European Earnings Underway, iPhone Sales Plummet | Bloomberg Markets Today 04/23/2024
Good morning from london.
This is Bloomberg Markets.
Today I’m Anna Edwards alongside Guy
Johnson and crazy obsessed with the gas
trade.
Just less than an hour away.
Here’s what you need to know.
Novartis raises forecasts for the year
after outperformance by some of its
major drugs.
We will speak to the CEO later in the
show.
Renault posts a beat in first quarter
revenue with EVs and hybrids now making
up 48% of sales despite a broad slump
for electric vehicles in Europe.
Last trade is our European PMI data out
this morning for clues on the health of
the economy and the ECB’s rate path
ahead.
In the meantime, a quick check on these
markets.
Green on the screen, we’re looking at
the stock market both at 50 futures
higher by 5/10 of 1%.
The puts in 100 and building on that
closing record yesterday, higher by 6/10
of 1%.
Futures trading, the bond market stays
sustainably above four and a half
percent at 4.6 on the ten year yield and
Eurodollar 106 49 marcus today starts
right now.
She’s on the 23rd.
Good morning, everybody.
So equity markets bounce back.
Gold doesn’t.
We’re going to watch the PMI data a
little bit later on.
Some interesting lines out of the
windows this morning.
Vice chair over the ECB, which I think
quite fascinating in terms of what he’s
looking at, apparently does matter.
The Fed apparently does matter,
apparently.
These things now matter.
It’s all maybe a little while ago that
maybe they did.
But guys, I think the equity market
story over the last 24 hours, 48 hours,
big sell off Friday into Monday, we
bounced back.
But gold continues to track lower this
morning, which I think is fascinating.
Yeah, gold really interesting because it
wasn’t always 100% clear what was
pushing it up in the first place.
There were many theories.
Chinese retail buyers, central banks.
Yeah, the Fed dynamics didn’t quite fit
with what we were seeing with the gold
price, but now we’re seeing in retreat
yesterday the biggest move, the worst
move in two days at two years.
Sorry for the for the precious metal,
apparently a big deal.
I think what’s important about the march
of the move is that the last time we saw
this kind of percentage decline and I
think 2.8%, it was back in June of 2022
and actually went into our little
Bloomberg archives, the vault where we
keep all of our of our history quite
big.
It’s it’s enormous.
And to see what the news was at the time
and it was when it was actually the day
of Powell’s testimony in Congress, what
he had specifically said, rates are
higher for longer, more rate increases.
And to me, I’m having a hard time kind
of piecing together the narrative is
this that concern that rates are, again
going to be higher for longer.
Is it a right story?
Is it doesn’t make sense against the
rate story over the last few weeks.
So I think it’s more confidence talking
about this on the floor of this morning.
Is this just an in video.
Yeah margin call story so I remember
2008 we get big sell off.
Everybody thinks gold’s going to protect
them.
It does because what do you what’s the
first thing you sell What you can what
you can and exactly and gold is the
thing you can sell.
If that big margin call comes through,
you sell the gold position to fund the
other positions.
And you do wonder whether we’re seeing
some of that.
Again, you mentioned 2008.
This is ringing bells now are all kinds
of times where we’ve seen big moves in
markets.
Gold can sometimes move
counterintuitively because of that exact
same effect.
Yes, he’s talking about how both of
these trades and the reason he makes the
the margin call reference is in
particular around in video, you saying,
you know, this is a retail investor
favorite and he dropped a lot last week.
And as a result, you could see margin
calls and what people sell they sell
gold.
I still find it fascinating of whether
this is simply just a pullback.
Right.
Like in the still because it’s still
staying above 2300.
I’m wondering if this is just like a
very cool, quick retracement of sorts.
It easily could be and an almost
certainly probably is.
I don’t know the answer to that
question, but we’ll wait and we’ll
watch.
But I think the margin call is
interesting because what this tells you
is it just reminds people of the ripple
effects.
Yeah, the link.
Yes, the assets are connected when
things start moving big time in one
place, particularly when it’s a crowded
trade.
Yeah, there are big ripple effects and I
get.
Sorry, go ahead.
And no, I’m taking us on to London.
I have one more gold thing to say
really, really fast.
It’s because I got really nerdy and I
think I piqued my own curiosity.
I’ve been like, deep into the terminal
world.
We’re talking about retracements.
I did a little bit of a nerdy thing.
I looked at the intraday chart, You can
do it on your Bloomberg terminal, going
back to the kind of trough you saw on
February 14th.
So spent about two months or so.
And you look at the gold chart has been
kind of exponential move higher, right?
You take a retracement, a Fibonacci
retracement, very simple and it lines up
perfectly to yesterday’s sell off.
So that tells you right there that this
is a technical move.
And now I’m done with the nerdiness for
the rest like I like I like the
Fibonacci lines.
Let’s see where it went crazy.
Only on the London market.
The Footsie very much on the move
yesterday.
I mean, yesterday we saw stocks in
Europe higher broadly and the Footsie
story stands out just because we’ve
we’ve gone to a new record.
Can I throw a bucket of cold water on?
Please do.
Because again, the terminal does this
beautifully get to your WPI screen.
Use the year to date currency adjusted
line, put it into dollars.
The Footsie 100 is in local currency, up
by three nearly 4%.
Year to date, it’s up by half a percent
if you put it to Sterling.
Yesterday’s move was sterling I people
are just Sterling took a hit yesterday.
Take a look at what’s happening in the
gilt market.
The gilt market is adjusting away from
the Fed and to the ECB.
And the ECB is expected to cut
significantly more than the Fed.
What could have gone that way?
Now it’s coming this way.
Sterling is weakening.
You plug that into the FTSE 100.
These are the numbers.
That’s a really interesting one might
say, because we had we had a story a
couple of days ago talking about how the
UK trajectory, certainly markets were
putting on the same trajectory as the
Fed.
But actually just in the last couple of
days, things changed and reprice back
towards the European story.
So we’ll see where where that takes us.
And we’ve got a guest, in fact, coming
up talking about bond markets will
certainly get a perspective there on
gilts.
I love that we’re talking about kind of
this breadth of the market in Europe and
it being really a currency story because
if you’re concerned about a correction
in the States, it’s a tech led
correction already seen elements of that
across the board is Europe the
protection of.
But we asked how unusual this question
yesterday over at BlackRock and she said
there will be a read through but it
won’t be as big of a read through
because Europe in some ways it doesn’t
have the tech problem and that’s
actually a positive for.
Sectors that are looking to broaden out
the rally.
But she did talk about rate cuts as
being quite a significant factor behind
that.
And I think that takes us to the
beginnings comments this morning, which
I think are interesting.
What the Fed decides is crucial for the
global economy.
I thought we were an independent central
bank and we didn’t talk about the Fed.
We need to take into account what’s
happening in the United States.
We are inclined to be very cautious
after what happens in June.
He’s saying that June is nailed down and
the market’s pricing 80% for a June cut.
But after that, the market pricing gets
very, very fuzzy.
We’re pricing two and a half at the
moment.
And he’s basically saying, I think what
he’s saying is if the Fed doesn’t cut,
we’ve got a problem and maybe won’t get
won’t be able to go as far.
Yes, because because wages have been the
thing we were watching the ECB as well.
He says there’s a clear slowdown in the
wage dynamics.
And that’s what we’re really watching
for between now and June, the June
meeting.
The reason it’s important is because
they get that fuller picture around the
wage story for Europe.
So that’s going to be front and center.
And the last remaining threat to your
point stems from not services inflation.
He also says when you take impact of the
movement into account, this is the
dollar story.
At the end of the day, this is all a
dollar story.
He’s basically saying we could we could
go in June, but I’m not sure we can go
much further after that because we need
to take into account if we go much
further than that, the first
move gets big.
We need to take that into account.
We need to look at what the Fed’s doing.
Despite the fact that Christine Lagarde
has repeated time and time and time
again, and he’s not the only one who’s
talking about the story.
Right.
We heard it out of Japan as well over
the last 24 hours that the Japanese
finance minister, Suzuki, saying the
time is ripe basically for currency
intervention.
We don’t know what that action actually
looks like for the further warnings.
That is, we like the BOJ at the end of
this week around what we could see in
terms of intervention on the Japanese
currency.
As we talk European earnings, we’ve had
plenty of those coming through Novartis.
We mentioned that in the headlines, but
talk to the CEO shortly.
Upgrading guidance.
What are they doing around the cost
side?
Still seem to be in a bit of an
allowance of question there and a little
bit of justification around the strategy
look for around Bolton.
So it’s this is a big upgrade.
This is a more significant upgrade than
you would assume via the cost story.
Remember, Novartis reports in dollars.
So you’ve got to factor that into
account.
Roche doesn’t it.
Reports in in Swiss francs.
So Promacta, an interesting two key
drugs that are going off patents and the
expectation is that maybe the generic
hit comes later for them because that’s
why they didn’t upgrade earlier in the
year because they were waiting for
clarity on the timing of that generic
threat.
And as to your point, guy, this is a
substantial upgrade, not just on sales
but also on the operating profit line.
So something going well and Novartis
will talk to the CEO about that.
It was also a bit of a litmus test,
right, because he had come under a lot
of flak for job cuts and spin offs and
kind of a really kind of austere
strategy and now looks to be paying off.
Yes.
What comes eventually it will hit,
though, this this patent cliff generic
story will be.
Yeah.
All the other drugs in the pipeline
behind them that are going to fill the
gap.
So I think some some quite interesting
questions.
Plenty to discuss.
SAP also out with numbers.
I’m really interested in this because of
course, as an eye line, it’s a tech
story.
So of course there’s an airline and
they’ve been offering businesses AI
tools in the cloud to try and sweeten
the incentives for moving from on
premise software provision to cloud
provision.
But that’s kind of what I find
fascinating about this story is I think
that I mean, it’s almost a decade.
Is it that we’ve been talking about this
transition from on premise to cloud and
still this is generating SAP, makes
money, makes loads of money off the off
premise business.
It still does does really well in that
business.
So the migration is definitely going to
help them.
But there’s still that side of the
business still is quantifiable,
understandable, predictable.
So there’s a kind of not we want to make
the move, but yeah, not quite as fast as
we thought.
And it’s taken some time and moving.
But moving to subscriptions is seen as
something that increases the amount of
money you get per per customer.
But I love that the way to sweeten it is
by offering 50% discount.
That’s enormous because you’re offering
your product for half of what you
usually do just to accelerate that
process.
They also saw that their current backlog
was 28%.
So there is a desire for it to move, to
move as quickly.
It just seems like there’s a capacity
issue.
There’s a little bit of a delay issue
getting baked into this great line.
And I’m just going to bring it up as is
a great line from the from the CFO over
at Renault this morning, talking about
the fact that residual value is higher
thanks to stable prices.
It feels like that’s a little bit of a
shot at Tesla this morning
and that low rate prices and hazy
business has paid the price for what
Tesla is doing because they had to delay
the spin off the listing, the IPO and
the AMPERE business that even parts of
the company as a result of some of the
Tesla price cuts.
So yeah but the really interesting lines
out of our November beating estimate EVs
and hybrids now 40% of sales at back to
profit revamping the line up and
actually talking about
EV products at a much lower price point
than some of the others.
Yeah, but remain open to an affordable
EV platform partnership.
They’re all struggling.
They can’t figure out how to make low
end EVs to compete with the Chinese, and
the Chinese are going to dominate that
space unless they can figure.
That out.
Yeah.
Getting the right tie up really
crucially matters.
Of course.
They clearly were, of course, very
closely linked to Nissan, but the market
is rewarding them for reducing the ties
with Nissan.
But getting out of that and now the
bigger the market cap of Renault now
actually bigger than than the Nissan.
And Renault has a currency problem as
well there.
Their their car unit division in
particular fell not because of the
dollar but because of devaluation in the
Argentine peso and the Turkish lira,
which is I think a non it was like the
line that shocks me out of that that
reporting.
