mentioned slowing rate hikes, but also the risk of lightning -- tightening too far where inflation becomes entrenched. goldman sachs and nomura have cut their china gdp forecast. and fed thanks weighs on china sentiment. it is -- and the fed sinks and ways on china sentiment. stocks at the moment down 0.8%. looking at volume this morning, just for good measure, lower than they were a month ago. dex features are flat and ftse 100 futures also flat. there is a lull. the idea that mark cudmore was talking about that the next catalyst is what we will hear from in jackson hole. until then, we are in a holding

pattern, although markets are trying to contest the fed. ftse is just opening up. gold spot at 1761. not only the u.s. yield curve, but in the u.k.. we had a warning from denny branch water -- denny -- danny blanchflower who says that these will make this interesting. i want to show you the u.s. 10 year yield that would give us an indication of what investors will buy in the yield curve. european stocks down 0.8%. let's get over to our bloomberg mliv managing editor mark cudmore. mark, you are looking at -- this morning. mark: this chart was flagged to

me at daybreak this morning and they got it from eric albert. it is an believable charge. it is the housing affordability chart in the u.s. as of the end of june. this white line is affordability index. it has fallen below 100. it means the median income in the u.s. is no longer sufficient to earn a fixed rate mortgage for the median house price in the u.s. high spouses -- house prices are becoming increasingly unaffordable. we saw the covid stimulus, so they are now unaffordable and they are the least affordable they have been since 1989. we have not seen them get this drastic at the height of the housing boon in the mid to thousands. the positive take away from this is maybe if housing is slowing down, the economy is slowing down and the consumer is getting

squeezed and may be the fed will not hike rates as much as some people think. maybe the dovish camp is right after all. even the most dovish narrative, the fed just stops and the fed does not pivoting next year, but they will only stop because the consumer is so squeezed already, so it is no bad news for the stoxx. francine: i also would love to get your thoughts on the fed. the u.s. two year yields surged after the fed minutes. they were initially dovish, but the not so much. what is your take? mark: they were dovish because they didn't want to go, we are going to be hawkish and hike 75 basis points. i don't think the minutes were particularly dovish. with what is happening in the market is the market is pricing a pivot which has not been expressed in any communication by the fed. the market is sticking with that pivot next year. the fed is saying, we are not

talking about a pivot raising rates a little slower and pausing the best case scenario. as we get closer to that pivot, the market is going to have to go and either the fed has to concede or the market has to succeed -- concede. i believe it will be the market that will concede. francine: it is bonkers. thank you as always for your analysis. mark cudmore. the minutes from the federal reserve meeting have revealed concerns that the central bank may need to start cooling off rate hikes. but it might still push further into restrictive territory. fed governor michelle bowman spoke about the u.s. labor market. >> we continue to see strong employment gains and low unemployment rates. the kind of labor markets that have historically pulled in more workers. francine: joining us now is

james athey and lynn thomasson. good morning. there is a bit of dovish news from the fed because of the fed minutes and the markets now have a lot of questions about what comes next. lynn: the markets have rallied going into this and liquidity has spent, and we still have a fed that is trying to tackle inflation. francine: what is your take in terms of the news for the future. is there a resolve there that we will see markets try to move? >> what has been missing from all of this is that all of these future outcomes in terms of the fed policy are contingent on economic outcomes. it is reasonable that if i have an economic forecast which is materially worse both in terms of the labor market and

inflation, then i might expect an initial fed policy through the second course of next year. but i think we all need to remember that at the moment, the fed is very much data-driven and they are taking it meeting by meeting. guidance that far out is not particularly useful and we would clarify under what conditions that items would be despite -- conditions that would be satisfied. francine: moving longer-term. james: there was recognition that the monetary policy operated longer than that, so i think they are going to hike with a high conviction because i do not think any of the economic barriers will allow the resource, but at the beginning of next year, it is all up or grabs and i have a much greater

concern about how well the economy is going to deal with this. the markets show that it is just one of the inputs of that concern. francine: what do you mean? lynn, if you look at james, he will have fun figuring out what the fed does through the winter. lynn: we love of you that says we do not know what is going to happen next year. -- we love a view that says we do not know what is going to happen next year. francine: how far will the fed try to fix inflation at the expense of economic growth? that is something we need to answer before we look at the data. lynn: the interesting part is in a sense, the fed is in a fairly good position compared to europe and the u.k. where it is much tougher that central banks are facing come up a much worse

