Squawk Box Europe Express

We speak exclusively to Deutsche Bank CEO Christian Sewing who warns that spiraling inflation and the energy crisis are a “perfect storm” to trigger a European recession. Asian markets are up and U.S. futures point to solid gains following the long Juneteenth weekend. President Biden says he is considering a pause on federal gasoline tax to help ease the cost burden on Americans ahead of the driving season while downplaying the risks of the U.S economy slipping into recession. In France, President Macron is set to hold coalition-building talks following the loss of his parliamentary majority.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

President Emmanuel Macron loses his absolute majority in the French parliament to a leftist coalition and a resurgent National Rally. Germany has announced it will return to coal in a bid to secure energy supplies ahead of winter as Russia continues to cut gas output. Asian markets are in the red on the back of the worst weekly performance by the S&P 500 since March 2020. And Bitcoin claws back some losses following a sharp weekend sell-off which saw the world’s biggest cryptocurrency hit an 18-month low. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

The Dow plunges to below the 30,000-mark for the first time since January last year following the Federal Reserve’s historic 75-bps rate hike. U.S. President Joe Biden says that a recession Stateside is still ‘not inevitable’ but he admitted that signs of an economic slowdown is weighing on the mood of the nation. In Luxembourg, German finance minister Christian Lindner tells CNBC that euro zone fragmentation is not a concern following a surge in bond yields within the bloc. The leaders of France, Germany, Italy and Romania visit Kyiv to demonstrate their support for Ukraine’s ‘eventual’ accession into the EU.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

The Federal Reserve hikes interest rates by a historical 75 bps in what is its most aggressive move since 1994. Chairman Jerome Powell has suggested that July’s FOMC meeting could result in a similar move should rampant inflation show no signs of abating. The markets react immediately, with the Dow and the S&P 500 breaking five-day losing streaks. Asian stocks follow suit and European equities are set to do likewise. The ECB touts a new ‘anti-fragmentation tool’ in a bid to quell the recent bond market turmoil. Reaction, however, is muted following the central bank’s emergency meeting yesterday. The SNB is also now under pressure, warning that Swiss bank assessment has deteriorated. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

U.S. Treasury yields achieve new highs while the S&P 500 sinks even further into bear market territory as investors anticipate more aggressive rate moves from the Fed. DoubleLine Capital’s Jeffrey Gundlach calls for a 200-bps interest rate hike while legendary investor Bill Ackman slams the U.S. central bank for losing control of inflation. We are live in Berlin at the world’s largest private equity event, SuperReturn International. Meanwhile in China, retail sales continue to fall but manufacturing picks up against expectation as Beijing authorities continue to rein the current Covid outbreak. And cryptocurrency exchange platform Coinbase sacks 18 per cent of its staff as a reported ‘crypto winter’ sets in for the sector.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

The S&P 500 plunges into bear market territory while the 10-year Treasury yield spikes to decade highs. Goldman Sachs and JP Morgan adjust their outlooks ahead of an expected 75-bps rate hike while the CME puts the odds of such a Fed move at more than 95 per cent. Morgan Stanley CEO James Gorman believes the chance of a U.S. recession now stands at 50-50. And in crypto news, Bitcoin sinks to below $21,000 as frozen withdrawals spook investors, wiping out more than $200bn from the market since Friday’s session.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

French President Emmanuel Macron's bid for an outright majority comes under threat, as the Left surges in the first round of National Assembly elections. Credit Suisse is reportedly placed on a watchlist by the U.K.'s FCA as the financial regulator says the Swiss bank has not done enough to address risk controls. Asian stocks and US futures move sharply lower, as inflation and recession fears push the two-year Treasury yield to a 14-year high, prompting some banks to forecast a 75 basis point Fed hike this week. In China, Beijing officials warn of an "explosive" Covid outbreak, while Shanghai starts yet another round of mass testing for the city's 25 million residents.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Wall Street marks its worst day in more than three weeks as markets await a fresh read on US inflation, with CPI forecast to hold near 40-year highs. “There’s nothing to suggest a recession is in the works,” says U.S. Treasury Secretary Janet Yellen. She rejects suggestions that a downturn is on the way, highlighting that the labour market is strong. China bucks the global inflation trend, as input prices hit at 14-month low, while consumer price inflation comes in below forecasts for May.  The ECB pledges to raise rates by 25 basis points in July and leaves the door open to a more hawkish move in September, as the central bank significantly slashes growth forecasts and raises inflation expectations.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Markets focusing on the ECB. President Christine Lagarde is expected to commit to a July rate hike, despite downgrading growth forecasts, as inflation hits a record high. Yields push higher, with Germany's 10-year bund yield hitting levels not seen since July 2014. Millions in Shanghai enter new lockdowns - just as China shows signs of recovery, with May exports coming in more than double expectations. Ukrainian President Volodymyr Zelenskyy calls on American corporate leaders to fully exit Russia, warning their taxes continue to help fund the Kremlin's war.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Credit Suisse issues a profit warning, saying tough trading conditions for the investment bank will drag the group to a net loss in the second quarter. The World Bank warns of 70s style stagflation as it slashes its global growth forecasts, saying many countries will find it hard to avoid recession. U.S. Treasury Secretary Janet Yellen tells Congress the country faces an extended period of higher prices, while admitting the administration's earlier characterization of inflation was misleading. Former German Chancellor Angela Merkel defends her record, hitting back at criticism that she appeased Russian President Vladimir Putin during her 16 years in power. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

