If you have 100,000 or more of Life Insurance, you may qualify to sell your policy. Dont cancel or let your policy lapse without finding out what its worth. Visit coventrydirect. Com to find out if your policy qualifies. Or call the number on your screen. Coventry direct, redefining insurance. Restoring price stability will require restrictive policy stance for some time the historical record cautions against prematurely loosening policy dont fight the fed is the message as european stocks follow asia into the red the ecb echos the fed with the officials warning a larger sacrifice is needed to target spiraling inflation. Chinese industrial profit falls in july as covid curves and factory productions stop margins and banks step in with more support. Germany is ahead of gas st storage, but shells ceo warns the crisis could last several winters. Just over one and a half hour into the trading week uk is closed for the holiday we have red across the board the rout continues after friday. We saw losses for europe as well building on the losses dax continues the weak trade one under performer this morning. Cac in france is down. We have some resilience in the swiss market smi down. 30 . In terms of currencies, we have moves in the euro and Sterling Sterling down nearly 80 basis points joumanna raised the question will we break through 1. 16 looks like something to watch. Euro trading against the dollar. Comments over the weekend is emphasizing how concerned consumers are with the economic of the eurozone with the crisis under way. Now turning to u. S. Futures. Wall street with further losses. All three indexes with a weaker start. 200 point decline for the Dow Jones Industrial average the dow dropped 1,000 points on friday millions of tons of grain and other foods need to be cleared from storage in ukraine to make room for the next harvest. That is according to the u. N. Coordinator for grans ins deal in the uk, soaring energy led fertilizers to stop production the government has ruled out any Financial Support for the plant after similar warnings forced it to intervene lets get out to the field in suffolk. I assume you have been talking to farmers this morning. Talk about the situation on the ground reporter it does feel dry to say the least. The global drought observatory saying 2 3 of europe is under drought. There has not been a lot of rainfall a lot of areas remain dry. There is a reservoir that has gone from 10 meters deep to 30 centimeters deep that is how dire the situation has become of course, forecasts are for weather to remain dry. Not much rainfall to come through in the area. It means areas like these which have sugar beet on one end and potato crop and wheat carry so much they will have to relook how much of this they can do again in the future. Even this crop yield is going to yield between 20 and 50 depending on the area. Sugar beet will go down to 50 easily that is also optimistic. That means food prices for you and i will go higher if those continue to go higher, inflation costs go higher, too that means the central bank will have to relook at things the bank of england and ecb may have to hike rates on a continued basis. That is the sentiment coming out in the United States we will have to keep on doing that to alleviate the pressure you have the Energy Crisis which continues to affect things it doesnt just affect things at the end of the scale, but even right here just to pump the water from that reservoir to irrigate some of the plants has meant that the cost has gone up at least th threefold as well. That is the energy cost at a primary level at one of the farms in suffolk the situation is dire. The costing is going to go back to the consumer. They are the ones that will have to pay that increase and it means that inflation is bound to stay high for a whole lot longer we spoke to andrew blank, the estate director at euston estate he said it will get worse for wear they are not worried about security food shortage i should say, because things could get better, but it is just about whether they will. We will need a wet winter to get things back on track somewhat. Do stay with us thank you for the breakdown with what is happening in the uk Farming Community. Alex marinelli with the World Food Program joins us now for further discussion alex, thank you for being with us lets kick off what we see in fertilizer markets given how central fertilizer is to the food supply system around the world. We have seen a sharp rise in prices due to the spike in Natural Gas Prices how is this impacting the global Farming Community and what is the alternatives for the fertilizer producers what were seeing there is clearly a price hike on fertilizer fertilizer we have a crisis this is availability crisis. The price of fertilizer soared and is a large worry for the World Food Program unless the fertilizer inputs go to the areas where they are needed, we will turn what we have as a distribution chrisrisis into availability crisis. That is the biggest fear there is no immediate solution except stabilizing the Global Market and make sure we reach harvest times. Alex, you are the supply chain director what are you main problems you are seeing from the logistics perspective . Were seeing two main problems the first problem is the financial issue. As the crisis, global food crisis is taking shape, we are having an unprecedented level of hunger across the world. 