economy with gas prices going higher and inflation in the u.k. hitting double digits yesterday. francine: what is the worst of two evils? james: that is the right question, and i agree with lynn that the fed is moving into a volatile position because they have been more prepared to move aggressively across the nettle. if we have learned any lesson from the period of the 70's into the early 1980's, if we learned any lesson, it is that the worst outcome is uncontrolled inflation. that will wipe it all out. i short-term recession is a small price to pay to control those wage price spirals. there is no question. the policy is to err on the side of over hawkishness today to avoid having to catch up with a situation that is already out of control. francine: where do you buy on

the treasury yield curve? james: that is a good question. i think we are getting to a point where the more they hike today, the more they are having to cuts tomorrow. tomorrow is just a turn of phrase. they continue to outperform too. how can they go increasingly hawkish through the rest of this year and how that is going to invert the yield curve. i set a barbell from the treasury curve because i hedge on that a little bit. at the moment, the managing situation short on the u.k. where they have much more catching up to do. francine: thank you both for joining us. then thomas and james athey, investment director at aberdeen. a positive outlook for the retail sector in the u.s., but how long can esther -- consumer spending last? this is bloomberg. ♪

francine: welcome back to the open. 11 minutes into the trading day. if you look at european stocks, pretty much flat. the dax gaining some 0.4%. it is a bouncing act on how the fed will quell inflation while at the same time maneuvering a

recession. investors also maneuvering a difficult chinese economic outlook. better than expected earnings from large u.s. retailers, putting a positive spin on stocks from walmart and home depot. but can consumers keep the momentum going? joining us now is charlie wells. what can you tell us about retail in the u.s.? charlie: this was supposed to be a bloodbath. there was headwinds, supply chains, and inventories. but things turned out better than expected. some of the largest retailers in the u.s. beat expectations. omar mark had a dire warning in july about profits but met those expectations. -- walmart had a dire warning in july about profits but met those expectations. there were concerns about a slowing housing market but home depot had record profit sales. the u.s. seems to be resilient but changing and you get the

sense when you look at walmart versus target. target is much more discretionary. they have more appliances and they struggled. he failed to meet the lowest profit estimates, but walmart captured a lot of the customers that were going to target in the first place and have a budget conscious consumer. francine: is this a trend? charlie: the second quarter was good for these retailers and they flashed a lot of their inventory and it seems like they are on a prompted -- positive project repeated they have kept their profit estimates for the year, so things are looking optimistic. francine: amazing that we do job -- do not talk much anymore about covid. even if energy prices going down and you see a downturn for the winter. charlie: that has been a difficulty. consumer behavior has shifted quickly, so that speaks to that

inventory presents were a lot of retailers bought patio furniture and the stay-at-home things that they thought consumers would like. they are moving from goods to services. francine: have you seen a move from higher and retailers to the more affordable? charlie: that is exactly what walmart's manager was talking about in their earnings call this week and they are also seeing consumers trading down. they are seeing that move from -- needs to things like canned tuna and hop starts. that's benefits retailers like walmart. the other concern that walmart has shown strength in groceries. consumers are looking for budget items, but groceries have smaller margins from other products, so that could have boded well the past quarter, but it could pose a problem going forward. francine: charlie wells with the latest on u.s. retail consumers. still with us is james athey,

investment director at aberdeen. we look at this bloomberg index which the italian and the french are big on in the morning. it does show a 17% increase year on year. how does covid distort everything? james: i am incredibly partial to a full english breakfast. that is going to hit me where it hurts. [laughter] charlie makes some interesting points. his analysis was good in terms of the consumer. we talked to domino's pizza about the shop effect. there are these types of goods provided, these types of retailers. they are very defensive relative to the cycle because they capture the downgrading of consumer purchases when we get into the downstage of the cycle.

there's a difference in terms of food between target and walmart. the buying price of the consumer has held up just thus far. it is difficult to separate all of the myriad of effects going on at the moment. we still have the covid effect on the potential to affect spending, people trying to consume as much services as they can because they have been unable to do so. when you look at everything that goes into the likely reactor -- reactions of the consumer going forward, unemployment will be critical to where we go next. if we can find that magical soft landing, but i am highly skeptical about that because we are still at an early stage when it comes to the economic effects of the tightening so far and we have much more to come. in the u.k., the cost shock is much worse and it will be a huge slice for the consumer to

discretion only spent. francine: even in the last 30 days, the english breakfast got more expensive. we were tracking egg, butter, bread. is this something that stays in the u.k.? james: i try to load my english breakfast consumption in buying more now. is that is what economic theory suggests will happen. so far, there is mixed evidence, but what we are seeing our consumption numbers and there is bringing forward of future consumption and that can be self-fulfilling. the biggest thing is keeping up with inflation. at the moment that continues, it