It’s interesting that we’re starting to
factor in more of the currency story.
We talk about it on the macro basis all
the time.
Now feels like it’s coming more and more
into the conversation with some of the
corporates.
One of the key things they let face and
story is going to be copper.
There is a growing shortage around
copper at the moment.
You take a look at what Anglo is saying
this morning, Anglo American coming out
and cutting its full year copper
production targets and there’s a big red
box around copper on the GM’s green
today is down by 2.3% this morning which
is it has has had a really good run
recently.
So I think maybe there’s some kind of
profit taking that maybe is coming
through there as well.
But nevertheless, he talks all the
copper specialists, they’re all selling
you shortage shortages coming.
And that’s where this is a supply side
story.
Demand is going to be big, but there is
isn’t going to be supply.
I find it fascinating that Anglo’s
cutting its copper production forecast,
not increasing it into a market you
would have thought will be desperate for
copper to electrify the global economy.
Yeah, absolutely.
The electrification of all corners seems
to be something we talk about daily.
Let’s also talk about what’s coming up
today in terms of the agenda ahead.
A US two year auction worth $69 billion.
Is that a record?
I think that’s a record.
It’s a two year auction.
We’ve got the US Senate eight vote.
This of course, around Ukraine and the
Middle East and other things.
And really crucially in focus, we’ve got
the UK Prime Minister Rishi Sunak on the
Ukraine beat, also heading to parts of
Eastern Europe.
He’s going to Poland.
He’s also going to then be in Germany.
Of course, we’ll be focused on the
earnings stories as well.
He will Europe will have caring, leading
the sort of luxury names over in the US.
Tesla, we’ve mentioned them already, but
Tesla will be reporting along with Visa,
PepsiCo and Texas Instruments.
And we have some central bank speakers,
crucially not from the Fed but from the
ECB and from the Bank of England.
So a lot to think about when it comes to
the to the to the macro, the micro.
It’s got it all today.
I know everyone’s excited about these
Tesla numbers.
I’m really sad about the PepsiCo numbers
and I’ll snack.
I love a snack.
My favorite ratio in the PepsiCo numbers
is the snack beverage ratio.
During COVID, they like WHATNOTS, the
directions and the recovery trade
flipped it again.
And but I think it’s such a great like
take on the consumer.
And I think there’s a really big macro
read from PepsiCo earnings because it
speaks about disposable income.
How many people are willing to buy like
$4 soda on on the run?
I love.
That’s what I’m excited about.
Tomorrow, I will come with them.
Some PepsiCo fact.
This speaks to the Unilever kind of
Nestlé story.
Yeah, I appreciate that.
Slightly different markets, but but
similar enough to to kind of put it in
the same bucket and the fact that these
are the areas that have underperformed.
And the reason one of the areas, the
reasons they’ve underperformed is
because there’s speculation they won’t
be able to drive the top line because
they’ve benefited from inflation,
allowing them upside on the top line.
The idea was inflation comes down, that
goes away.
Therefore they struggle.
Therefore they need to cut costs in the
middle.
But if inflation still going,
particularly the states, maybe the top
line keeps going, right?
So maybe we revisit that because yeah,
the start of the year, the conversation
had been a pivot away from pricing power
towards volume.
Now the mix may be maybe goes back a lot
to think about them when it comes to the
the agenda ahead.
Coming up, then going, we’ve got
Novartis CEO standing by for advanced
mattresses and is going to be speaking
to the team, joining the show to talk
about earnings of the drug maker, raise
its forecast for the year.
Absolutely.
We’re going to catch up with Boston
Consulting Group a little bit later on.
Kristen Sweitzer is going to discuss the
global demand for consulting services,
getting his take on the the German PMI
as well.
Up next, equities bouncing back, but for
how long?
We’re going to take you back to that
market conversation.
You want to join in the debate.
We’ve got lots to talk about this
morning.
But he’s going all Fibonacci levels
which definitely usually elicit some
kind of response.
I’ll be plus to go.
This is Bloomberg.
The idea is diversify, keep a lot of
income, don’t take a lot of interest
rate risk and, you know, just move it
around.
I mean, at some point this year, I think
we’re going to increase our interest
rate exposure depending on the inflation
data we get.
But for now, I would like to just clip
coupon and just make it through what is
a tough rate period.
So for a period BlackRock’s global CIO
of fixed income of that.
Speaking to Bloomberg, let’s get some
further views on bond markets.
We’re joined now by Eva Sunway, who is
who manages the Global Government Bond
Fund at AMG Investments and joins us
here on set this morning.
Very good to see you.
Nice to have you with us.
Let me get your overall views and that
sort of sets out your support for 2024.
And we’ll start with the Fed.
When we started this year, the market
came into this year thinking we get six,
maybe even seven rate cuts.
That’s a long time ago.
We’re now in April and the market is
expecting far fewer, if any, in some
cases.
Some people not expecting very many cuts
from the Fed at all.
What are you positioning for this year?
I think, you know, we’ve seen a lot of
variation in terms of market
positioning, market forecast, market
pricing.
You know, we had we were pricing seven
cuts at the beginning of the year, and
now we’re just about pricing 40 basis
points after yesterday’s moves.
I think there’s a risk of too much
complacency in the markets.
I think the outlook is generally pretty
positive in terms of economic growth, in
terms of, you know, where markets are
heading for this year.
I think we’ve seen signs that things are
starting to wobble slightly, especially
if you look at risk assets.
So I think there are signs that actually
we could be surprised in terms of cuts
coming further forward.
But I think a lot depends on the data.
A lot is still riding on the strong
economic data on the US exceptionalism.
You know, it’s really taking hold of
markets at the moment.
Okay.
And where does the UK stand where the
gilt stands in that mix?
Then?
We were just showing a chart there that
talks about how well you know, where
rates are heading in the US, in the UK
and in the eurozone.
And you talk about US success,
exceptionalism.
Until the last couple of days, the
markets seem to be thinking that the UK
was going to price a little bit more
like the Fed than the ECB, and yet then
we rethink that and the gap closes and
gilt sort of trend yields in the UK
trending downwards towards European
level.
So where do you expect gilts to trade?
I think that’s a really interesting one
because, you know, we were also at one
point expecting the Bank of England to
be the first ones to cut.
I think everyone expected the UK to be
sat on the worst economic profile and
therefore we needed to cut first and
that has definitely been pushed back.
I think there is definitely more room
for the Bank of England to potentially
cut sooner than markets are pricing,
especially if you look at currencies.
I think actually given the strength of
sterling over, you know, the more medium
term, of course it’s been weaker in the
shorter term, but over the more medium
term, that sterling strength I actually
think gives the Bank of England a bit
more of a buffer to cut without, you
know, the currency absolutely tanking.
And so potentially, you know, a bit
sooner.
But at the moment, markets are very
unsure as bring up the ECB.
So I don’t want to talk about the ECB
Vice president VIX indexes on the tape
this morning talking about the Fed and
the ECB.
How much divergence can we see between
European central banks, the Bank of
England, the ECB and what happens with
the Fed?
He sees he’s saying this morning it’s a
Le Monde interview.
I think we need to take the impact of
fixed movements into account.
What the Fed decides is crucial for the
global economy.
We need to take into account what’s
happening in the United States.
Jun is nailed down, but he is not sure
after that.
So we go once in June.
Fed doesn’t cut very much.
How much room has the ECB really got?
Yeah, I think we need to look at
obviously the data, but we also need to
look very closely at central bank
rhetoric and the narrative that they’re
trying to pass out there.
I think that, as you say, very set on
June.
I don’t expect that to change in the
near term.
I think people are you know, I think the
concern is that the divergence becomes
one is hawkish and one is dovish.
And I don’t think that’s quite what
they’re aiming for.
I think we’re going to have a situation
where the ECB knows they likely need to
cut first, but they’re going from
hawkish to perhaps slightly less
hawkish.
I don’t think they’re suddenly going
from hawkish to, you know, very easy
monetary policy all of a sudden.
When’s the when’s the bond market going
to freak out about BCP?
SE
Yeah, BCP is concerned me slightly.
I mean, they’ve outperformed broadly,
especially on the periphery markets
when spreads start to, you know, sell
off and get wobbly.
In the past we have seen BJP’s, it’s a
bit like corporate credit and therefore
widen alongside spreads.
We do know the fiscal position is a
little bit wobbly initially.
You know, the thing that concerns me is
if we do have a spread blow out in
Italy, the ECB has the spread control to
the CPI.
That actually requires a fiscal deficit.
Exactly.
A of conditions, one of which is a
fiscal deficit of -3%.
And at the moment of 12 for 23, we were
on minus eight.
So there are some concerns there if we
haven’t seen it yet.
But if something worse it worse, they go
wobbly in the B2B market.
I do have some worries, though.
Put it put a number on it.
What is it?
What does a big spread blowout look
like?
I think, you know, there’s all in yields
and there’s also, you know, spread
versus burned.
And I think we’re not quite at the sort
of 300, 400 levels that we were
considering back in, you know, a couple
of years ago when we had emergency
meetings and the things that were
potentially triggering those spread
control to.
I don’t think we’re close to that yet.
And it will be a balance of both BJP’s
and Burns.
So not not there yet, but a concern.
And then let’s bring it back to the
states here.
5% yield is something we talk about
often on the show.
The possibility of it at least.
Is that on the horizon?
Do you see it?
What’s the ceiling in yields on the ten
year right now?
I think today’s auction will be
important to see how much upside is out
there and see what you know, whether we
can get to that 5% point of the front
end of the curve and what that
potentially means for the for the for
the kind of belly tenure of the curve.
I think curves have been very important
kind of this year.
We’ve seen steepening is more of a bias.
And now we’re going back to flattening
as those, you know, cuts are being
pushed out.
And so I think the ten year is sort of
actually staying reasonably stable
versus the front end and the back end
given the kind of seesaw we’re seeing.
But, you know, it’s on terminal value
for the ten year.
I
don’t I wouldn’t rule out going back up
to five, but I don’t think we’d we’d get
much further.
In terms of.
You look at the data and trying to think
about and understand the data and what’s
driving where to get PMI data out of
Europe very soon.
Throughout this morning, and I’m trying
to understand
what the relationship that markets have
to the data at the moment.
You talk about central banks a little
bit earlier on in terms of the swings
we’re getting.
How does it work?
Is it data fed market or is it Fed’s
kind of data?
What am I looking at?
What are the clues I’m looking at in
terms of how this process is going to
unfold at the moment?
How they talk about big data depend
about how data dependent really are
they?
I think there’s been a real shift in
terms of markets being much more
reactionary at the moment versus being
proactive generally and being more
forward looking.
I think we were really at the moment
reacting to very recent data points,
which sometimes is a bit confusing
because if you’re looking at monetary
policy and fiscal policy, these things
operate with a lag.
So it feels often counterintuitive to
expect central banks to react of the
most recent data point when actually
they should be reacting off, you know,
whatever’s fed through from from a while
ago.
I think we have a bit of a pattern at
the moment of data comes out, market
reacts, and then we have a central bank
commentary that will either be hawkish
or dovish versus the data and then that
will swing markets the other way.
So there is a bit of a a dance that
we’re going through at the moment in the
market.
I think the reaction function is is.
Is working.
I think the market understands the
reaction function, which I think the Fed
has a reaction function.
The ECB has a reaction function.
Very briefly, I think, you know, lots of
uncertainty in the markets.
I think difficult for investors to to
position at this point.
No kidding.
No kidding.
Even some way Fund manager, AMG
Investment.
Thank you very much indeed.
Coming up, we’re going to talk about
what’s happening to the yen.
We need to talk about the BMJ as well.
That’s next.
This is Bloomberg.
But within the GTA, I think it’s fair to
assume that the environment for taking
appropriate action on Forex is in place.
No, I won’t say what the action is.
