European Stocks Earnings In Focus | Daybreak: Europe 04/23/2024

European Stocks Earnings In Focus | Daybreak: Europe 04/23/2024

Good morning.
This is Bloomberg Daybreak Europe.
I’m Tom Mackenzie in London.
These are the stories that set your
agenda.
Stocks in Asia follow the US higher on
optimism.
Big tech will report healthy profits
this week, but could troubles at Tesla
spoil the party in Europe?
Traders I pay my data out this morning
for clues on the health of the economy
and the ECB’s rate path ahead.
Plus, the UK government’s controversial
Rwanda deportation bill is finally set
to become law, but questions remain over
how the policy will work and when the
first flights will take off.
We are in earnings season, of course, so
we bring you the results now crossing
from the French automaker Renault.
And it’s a beat in terms of the first
quarter.
Revenues coming in at €11.71 billion
above the estimates of 11.4, €3 billion
for Renault.
We know that being a focus in terms of
the demand, of course, for their
vehicles.
We know there’s been pretty decent
demand for the revamped Clio.
We’re looking, of course, for any lines
on the outlook for EVs more broadly,
competition from Tesla, competition from
Chinese automakers as well.
Of course, this is so beat in terms of
first quarter revenue for Renault, just
in terms of the full year, they’re
seeing FCF at least of 2.5 billion.
The estimates had been for 2.62 billion.
So a little bit below the estimates in
terms of full year FCF for Renault,
first quarter, again coming in with a
modest beat of 11.71 billions.
The ads have been for €11.43 billion on
Renault.
We’ll keep across that story for you.
Of course, in terms of the margins for
the full year, they’re saying operating
full year margins at Renault of at least
7.5%, roughly in line with the
estimates.
We’ll switch focus to the drugmaker
Novartis now because lines dropping on
the earnings story for that drug maker.
Again, they’ve been a little bit of
scrutiny around the sales outlook for
particularly for that key growth drivers
in terms of the drops within their
pipeline and look as to whether or not
they’re going to be raising their
forecast net sales for the first quarter
for Novartis coming in on a beat, 11.83
billion.
The estimates have been for just shy of
11.5 billion.
So it’s a beat in terms of first quarter
net sales, core EPS coming in above the
estimates as well.
So the earnings per share coming in
above estimates, $1.8.
The estimates have been for a little shy
of 1.7 billion.
So it’s a beat there as well.
And here’s the line.
And as you’ve been looking for, they
have indeed raised their full year net
sales and core operating income
guidance.
So it is a raise for Novartis.
That’s the redhead.
That was the key question for analysts
looking at this drugmaker.
And they have gone there.
They are seeing more momentum clearly
and are more optimistic about the year
ahead.
Novartis raising their full year net
sales and core operating income
guidance.
We will dig into that story later in the
show.
We’re also going to be speaking to the
CEO of Novartis about those results at
8:15 a.m.
UK time.
Let’s check in on the markets then.
A rebound in terms of the optimism for
US stocks yesterday, particularly within
the tech space.
The Nasdaq 100 ending up a little over
1%.
The S&P adding about 0.9% as well.
So making up for some of the losses that
we’ve seen over the last few weeks.
And that optimism continues to filter
through to the Asian session, the US
session, the European session, I should
say as well.
European futures pointing higher right
now by 5/10 of a percent.
The Footsie 100 breaking through fresh
records yesterday.
The Footsie 100 is coming back.
It’s done its catch up with some of its
peers at 8092.
Futures pointing higher for the footsie.
One had by 5/10 of a percent.
S&P futures, though, flat currently
after the gains that we saw yesterday.
NASDAQ futures looking off by about a
10th of a percent.
Of course, going to be scrutinizing the
Tesla story on the earnings front out of
the US later today.
Let’s look at the board and look cross
asset then a big week in terms of those
Treasury auctions and whether or not
there is going to be appetite.
It’s going to test that appetite for
those treasuries and that’s going to
kick off, of course, when we get a
preview of that.
US too, yet still above or just below
that 5% level now at 497, having crossed
above that.
And of course, yields have been at their
highest level all around the highest
level, of course, year to date, the
Japanese yen in focus, we had the
finance minister coming out and
suggesting that the conditions are
potentially there for intervention.
We watch that as a little bit of a pop
in the yen on the back of those
comments.
Currently 150 for gold.
The losses yesterday up 2.7%.
And further downside right now for the
yellow metal on these easing
geopolitical risks down $0.09 and 87.40
on Brent up $0.05.
Let’s cross over to Asia now where
everyone is standing by patiently in
Singapore for a deep dive on those Asian
markets April.
Yeah, we’re seeing a bit of a mixed
recovery in the Asia-Pacific.
The Hang Seng is leading the way.
That gained to the highest level in
about two weeks is underpinned by the
surge in these Chinese tech names.
Your MI twins, your $0.10.
But apart from that, it’s really a mixed
picture where you have the cost B,
that’s quite flat.
A lot will depend on those big tech
earnings.
A Nikkei that has pared gains from early
on in the session following those very
comments from the country’s finance
minister and the possibility of an
intervention.