is going to be difficult to sustain strong consumption. also the distribution, once we get that did -- that. there are 25% of the top that are not noticing the changes in cost and they will continue consuming an incredible rate throughout the second stage of the cycle. it is important to notice there are still huge distribution issues when it comes to wealth and income. francine: when you look at the u.k. specifically, there has been pent up demand from people going on holiday in the summer months and credit cards are filling. energy costs are where we are going to feel the pain. in terms of timeline, the worst period is november and december for the u.k. how do you deal with that? james: the energy price cap is a

well-known date in the diary which comes in november and december and that will be critical in terms of the markets. we are going to see the effects. the consumer will lag into the third quarter of next year, but it remains to be seen the extent to which government policy is going to offset some or all of that potential of energy cuts. there is still some uncertainty, but travel does not look great. i can understand why the yield market is somewhat concerned, particularly with the potential of more fiscal loosening on top of a 13% inflation rate and a big deficit. that is a dangerous combination. the bank of england have got themselves a more sticky situation than they needed to be. they have dragged their feet and are far behind the curve. this is a concern for sterling

and if that were to become a more punishing cycle, that could become really ugly. i am sure the back and is noticing this as well because relative to other markets, they are likely to come under pressure. francine: james athey, thank you so much. coming up, anderson from baillie gifford believes money after he retires. that is the big take coming up on the program. this is bloomberg. ♪

francine: welcome back to the open. 23 minutes into european trading day. a lot of focus on china, the fact they are slowing down. many opinions on whether that means that will hinder growth or whether they will support the economy. and investors pouring through those fed minutes. initially, they were soon the main dovish, but -- they were seeming dovish, but we are not sure of the extent of inflation. the european stacks are flat but the dax holding onto gains 0.2% higher. the u.s. and taiwan have started formal negotiations on a bilateral trade initiative the u.s. says this first round of talks will take place early this fall. the move will likely further

tensions with china that are already high after nancy pelosi's recent visit to taipei. joining us to talk about all of this is bruce einhorn. what more do we know about the trade talks? bruce: these were initially announced a couple of months ago in june of -- that this was something they wanted to do. it is not a surprise. what we now know is when the talks will begin. they are going to start in early fall and they are going to focus on things that might get trade markets excited, but not a lot of other people. regulatory practices, anticorruption standards, and deepening agricultural trade are among the topics to be discussed. it is important to have a big caveat here. as popular as taiwan is in the u.s. congress among both democrats and republicans, trade

deals are not. getting a trade deal approved in the united states is difficult these days. we shouldn't expect a huge breakthrough with these talks. francine: this also comes on the heels of the pelosi visit. what is the impact on u.s.-china relations? bruce: that is the big concern because after nancy pelosi visited, china conducted military exercises for many days. the u.s. recently had another visit. the two countries, china and the u.s., are at odds when it comes to taiwan. tensions are likely to keep going up, partially over the trade deal. the other thing to keep in mind

is sometime next month, there is a bill that senator bob mcmahon does and lindsey graham are proposing that would upgrade taiwan's status to a major non-nato ally and also allocate several billion dollars in security assistance to taiwan. that is something that even more than trade talks will capture the attention of beijing and no doubt they will not be happy about it. francine: thank you. bruce einhorn on the latest between the u.s., china, and taiwan. coming up, the u.s. will dial back rate hikes eventually. we discuss that and more with our next guest. this is bloomberg. ♪

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and when you book and pay throug you're covered by our happiness it's easy to make your home an a check out angi.com today. angi... and done. francine: welcome back to the open, 30 minutes into the trading day. the fed hedge, fomc will slow

rate hikes but noted risks of tightening too far and becoming entrenched. china downgrade, a power crunch and covid lockdowns could weigh on demand. the combination spells risk off. european stocks struggle for direction. across equities, the mliv blog on the bloomberg terminal is extremely helpful. congratulations for keeping us entertained in august. the talk about whether the bulls or bears are right when it comes to the key catalyst next week, starting on august 25. if you look at the consolidation in global equities across the world, it has had a huge impact.

they argue from early june. the dax, everything else flat. the ftse down .2%. let's look at the sectors on the move. there has been volatility in the tech sector because of the earnings in the u.s. we also had retail sales in the u.s. the latest from walmart, better-than-expected. not flowing through to europe. we have auto parts gaining 0.1% and banks down 0.6%. the minutes from the federal reserve july meeting says they may need to cool off rate hikes. they made it clear they need to push further into restrictive territory. officials agreed on the need to dial back the pace of rate hikes while monitoring tightening. joining us now is carlos.