From the businesses.
They keep talking about how the
environment is now in place to intervene
in the market if needed.
The language gets stronger and stronger
and stronger.
This is probably the clearest signal yet
from the Japanese authorities that they
are getting ready to pull the trigger on
some kind of intervention.
When’s the right time?
We thought it might have been at 152,
three, four, five.
We we keep going.
The market gets more and more stretched.
Yeah.
The end of last week, we were talking
about the meetings taking place between
Japan and the United States, the
Treasury Treasuries coming together, if
you like.
And it was seen as a bit of an
endorsement from the United States.
But how long the lead time is between
that kind of meeting of minds and some
actual action.
Maybe we’re about to find out.
Well, you know, so fascinating because
this is kind of the traditional haven
trade.
Right.
And you saw it with the Swiss, the as
well.
And yet it’s not really functioning that
way when you look at kind of capital
flows, etc..
And I think a lot of that is because the
intervention risk is just too volatile.
It’s too risky to serve as that hedge,
even though it is a creditor nation at
the end of the day, which I think brings
me to the kind of the gold story as
well, because it kind of feels like
there’s that gold trade off, right?
If the Japanese yen isn’t going to be
your hedge or if the Swiss isn’t going
to be your your hedges, given the S&P is
cutting, it has been had an inflation
problem for a while.
Where else do you go besides gold and
the dollar?
And it feels like the dollar has only
become very pop popularized.
I think I to go with that line again
since this kind of higher for a longer
narrative because it was also that the
dollar’s going to weaken at any moment
now given the Fed cut.
That really only leaves one player on
the table.
And that’s gold, right?
I mean, we’ve got some charts.
I do.
I was I was waiting for everything
having.
So I was waiting Verizon I can go into
the chart to all cool Anyways overnight
we talked about at the start of the show
2303 is where we are on gold.
I think we’re kind of wracking our
brains about what drove the move itself.
Is this a rate story?
Is this a fun flow story?
I’ve got a third theory, which is that
this is really just technicals and I am
putting my American hat on, which is
it’s simply to say it’s technical,
stupid, and I’m not calling anyone
stupid.
That was a reference to James Carville.
It’s meant to be funny, whatever.
And what it basically shows is the
Fibonacci retracement is very simple.
You take it down from the the trough and
February 14th, which is kind of the
recent low that we had year to date and
take it all the way to the peak that we
got a couple of last week actually in
the record highs, it lines up perfectly.
You could see that with that yellow line
in between ones that 23.6% level.
So when you see it line up like that, to
me that screams this is just quickly
taking some cash on the table, taking a
little bit of a breather.
It’s not necessarily fundamentally
driven.
It’s a theory.
I can understand why I might stop that,
but why did it start there?
The sell off is my question.
So why is gold wise gold come down?
I can see.
I think there’s that there’s a there’s a
nice line in the sand that allows for
the technicals to dictate how far the
sell off goes.
Yeah.
Why did it start?
And this comes back to this whole idea
of are we into margin call territory of
people selling this because they have to
is it just got too far a central banks
backing off.
I think so I think it’s really
interesting that it stops here and that
gives us some sort of a floor on it but
kind of what does it tell us about how
far we can go?
And it’s in conjunction with the
fundamentals.
Yeah, You know, with the geopolitical
narrative, clearly the tension building
over recent weeks and then the
interpretation of what we’ve heard from
Iran being that’s you know, that things
may be do not escalate right here, right
now and that being seen as something
that leaves room for gold to come lower.
So the fundamentals in the mix as well.
It does.
And I think there’s also that consumer
story to it as well, Right?
Because you mentioned, I think the
physical demand story that we mentioned
as well and that it’s, you know, the
Chinese and Indian demand story that you
can get in
January around Lunar New Year, etc., can
also create kind of a bid, but then also
flows into this kind of global consumer
story.
And China’s such a big part of it as
well.
And that’s kind of where I want to go
next when it comes to simply our next
guest.
Joining us now, Phoenix Kaplan, Global
head of Emerging Markets Research over
at SOC Gen, joins me this morning.
Thank you for joining us.
Thank you for making it and talk to us
about that consumer story, especially
when it comes to the emerging markets.
Is there more concern in the universe
right now?
So I think one of the really interesting
things that I’ve just noticed over the
past several days is that the story that
we’re seeing is not kind of the
traditional kind of risk off risk
aversion you would see going higher, US
rates going higher, AGMs blowing up.
We’re not seeing that story.
And because the underpinning of the US
economy is is so resilient.
And so we’ve got that kind of underlying
confidence that’s imbued by the stronger
US growth context and that’s helping AEM
currencies to not blow up.
So we so it’s not like last year when we
were kind of in a stagflation
environment where the US growth was
slowing down more markedly and we still
had inflation.
Now it’s more of an inflationary
environment underpinned by resilient
growth, and I think that imbues quite a
lot of strength into some parts of
emerging markets in particular like the
LatAm complex that’s still benefiting so
much from their tighter linkages with
the US growth from all the near
certainty themes and then some
particular markets as well that are
benefiting from kind of the shift away
from China, like India, like Vietnam.
What is the bigger risk to the.
Universe, and I’m sure we’ll get more
specific.
But is it the dollar strength story
coming off of the Federal Reserve or is
it commodity driven inflation perhaps
coming out of the Middle East or
arguably Asia as well?
What’s the bigger risk?
So I think what we’re likely to see is
actually a correlation between the
dollar and impacts.
Though up until this point it has been
super strong correlations in the
nineties betas closer to for some
currencies.
So so there’s been a very strong impetus
into currencies from the impact of the
U.S.
dollar.
But I think going forward, because the
dollar strength is actually underpinned
by very resilient U.S.
economic growth, we’re likely to see a
divergence between the performances of
currencies, a correlation at the
aggregate level, and then we’ll see some
very high performing currencies like
LatAm versus some underperforming
currencies, like, let’s say, Delta or
against.
Hmm.
I was going to ask you about that.
So the emerging market currencies in in
Europe, I wanted to go to you and you
talk about LatAm benefiting.
So I want to watch what’s on the
pressure then.
Do you think that the Eastern European
currencies take some pressure given
where Europe is right now in the
European growth story in contrast to the
US?
What’s your view?
Yeah, I mean, we’ve just been
disappointed time and time again by the
European growth story.
We’ll see some more data come out this
week around kind of the business climate
surveys.
But overall, it’s been a drag on see
performance out of those tight linkages
between C E complex and the euro.
And because of how tightly linked the
euro is to the dollar that actually
weighs down that the c e complex quite a
lot.
Much more so than the LatAm currencies.
They’re not that much correlated to $2
impact right now.
Yeah, but on the right side, LatAm is
where things are much more vulnerable
and they are much more vulnerable to,
let’s say, higher U.S.
Treasury yields.
That impacts LatAm rates much more so
than any other part of the OC.
But you do think that some of the
structural things that Europe is doing
can support some of those Eastern
European currency.
So, for example, I noticed in your
notes, you say you’re bullish on the on
the Polish currency, and this is to do
with payments from the EU recovery fund.
So he’s structural big change in Europe
having a real impact on your calls?
Yes.
And also kind of the shift that we saw
out of the government and the elections
that happened in Poland last year and a
much more kind of European friendly
reforms focused government that’s more a
more market friendly, more predictable
policy, maybe around monetary policy,
Possibly.
Yeah.
How many central banks in the universe
are going to have to raise rates to
defend their currency?
Indonesia is coming on Wednesday.
Are we going to see many more?
Are we done with rate hikes?
Universe I think the bar for rate hikes
is very high.
So I mean, I’ve thought a lot about this
and yeah, Bank of Indonesia, that’s one
place.
But there are not that many places that
are going to be under so much pressure
to hike.
I mean, just at a stretch.
Turkey.
Yep, at a stretch.
South Africa
and Egypt as well.
But I think, you know, those those cases
are also very idiosyncratic in nature.
And Turkey still has a huge inflation
problem that they’re trying to grapple
with.
So I think in terms of rate hikes, it’s
very far and few in between.
Okay.
So much more likely we’ll see a
prolonged
scenario of of things staying where they
are and then a much more gradual easing
cycle than what was priced in
previously.
If the Chinese decide to depreciate
their currency significantly, what is
the read across into the rest of the
universe?
They haven’t done it yet.
They’re holding the line.
But we’re seeing kind of incremental
moves and we’re watching it very
carefully.
In terms of the windows they’re
operating in, the bands they’re
operating in.
If there was a desire to push out
exports, the rest of the world currency
may be part of that.
What impact would that have?
The Chinese have long kind of argue that
they’re trying to create a strategic
alternative to the dollar.
If they decide to abandon that, what
impact would it have elsewhere?
I think for them, the implication around
currency stability is one such that they
want for there to be a predictable
environment for investors to be
comfortable with.
And let’s say if we’re looking at a
scenario of a one off devalue that
imbues a lot of uncertainty and
volatility, even if it’s short term into
the markets.
And I think I think at this point
they’re quite uncomfortable with that
prospect of Sure.
And so trying to protect capital flights
and try to prevent against kind of the
risk of capital moving out of the
country is still a big concern for them.
And so I think at this point, because of
how weak the underlying economics of the
country are, they still want a very
stable financial system and try to avoid
that risk all together.
PHOENIX We talked to them about what the
Chinese authorities might do with that
currency and how that spills over to
other em.
What about something else that we’re
waiting for in markets, which is whether
we’ll get some intervention from the BOJ
and how that spills out into and perhaps
I mean, clearly it will it’ll get
transmitted through the dollar, I
imagine maybe other ways as well.
What’s at stake for em if the BOJ does
intervene to support its currency, do
you think.
Yeah.
I mean that’s that’s a risk I think at
this point that the market is just so
unconvinced that this is going to happen
any time soon.
And all the clients that we’ve meetings
that we’ve done, clients are pushing
back against this and trying to shore up
the yen further and further.
So I think that risk is being pushed out
because the market is having such a
strong position and the yen position is
still very, very strong at this point
and according to the data.
So I think if this does happen and they
intervene aggressively enough, yes, this
could feed through to higher US rates,
for instance.
And and we’ll have a whole kind of
repricing around what kind of investors
are now coming back into U.S.
Treasuries.
And is that’s kind of a compelling
enough level.
So I think for em, the risks still over
the near-term is not around the yen, but
it’s around kind of a move away from EM
rates as being kind of the story for
where to invest in emerging markets and
then towards selectively in currencies
that are going to benefit from the
growth differential.
Good to see you this morning.
Thanks for dropping by to see us.
I
try to put the pieces together at the
moment.
Absolutely fascinating and experiencing
what you say about the interest rate
hike story.
Phoenix, thank you very much indeed.
Phoenix.
Caitlin, Global head of emerging market
research at SOC Gen, Corporate and
investment banking.
Thank you very much.
A little news on gilts.
We’re getting a little extra supply.
The dmo is announcing this as we speak,
so it’s going to sell £277.7 billion
worth of gilts compared to 65 at a plan
for in March.
The increase will it mean an additional
5.4 in sales of short medium?
I think it’s an extra 3.9.
We get an extra billion of long term
gilts.
This another 1.1 of index in blinkers
coming through.
The change reflects the UK public
finance data published earlier on
Tuesday.
So UK government borrowing overshooting
official forecast centre.
Okay, so that’s the UK story.
Let’s move on to another angle on
commodities.
We’ve got Shell and Totalenergies among
several global energy companies in talks
to buy stakes in Adnoc next LNG export
projects in the United Arab Emirates in
the UAE.
The two will matches along with some
other names, including the Japanese
trading house Mitsui.
They were looking at trying to get
equity.
Stakes in this particular facility.
They want contracts to purchase LNG from
it as well as these equity stakes.
So we’ll continue to watch that one.
And of course, we keep our eye on the
European corporate.
Nicely.
We do.
Coming up on the program, Novartis
raising its forecast for the year.