Now, it does seem like sentiment towards
China is improving, though We have a
rare upgrade and it’s coming from UBS on
its Chinese Hong Kong stocks to
overweight from neutral.
It’s going to do this by downgrading
South Korea and Taiwan stocks.
And we’re seeing on the CSI 300, it is
negative today, but the MSCI China,
another key gauge, is ticking higher.
And indeed, since the January lows, it
has been recovering about 14%.
Now, the reasons behind this UBS call,
it says that earnings in China have been
fairly resilient, despite the property
sector woes, despite the macro economic
concerns.
And it actually sees an early pick up in
consumption and that household savings
could start trickling through into
spending as well as the markets.
So that’s what we’re seeing in China.
But flip the board, because we did hear
from the Japanese finance minister and
despite the dollar yen levels, 15485
overnight and this is coming against the
backdrop of a softer dollar as those
Middle East tensions ease and we’re
seeing those safe haven bets come back.
The finance minister’s comments perhaps
prompted because of this.
He talks about how they’re more
conducive environment for intervention.
We also heard from the BOJ governor and
those comments from COSBOA that also
seem to be geared towards curbing yen
weakness and that they reiterate they
could raise rates if inflation hits a 2%
target.
Let’s flip the board because that seems
to be raising the speculation on
Japanese that we could see that another
rate hike later on in the year, the
yield on the five year in Japan hitting
the highest level since 2011, and that’s
what we’re seeing in the Asia Pacific
for now, top.
Abraham, thank you very much indeed.
With the Asian market check for us.
We’ll stay on the Japan story as well
and get a little bit more analysis on
that, given the comments we’ve been
hearing as April’s outline from the
finance minister and away to himself as
well.
The yen then gaining a little bit after
Japan’s finance minister said the
environment is in place for intervention
if needed.
Do you continue to do?
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.
Okay, let’s bring in Mark.
Adam lives.
Mark Cranfield strategy is of course for
them life.
And Mark think is getting that warning
relatively stern from from the finance
minister Suzuki over and over in Japan.
We lead up of course to the BOJ meeting
and decision on Friday.
How is the yen expected to react around
that meeting?
It’s going to be a tricky week,
actually, for you and traders, because
even before you get to the Bank of Japan
meeting, you’ve also got this Treasury
auction coming up this week.
We probably talk about that in a moment.
But if yields rise in the meantime from
the United States and traders are
probably want to buy dollar yen
initially.
If you remember, the CPI event in the US
was the one that triggered bullion going
above 152 a couple of weeks ago.
We’re now not far from 155, so we’re
going to get through that first.
But clearly, the way that the Japanese
are speaking, there’s a lot more weight
being put on this week’s Bank of Japan
meeting.
And Governor Yoshida has said more than
once that the yen inflationary impact is
something he’s watching very closely
with that hasn’t gone away.
If anything, it’s getting worse.
He’s also very concerned about the
purchases of JGBs.
He doesn’t really want to buy the huge
numbers that his predecessor was buying.
In fact, he’s looking for ways to try
and reduce JGB holdings.
So that’s obviously a slightly hawkish
sign as well, which should support the
yen if he puts it together in a nice
package, which he may well do this
Friday.
So you’ve got the the finance minister
giving another warning.
We haven’t heard today from the chief
currency person at the IMF, but that may
be coming as well.
And you’ve got the Bank of Japan coming
up.
And when they talk about intervention
being in the right place, as it were,
what they’re really referring to is last
week we had the meeting with Janet
Yellen when she stood beside the finance
ministers from South Korea and Japan.
There was a kind of united front telling
the markets that the United States might
not get involved, but we’re not going to
stand in the way if those countries want
to support their currencies.
So that’s what he’s talking about.
The timing really is just the question
here, whether it’s going to come this
week or whether the Bank of Japan will
do enough to strengthen the yen by the
end of the week.
Okay.
Really interesting.
Not conducive environment basically and
not to the US the US saying yet you have
the green light essentially to talking
of the US there not a big week is we
flying around these Treasury auctions.
Is there any sense that there’s going to
be any, any wrinkles in this are going
to be well absorbed.
What what’s the appetite look looking
like for those auctions?
It’s difficult to see how this this
could run to smoothly.
We’re talking about $180 billion worth
of treasuries, including today, the
largest two year auction that’s ever
happened under the 80 billion.
Wow.
Used to be a large quarterly
refinancing.
We’re doing it all in one week and
yields are already pretty high.
We’ve seen that back up in yields
recently because of strong data in the
United States.
The Fed is telling us they’re in no rush
to lower interest rates.
The conditions are not great really for
doing such a huge amount of treasuries
spread over three days.
So certainly it wouldn’t take much to
push yields a bit higher this week to
absorb all of that without some
concession in the pricing seems a bit
unrealistic.
Unless, of course there are some
external factors, something that makes
everyone want to go for Haven, a place
that’s not on the table right now.
It could happen, but otherwise it’s
going to be a very strenuous week for
people in the bond market to try and get
through such an enormous amount when in
the background as well.
You have Fitch reminding them last year
when they did the downgrade during
United States.