345 Million People are in acute food insecurity. So wfp is scaling up with the price of commodities and the price to move the commodities is hurting. On a monthly basis, operating costs have gone up 70 million a month. Enough to feed 4 Million People. We have a cost dimension and operational issue. Supply chain systems havent recovered from the covid shutdowns. The shipping market is still strained on average, a month to a month and a half longer to reach the populations we need. Combination of elevated costs and longer supply chain times are things we are seeing today alex, i think you mentioned about 350 Million People living in hunger right now. Can you just spell out for us the importance of ukraine and how important ukrainian grains can be in helping to alleviate some of the hunger situation that were witnessing across the world . It is tremendously important. The hunger has been caused as many of us know by a multitude of toxic effects climate issues that were seeing of course, the covid pandemic has affected poverty as well as conflict you add to the toxic mix and raise of food prices globally. That is really what were seeing the ukraine grain, this 20 million tons, has had a huge impact on global prices. Since weve seen the recent opening of the sea port, we have seen a stabilization there is a market stabilization were seeing for people spending more than half of the income to buy food, price increase of 15 which is what were seeing across the globe has a tremendous effect on peoples ability to bring food home the wfp has 20 million this year why are rich countries drags their feet and what can be done to secure that money so, we require 22 billion for unprecedented implementation in 2022. We are trying to reach 150 Million People on top of that increased operating cost, there is a need for everybody to step up of course, we know that the amount spent in the last two years with covid measures and climate measures means the Economic Situation of the world is finding it difficult. We are in a place where we are having an unprecedented gap. Wfp has never had a gap with the resource level and what we need to do. It is imperative we receive those resources. Out of the people we spoke of that i say is food insecure, there are countries on the brink of famine. It is imperative that wfp and world rallies to ensure this doesnt deteriorate. Today, we are having to take food from the hungry to feed th starving if that makes sense we are between the gap of what we need and what we have has never been this high alex, it is aribe here. Im in farm country. The notion you are getting as well from farmers here is the yield is dropped off you get between 20 to 50 of the yield of any crop. They may have to specialize and cut down on certain crops to ensure they have enough irrigation for some of the crops they have infield. Are you finding a lot of farmers have to specialize and reduce crop sizes that much if they are doing that, what does it mean for Food Security on the whole is cost a lot more pricing pressure effecting them more now and prices increasing th threefold . All of the above. What we are seeing is the crowd and we have four failed rains in the horn of africa the satihara is going through a drought as well. If fertilizer inputs dont follow, there is a risk of this becoming more. That means more reliance on more countries on imports and this effect with the global prices and reliance on imports increases, we are having a dire situation in most of those countries. I totally agree. Alex, thank you so much for being with us this morning director of supply chain of u. N. World food program aribile, thank you wall street braces for another down day as markets come to terms with the jay powells no gain an approach to inflation. Well have more after the break. Millions have made the switch from the big three to the best kept secret in wireless Xfinity Mobile. That means millions are saving hundreds a year with the fastest mobile service. And now, introducing the best price for two lines of unlimited. Just 30 per line. There are millions of happy campers out there. And this is the perfect time to join them. With the best mobile price for two lines of unlimited. Take the Xfinity Mobile savings challenge and see how much you can save. Switch to Xfinity Mobile today. Higher Interest Rates and Slower Growth and softer Market Conditions will bring down inflation,but it will bring pain to houses this is the unfortunate cost of reducing inflation the failure would mean far greater pain that was fed chair jay powell speaking at jackson hole on friday and setting off a market rout in wall street. Down 4 Percentage Points for the week asian equities in the red. This as investors are getting concerned that Central Banks will keep tightening rates and keep them at a restrictive territory for a longer period of time than envisioned even if it means the economies turn to recession. Recession fears are driving the moves today. The basf is getting hit as reduce the reduction on the back of the Energy Prices and pick up on the gas prices in europe. For europe, it is a double whammy you have inflation problem, but major growth problem on the cost of living. That is something that policymakers are dealing with. Cac in france is down. Italy is very much in focus as we get closer to the september 25th elections down 1 point as well a lot of movement in yields. European 10year bund up 12basis points 1. 