Squawk Box Europe Express

Amazon founder Jeff Bezos slams U.S. President Joe Biden on inflation, accusing him of a ‘deep misunderstanding’ of economics. Tesla suffers its first quarterly decline in deliveries in two years due to continued Chinese Covid lockdowns. The IEA warns of a ‘red alert’ for a global recession and calls on Saudi Arabia to pump more oil while the Norwegian Oil & Gas Association says that industrial action may cut the country’s output by 13 per cent. Stateside, travellers are braced for 4th of July chaos while in Europe, Ryanair cabin crew in Spain have voted to strike.

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The Federal Reserve’s preferred measure of inflation eases but remains at levels not seen since the 1980s. The S&P 500 ends H1 with its worst performance since 1970. Asian equities are down but Chinese stocks outperform as factory activity rebounds at its fastest pace for a year. Siemens reports a write-down of its stake in Siemens Energy which will create a €2.8bn loss in Q3. And in crypto news, FTX is reportedly close to buying BlockFi in a $25m fire sale.

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The S&P 500 stares down the barrel its worst first half since 1970 while a host of other assets trade at multi-decade lows, but energy outperforms amid the turbulence with WTI on track for its longest quarterly win streak ever. The world’s top central bankers walk the inflation tightrope at the ECB's Sintra summit, with Fed Chair Jerome Powell admitting aggressive tightening could spark a recession. Over in Asia, the end of strict Covid curbs boosts the Chinese economy with factory activity expanding for the first time in 3 months while the service sector rebounds at its fastest pace in more than a year. Three Arrows Capital becomes the latest casualty of the crypto winter. Liquidators move in after the hedge fund defaults on a loan tied to big bets on digital currencies.

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Turkey lifts its veto to NATO expansion, allowing Finland and Sweden to join the alliance. Secretary-General Jens Stoltenberg tells CNBC that the ‘historic’ move will be globally significant. In Bavaria, G-7 leaders have pledged to maintain sanctions on Russia to curtail key revenues. French President Emmanuel Macron tells this channel that a price cap mechanism on Russian oil is still a work in progress. We also hear from ECB chief economist Philip Lane in Sintra, Portugal, who says the central bank is set to raise rates by 25bps in July and potentially by more in September. And in U.S. markets, consumer sentiment plunges, with Wall Street on track for its worst H1 performance since 1970.

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G-7 leaders mull the feasibility of a price cap on Russian oil as French President Macron admits he faces reluctance from major international producers to boost supply. NATO announces it will increase the number of troops on high alert from 40,000 to 300,000. We are live in Madrid ahead of the bloc’s summit. A Swiss court finds Credit Suisse guilty in a high-profile Bulgarian money-laundering case. CEO Thomas Gottstein is due to face investors at the lender’s Investor Deep Dive today. Central bank governors arrive in Sintra, Portugal at the ECB Forum where ECB board member Isabel Schnabel warns that fragilities are beginning to show between nations over inflation. And in crypto news, Robinhood shares are in the red in extended trade after cryptocurrency exchange FTX denies rumours it is looking to buy the trading app.

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We are live at Elmau Castle in Bavaria where G-7 leaders are meeting to increase pressure on Moscow through a price cap on Russian oil and a ban on imports of Russian gold. Western sanctions have pushed Russia to default on its foreign debt for the first time in more than a century. The BiS has warned that the world has reached a tipping point on inflation. French energy executives have urged consumers to cut back on gas usage, warning of social fractures should supplies fail be replenished before winter. And in the U.S., the S&P 500 posts its largest one-day rally since 2020 but overall, U.S. stocks are still set to record their worst H1 performance in more than 50 years.

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U.S. Federal Reserve chairman Jerome Powell faces the House Financial Services Committee and admits that he had underestimated inflation. Lawmakers pressed the central bank chief on how he would respond should his aggressive rate hikes push the U.S. economy into a recession. Wall Street is set to break a three-week losing streak later today as a very volatile H1 comes to a close. EU leaders unanimously approve candidate status for Ukraine but European Commission President Ursula Von Der Leyen insists the process will not be rushed through. Inflation in Japan exceeds the BoJ’s expectations for the second consecutive month. Softbank CEO Masayoshi Son leads the investment titan’s AGM. He says that, despite pressure from London, chip maker ARM is most likely to list on the Nasdaq.

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U.S. Federal Reserve Chairman Jerome Powell has told the Senate Committee that a soft landing for the economy is now very difficult but insists that the central bank must succeed in reining in inflation. President Biden has called for a three-month federal gas tax holiday to ease the burden on U.S. consumers. He faces strong opposition from lawmakers, including from within his own party. The GOP has branded the move as “yet another gimmick”. In France, President Macron seeks compromise with opposition parties following the loss of his parliamentary majority. And, we hear exclusively from Meta CEO Mark Zuckerberg who says that the virtual ecosystem, or ‘metaverse’ will create huge new economic opportunities.  

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The S&P 500 hits back with its best day in June so far as Wall Street recovers from its worst weekly loss in 2 years. However, Asian markets don’t follow suit. South Korean stocks lead declines while the yen hits its lowest level in almost 24 years. Germany’s industry association, the BDI, has slashed its 2022 outlook and says a European recession is certain should Russia cut gas supplies completely. Meanwhile in the U.S., President Biden and Chevron CEO Michael Wirth spar over energy policy criticism. And in France, President Emmanuel Macron holds talks with rival parliamentary parties as National Rally leader Marine Le Pen says she was now entitled to key cabinet positions.    

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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.

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