Now, one of the reasons they did it is
because the US fiscal deficit is just
getting bigger and there’s no particular
sign it’s being raised in, which means
they’ll be even more.
Treasury is coming down the road, even
more issuance ahead.
So it’s not like you get through this
week and then you get a holiday.
No, there’s going to be a lot more bonds
for sale in the near future.
Wow, 180 billion in a single week in
terms of Treasury auctions, as you say,
a record auction of two years.
And as you say, that record may or may
not last.
Meanwhile, stand stand for very long,
given given the fiscal constraints, at
least of the US and the need to add to
that amyloid status is.
Mark Cranfield On whether or not these
markets can digest that Treasury or
those Treasury auctions through this
week.
Thank you very much indeed for the
analysis.
As ever now engulfed in turmoil over the
last week, We’ll switch focus now to the
Tesla earnings story with a preview.
Tesla set to report first quarter
results later on today.
It’s going to be huge, really, really
significant set of earnings for Tesla.
Shares down some 43%, 42% year to date.
Elon Musk making a big bets, of course,
on autonomous vehicles with the robotaxi
taking priority.
Let’s get more then with Robert Lee from
Bloomberg Intelligence to set us up for
this consequential day for Tesla and the
company’s investors.
And Rob, what are you and the team going
to be scrutinizing from these numbers
then?
Okay.
Well, first of all, I think the chart
tells you everything about market
expectations on these results, given the
recent significant underperformance.
But just to throw one number at you, if
you look at the adjusted EBIT number,
the market expect and that’s like cash
adjusted operating profit measure, the
market’s looking for that to fall 8% to
15% year over year.
That will be the weakest, a bit number
that the company will have reported
since Q3 2021.
So clearly, there’s a lot of pressure on
Tesla’s business at the moment.
Rob, when it comes to that pressure, the
competition out of China by day by day,
in particular, the domestic, the
challenges within the company debate
over the robotaxi versus the $25,000
car.
Everything else, the regulatory
challenges, the companies focus on.
Which of those risks do you think is
most salient right now for Tesla?
Paul Okay.
So breaking it down briefly into
timeframes.
I mean, near-term, I mean, Avs, I think
most people agree a very, you know,
attractive, secular, long term trend.
You know, arguably we will be driving
EVs in at some point in the future.
However, near-term, these things are
priced at a premium to mainstream
automobiles and in a slowing economic
economic environment that’s impacting
the demand.
At the same time, you’ve got very
aggressive volume players like Big Idea,
as you mentioned, moving into the market
and aggressively trying to take share,
which is pressuring Tesla’s business.
In addition to that, you’ve got some
strategic uncertainty as to whether, you
know, under the leadership of Elon Musk
as to whether this company is going to
move into the Robotaxi market or whether
they should go into the mainstream auto
market.
The company is leaning towards robo
taxis.
But again, you look at the share price
reaction, I think the market is given a
very clear view as to what it thinks on
that potential strategy.
Just to draw a little parallel with you,
based in London.
I mean, London cabs are an icon of the
city, aren’t they?
That company.
And they’re manufactured by Geely, a
mainstream Chinese automotive maker.
So robo taxis ultimately is going to be
a volume business globally.
The question is, is is Tesla well-placed
to prosper in that in the long run?
And the market seems to be questioning
that at this point in time.
Okay.
Really nice set up for this earnings
day.
The important earnings, of course,
coming out from Tesla and the sets up
there from Robert Lee from Bloomberg
Intelligence.
So maybe we need to be taking a closer
look at the London black cab owned by
JD, as you say, in terms of whether or
not they have plans along similar
routes.
Thank you, Rob, as ever, for the setup.
Here’s what else you should be looking
at for today.
Here’s what else should be on your
docket this morning.
We’re going to get a little bit more of
a round out of building out the picture
when it comes to the economic picture
out of the eurozone and out of Europe.
With those European PMI, they’re going
to be dropping between around eight
around 930.
So what are those?
We heard increasingly comments from the
likes of German Chancellor Olaf Schulz
suggesting that the German economy has
turned a corner, the IMF as well,
something a little bit more positive on
the European economy.
So if the PMIs later today bear that
story out in terms of the earnings on
the luxury front, then caring sales
dropping 5 p.m.
UK time the challenges around the Gucci
brand which brand in focus for us and
we’ve done a big take Bloomberg’s done
some great reporting on this so check
that out as well be breaking that story
down for you later in the show and then
set spam UK time.
Look, as Mark Cranfield was saying, a
record two year auction in the US two
year Treasury auctions.
So watching as to whether or not the
market will absorb that comfortably or
whether or not there will be strains,
that’s going to be really important.
6 p.m.
UK time as well.
Now coming up, after months of wrangling
in the UK parliament, Rishi Sunak’s
flagship Rwanda deportation bill is set
to become law.
We’re going to take a look at what
happens next here in London and in
Kigali.
That is next.
This has been bad.
Welcome back to Bloomberg DAYBREAK,
Europe.
Now we’re going to get the details on
the news that the UK Prime Minister,
Rishi Sunak’s flagship law to deport
asylum seekers to Rwanda has cleared
that key hurdle.