51 is where we are right now 10year italian yield is up 14 points the spread is three basis points the italian bund spread is what people are watching. We have more price action in the france sector. The front end of the yield curve saw the big move 2year is up 17basis points as they move in the possibility of the 75 basis point hike at the next meeting that is having an impact on the curve. A quick look at the italian Banking Sector Good Movement in the 10year up 17 basis points. Having a downward effect for the european banks sanpaolo is down a fraction. Lets look at u. S. Futures and how wall street is poised to open after the plunge on friday. The Dow Jones Industrial average dropped 1,000 points worst day since may. We saw nasdaq drop 4 . Its worst daily performance since june s p falling as well. Joumanna, what i found interesting about the selloff on friday is everyone we spoke to last week said they were expecting a hawkish jay powell we got a hawkish jay powell and the market sold off. What was new in the statement that caused so much jitters in the market we had the analyst at the start of the show who said what you said there is a community of people out there who believed or wanted to believe that there was such a thing called a fed pivot in the sense that the fed were giving a reason to start cooling off on further rate hikes actually, you listen to everything he said since that moment and thatjune fmoc and h is consistent. The major focus of ours and major Central Banks around the world is taming that inflation beast. It is very, very difficult to keep Inflation Expectation anchored if investors dont feel like Central Banks have a hold on what is happening and regain the credibility. One part is them looking to remind the community that they will be responsible for bringing inflation rates down the question is if they believe them this fed faced so much criticism with the money they pumped into the economy. Now they are being strict about approaching the economy and taking that stimulus back and still getting criticism. It is a difficult position to be in to my mind, i dont know where that money is going. We saw the dow plunge on friday. We have seen in recent weeks and months is money flow away from europe into the u. S. Analysts and investors dont want to invest in europe because of the Energy Crisis where is attractive . It is a good test to see the money that flowed out of the market on friday finds its way back in. I think it was interesting. I saw before i went on holiday a couple of weeks ago and looking at bank of america and merrill lynch, they saw money flow back into credit bonds. You have to be discerning of the credit you are exposed to. There is demand from investors to find a socalled safer haven to put money in whether credit will do that in this environment is probably a big question certainly the spread and the risk premium you get from doing that compensates for that risk you are exposing yourself to i want to say one further thing to europe. This is close to you i thought it was interesting the industrial giants like the ones in germany like the ones you used to cover. Now Energy Prices are restrictive for us and we have to start cutting down on production this is one thing people dont factor in enough into where the european economy is going. Europe really is in a much worse situation than u. S. Because of gas. Exactly that is where the relative call comes in it will be a really fascinating test whether the money that has now short termed flowed from the u. S. Finds its way back precisely because of the Energy Situation making europe unattractive place or do they look elsewhere do other parts of the asset market become more attractive . Clearly the european story has a number of challenges ahead the u. S. Story much more highly debated. If you have a Federal Reserve poised to continue hiking more aggressively, is that story as attractive i read over the weekend that germany actually despite everything and the Energy Crisis and higher prices, et cetera, have reduced dependence from 20 to 50 which is impressive it has come at a cost. Potentially, a really long term play. We will continue the discussion throughout the week. That is it for todays show. Im Julianna Tatelbaum im joumanna bercetche. Worldwide exchange is coming up next. Do you have a Life Insurance policy you no longer need . Now you can sell your policy even a term policy for an immediate cash payment. We thought we had planned carefully for our retirement. But we quickly realized we needed a way to supplement our income. If you have 100,000 or more of Life Insurance, you may qualify to sell your policy. Dont cancel or let your policy lapse without finding out what its worth. Visit coventrydirect. Com to find out if your policy qualifies. Or call the number on your screen. Coventry direct, redefining insurance. It is 5 00 a. M. In manhattan. Here is your top five 5. Brace for selling since the worse day since may. If history is any guide, this will hold through the close. Jay powell pledges to get forceful about inflation all this against the broader s p 500 pile up. Hitting levels not seen since the height of the pandemic. The bond market doing some
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