Sales of its blockbuster medicines
outpace expectations.
We’ll have the details next.
A little bit of a deep dive.
Stick with us.
This is Bloomberg.
Welcome back to Marseilles.
We’re about 15 minutes, 14 minutes and
change from the cash equities open.
European futures pointing to a positive
start.
Despite that 41 100 record that we saw
yesterday looks like a little bit more
momentum across the continent.
Does that sustain going into the open as
we get perhaps a little bit more of
these earnings starting to show up in
some of the numbers?
In the meantime, before we get into some
nitty gritty of the corporate space, I
want to break some headlines coming out
of Russia here.
This is getting some headlines when we
hear from TASS saying that Russia may
abolish the export duty for RUSAL.
This is, of course, the second largest
aluminum maker in the entire world.
They’re discussing those support
measures in the near future.
The context is important here because on
April 16th, Rusal had specifically
appealed to Russia in the face of the
sanctions coming out of the UK and the
US around being able to trade Russian
aluminum on the LME.
That of course create a little bit of an
oversupply on the LME that we covered on
the show as well since then, now it
looks like we’re still needs a little
bit more help from the Russian
government, those support measures to be
discussed.
Guy, Let’s talk about Novartis
big a big upgrade this morning.
Everybody was expecting that the company
would beat rates.
They certainly delivered on that.
The company’s raised its full year
forecast.
Sales of blockbuster medicine, heart
disease, psoriasis outpacing
expectations.
The Swiss drug maker is pushing for
growth of the years of successive
revamps.
We’ve cut jobs, but is the job story
really responsible for the upgrade we’re
seeing this morning?
Let’s try and figure this all out.
Bloomberg Sam Purcell joins us now to
try and answer these questions.
This is a big upgrade.
Talk me through the background to why
this company has the confidence, why
Vance has the confidence to deliver that
and where it’s coming from in terms of
the drug specifically that we’re looking
at.
Yeah.
So good morning.
We think looking through the numbers
that that the massive I mean, this
wasn’t the one step upgrade for the full
year is a two step upgrade on the core
operating margin.
Right.
We went from high single digits to
low double digits or mid-teens and we
think that’s coming from a more
confidence from the company in being
able to defend the product.
Promacta Particularly, we think against
generic competition in the latter half
of the year.
So that’s something that clearly a
product at that age usually has the best
margins.
Yep.
And so when you saved another quarter or
two quarters of sales there, it does
impact your margins significantly.
But the underlying is also doing well.
Okay.
That’s interesting because Guy was
making the point.
It’s interesting to get your view.
And Sam, we talked about this earlier in
the program that you fend off the
generics for a few more quarters.
You still face that generic competition.
It’s just delayed.
But but I suppose your point is that
when you’re talking about patents, every
quarter counts.
Absolutely.
I mean, in a drug that’s doing 2 billion
a year, you keep it another 500 million
a quarter, you keep it another quarter.
And let’s say the margin on that is
gross margin on that is like 18 90%.
Now, you know, that’s quite useful
amounts of cash to keep on your balance
sheet.
So what’s the strategy there?
How are they combating that?
They know So they have a pretty decent
pipeline of products feeding it.
But I think that’s a key question for
the company as to how well will you be
able because these general size issues
are tough.
They tend to be especially the ones that
you’ve, you know, that allow you to have
this kind of operating margin impact.
These are the sorts of things that end
up
being difficult to to fill the hole with
another drug.
It takes time for other drugs to grow.
So and they have they have a pretty good
pipeline.
Novartis is a very large arena, one of
the largest pharmaceutical companies.
They’ve been successful in some of the
products that they’ve brought along
quite a few, and I think they’ll manage.
But the question is, what’s the cadence
of that going to be like?
Are they going to tread water for a year
or two or maybe even dip a little bit?
But nobody would be surprised if they do
because these are hard things to
replace.
What’s what’s next?
We’ve got Nova coming up.
We got a big, big R&D day coming up for
Astra.
What are the ones you’re going to be
watching out for this reporting season
that are going to kind of really stand
out?
Is it going to be novo?
Is it going to be the Astra story?
Is Roche going to do anything?
What’s happening with Sanofi?
So with Novo and Lilly, both of whom are
next week?
Yeah, I think the questions a little bit
like what you keep asking, I’m pretty
sure about the tech giants.
Will I match the lofty expectations that
analysts have got in consensus?
You know, every quarter that game is
played, right?
Yep.
The same goes for the obesity drugs
because you do have that supply
constraint, right?
Remember that?
That hasn’t been solved.
Solved necessarily.
They are they have much more demand that
they can they can fulfill.
So the question is, will they meet this
quarter or not?
But maybe not quarterly focus.
People at buy, at least in the long run.
As you know, we have a very positive
view on the obesity market, which
clearly is echoed by quite a few people
in the in the market.
So but it will be what people are going
to watch out for.
And both companies have been working on
expanding their capacity, some of them
by doing.
Deals.
And then AstraZeneca, of course, which
is this week,
you know, they do have quite a bunch of
new products coming along.
You might have seen the share prices
come back quite nicely, a good 10% rise
in the past couple of months.
And we want to see what they’re going to
tell us on the 21st of May.
They have a strong pipeline.
This management team has really
rejuvenated this company.
Can they do another ten years of major
growth?
We’ll be back to talking about executive
pay in the UK.
Won’t be as well.
That that might be a thing.
Thanks so much for joining us and
physically seeing you.
Pharmaceutical analyst for Bloomberg
Intelligence joining us there with the
latest on Novartis and some of the other
themes in the drug space.
And don’t miss our conversation with
Vasan.
I received the CEO of Novartis.
That’s coming up at 8:15 a.m.
UK time.
Let’s get an update on stocks in Focus
this morning.
Joe Easton has a briefing.
Joe.
Morning, Alex.
We started in the auto space with better
than expected earnings out of Renault
this morning.
This is the company continues to push on
in electric vehicles with a bunch of new
launches recently and these better than
expected results taking the sting out of
recent news that they cancelled their
easy IPO, the AMPERE business which they
recently scrapped.
Here’s the numbers on the screen €11.7
billion in terms of the revenue better
than expected.
As I say, even now, 48% of sales in that
IPO abandoned down the bottom there.
Now, some of the new launches coming out
over the next year include the €25,000
Renault five.
They say in the statement that should
help them push on in terms of their
sales as well.
There it is on the one year, up 40%, 43%
doing pretty well.
That is a recent rally that we’ve seen
since the back end of last year.
But analysts are still positive on this
one.
16 buys only a couple of sells on
Renault at the moment.
Potentially.
This will place all of those bullish
analysts this morning that we’ve
obviously got Abbey Foods, the owner of
Primark.
We’ve got a jump in operating profit
across the business.
All of the segments saying decent gains
in terms of their most recent profit,
not just Primark, though.
We’re also seeing gains in grocery.
This includes brands like Twinings, Tea
and Kingsmill Bread.
So we got profits up 33% there and Sugar
doing well.
Interestingly, due to some agricultural
trends, they say the beat crop has been
better than expected.
As we can say now, sugar is around 13%
of sales.
Retail, Primark still the biggest
driver, 46%.
Finally, over in Cloud Software, we got
ex AP, the fastest cloud growth on
record for the company.
According to them, revenue slightly
higher than expected as well.
The only slight negative is operating
expenses much higher and potentially
trimming at some of the event gains.
That’s according to analysts at Morgan
Stanley.
Out in a note this morning.
The stock, though, is higher on trade
gape by around 3% this morning.
According to the latest data.
There is the break up the cloud still
the main business, 44% software is much
smaller now and software services as
well making up the other business.
Interestingly, only three sales on that
on those 18 buys potentially that could
be another one that’s pleasing analysts
this morning.
Keep an eye on SRP in Germany.
All right, our equities reporter there,
Joe Easton.
We thank you so much for bringing those
to our attention.
Of course, we’ll be speaking with the
SAP CFO later.
That conversation around 11:30 a.m.
UK time.
You do not want to miss that.
Coming up, it is the market open,
futures pointing higher.
So of course, comes off the toes off the
heels, I should say, of footsie 100
hitting that record high the opens next.
This is Bloomberg.
She said the 23rd of April, a couple of
weeks to go to the start of equity
trading here in Europe.
There are intriguing things happening in
European equities this morning so far.
He’s called up around eight, 9/10 of 1%.
The CAC is very soft this morning.
The prints I’m looking at is negative
half a percent at the moment.
I will caution that I think LVMH goes up
today, so that’s probably worth flagging
quite a big part of the cat, Carol.
Got to be part of the European markets,
so just be aware of that.
But the DAX is up nearly 1.3% this
morning.
One of the some sap in the mix there in
terms of those dividends.
Yeah, we’ve got LVMH, we’ve got Henkel
got Van or Christian Deal.
So there are a few to keep an eye on on
this 23rd of April to your point, guy.
Yep.
Worth watching out for that.
Also going to watch what happens with
the gilts open I think this morning
after that extra supplies come through.
So the DMO announcing that first thing
this morning.
There’s also a political implication of
this, which is basically Jeremy Hunt
doesn’t have as much room for movement
as he as he initially first thought he
did have.
Yeah.
So 4.2% is the yield on the ten years
when we go into the session with.
So we’ll see where that one opens up.
Talking about the bond markets, though,
Italy, Germany, ten year yield spread.
I see that dropping.
You were asking our guest in the last
hour about Italy and where the BTP has
become a concern.
She seemed quite relaxed for it.
So we’re at a four week low in terms of
that yield spread.
The other two stocks are put on the
radar, Renault and Anglo American both.
I’m curious to see how Renault in
particular performs, given that the
revenue on the top line seemed good.
But then if you look into the nitty
gritty, it’s actually not as strong as
Becky.
I’m curious how the market takes out
what they’re actually responding to.
They are.
The Anglo American piece is interesting,
though.
Do you start to see a more violent
reaction in the copper market off of
that, that kind of capacity constraint?
Is that a big hit or is that a a boost
to the stock in terms simply lower
supply?
We’ll see how SAP opens as well.
A number of stocks then.
We’ve been through a few of them at SAP,
Novartis.
We get numbers out from all of these
businesses and SAP dropped in the US
session and then recovered.
So we’ll see where that one that takes
us opening course had suggested we might
be a little bit higher on SAP this
morning.
So markets are open across Europe.
We’re up by around a 10th of a percent
on the Footsie 100, the up at New
Records, Footsie 100 as it was
yesterday.
I don’t know if there’s writing about
that overnight actually talking about
the counterpoint between the real
nervousness around geopolitics and the
way that the photo comes through with a
new record in Monday’s session.
Is that so?
How do we assess the juxtaposition of
those two things broadly, then?
The story for Europe is a little bit
stronger, up by 3/10 of 1% on the stoxx
600.
The CAC is up by by that amount.
So on par with that gain and the dax up
by 2/10 of 1%.
So modest gains across these European
markets.
Go ahead.
Yeah I think it’s interesting that that
we I think it is currency adjusts all of
this as well which I think is something
that we need to pay attention to.
The Footsie 100.
It was got very excited about the fact
that it has rallied in the way that it
has back out the currency.
Maybe that’s the way it doesn’t quite so
advantageous.
It depends what you’re investing.
If you’re a UK investor, then you don’t
really you don’t really mind too much
because you basically swapping one for
the other.
But if you’re an international investor,
you really picking up that much here.
Now.
123 on cable as we speak.
I want to point out on the Footsie,
though, you are seeing the
underperformer this morning being a lot
of the commodity sectors, Rio Tinto,
Glencore and of course Anglo American.
So not a positive than from those
numbers coming out on the copper space
as well.
But your health care, your commodity
story as well as linked to the upside in
terms of oil shelves when you’re a major
index contributors to the upside,
AstraZeneca at GSK as well.
This feels like a Novartis read through
on on on the gainers.