how high can the dollar go? is there anything that can stop its ascent? carlos: it is already a strong currency. it can remain strong, it is hiking rates at a faster pace. it is not clear it can strengthen more. for emerging markets it is different because actually emerging markets, not all of them but many of them are hiking at a faster pace than the federal reserve. they started last year earlier than the fed. if you look at the dollar against emerging market currencies, it is less. francine: a month and a half ago you were saying emerging market

local currency debt has been resilient despite the strong dollar. you are expecting this to continue. is there something you worry could take investors by surprise? carlos: inflation could be more persistent than investors are expecting, and that would be negative because that would mean the fed would have to hike more than the market is expecting, and emerging markets would have to hike more than expected, and that would be a surprising negative shock. it is difficult to predict inflation month-to-month. in july inflation was lower-than-expected. let's hope it continues that way. francine: are you expecting emerging-market central banks to be more aggressive than

developed nations to fight inflation? carlos: yes, totally. a number of emerging markets will be hiking in the next couple of meetings or more. i expect that. interest rates are higher in emerging markets and will continue to be the case. the carry on for local debt is as attractive as early 2017. it is a game changer in the last five years. francine: we talked about emerging markets but they are not equal. is there one emerging-market that looks like great value at the moment? what part of the world do you prefer? carlos: talking about local currency specifically, brazil and columbia are attractive now. the reasons are because these

countries are ahead of the cycle, particularly brazil. it is almost done with the hiking cycle. this will be the first emerging-market central bank to cut rates in 2023, and columbia is not as ahead in the cycle as brazil, and columbia is a country where the economy is overheated. you already have double-digit rates in columbia, and the currency is cheap. the central bank has been hiking aggressively although it is not done yet. those two i would highlight. other countries have some effectiveness like south africa, indonesia, perhaps hungary could

be a candidate. francine: is this because they look cheap compared to the fundamentals, or you are expecting reforms to come into play for local currency markets? carlos: it is a combination of attractive carry, cheap currency valuations, and it depends on every case. south africa is a completely different case. and hungry you have yields you have not seen in recent times. the central bank is becoming more than in the past but not sufficiently yet, but i believe they are getting there. it is not about structural reforms. francine: thank you so much, carlos de sousa, strategist / portfolio manager, vontobel asset management.

let's get to the bloomberg first word news. laura: goldman sachs has downgraded the forecast for china, and goldman lowered its projection for this year to 3% from 3.3%. the energy crisis is adding more uncertainty to the outlook. egypt's central bank governor resigned yesterday, a day before an interest rate meeting. according to state run media he was a pointed advisor to the president but no further details on the resignation. it was not announced who would take over as the next governor. ukraine's credit score has been lifted out of default by fitch. the agreement with creditors to delay debt payments comes after bondholders agreed to defer $6 billion in principal and interest payments for two years to help the war-torn country. britain is set to face days of

disruption, rail workers are set for a nationwide strike as bus workers will hold a walkout in london. that will be followed by an eight day strike at the u.k.'s largest container port. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: coming up, life after anderson. months after the pre-visionary leader retires. we have bloomberg's big take up next. this is bloomberg. ♪

francine: welcome back to the open, 41 minutes into the trading day. the dax is powering ahead due to the big caps. optimism over the fed, a lot of investors took it as a dovish message. before cathie wood and crypto, a little-known investment management firm transformed the last decade into one of the

world's top performers of its kind here it is led by james anderson and has nearly $500 billion of assets under management with early bets on amazon and tesla. anderson has retired, and the bull run has slowed. we are joined by the author of the piece. thank you for joining us. this is an amazing story. i urge everyone to read it. this is a small scottish asset manager who became a huge player , and now trailing off. >> exactly. it is a fascinating story. baillie gifford has been around for more than a century. it nearly collapsed. it is a partnership so they do not have shareholders. they transformed themselves

based on other ideas. james anderson was not a senior partner or ceo, just a partner, and he managed with big ideas to transform the company's dna and bring it where it is today. they decided to stop investing geographically and go for big things, and they supported the big trend of the future. francine: it is an incredible story, and like cult of personality. how did james anderson transform it? >> he is a very smart man, very eloquent and good at convincing people. it does help. you have to take a step back. he managed to convince everybody this is the way forward. his strategists were the ones who became famous and made baillie gifford a sensation during the covid rally.