UK Prime Minister Boris Johnson survives a confidence vote, but his leadership is rocked after more than 40% of his own MPs vote to remove him from office. Across in China, Didi Chuxing was up almost 25% amid a report Chinese authorities may allow the ride hailing companies app back into domestic app stores. The Australian dollar spikes as the central bank lifts rates by a bigger-than-expected 50 basis points, the largest single rate hike since the start of the century and the first move since 2013. Elon Musk threatens to walk away from his 44 billion dollar deal to buy the social media platform unless the group provides more information on fake accounts.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Global stocks show resilience amid a stronger than expected US jobs print. Cleveland Fed President Loretta Mester tells CNBC the fight against rising prices is ongoing. Chinese service sector activity contracts for the third straight month, while Beijing eases Covid restrictions in a bid to stave off an economic downturn. Crude prices gain after Saudi Arabia hikes the price-tag of its flagship product, signaling strong demand expectations even as OPEC-plus producers accelerate output increases. A U-turn for Elon Musk as the Tesla CEO backtracks on claims the automaker will need to cut 10 percent of its workforce, after saying he feels 'super bad' about the economy. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

JPMorgan CEO Jamie Dimon warns of an economic “hurricane” on the horizon as the Federal Reserve scrambles to wind back Covid-era policy in a bid to rein in inflation. Recession fears weigh on U.S. markets on the first day of June trading. U.S. Treasury Secretary Janet Yellen tells CNBC that the White House is working on various fronts to bring inflation down. Crude prices fall following reports that Saudi Arabia could be ready to boost production should sanction-hit Russian oil decline. Meta COO Sheryl Sandberg is to step down after 14 years with the Facebook parent company. She will be replaced by Meta’s chief growth officer Javier Olivan this autumn.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Opec is reportedly set to review its Russia oil deal while the UK will back this week’s EU sea-delivered crude embargo agreement. In the U.S., President Biden has held talks with Federal Reserve Chairman Jerome Powell to discuss surging inflation. Biden promised to back the central bank’s strategy and independence in tackling price pressures. Euro zone inflation soars to its highest level since the currency was launched, causing bond yields to plunge. The decline in Chinese factory activity has eased but remains in contraction territory after authorities finally lift restrictions in Shanghai. And in banking news, Deutsche Bank’s asset manager unit DWS is raided by police conducting a ‘greenwashing’ investigation.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Oil is up after EU leaders agree to a Russian crude embargo. The deal features an exemption for pipeline deliveries after Hungarian-led opposition. President Joe Biden is to meet Federal Reserve Chairman Jerome Powell following his re-confirmation. China manufacturing activity declines for the third consecutive month but there are signs of easing as Covid restrictions are beginning to lift in Beijing and Shanghai. In banking news, Credit Suisse has slapped down suggestions it is looking to bolster its balance sheet following recent losses. Specialty chemicals giant DSM creates a merger of equals with Swiss fragrance and flavour company Firmenich.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Asian stocks are at a three-week high following the S&P 500 and Dow’s rebound on Wall Street last week. Beijing reopens shopping centres and its subway system while Shanghai says it will remove almost all Covid restrictions by mid-week. German economy minister Robert Habeck warns that European unity on a Russian oil embargo is “starting to crumble” ahead of today’s extraordinary council meeting. And Just Eat Takeaway’s move to sell Grubhub is in question as the firm is set to take a multibillion-dollar writedown.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

U.S. markets are buoyed by retail stocks with department store giant Macy’s lifting guidance. In China, industrial profits plunge as Beijing's zero-Covid policies hurt manufacturers and supply chains. But tech giants Alibaba and Baidu beat earnings expectations to boost shares in Hong Kong. Staying with tech, Broadcom is set to snap up cloud computing firm VMWare in a $61bn deal. And, in the U.K., BP says it will review its North Sea investments after Chancellor Rishi Sunak unveils a windfall tax, giving hundreds of pounds to households in a bid to ease the cost-of-living crisis.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

U.S. markets are up with the Dow set to break an eight-week losing streak, despite Fed minutes indicating the central bank may raise rates beyond neutral and into restrictive territory. We speak to ECB Countil Member Klaas Knot who suggests a 50bps hike as early as July is “not off the table”. In a bid to stave off its first national default for 100 years, Russia offers to pay off dollar debt in rubles. Ukrainian Foreign Minister Dmitro Kuleba tells CNBC that Russia is using the release of food supplies in Ukrainian ports as a blackmailing tool against the West to ease sanctions and that stronger measures are required against the Kremlin.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Doom and gloom in Davos overnight after billionaire investor George Soros issues dour economic warnings about China’s zero-Covid policy and the potential for a civilisation-ending Third World War. We hear from EC President Ursula Von Der Leyen who says the bloc is ready to green-light a Russian oil embargo “within days”. She also urged every nation to help Ukraine with its reconstruction efforts, including the use of Russian assets. U.S. retailers, led by an outlook hike from Nordstrom, rebound, lifting Wall Street back into positive territory. Treasury yields are also down to their lowest level since April ahead of Fed minutes due today. Swiss miner Glencore is slapped with $1.5bn bill to settle bribery charges in three countries. And in autos news, Stellantis CEO Carlos Tavares has warned policy makers that car companies will struggle to meet demand for EVs due to continuing raw material shortages.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-n

We hear from Spanish prime minister Pedro Sanchez who says the war in Ukraine is hampering the EU recovery but remains optimistic over the bloc’s unity and strong fundamentals. Speaking at a CNBC panel at the World Economic Forum in Davos, IMF managing director Kristalina Georgieva warns of increasing economic challenges while Citi boss Jane Fraser believes a recession is inevitable. We also hear from Banque de France governor François Villeroy de Galhau who says July and September hikes by the ECB are a given. U.S. markets see a banks rally but a profit warning from social media giant Snap drives tech futures on the Nasdaq lower. And in Tokyo, Quad nations agree to a new satellite-based maritime initiative in a bid to counter China.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.