This is a huge upgrade They have really
there was an expectation are they going
to are they not going to beat race?
Yeah, well, they’ve beaten and they’ve
raised by an order of magnitude way
beyond everybody’s expectations.
So I think the read across is that this
is this is very good news for Novartis.
But is there really a read across the
rest of the space specific, doesn’t it?
I mean, Novartis shares, they’re not
pretty strong, up nearly 4% as they jump
out of the gates this morning.
But it does feel quite specific to this
business.
The conversation we were having with Sam
us early, early on was that this is you
know, it’s great for Novartis if you can
fend off that generic competition for a
little bit longer, but that doesn’t have
much really crossed into into other
corporates, perhaps technology doing
really well this morning.
So maybe the read across there from the
US session of yesterday and as I say the
SNP numbers as well.
Right.
Like the fact that ASML and ACP tend to
trade hand in hand.
It was also noted the banks were doing
quite well as well.
This actually feels like a fairly broad
rally that you were seeing and there’s
not many sectors in negative any two.
Yeah, So, so gilt yields are higher this
morning and the rest of the market,
while treasuries aren’t, but gilt yields
are higher.
So this extra supply obviously is going
to require extra payments and as a
result of which we see yields moving
higher, that seems entirely logical.
What is the rate there then from that
massive auction you’re going to see in
the states today?
Is there one in about 24 hours time into
the gilt market?
Yeah.
And how much are they trading in, you
know, reflecting each other as we were
discussing at the top of the program?
I think I think the two stories are the
same in some ways.
We we are.
We are in.
Me, too.
We’re going to have to push the Mexican
plants into the market.
These are huge auctions in the States.
Absolutely huge.
And supply has been an issue.
There have been bottlenecks in terms of
some of that supply story.
So I’m intrigued to see how some of
these auctions go in the states.
Let’s talk a little bit about where we
are with these markets.
We have seen a significant sell off that
has taken place over the last few days
in US markets.
That didn’t happen yesterday, but that
is raising questions about what you do
in terms of getting out of some of the
concentrated areas of the market,
particularly in technology.
And I was just mentioning that and maybe
looking elsewhere.
We spoke to Jill yesterday from
BlackRock to get her take on if you are
going to get out of some of those
concentrated areas, where do you go?
Where should you be looking?
The European names, this really, really
could be an interesting time for these
names.
The broadening of the market much more
relevant in Europe.
The valuation gap, which is now at 40%
versus a more traditional 2025, could be
interesting.
And if the ECB does cut before the Fed,
which is now basically what’s being
built into consensus, could also give us
a bit of a pivot for the small caps.
BlackRock, CIO from Fundamental equities
in EMEA have a deal speaking to us this
time yesterday.
Joining us now, George Maris, CEO and
global head of equities at Principal
Asset Management.
Nice to see you.
Great to be here.
If you are going to diversify, do you
think you should?
And if you are, where should you be
looking?
I do think you should diversify.
I think there’s going to be a broadening
of market returns, especially within
equities.
The narrow concentration we’ve had has
been partly a function of great
fundamentals, but partly because we’ve
had opaque economic environment.
Right.
2023 was a challenging year.
You had bank troubles everywhere,
whether it was Credit Suisse, Silicon
Valley, etc..
So there was a hurting behind anything
with good fundamentals.
We didn’t see that in Europe.
We’ve seen a broadening out of economic
fortunes.
I think we’re going to see a broadening
out of economic returns as a
consequence.
And so it does mean you want to start
hunting at places that haven’t done
particularly as well as others.
If us if we do see drops, though, like
the 10% drop we’ve seen in in video.
Isn’t there less reason to diversify?
Isn’t there a reason maybe to actually
think of that as an opportunity?
I think you could say that I would.
I would push back and say, if you look
at where momentum has been in the first
quarter of the year, we’ve had, you
know, the second highest momentum number
we’ve had in 100 years.
Right.
So we’ve had an extraordinary herding
with respect to momentum as a factor in
markets.
Strong markets.
I think there has been a winner take all
mentality.
I don’t think that’s been right.
So a retrenchment from some of these
companies like in in video, etc., which
have skyrocketed to super highs.
A lot of this based on very short term
trading activity, does present
opportunity to redeploy capital
elsewhere.
What does the bear case for European
equities right now feels like?
The consensus, at least from the folks
that we’ve been talking to on the show,
has been you’ve got a rate cut in the
works, you’ve got currency depreciation
and you’ve got a broader makeup of the
indexes.
So therefore, Europe has kind of the
American catch up trade is a no brainer.
What’s the bear case?
Well, I don’t.
First of all, I am sympathetic to that,
but I don’t think it’s a no brainer.
I think you continue to lack.
You continue to lack relative to the
U.S., the most dynamic elements of
innovation.
Right.
So artificial intelligence still seem
spurred, particularly American
phenomenon.
If you even think about cloud based
development, it’s a particularly
American based phenomenon.
If you think about the advantages in
biotechnology and therapeutics, even
though a lot is happening in Europe,
we’re playing it that way.
There’s still the the the imminence of
that is in the United States.
So you’re seeing the cutting edge happen
in the U.S..
I think the argument here is have
valuations gone way too high?
And I think this week will be a very
interesting week with six of the mag
seven reporting.
I think earnings will likely be very
strong.
I think it’ll be interesting to see is
what reactions are.
And I think it’s that part that’s going
to be the really that part of the
behavioral element is going to be what’s
at play.
Are valuations way too high?
I think for the I think for the
concentrated view, they certainly seem
stretched.
I think for the aggregated market less
so.
And in fact, even during some of the
sell offs, we saw a you know, healthy
breadth is up for tech in the States or
are you referring to Europe?
I’m arguing for tech in the States.
But, you know, I would also argue that
for the select few of, let’s say,
bulletproof companies, there’s been a
hurting that has maybe been less
valuation sensitive than it may
otherwise should.
George, good morning.
So interesting to hear about your view
on China because you mentioned this in
your notes.
You say that this is a highly intriguing
market at this point.
When you visit and talk to clients
globally, what are they looking to China
for?
Because, you know, thinking has moved on
a lot since, you know, ten years ago
where investors would maybe buy European
names for the growth of the middle class
consumer in China.
And that’s the way they do exposure.
Well, they go in and buy Chinese
property.
Both of those perhaps coming under a
little pressure as investment themes
right now.
So what do you buy China for?
How at this point?
I think what’s intriguing here is how
the narrative has shifted so
dramatically.
Everybody everywhere is negative on
China, whether it’s on the Chinese
economy, the geopolitical situation, the
constituency, the economy.
It’s negative every which way you go.
And yet the underlying it, first of all,
it’s still the second largest economy in
the world.
It is still growing.
There’s tons of innovation happening, a
lot of the geopolitics which are
creating on shoring and near shoring
around the world are also creating and
shoring and near shoring in China.
So there’s a lot of development of
opportunities there.
And from a valuation perspective, it’s
at least the cheapest, if not among the
cheapest developed markets in the world,
trading at a substantial fraction of
what you see in the U.S., even at a
discount to the continent.
So again, I think the the opportunities
are tricky, but if you’re worried about
the geopolitics, maybe you don’t.
Maybe that just overwrites all of what
you’ve said, all of those solid
arguments you’ve made.
Or is there a point where you say, yes,
I accept the geopolitical risk and the
other reasons are so compelling, you buy
anyway.
So I think the geopolitical risk has
always been present with us, is present
everywhere you are in the world.
And look, we have a hot war on the
continent.
And so geopolitical risk is everywhere.
I think in the geopolitical risk with
respect to China feels overstated,
substantially so.
And with that, these are opportunities
that are extraordinarily compelling.
When do I start positioning for the US
election?
That’s a tough one because I don’t know
how that’s going to play out.
I think this election is if you look at
where markets are, the markets are
indicating a toss up.
I think this is a an election that will
matter.
It will matter for markets.
And so I think you start thinking about
buying companies that are, you know,
resilient, that are not terribly
expensive because it is going to be a
volatile period.
Is that is that a question you’re
getting here in Europe?
What’s the what’s the number one
question you’re getting when you’re
talking to people here in Europe?
The question in Europe is when will
European equities rally once they catch
up to the U.S.?
Is that where we started our
conversation?
And it’s been it’s been a question
that’s been that’s been foremost on
people’s minds for several years now is
when are we going to close this gap?
I do think the opportunity now is more,
you know, more intriguing than it’s been
in a while.
George, I see.
Thanks for stopping by.
Next time you come to London, make sure
you come and see us.
George Mann, our own global head of
equities at Principal Asset Management.
Thank you very much indeed.
Novartis, the stock is up.
The Swiss drugmaker raising its full
year outlook.
We are going to speak to its CEO, Vice
Narasimhan is going to be joining us
next.
This is Bloomberg.
This is Marcus today.
We’re about 14 minutes into the European
trading day, seeing fairly positive
start more momentum building in the
footsie, 100 green on screen across the
board and a fairly broad one at that.
You’re only sector in the red at least
on the footsie 100 is going to be
materials perhaps a lot of that coming
off the earnings story of Anglo
American.
What the read through is for some of the
other commodity names, but plenty of
other earnings stories to keep an eye
on.
SAP higher, for example, even Renault
moving as well and of course Novartis
and coming in with a pretty hot share
move this morning.
Yeah, absolutely.
The no RC share price up by 4.6% as the
company upgrades guidance and in some
style upgrading the sales line and the
core operating profit line.
Let’s talk about optimism for 2024 then
with Van’s announcement, who’s the
Novartis CEO and joins us right now.
It was very nice to have you on the
program as always.
So you’ve upgraded your guidance today,
expressing some confidence, some clarity
perhaps around the threat from generic
competition.
Does this push challenges into 2025?
Is this what we’re what we’re seeing
here, or are you just broadly more
positive about the outlook?
I think we’re broadly more positive
about the momentum we’re seeing in the
business.
One, we saw very good performance across
our growth drivers, both established
medicines like trust own percentage, but
very strong growth from our recent
launches.
Content Kisqali We think though, that
both when you have that broad base of
medicines all growing really well, it
gives us confidence for this year but
also for the year to come.
In addition, we saw our performance
broad based from a geographical
perspective, very strong performance
U.S., ex-U.S., Europe, China, Japan also
giving us a lot of confidence.
So while there was a small contribution
from generics getting pushed out, we’re
reiterating our confidence in our 5%
plus sales growth guidance out to 2028
and our 40% plus margin guidance out to
2027, along with the various guidance
raise as you just mentioned.
Can I ask you about?
Perfect.
Then there’s clearly one of the one of
the drugs, a cancer drug that you have
high hopes for.
It does seem as if sales came in,
perhaps just a little shy of
expectations.
But I wonder if this reflects a broader
concern about convincing the market to
pivot towards a new type of a targeted
radioactive therapy.
Are you concerned about how long it’s
taking to convince the market that this
is the way forward?
Or do you not have concerns that.
No concerns.
We feel very confident about the
political outlook.
We saw strong quarter over quarter
growth.
And it’s important to note we’re just
now coming out of a supply disruption we
had last year.
Now in the first quarter, we had 99.5%
on time delivery of the medicine.
We’re seeing a broad and base of growth
in the United States from treating
centers that are getting comfortable
with this new technology.
It is a very novel approach and so
oncologists need to understand they can
refer patients for this therapy, really
like a therapy for prostate cancer
patients.
The other opportunity we have in the
second half of this year is this
medicine will go global.
We’ll have the opportunity to take the
vector outside of the U.S.
at scale.
That will give us further growth.
The most exciting part of the Invictus
story and a Radio Alliance talk therapy
story in general is moving into new
cancers and new cancer settings.
So with Pacific, though, we confirmed
earlier this year that we will file for
the PSA, for setting for Pluto that will
allow us to broaden the indication base.
We’ve also done a number of deals and
having in-house programs to bring more
radio like in therapy, forward therapy,
sports.