We’ll get the details on that.
But before we get to that story, I’m
going to get reporters out of London.
When we get reporters out of Kigali as
well to cover that story for us.
Before we get there, let’s bring you
some sound, a tape, some interview with
the president of the European Investment
Bank, who says that the EU support for
Ukraine is unwavering, unwavering.
Nadia Calvino spoke to Bloomberg about
the impacts of a $61 billion aid package
approved by the House of Representatives
over the weekend.
I think it was a very productive spring
meetings week.
We had many exchanges and I really see a
momentum in coming together and
supporting Ukraine very strongly, but
also deepening our cooperation within
the Multilateral Development Bank family
to contribute to climate change,
financing, peaceful and and more.
How would I say sustainable world going
forward?
We’ll get some more details on your
lending plans in just a moment.
There has been a sense of fatigue in
Congress around what is happening with
Ukraine in its war, its fight against
Russia.
There are some people asking whether the
there is a different way, whether this
should be something we continue with,
stick with, continue funding.
What looks like may be a never ending
war.
What would your view on that argument
be?
Well, absolutely.
We need to support Ukraine.
It is it is a very serious situation
that we’re living in.
It’s a threat to democracy at the end of
the day.
And and the way we see things, I think,
in the U.S.
and Europe, too.
And so from the European point of view,
there’s no doubt our support to Ukraine
is unwavering.
I think the decision that has been taken
by the US 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, of course.
But, President, did you see the vote
counts on those aid bills?
So when you look at something like the
Indo-Pacific, it was 385 to 3234 in the
House when it comes to Israel, it was
311 to 112.
It barely got through when it came.
Sorry, excuse me, to Ukraine.
How concerned are you about how deeply
divided US politicians are about aiding
Ukraine over, say, other issues like
Israel and Taiwan?
I really think that we should continue
to support Ukraine, as President
Zelensky was just saying on the screen.
They have a chance if we continue to
support them from the European point of
view.
You know, Ukraine is our neighbor.
It is a prospective member of the
family, if I can say it this way.
And thus we need to ensure that we keep
a secure environment in the region.
The other conflicts are just as
important.
I mean, the Middle East situation is
very is very worrying.
It’s a source of concern for all of us.
And we should try to stop that war and
that conflict, you know, as soon as
possible.
But Ukraine should not be forgotten.
European Investment Bank president Nadia
Calvino speaking to Bloomberg.
Plenty more coming up, including the
story around Rishi Sunak and Rwanda, the
deportation story, what it could mean
for his poll ratings as well, the
consequences on the ground in that
country.
This is Bloomberg.
Welcome back now.
UK Prime Minister Rishi Sunak’s flagship
law to deport asylum seekers to Rwanda
has cleared its final hurdle in
Parliament.
The Government says the first flights
are planned by July.
I’m joined now by Bloomberg right here
in London and Indira Ganga in Kigali for
the Rwanda side.
Let’s start with you then in terms of
the deportations.
What do we know about this deal?
Well, we know that the this will soon
become law.
He will receive royal assent later in
the week.
So it’s definitely going to happen after
a couple of years of wrangling over it.
Now, what Rishi will be hoping will
happen is that flights get off by the
beginning of July, if not earlier.
They might be hoping for a little bit
earlier that this that we then see a
steady stream of deportations to Rwanda
that this does have a deterrent effect
and then it improves his poll ratings.
Whether that’s actually guaranteed to
happen is less certain.
He’s had to kind of move heaven and
earth to make this to make this law and
to put this law into the law books, this
this plan into the law books.
Why has he put so much effort into this
particular policy?
Well, he definitely wants you to think
that he has moved heaven and earth to to
get this law passed.
And in some ways, he has There have been
challenges in the House of Lords, but
the government has itself delayed on
this a few times, despite describing it
as emergency legislation.
And that’s because behind the scenes,
the logistics of this are really, really
complicated.
And I think there’s still speculation in
Westminster that actually the government
aren’t quite ready yet to get these
these flights off.
We might hear more about that from from
the Rwandan side.
But the reason he’s put so much effort
into this is that it’s really the the
government’s flagship policy and their
last ditch attempt to get some a bit of
a boost in the polls ahead of the
general election later this year when
they’re way behind absolute one of the
key five policies.
Of course, what he set up very, very
nicely to bring in under a gag order
standing by in Kigali.
Indira, let’s cross over to you to get
that perspective then from Rwanda, the
logistics, the practicalities of this.
How close is Rwanda to being ready to
accept these deportations, these these
immigrants who are being deported to
that country?
Tom, Housing is ready there.
Several hotels on standby, one of them
being called hostel in Google that has a
bed, a mosquito net and a pool table.
And the government says it’s not Bob
Dylan, but it’s decent.
They’re also working on opportunities.
They’ll be teaching them Kinyarwanda,
the national language and job skills so
that they can integrate them into the
community and turn them into assets.
However, this is not without skepticism.
Rwanda has been criticized by Opposition
Leader victory in Kibera as a country
that is not democratic as compared to
the UK.
And so the good life that this asylum
seekers are looking for, they are not
going to find it in Rwanda.