francine: now he is gone, what the next few years mean for baillie gifford? >> for now baillie gifford is hostage to the market. they have big stakes in all the hot names that did good during the covid rally, and are now crushing. they do not have shareholders so they can take their time. they tell investors to wait 10-20 years. the fund managers told people do not invest with us if you do not have five years. they take a long-term investment approach but it depends on how long the market mayhem would last and how long clients would feel about that. francine: thank you for joining us. go to bloomberg.com. opec's new chief says oil markets are facing a high risk of a supply squeeze this year as demand remains resilient and

capacity dwindles. >> i would warn against using a major global recession still. we are looking at growth levels, gdp rates similar to historical levels for now. still, we are on the signs of an energy crisis. come winter i do not know what it will look like. we see utility bills skyrocketing in europe and in the u.k. and germany. governments are acting to take that burden off consumers. this boils down to the issue of investment. it has been a lack of investment and chronic underinvestment for several years, that is what has taken us to where we are today. that is the major issue. that requires a holistic solution.

it cannot be solved by saying to opec, give us more. we are in a dichotomy. if you look at the g7 statement, it calls on opec to act in a responsible way to ensure adequate supply to the world, but at the same time it masks for reduction or stopping funding of fossil fuel investments. how can you have the two? manus: do we need to passively accept energy transition is delayed and not denied? >> defining transition is the first key step. the world still uses coal. we need to agree in a holistic way on the definition of energy transition. i do not think transition means we should stop using oil, gas and fossil fuels. we should collectively work together with technology providers, international oil companies and energy companies on finding ways and means to

advance technologies to decarbonize the production and use of oil or gas. that is possible but we are focusing on transitioning away, and i do not think the world can live in the future without oil, which today comprises 30% of the energy mix. gases another 25%. if you add coal, close to 80% of the global energy mix. the solution is you have to find technologies, ways and means to decarbonize fossil fuels rather than push away from fossil fuels. all forms of energy should complement each other. you cannot take one and replace one overnight. francine: the new opec secretary general speaking to manus cranny. let's look at the events we are following today. at 1:30 the u.s. jobless claims and business outlook, that is

followed by earnings news. the company is expected to benefit from a cosmetics renaissance in the u.s. and europe. and then we will have u.s. july existing home sales data. and tonight separate events about the economic outlook. coming up, manchester united's owners are considering selling a minority stake in the football club. could the richest man be one of them? this is bloomberg. ♪

>> when it comes to the russian assets, we have been instructed by the government to exit these for the time being. they do not really trade, we cannot be certain where they end up.

we have not sold them yet. we came into this year underweight and shares, and lest risky bond portfolio, we have taken that underweight. we remain slightly cautious on the outlook. markets do not go down in a straight line. we are uncertain and whether we have seen a bottom or if we will see a continuation. francine: that was norges bank investment management chief executive officer on the state of russian assets, one of the world's largest funds. let's check in on the markets, 52 minutes into the trading day. if you look at the dax, gaining 0.4% where everything else is moving sideways. u.s. futures dropping on optimism over the fed minutes we saw yesterday, interpreted as

dovish. the federal reserve did signal a delicate balancing act with the inflation busting rate hike continuing despite a weakening economy. policymakers worrying and warning about over tightening but they need to get inflation under control which is why caution is the word of the moment as we head into a possible catalyst, jackson hole, that starts august 25. let's focus on football. a minority stake is open for chester united. they are in exclusive talks. fans of the team calling for change in ownership but we understand the glazer's are not ready to see control of the club. we are joined with the very latest. so much speculation. was this started by the elon musk tweet? >> that really took off, didn't

it? i came into the studio yesterday morning and everybody had retreated elon musk saying he wanted to buy the club, then he said, i am just joking. he said he had supported them. this got the ball rolling but we have this bloomberg scoot which says the glazer family could sell a minority stake in manchester united. speculation in the newspaper said jim radcliffe, a british billionaire, could be interested in buying the club. francine: this is a huge story. it gets everyone talking about who could do it and who could not. this is on the back of the chelsea sale. could americans make money?

>> we did see when chelsea was sold, americans made money. it was todd foley and clearlake investment who did that sale. the premier league will make so much money this year. they could outclass european competitors, and a lot of it is due to american investment. this is a club that is everywhere, it is so global. they were so successful, they won 13 trophies. they have not won since 2017, but i grew up in africa, and wherever i went there was a man united towel hanging up somewhere. francine: i have rarely seen owners who are not liked as the glazers. what does this tell us about potential buyers?

>> apparently what will happen with the club, manchester united fans are so unhappy, they could hold protests on august 22 when they face liver will let home. -- face liverpool at home. they lost their first game 4-0, and the fans are really unhappy. john, who works here, said it is time for a change of hands. francine: now is the time for change. thank you so much with the latest on football. that is it for the european market open. this is bloomberg. ♪

>> every single company has talked about the fact whether it was late may or early june until mid july, your pressure