So we think this will be a significant
market opportunity for the company.
First.
Good morning.
It’s Guy.
So a big beat and a big raise in the
market likes it.
What gets you the big beat and big raise
in 2025?
What are you most excited about?
What’s what’s going to deliver the same
performance that we’re seeing now next
year?
Couple of things, guys.
So, one, these growth drivers that we
have that are really taking off with new
indications.
So you have percentages that really
outperform, have a significant
outperformance in order one and that’s
driven of new indications for this
medicine.
And this is the medicine we expect to be
$7 billion plus over time by the end of
the decade.
The Centex will give us a lot of
momentum and they do have this group of
recently launched medicines that are
going to get new indications.
So you have Kisqali, you have Slavic, do
you have someplace you have a taco pad?
Each one of these medicines, we believe,
have multibillion dollar potential.
They have new indications coming over
the course of this year or early next
year that gives us another wave of
growth.
And then also exciting is we have a full
pipeline.
We had ten positive phase three readouts
in 2023.
Yep.
And as those readouts now come into
submission, that will give us the third
leg to grow through that through the end
of this decade.
Can I can I ask you a slightly sort of
leftfield question this morning?
Is that what is still a Swiss company?
What?
Really?
What?
Yeah.
Let’s keep you on your toes.
And it’s also still a Swiss company.
I know you based, but you’ve.
You’ve now got a what is it, an Italian,
Swiss, American Italian chair coming in.
I’m wondering how that’s going to change
the culture.
You reported dollars.
You’re domiciled in Switzerland, but
increasingly you don’t feel like a Swiss
company.
Certainly.
Maybe compared with Roche, you’re CFO is
still Swiss.
How is the culture of the company going
to evolve going forward from here?
Is that Swiss heritage still strong or
is it being diluted, do you think, at
the moment?
You know, that’s interesting.
We have deep Swiss roots.
This is a 250 year old company, and its
roots are in Switzerland and will remain
in Switzerland.
But we’re also a global company.
And the interesting thing is we’ve been
a global company for over 100 plus
years.
And so we want to maintain that global
footprint, global talent, get the best
people into the best roles while still
maintaining our Swiss roots.
And I think we strike that balance.
Balance.
Well, we have a few members of our
executive committee who are Swiss
citizens.
I’ve lived in Switzerland for a decade
plus, and so I think we have those deep
Swiss roots.
But it’s important to remember we are a
global company.
We compete in global markets for our
shareholders.
They want to see a world class global, a
leading pharmaceutical company, and
that’s the balance we’ll keep working to
strike.
But I sit here in Basel today and that’s
where we’re going to stay.
Fans.
It’s crazy.
Talk to us a little bit about the cash
on your balance sheet here.
There’s a lot of positivity coming from
you this morning, from your share price
as well, from the analyst commentary off
these results.
Talk a little bit about where you stand
on one buybacks and two, restructuring.
Does that continue?
And we have a really strong cash
position and we feel really good about
our shareholder friendly approach to
capital allocation.
We maintain our approach of bolt ons and
we look at really some 5 billion tons.
But if you look at most of the deals
we’ve done, they’ve been in the sub
billion space and that’s where we want
to stay.
We have an ongoing 5 billion share
buyback that we expect to complete over
the course of next year.
And we continue to see buybacks as a
critical part of our capital allocation
strategy.
The strong and growing dividend in Swiss
francs will continue and we maintain our
investments in the business in terms of
restructuring.
Now what you see in the company is just
ongoing adjustments.
We completed a major reorganization a
few years ago and that’s bearing fruit.
I mean, that’s what you’re seeing in the
financial performance and overall
operating performance of Novartis.
But we also recently announced a few
other adjustments in our R&D footprint.
And that’s, I think normal course of
business will, of course, always make
those adjustments, but we think we’re
set up in the right way now through the
end of this decade to drive the growth
that we’ve outlined.
Talk to us then about that bolt on
strategy as well.
Morphosys getting a lot of attention,
that acquisition.
How confident are you that it’s going to
pass kind of the regulators ire?
And if it does, how many more deals are
in the pipeline?
Yeah, we feel good about the bolt on
approach.
I don’t want to comment on any specific
companies, especially because we’re
especially the Morpheus is we have the
tender offer ongoing, but overall, we
feel very good about this approach of
bolting on.
We’ve done over 15 deals and the recent
orders are mostly focused in our core
therapeutic areas or our core technology
areas.
So many deals in radio like in therapy
or RNA therapeutics.
And so we think this is the right
approach to take those bets earlier on
in the development lifecycle of a drug
or in a company and then bring them into
Novartis.
And then we do the later stage
development.
We find it harder and harder to create
value for larger acquisitions where I
think the drugs are already on the
market or they’re very well modeled by
the street.
So that’s the approach we’re going to
continue to take, I think, for for the
coming years.
What would change that?
Would a large deal in the space changed
that, proving it could be done.
What is?
I hear what you’re saying in terms of
the understanding of the science and you
being able to model the kind of outcomes
that you’re looking at.
But do you feel that the industry is
being held back because of regulators or
science right now in terms of its
approach to M&A?
I think first off, on the first part of
that question, there’s always this
question of does the industry need
further consolidation?
And I think the biggest topic with
respect to that is where do you really
get better R&D performance?
That’s not been historically shown that
when you bring large companies together,
large portfolios together, you get
better replacement power and innovation
because often you have too disrupted R&D
organizations and you disrupted
pipelines.
So that’s been, I think, the difficult
thing to solve in our sector when we
think about very large M&A now, when we
think about more bolt on M&A, this is
primarily a science topic in my mind.
While we know the API continues to hover
around relative lows from from where
it’s been in the last decade, we still
are primarily driven not by valuation
but by the quality of the science.
So I think what we’re seeing now is as
capital has flowed out of the biotech
system, we see a lot more scrutiny and a
lot more pressure on biotechs to
actually have to show do they actually
have strong data.
And when we look at that data, that’s
really what’s driving our M&A approach.
That’s why we think the biggest
opportunities are earlier stage.
These companies that are early need some
support from a large company like us
that hopefully can bring these
innovations forward.
All right.
Fastener, seven Novartis as CEO.
We thank you so much for joining the
program this morning.
We go from the micro to the macro.
We are getting some headlines coming out
of France here, the PMI’s crossing the
Bloomberg terminal, April manufacturing
PMI at about 44.9.
The forecast there was 46.8.
So you are seeing some weakness there.
But the services pmi coming in hot
rising to about 50.5 of a reading
forecast.
There was 48.9 seeing a bump in the euro
off the back of that, we are now at 106
60 going really interesting.
Do we see this outperformance on the
services side?
I mean manufacturing sit in the
doldrums.
It seems that outperformance on the
services side, the German PMI which
we’re going to get in a few minutes
time, that’s already back over 50 on
services and I think it was deals you
were pointing us toward the top of the
top of the hour doing interviews with
the French media.
He’s talking about the services sector
and that the largest remaining threat
stems from services inflation.
It’s the second assist.
That’s where the problem is.
And that’s why they cannot be sure at
this point in time that they can
progress much further than June.
June looks like it’s nailed down.
And again, this is talking about that
this morning.
Where do you go from there, particularly
with the Fed potentially on hold sticky
some some sticky services inflation.
That’s where life gets a little bit
tricky.
And it’s interesting to see the
reaction.
We are getting quite strong reaction we
are getting in euro dollar this morning
to all of this coming together.
Let’s take a quick look at some of the
folks who are watching here.
The course we watch around Europe.
Remember, the LVMH has gone ex-dividend
today, so just be aware of that and
that’s why you’re seeing the weakness.
But elsewhere, some broad strength
coming through for European equities.
Okay.
Let’s have a quick look at what is on
the move then this morning.
I mean, broadly, we’re moving higher
across European stocks, up by 6/10 of 1%
on the stoxx 600.
The 5100 echoes that a day after we saw
a record on the on the footsie 100 in
terms of its performance.
We are once again talking about strength
across European stocks.
The futures picture then equity for the
US looks flat to positive.
We’re waiting for the next leg perhaps
of the earnings story.
We’re in that here in Europe, we’re in
it in the United States.
We move more and more towards the tech
theme over in the US, and that’s going
to be really informative.
Yeah, Tesla reporting tonight.
But I would also bring your attention to
the bond market here as well for 61 on
that ten year yield.
A lot of questions even just this
morning about what that six $9 billion
auction in the states means and the
ripple effects that you see not only in
the yield picture, but also in the stock
picture as well.
Coming up on the program, you do not
want to miss our interview.
Chris Schweizer joins us, CEO of Boston
Consulting Group.
We’re going to talk about, well, a
little bit of everything, frankly, You
don’t want to miss it.
Stick with us.
This is Bloomberg.
Welcome back to what you might find
today with 30 minutes into the trading
session here in Europe.
A bit of breaking news we’re going to
bring you, which could have a meaningful
impact on today’s session.
There’s data coming out of counterpoint,
which gets Italian, what’s happening in
China for Apple.
And what the indication is, is that
Apple’s Q1 China iPhone sales fell.
Drum roll, get this, 19%.
That is a very big number that is going
to have a meaningful impact probably on
the way that the market is perceiving
Apple a little bit later on.
I think it was Bank of America out with
a more positive note on Apple yesterday.
But iPhone sales down 19%, Ana, in the
first quarter.
This is a big critical.
Very important.
I can keep growing market for Apple.
Yes, absolutely.
And we’ve seen some.
There was this one house yesterday
talking quite positively about Apple and
its prospects.
So we’ll watch how that one trades
today.
I’ll pivot it back to the European
economy.
We got the French PMI data out a little
bit earlier on.
We just got the German data and it’s
certainly worth a look.
So the French story was that services
were better than expected and back in
growth territory.
Well, we’ve got some real positivity
around the German services story as
well.
This is not a manufacturing recovery
story, but they see services in much
better health.
So 53.3 is the reading for German
services.
That’s above last time is above the
survey of 50.5.
Manufacturing is still in the doldrums,
as I say, 42.2 that.
But that drags the composite out into
growth for the German economy.
I wonder if the changing nature perhaps
of the German economy at work here and
the euro is certainly responding.
Where does this leave the ECB and its
ability to cut rates or not?
So that’s the macro story.
Let’s use that as a way into our next
conversation.
I’m pleased to say we’re joined by
Christoph Schreiber, who is the CEO of
Boston Consulting Group.
Passing through our studios this morning
and a great opportunity to get your
thoughts, Chris.
Really nice to see you.
Thanks very much for being with us.
So let’s start with what we’re hearing
around the European economy, the
Eurozone economy.
On the services side, the French, the
German numbers do seem to be adding up
to something a little more positive.
Does that fit in with the types of
C-suite conversations you’re having with
European execs right now?
Well, for sure, over the past one or two
years, the general narrative about the
European economy has been very negative.
Growth has been down.
Inflation was high.
Now it’s getting more contained.
But fundamentally, I do think we had a
lot of bad news.
What we have been observing and also in
my conversations with many CEOs, is that
there’s a bit of a detachment between
what the economies felt like and how the
companies that are headquartered in
Europe actually look at the leading
German companies.
I mean, they kept growing, they kept
investing, but of course, in a very,
very global way.
And so there has been much less overlap
between the German economy and the
success of German companies.
And I do think we are now slowly but
surely starting to see some of the
metrics pick up.
You mentioned the PMI.
That’s good to hear.
Well, I’m glad to hear that news.
In fact, I do believe that there might
be some more positive news coming about
Europe over the coming months and
quarters.
Okay.
So you have a slightly more positive
outlook, things improving around the
European growth story.
And let’s go from that to the sort of
real big picture thinking that no doubt
C-suite execs are doing right now around
I and I know that this is just something
that you’re working on a lot you’re
pivoting increasingly workforce your
hiring towards that.
How big is that business going to be for
you?
Take us forward, Christoph A few years,
five years, ten years, how much of what
you do is going to be centered around
AI?