Yeah, and of course, there’s been the
criticism there as well around Rwanda’s
human human rights record as well.
Is there any lingering doubt on the
suitability of Rwanda to host these
asylum seekers above and beyond what
you’ve outlined for us?
Tom.
For as long as the first fly takes off,
then attention will be shifted back to
the runners, legal and judicial system.
And yesterday, Prime Minister soon said
that necessary changes have been made to
accommodate the legal needs of asylum
seekers fairly and squarely once they
get here.
The Government has said that criticism
is unwarranted and President Paul
Kagame, in his tough talking nature, has
said that if this asylum seekers do not
come here, they will give back the money
and there are going up in Kigali.
Thank you very much indeed.
Coming up, the iPod presses a bullish
long term outlook for EVs.
This just days after Tesla slashes
prices to counter declining sales.
And that ferocious Chinese competition.
More on that story next.
This is Bloomberg.
Good morning.
This is Bloomberg Daybreak Europe.
I’m Tom Mackenzie in London.
These are the stories that set your
agenda.
Stocks in Asia follow the US high on
optimism that big tech will report
healthy profits this week.
But could troubles at Tesla spoil the
party here in Europe?
Traders IPM data out this morning for
clues on the health of the economy and
the ECB’s rate path ahead.
And earnings season is underway with a
beat for both Renault and Novartis, the
Swiss pharma giant raising its full year
sales forecast as blockbuster treatments
outperform.
So we tie the earnings story into these
markets.
Then European futures pointing higher as
we check the markets after a decent day,
of course, for the US giving some
reprieve to those who had had their
hands burned over the last couple of
weeks.
And you did see gains on the Nasdaq 100
little over 1%.
The S&P closed higher by 0.9%.
Futures in the US now looking a little
flat, frankly, and the S&P futures
looking flat now that futures looking to
license losses of around a 10th of a
percent.
But we are set, it seems, for a decent
session here in europe, up 14% across
the stoxx 50 futures footsie 100 futures
also pointing to build on the gains of
yesterday up 6.2% after the footsie 100
crossed through a fresh record.
Let’s flip the board and look cross at
that then a big week of course in terms
of these treasury auctions that we keep
an eye across the treasury curve, a
record offering of two year treasuries
later today, 496 on the two year just
coming back below that 5% level.
The Japanese yen in focus for us today
on some potential intervention comments
from the finance minister.
One 5476 Gold dropped 2.7% yesterday.
Further losses today down 7/10 of a
percent at 2310.
And Brent, a little bit of a gain coming
through for oil, up 14%, $87 a barrel.
Let’s cross over to Asia, where Abraham
is standing by with a view, of course,
or at least a take on the yen.
But we’ll start with the broader Asia
markets overall seeing some upside
coming through for HS tech, those tech
listed Chinese tech listed companies
over in Hong Kong.
What else is happening across Asia?
I think that is the focus for Asia start
a benchmark.
I mean, we see the Hang Seng that is
leading the charge, the recovery in a
way.
But elsewhere in the region, it’s pretty
tepid or even on the mainland where the
CSI 300 is sinking today.
Now, the improved sentiment towards
Chinese stocks seems to be coming
through from that upgrade that’s coming
in really rare from UBS on Chinese on
Hong Kong stocks.
And it seems to be that indication about
how in China those earnings are
resilient, despite the property, the
macroeconomic worries.
So that is the divergence we’re seeing
on the Hang Seng.
But elsewhere in the region, you can see
despite the tick up in the Nikkei today
and indeed the recovery from yesterday,
it’s failing to recoup the two plus
percent declines from last Friday.
The cost be also flat.
You really get the sense that a lot is
going to depend on those tech earnings
later in the week.
And indeed, we’re seeing some of these
tech light indices in the Asia Pacific.
They’ve been benefiting amid the recent
rout in the sector.
Now, let’s look the board take a closer
look at the UBS call.
It is about that key China gauge, MSCI
China, and it has been recovering since
the January lows, about 14% higher since
then.
And a lot of this has to do with how it
believes we are seeing that early signs
of a pickup in consumer spending and
that that could eventually filter
through into the stock market Tom.
Yeah.
Interesting call coming through from
UBS, as you say.
Look, a reminder as well today that we
will remain on intervention.
Watch for the end.
Absolutely.
And the yen weakness hitting 15485
overnight is coming in despite that
softer dollar as those safe haven bets
ease.
And it’s also interesting, despite the
intervention chatter from the finance
minister and then the BOJ governor in
comments seemingly geared towards
curbing yen weakness and that recovery
somewhat today, that if you take a look
at the leverage funds as well as the
asset managers, the yen weakness bets
that on the weekly data has risen to the
highest level since the records began
way back in 2006.
And this raises those concerns, those
risks when everybody seems to be piling
into one direction on the currency.
And this makes the yen vulnerable to a
pullback.
Let’s put the board, because as I say,
it wasn’t just the finance minister.
We also got those comments from the BOJ
governor and he reiterated that they
couldn’t raise rates if inflation moves
towards that 2% target.
That’s raising speculation that we could
get another rate hike from the central
bank later in the year.