Well, what we observe is that it’s a
very interesting point in the kind of
adoption curve of AI and generative AI
in corporate settings.
We are at this point that the kind of AI
experimentation of 2023 is now turning
into a company wide and function wide
transformation of what companies do and
how they operate.
And that’s a very interesting moment in
the history of that technology.
And we anticipate that there will be
some companies that are true winners who
make this a very productive and high
return on investment technology, and
then others who are going to be laggards
and who are left behind as BCG.
We do advise companies on their biggest
and most complex challenges and not
surprisingly, technology.
AI and Jenny AI is one of those items.
It’s very high on the agenda.
We are approaching 20% of our revenue in
2024 are coming from I am Jenny, which
is one of the biggest growth vectors and
frankly one of the biggest growth
stories we have ever seen in our
business.
61 last.
I mean, that’s very quick.
Absolutely.
Well, we’ve been investing in AI for
about a decade.
It’s not that predictive.
AI is totally new, but generative.
A.I.
came in as a as an additional vector
over the past 18 months.
And so, look, we are getting close to
20% and we anticipate that that will
double over the next few years.
And so it’s becoming a major part of our
business.
When we talk about the regional
breakdown, though.
Walk us through where that growth is
coming from.
From the consulting business in
particular.
Feels like the Middle East is the hot
spot lately.
What challenges do you find there?
Well, the.
The Middle East is an incredibly
important growth factor for so many
industries.
I mean, if I talk to CEOs of any
multinational company right now, also of
the leading banks and financial services
players, I mean, the Middle East is very
high on their growth agenda.
That’s true for professional services
firms as well.
It is a major growth factor.
But I mean, it’s still a relatively
small part of the overall mix.
What we are observing is that what type
of services are in demand and actually
in growing demand in every part of the
world.
It’s not that there are a few countries
that drive it and others that don’t.
We see I mean, the whole question that
we just spoke about, AI and generative
AI in tech, that’s the same question for
companies in Japan and in the Middle
East and in core Europe and in the U.S.
and in Brazil.
So it doesn’t really differentiate that
much.
Talk to us about the labor picture.
That and BCG is growing, but perhaps not
growing as fast as it did, say, a year
ago.
In 2023, I think the stat is something
like 2000 employees hired five times
fewer than than the previous year.
Why that slowdown?
Well, the 2000 is just the net addition
of capacity and growth of our team.
We actually continue to hire very
significantly and we will do that and we
are doing that also in 2024.
We are very proud of that.
I do think it was an important year to
show to our team that we believe in the
growth and in the opportunity out there.
That’s why we expanded.
That’s why we keep expanding also in
2024.
And look, ultimately, I mean, any talent
business moves, I mean, relatively
slowly.
You hire people, you train people, you
would develop them from one role to
another, and you do not change that in
quarterly increments.
And we are very committed to our long
term people agenda and quite
successfully so.
Morning.
Do you think I will be fewer people,
though?
You think you’re going to need fewer
people in the future?
Is this a is this going to be a
productivity boom for you?
And if so, to what extent will that
impact headcount?
Well, I do not fall in the camp of the
people who predict that millions and
maybe hundreds of millions of jobs are
going to be made obsolete.
In fact,
the companies that we advise at the
moment, they all aspire to productivity
gains.
There’s no doubt part of that
productivity gain, however, materializes
in the form of higher top line and
higher growth.
And it’s not that I mean, you
immediately lay off large numbers of
people.
Some of that is going to happen for
sure.
But then on the other hand, new jobs are
emerging, right?
I mean, you need people who can program
and code the respective AI and
generative tools.
You need people who do all the
upskilling.
You need completely different types of
talent in your workforce.
So, I mean, you’re going to see kind of
shifts in what talent companies have and
where they record and where they run
inside a consulting company for or for
consulting inside a consulting company.
You’re going to need to hire more people
initially, but can you hire them enough?
Hanging onto them is going to be
difficult.
Where are you going to see where’s the
productivity coming from within your
business that is going to have a
material impact?
Because you look at the hiring curves,
they went up, they’re coming back down
again.
Does that trend generally continue
within the industry?
I’m not talking specifically about your
company as I starts to have an impact
and how does it shift within the
consulting world to reflect the reality,
how you hire, where you hire, and the
numbers you hire?
Well, for sure, any professional
services firm is as exposed to the
opportunity and also to the downsides of
a big technological transformation.
And for us, that means that we I mean,
already have been hiring over many
years, a lot more tech talent.
I mean, we talk about data scientists,
we talk about air engineers, we talk
about designers, etc..
So the number of profiles in that space
is constantly going up.
We have our dedicated unit for that big
X with more than 3000 people.
I guess some other job profile, it’s
going to be fewer in the mix going
forward.
Absolutely.
Yes.
So we we take our own medicine and we
very boldly embrace new technologies.
Actually, all 33,000 BCG staff have
access to a suite of training, AI tools,
and I’m blown away by the adoption and
the use.
And I mean, it’s quite remarkable.
Christophe, let me talk to you about so
this is one area clearly of a huge
growth globally.
We’ve talked a lot about that in terms
of geographies.
We’ve seen quite a lot of consultancies
growing substantially in their Middle
East businesses.
I wonder how you’re positioned in that
particular area, whether you’re growing
there and any particular cities in
particular.
What’s the Middle East experience for
your business at this point?
Well, we are growing in the Middle East.
I do think many companies of all sorts
are growing in the Middle East.
It’s become such a economic powerhouse
and many industries obviously in the
energy industry, but now increasingly
also in industrial goods and financial
services, in the broader investment
industry, now also for services.
So yeah, it’s it’s been a good market
environment.
But I mean, again, let’s stay
calibrated.
It’s still a relatively small part of
the overall global consulting industry
and the overall global professional
services world.
Okay.
I’m going to wrap it up there, Chris.
Thanks for stopping by to see us.
We’ll look forward to seeing you again.
Thank you very much indeed for stopping
by to see us here at Bloomberg Chris.
Off site, sir.
The CEO of the Boston Consulting Group.
Boston Consulting Group.
Okay.
Coming up, I want to get back to this
Apple story.
We’ll do that in just a moment.
Apple’s iPhone sales in China suffering
the gadget’s worst performance.
So since Covid, you’d normally expect
iPhone sales to be doing well at this
time of the year.
This is a kind of seasonal boom for
phone sales in China.
Other brands look like maybe they’re
taking some of the bonus here.
We’ll talk about that next.
This is Bloomberg.
The decision that has been taken by the
U.S.
to provide support for more than $60
billion is very valuable.
And these joins also the previous
decision of the European institutions to
provide €50 billion in the Ukraine
facility, which we will manage at the
European Investment Bank.
And I think it will provide much, much
valuable support for the reconstruction
as well as the military effort.
European Investment Bank president Nadia
Calvino there speaking to the Bloomberg
Surveillance team in the States.
She’s very positive about the aid.
It’s in line with what you’ve seen from
a lot of the European leaders as well.
Point out, however, that when you talk
to them, the Baltic kind of foreign
ministers as well, the foreign leaders
there, they have a far more concerned
rhetoric around it.
They say, well, it’s great that the aid
is coming.
We still have a battle along the way.
At least those are the words of the
Lithuanian foreign minister that caught
my eye, that you are starting to see
some real panic here.
Is that okay?
We have the aid come through.
What are we going to see it show up in
kits and in troops and in defense
spending, etc.?
What does that delay look like?
Yeah, Germany putting pressure on the US
and others to increase supply of Patriot
air defense systems very specifically to
Ukraine.
And with that in mind, we know that the
UK prime minister is in the region, he’s
in Poland, then in Germany, and he’s
talking about, well, it’s going to be it
adds up to the single biggest package to
Ukraine from the UK, scaling up the
domestic defence supply chain within the
UK to try and deliver on that as well.
I think the key thing and really put a
finger on it here is that there is there
are gaps in the air defense system that
Ukraine is currently operating and there
is an idea that maybe we need to pull in
some of the more the the some more petro
systems out of Europe.
I think Greece is one of the countries.
Spain is one, maybe one of the other
countries.
I can’t remember exactly which countries
to provide that kit.
But but speed is absolutely critical
here.
Now, we’ve gone through that key vote,
and it’s a Senate vote today, isn’t it?
Yeah, it clears the Senate today.
And then I think it’s Biden’s indicated
that the speed at which this is going to
be delivered will be will be pretty
quick, will be pretty quick.
And I think it’s going to be interesting
to see just how big an impact it could
have and how quickly it will have an
impact on the battlefield.
It is.
And there is a market right through to
this as well in that I think our
producer, Dan Curtis, pointed this out
to me yesterday.
Some of the US defense stocks have
actually rallied to kind of record highs
of 52 week highs on these headlines on
this prospect as well.
So RTX,
I’m kind of like what is the actual name
rate?
The ticker ranks me right here.
I know, I know.
I’m thinking tickers.
I’m sorry.
Lockheed Martin was another one as well
rallying off of this.
The delays, interesting I saw coming
back to that capacity story where the
commodity input, the aluminum, the
steel, the raw materials that you need
for this kind of longer term term bent.
And therefore and so it is interesting
that in the midst of that UK
announcement about what they’re
delivering to Ukraine, they do talk
about the ability to scale up the supply
chains, to speed up the delivery of
these things.
So we’ll continue to monitor that.
All the things we’re monitoring for you
today, of course, back to the to the
markets is a big US two year auction
worth 69 billion USD.
How that goes down will be watched very
closely.
As we’ve mentioned, UK Prime Minister
Rishi Sunak will be visiting Poland and
then he’s on to Germany.
We’ve got European earnings coming later
on in the day, so don’t be fooled.
By the end of trading we will still have
some earnings coming from the likes of
caring on the luxury space over to the
US, Tesla Visa, PepsiCo, Texas
Instruments.
A lot of different themes around the
earnings story to focus in on.
And then we’ll have some ECB speakers,
some big speakers as well as well
speaking later on today.
Hugh Pell amongst them, we haven’t heard
all that much from him, the chief
economist at the Bank of England.
So that’s going to be certainly
something that we will watch.
I suppose that could be interesting in
itself, couldn’t it?
We’ve seen this increase in in gilt
issuance being announced this morning
and gilt markets trade obviously
important for the Bank of England at
this point and the trajectory for UK
rates very important.
And does it continue to tack a little to
the US or does it fall back to where the
European story is On the supply side,
the the DMO is going to be issuing more
gilts at the same time as the Bank of
England is continuing with its
quantitative tightening programme.
So there is if you think about what’s
happening in sort of just the mechanics
of the market, there is an awful lot of
supply coming back into the market at
this point.
Can the market absorb all of that and
and how long is it going to take for the
market to kind of work out what the new
pricing regime looks like, given just
how big a supply story it’s going to be
looking at here?
There’s no guarantee.
We don’t know.
We’re about to have a general election
in this country.
We don’t know the Labour Party sounding
like it does want to be fiscally
conservative on the other side of that
election.
But how long does that ultimately last
for?
Remains an open question here and in the
United States, this insatiable demand
for bonds that we were promised six
months ago around the world have not
manifested.
And I’m curious, even as we talk about
rate cuts in Europe in particular, where
that bid even comes from and why that
the narrative is changed when we’re
actually talking about not only cuts
here, but but weakness in growth when
we’re talking about even the US Treasury
market perhaps not being seeing the bid
that it traditionally would get, where
is that insatiable demand?
And we heard our guest earlier this
morning talking about the fact that 5%
yield are very plausible and but not
much higher than that starting to be
income.
The traders tracks in the narratives as
you start to talk about even higher, 5%.
Right.
And I wonder how any kind of economic
recovery in Europe fits into that
narrative.
What does that do to demand and the
demand story around?
Because we’ve got the you know, the euro
really responding this morning to that
better than expected services data.
And you put that with the the Guindos
comments.