And we’re seeing the bonds pulling back
in Japan.
The yield on the five year hitting the
highest since 2011 at one point on.
April Hong, thank you very much indeed.
And sending us up as well as we look
ahead, of course, the BOJ meeting later
this week on Friday, April, thank you.
With a market check and a gauge on the
Japanese yen.
Now to the eurozone where initial PMI
readings for April are due this morning
for the euro area.
And here in the U.K.
as well, the data is going to give us a
first insight into how growth is looking
in the second quarter.
For a preview, let’s bring in
Bloomberg’s Mary Nicola, who’s been
writing this for about this as well on
the Life blog.
Worth checking out the analysis coming
through from Mary.
Before we get there, though, Mary, how
will that improvement, the likely
improvement, that’s the expectation
There going to be a bit of a tick up.
How will that improvement in this PMI
data likely affect ECB rate expectations
in your view?
Yeah, it doesn’t look like it will
affect expectations because at the end
of the day, it’s still about inflation
and it’s still an inflation targeting
central bank that the ECB, of course.
So if it’s all going to be about
disinflation, do disinflationary
pressures come through?
But to be honest, if you look at the if
you see a considerable uptick and an
ongoing uptick, the momentum gathering
for growth, it should be a huge sigh of
relief for Europe.
They had a very rough second half of the
year in terms of how GDP had panned out
for the region.
So now this is a sign and especially
we’ve seen some of these signs that, you
know, Q2, the start of Q2 looks good
with earlier today.
The PMIs out of Japan and Australia were
actually better and looking more more
rosy for for the second for Q2 of this
year.
So for now, the growth trajectory looks
better, but we wouldn’t say we’re out of
the woods yet that the that the ECB
would consider to stand pat.
But at the end of the day, it’s still
going to be about rate differentials and
the disinflationary trend that is
happening in the eurozone that will
continue to drive euro dollar and rate
expectations.
Okay.
Really interesting.
And it sounds like a relatively positive
backdrop.
If growth picks up and you still get
that coming through by the ECB in June
as you and the team expect.
When we when we switch focus to the US,
then the auctions that are coming
through with absolutely huge auctions
for the two five sevens in terms of the
appetite, in terms of the potential
ruptures in the Treasury.
Should we break?
Should we be braced for ruptures or is
this going to be relatively well
absorbed?
There’s likely to be headwinds coming
through.
If you recall, the ten and 30 year
auctions weren’t so well received.
We’re seeing a pick up in in in Treasury
yields.
And of course, you still have some
headwinds from some of the data that’s
coming out this week, whether it’s GDP
or PCE.
So it likely will be that traders will
be standing by, standing on the
sidelines because of what to expect from
other data.
Then, of course, you had just last week
the IMF pointing out about the debt
levels in the US and the rising debt
levels.
So there is a is a confluence of forces
really that are that’s going to leave
Treasuries at Treasury auctions with a
few more headwinds than anticipated,
especially with such a busy week from on
the GDP side.
And then of course, just that remnants
of what we’ve heard from on on the debt
levels in the US.
Bloomberg lives.
Mary Nicola, thank you very much indeed.
And again, check out Mary’s analysis on
the Life blog on the term and of course
and on dot com sending us up of course
for that PMI data and the Treasury
auctions through the US this week.
Mary thank you.
Now switching focus, the International
Energy Agency says China’s exports are
set to change the map of the global EV
market.
According to reports out today, Chinese
companies made more than half of all
electric cars sold in the world last
year.
This comes with Tesla, of course, set to
report first quarter results later
today.
We know the competition with its Chinese
counterparts has been intense monitoring
all of this for us.
Bloomberg’s Oliver joining us out of
Berlin, of course, the capital of a
country very much exposed.
Some of these challenges
when it comes to the Tesla story,
earnings out today, a lot of news, a lot
of bad news, frankly, about the company
in the last few days.
What are you going to be looking for?
Yeah.
Tom, It’s almost impossible to keep up
with what we’ve got over even the last
two weeks, even the last week.
So, you know, there’s so much of this
background noise going on as you’re
going into the numbers.
And as you can imagine, Tom, it’s not
really all about the numbers.
We already got the first quarter sales.
Those really are disappointment.
That was the first fall since the
pandemic that Tesla had.
So I don’t think a lot of people are
putting a huge amount of stock in the
numbers themselves.
What they want as investors is what is
going on at the company.
What does the vision going forward look
like?
Earlier in the quarter, there was
already some of that question, right?
Because Tesla there seemed to be a sort
of a high crush on the EV sales.
There’s a lot of competition in the
market coming from China.
And the question was how is Tesla going
to retake the initiative?
Obviously, they were the sort of early
winners, and the answer to that question
was the cheaper model, the $25,000
model, Tesla model two, which was going
to start to sort of dominate the focus
for Elon Musk.
Then we heard that that plan had been
scrapped and that Elon Musk was then
going to sort of focus his energies on
these sort of robo taxis and autonomous
driving, which makes sense in a certain
sense because, you know, Tesla is in
some way the sort of great disruptor, a
cheaper car is kind of in keeping with
what the EV sector is doing.
A robotaxi would be obviously sort of
revolutionary, but it’s again very much
pie in the sky.
So as much as we care about the numbers
on a general sort of quarterly basis for
Tesla, really the focus as as often it
is, is going to be the call Elon Musk
speaking directly to investors and
shareholders.
What is the plan for this business going
forward amid all of this insane news
flow?
Frankly, we’ve seen over the last two
weeks, whether it’s the job cuts, high
level executives leaving, you know, the
pivot for where the business focus is
going to be, he really needs to sort of
retake the initiative and the story of
Tesla.
The story of Tesla.
I’m going to get details.
It’s such a big day for that company
with these earnings.
And we have a fantastic chart that kind
of puts the pull back into into context
for us.
And then I’ll get your views on what
I’ve been hearing from the IEA.
But this chart, if we can pull it up
now, shows, of course, we’ve seen this
pullback about 42% year to date for the
Tesla stock.
That’s the pullback.
But within the context of the pullback
that we’ve seen historically, at least
since 1999, for the Magnificent Seven,
it is relatively modest.
In fact, the biggest pullback coming for
Apple of almost 77% back in 2000.
Nonetheless, of course, it has sort of
caught the attention of investors.
They’ve been burnt by this.
That’s the context, though, in terms of
the pullback we’ve seen across these big
tech names.
Let’s bring it back to the macro OLLI
and the IEA and that outlook and how the
Tesla story feeds into that.
Yeah.
So listen, Tom, I mean, we had this
great report out of the IEA.
Really interesting.
Goes through a lot of different numbers,
is very comprehensive because there’s a
lot of talk around the EV market,
whether it’s the sort of, you know, is
it sort of stalled out?
You know, is it going to sort of
massively disappoint in terms of
expectations?
And this has been kind of the chatter
around it.
I mean, what they have found is in the
first quarter of this year, EV sales
grew by 25%.
That’s about the same rate as it was
last year.
And of course, coming from a much higher
base now this year, they expect 20% of
all cars to be sold to be EVs.
But really, this is Tom, as you were
alluding to.
Maybe this is really a China story In
China this year, they’re expecting 45%
of all cars sold, almost half right to
be EVs.
That is absolutely sort of mammoth,
right?
That is much faster than anywhere else
in the rest of the planet.
And you can kind of look at the Tesla
numbers to go back quickly to that.
To last year, in the first quarter of
last year, Tesla had about almost an 11%
market share in China.
By the fourth quarter it was 6.7%, which
just tells you how fast these companies
are bringing product to market and how
cheaply, because in China, 60% of EVs
are actually cheaper than combustion
engine vehicles.
And much of that is going to be exported
to the rest of the world, as we’ve
talked a lot about, it’s concerning over
here in Europe to policymakers.
But China is the biggest exporter of
cars now.
It has overtaken Japan.
It has overtaken
Germany for sure.
And so these are all the sort of the
context that is coming in, but also in
the IEA.
Before, Tom, before I leave you just
quickly, because obviously the IEA
historically talking about energy and
oil, the impact for the oil market, they
say by 2035 is that this will displace
in terms of EVs, will displace 12
million barrels a day in terms of global
oil demand, because there will not just
be those gas guzzling cars on the roads.
Wow.
Yeah China bought Tesla when to to kind
of scoop up the domestic market and get
them on game and they certainly have
managed to do that.
Bloomberg’s Oliver Crook thank you very
much indeed for the detailed analysis.
Set us up of course, for a big day for
Tesla earnings coming up.
Talking of earnings, Novartis raising
its full year guidance.
They did raise that guidance after
reporting better than expected first
quarter results.
I’m going to dig into that story around
the Swiss drugs giant.
What is propelling that relative
optimism?
That is next.
This is Bloomberg.
We do personalization and you can
subjectively tell me what you think
about yourself, but I can help me to
analyze your face better than you could
sometimes vocalize and put on the
personalization.
So bringing in eye to that is really
important.
Bringing an eye to our backend to
analyze our data better bring in AI to
make the company more efficient and give
people the equivalent of a personal
assistant in their team is a fantastic
way to support and grow your business.
Get to where we’re heading.
I think cheating is a word that isn’t
relevant.
It’s the progress of technology.
Okay, That was Trinny Woodall, the CEO
and founder of Make Up Brand three
London, Speaking exclusively to
Bloomberg.
Now, the US Federal Trade Commission is
seeking to stop an eight and a half
billion dollar merger between two
fashion giants.
Staying on the fashion story, the agency
filed complaints alleging that the deal
between coach parent company Tapestry
and Michael Kors, owner Capri, would
harm the luxury goods market is the
first time the Biden administration has
used its aggressive antitrust
enforcement to stop a deal in that
particular sector.
Now to the earnings story around the
drug space.
Novartis raising its forecast for the
year as sales of its blockbuster
medicines for heart disease and
psoriasis outpaced expectations.
The Swiss drug maker is pushing for
strong growth after years of successive
revamps, very pleased to say.
We’re joined now by Sam Pacelli, our
senior pharmaceutical analyst for
Bloomberg Intelligence.
Sam, thanks for joining us on set.