We’re watching what’s happening with the
Fed the markets now pricing in I.
Non-negligible, I think is around 20%
chance of a hike big the next move from
the from the Fed.
The ECB cannot go too far.
If that pricing gains traction and we
get June then was well the gap I mean
you know yes June is the expectation but
do we so let’s assume we get June.
That is what the market is.
80% is price.
You only do June and then you stop and
then the the future in the US path looks
very, very different.
You wonder what what history how history
looks back on that one rate cut in June
if that’s all you get.
But then what effect will it have.
Yeah, but there is now precedent for
a kind of stop and go approach.
You saw that in the hikes with the
Federal Reserve, which at the time I
would say about a year ago or so, the
conversation was we hike.
Once you have to hike every meeting, you
can’t you can’t do the stop and start.
And Goldman, I remember, was the
contrarian at that point.
It feels like now there’s a precedent to
kind of to kind of do that.
There are some on the ECB Governing
Council that are talking about three or
four rate cuts this year.
Yeah.
As being a realistic objective, the
Kindle feels like it’s pouring an awful
lot of cold water on that idea right
now.
How does that all factor into the stock
story as well?
There is a Bond story.
There’s a stock story.
There’s a global consumer story at its
core.
And of course, how’s that hit the major
tech stocks?
Which brings us nicely into one of the
major ones.
We watch Apple.
Of course, we’re going to follow up on
that story.
The headlines crossing earlier in the
hour.
The first quarter iPhone sales in China
have suffered the gadget’s worst
performance since COVID dropping 19%,
according to Counterpoint.
Let’s bring in Edwin Chan, Bloomberg’s
managing editor for Asia Technology.
Edwin, walk us through the decline here.
It’s.
I think this is the first kind of real
snapshot of what’s happening in China
that we’re getting.
But what it is, is Apple’s popularity
has been steadily declining.
I think around the time, but certainly
not just after Huawei released its now
infamous mate 60 smartphone, the one
with the advanced made in China Chip.
And I think what that was was kind of a
wake up call to many, many consumers
within the country that local brands can
can outperform.
And I think since then, we’ve seen a
resurgence of demand for local brands
like Oppo and Vivo and Honor and Huawei
itself, of course, And that’s steadily
eroded Apple’s market share.
At the same time, you see a lot of news
reports, including our own, about how
the government is actively encouraging
or discouraging the use of iPhones
within the workplace, particularly at
more sensitive agencies and
corporations.
So it’s kind of a perfect storm of
negative factors
that are that are kind of depressing.
Apple sales in China.
Is this a is this a product story, i.e.,
the opposition is better at producing
products that the Chinese consumer wants
at the moment?
Or is it that politics and what are they
buying?
What are the Chinese consumers buying if
they’re not buying Apple?
I think that’s the thing, as I was
alluding to, this has been a steady
transition.
It’s been a process, I think over the
past 2 to 3, maybe four years.
A lot of Chinese brands have begun to
escape the perception that there are
cheaper and lower quality, inferior
alternatives to Apple and Samsung.
Speaking of Samsung, they barely have
any market share left, whereas Apple is
starting to see a decline.
And I think companies like while we have
managed to get a lot better at not just
catering to Chinese tastes, as you
mentioned, but also coming up with
genuinely high quality products, good
cameras, for instance, longer lasting
batteries, better memory, that sort of
thing.
And I think Chinese consumers are
responding.
Okay.
So China still remains one of the
company’s biggest markets.
As you’ve as you’ve you spelt out, it’s
still important to Apple, but things are
becoming more difficult and geopolitics
does play a role in some of that.
So is this the direction of travel for
the foreseeable future or does this
change?
I think it depends on a number of
factors.
One is how hard Beijing the Chinese
government pushes consumers away from
Apple.
But the second, perhaps more important
factor is what Apple does in response.
I think there is right or wrong a
perception, at least within the Chinese
market, that Apple is lagging in a few
areas, not least in terms of integrating
artificial intelligence into its
gadgets.
I think a lot of brands have
gotten a gotten good publicity around
what they like to call the iPhone, a
computing edge computing, if you will.
And Apple is perceived as a laggard in
the generative AI race.
So it depends what Apple does to
overcome that perception.
And not just in China, by the way, but
globally as well.
At the same time,
consumers do need to see an evolutionary
upgrade in the next lineup of iPhones,
whether you want to call it the iPhone
16 or whatever.
There is a growing sense that there has
to be some a leap, a bigger leap forward
to really get consumers excited again.
Edwin, thanks so much.
Managing editor for Asian Technology,
Edwin Chen, joining us there with
thoughts on Apple and a challenging
market that still remains.
Mark Gurman had a really interesting
piece over the last couple of days
talking about the fact that Apple may
need to change tactics here and may need
to go for a more low end sort of price
sensitive phone, which it’s never done
before.
Up until now, it’s kind of chased
margin.
It may have to shift tactics here and
start chasing the top line in the volume
story.
How would that how does that kind of
upset the longer term story?
How does that upset the services?
I don’t know.
But but I think there is a that feels
like people are talking about a pivot
for feels like our expectations are
always so high.
With regards to Apple, I mean, a
business that’s really reinvented our
lives in so many ways.
How do you live up to your own hype in
that situation?
Yet you innovate, you anyway.
You have to keep innovating.
And that’s been the struggle.
But I’m also wondering if they sought to
change and transform their business
model a little bit.
Right?
Because I think 30% of Apple revenue
comes from services.
As far as well.
So it’s kind of the Apple cares the
screen fixing.
But that’s what the there’s so much
regulatory pressure in that space.
There is.
There is but I’m we keep talking about
Apple is kind of this hardware company
does it ultimately in say ten years time
become a services company to offset this
kind of weakness, this kind of exposure
Increasingly so perhaps.
I mean, from one increasingly services
company to a company that does do tech
services and that’s SAP is the best
performer on the Stoxx 50.
I think today’s up by setting up by 4%
at this morning so we got some
outperformance and Avast is doing also
pretty well as well.
So we have spoken to the CEO of Novartis
already this morning.
He was talking pretty confidently about
the outlook for that business as they
really strongly upgrade their guidance
and we will be hear from A.S.A.P
shortly.
930 UK time.
We’ll speak to jeff Curry, chief
strategy officer of energy pathways at
Carlyle.
You don’t want to miss his thoughts, of
course, on the commodities market.
And later this morning, we’ll be
speaking to the CFO of SAP, Dominic
Hasam.
That’s on the back of these numbers that
have sent this stock up quite strongly,
up by just over 4% as the pivot towards
the cloud continues.
That is it from us.
This is going back.
European earnings season gets underway. Novartis raises its forecast as sales outperform. Renault also exceeds expectations. Apple’s iPhone sales plummet in China and Euro private sector activity passes to the highest of the year. Markets Today has everything you need to know as markets open across Europe. With analysis you won’t find anywhere else, we break down the biggest stories of the day and speak to top guests who have skin in the game. Hosted by Anna Edwards, Kriti Gupta and Guy Johnson.
——–
More on Bloomberg Television and Markets
Like this video? Subscribe and turn on notifications so you don’t miss any videos from Bloomberg Markets & Finance: https://tinyurl.com/ysu5b8a9
Visit http://www.bloomberg.com for business news & analysis, up-to-the-minute market data, features, profiles and more.
Connect with Bloomberg Television on:
X: https://twitter.com/BloombergTV
Facebook: https://www.facebook.com/BloombergTelevision
Instagram: https://www.instagram.com/bloombergtv/
Connect with Bloomberg Business on:
X: https://twitter.com/business
Facebook: https://www.facebook.com/bloombergbusiness
Instagram: https://www.instagram.com/bloombergbusiness/
TikTok: https://www.tiktok.com/@bloombergbusiness?lang=en
Reddit: https://www.reddit.com/r/bloomberg/
LinkedIn: https://www.linkedin.com/company/bloomberg-news/
More from Bloomberg:
Bloomberg Radio: https://twitter.com/BloombergRadio
Bloomberg Surveillance: https://twitter.com/bsurveillance
Bloomberg Politics: https://twitter.com/bpolitics
Bloomberg Originals: https://twitter.com/bbgoriginals
Watch more on YouTube:
Bloomberg Technology: https://www.youtube.com/@BloombergTechnology
Bloomberg Originals: https://www.youtube.com/@business
Bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake
Bloomberg Espanol: https://www.youtube.com/@bloomberg_espanol
Bloomberg Podcasts: https://www.youtube.com/@BloombergPodcasts
——–
More on Bloomberg Television and Markets
Like this video? Subscribe and turn on notifications so you don’t miss any videos from Bloomberg Markets & Finance: https://tinyurl.com/ysu5b8a9
Visit http://www.bloomberg.com for business news & analysis, up-to-the-minute market data, features, profiles and more.
Connect with Bloomberg Television on:
X: https://twitter.com/BloombergTV
Facebook: https://www.facebook.com/BloombergTelevision
Instagram: https://www.instagram.com/bloombergtv/
Connect with Bloomberg Business on:
X: https://twitter.com/business
Facebook: https://www.facebook.com/bloombergbusiness
Instagram: https://www.instagram.com/bloombergbusiness/
TikTok: https://www.tiktok.com/@bloombergbusiness?lang=en
Reddit: https://www.reddit.com/r/bloomberg/
LinkedIn: https://www.linkedin.com/company/bloomberg-news/
More from Bloomberg:
Bloomberg Radio: https://twitter.com/BloombergRadio
Bloomberg Surveillance: https://twitter.com/bsurveillance
Bloomberg Politics: https://twitter.com/bpolitics
Bloomberg Originals: https://twitter.com/bbgoriginals
Watch more on YouTube:
Bloomberg Technology: https://www.youtube.com/@BloombergTechnology
Bloomberg Originals: https://www.youtube.com/@business
Bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake
Bloomberg Espanol: https://www.youtube.com/@bloomberg_espanol
Bloomberg Podcasts: https://www.youtube.com/@BloombergPodcasts
——–
More on Bloomberg Television and Markets
Like this video? Subscribe and turn on notifications so you don’t miss any videos from Bloomberg Markets & Finance: https://tinyurl.com/ysu5b8a9
Visit http://www.bloomberg.com for business news & analysis, up-to-the-minute market data, features, profiles and more.
Connect with Bloomberg Television on:
X: https://twitter.com/BloombergTV
Facebook: https://www.facebook.com/BloombergTelevision
Instagram: https://www.instagram.com/bloombergtv/
Connect with Bloomberg Business on:
X: https://twitter.com/business
Facebook: https://www.facebook.com/bloombergbusiness
Instagram: https://www.instagram.com/bloombergbusiness/
TikTok: https://www.tiktok.com/@bloombergbusiness?lang=en
Reddit: https://www.reddit.com/r/bloomberg/
LinkedIn: https://www.linkedin.com/company/bloomberg-news/
More from Bloomberg:
Bloomberg Radio: https://twitter.com/BloombergRadio
Bloomberg Surveillance: https://twitter.com/bsurveillance
Bloomberg Politics: https://twitter.com/bpolitics
Bloomberg Originals: https://twitter.com/bbgoriginals
Watch more on YouTube:
Bloomberg Technology: https://www.youtube.com/@BloombergTechnology
Bloomberg Originals: https://www.youtube.com/@business
Bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake
Bloomberg Espanol: https://www.youtube.com/@bloomberg_espanol
Bloomberg Podcasts: https://www.youtube.com/@BloombergPodcasts
8 Comments
Stop ambientalist crazy
Cyberopoliss partnerships are a testament to its credibility.
Cyberopoliss market entry timing couldnt be better.
The more I dive into Cyberopolis, the more bullish I become.
Cyberopoliss tokenomics are well thought out. Bullish!
Cyberopoliss partnerships are a testament to its credibility.
Just referred a bunch of friends to Cyberopolis – cant keep this a secret!
Cyberopoliss responsiveness to community feedback is impressive.