Early doors this morning.
What stood out to you from these
earnings?
Yeah, well, good morning.
First today, obviously the beat, but
that was the kind of the cadence we
expected.
Novartis last year every quarter beat,
raised, beat, raised, beat.
So that was on the cards, at least for
us.
What is interesting today is the
guidance change.
The guidance change didn’t move just one
step in jump two steps.
So especially at the core operating
profit, Core operating profit previous
guidance was high single digits.
Now they’ve jumped to low double digits,
mid-teens.
That’s a massive jump right in the first
quarter.
You’ll see that some of the costs were
better than expected or lower than
expected for the full year.
Our feeling is that this this change in
terms of the massive increase in
guidance is driven by a later than
expected generic hit.
When a drug is generic, it’s got really
high margins because that’s the end of
its life.
Then I’ll do my promotions anymore.
So when it when you save another quarter
or two quarters of it on your PNL, it’s
got a big hit, a big positive hit on the
margins.
So does that come back to bite them at
some India?
And yes, it will come.
But but look, I mean every quarter is
that extra amount of cash.
Yeah.
So nobody takes that cash away if the
generics ization is later.
Okay.
And then they’re working through on the
costs.
You’re saying that’s been some progress
there as well.
Is there is there a broader read across
from for Novartis story to the broader
pharmaceutical space, or is this
idiosyncratic to Novartis?
I don’t think so.
I mean, as I said, last year, Novartis
did the same thing, one quarter being
raised.
But the reality is that the other
companies have all got their own
dynamics.
Roche, for example, that’s got sales.
Remember, they only do sales on a
quarterly basis.
And we you know, we’re not expecting any
major issues there except for headwind
from currency.
You know, they reported Swiss francs,
Novartis reported dollars.
And the other thing for Roche, of
course, is that it’s the end of COVID
hit for them that that that that’s gone,
that’s all washed out.
Then you’ve got Sanofi and AstraZeneca
this week also.
And Sanofi has already warned for the
year.
So we’re not expecting much except for
the new CFO, maybe setting out his plan.
And AstraZeneca, they’ve got an R&D day
of the 21st of May.
So I don’t think they’re going to give
any big new updates there at the end the
Q1 and they only just reported Q1 a few
weeks, Q4 a few weeks ago.
So.
Okay.
Interesting.
So all very different stories actually
for each of these individual companies
going back to Novartis, then what is
driving what is driving the growth for
them?
Where’s that coming?
Is in particular particular parts of the
pipeline, particular regions, but they
have a pretty robust pipeline of drugs
and drugs on the market that are going
quite nicely this quarter.
Cosmetics, as you said in your intro for
psoriasis, did much better than
expected, about 100 million, I think, or
something in the region of six or 7%.
The same happened with the
cardiovascular drug and unfortunately is
one of the ones that’s going to go off
patent later on in the year potentially.
And that also beat.
So there is those drivers are there.
What we need to sees is growth from the
other drugs that they’ve launched
recently, a neuroscience drug, for
instance, called Xeljanz, Mar and a
bunch of other and recently launched
drugs.
They performed okay some missed some
beat a little bit or in line.
So these are the two things that are
driving them.
What we’re looking forward to is new
drugs coming along and helping them
grow.
Okay.
So watching for some of those new names
to see how they perform in the in the
quarter.
So have some facility at some facility
with the analysis that on the back of
that, Novartis, of course, upgrading
their forecast for the full year.
From Bloomberg Intelligence and across
the pharmaceutical space.
Thank you very much indeed.
What are we hearing as well from the
departing CEO in a little over an hour’s
time?
So do not miss that interview.
8:15 a.m.
U.K.
time on the Markets Today Show.
Now, SAP has reported first quarter
cloud revenue in line with estimates
with a boom in demand for artificial
intelligence fuelling the German
software company’s growth.
Europe’s biggest software firm has been
seeking to migrate customers from its
legacy on premise software to the cloud,
where it is offering air services this
year.
SAP announced discounts of as much as
50% to existing clients to accelerate
that shift to subscription models.
Shares listed in the US fell initially,
but then rebounded post-market.
We’re going to be speaking with the sea
SAP CFO Dominic Assam.
That is a later conversation at around
11:30 a.m.
UK time.
Plenty more coming up.
Stay with us.
This is Bring Back.
Welcome back to Bloomberg Daybreak
Europe.
Yes, we saw some upside yesterday, but
don’t get complacent.
That is the line from Jp morgan’s Marco
Colony, which they haven’t had that
calls right in the last two years.
But nonetheless, they still saw someone
worth paying attention to.
That’s complacency.
He suggests the earnings might give a
bit of a lift in terms of what’s
happening across the S&P this week, but
it’s going to be short lived because of
the interest rate concerns, specific
inflation concerns and valuations.
And again, he stresses there is some
complacency that target for the S&P.
One of the lowest on the street at 4200.
That would suggest another 16% drop for
the S&P.
So now the warning coming through from
jp morgan and Mark, i kilonova just bear
that in mind as we build up to this
earnings season.
Let’s flip the screen then and have a
look there.
And talking of earnings, it is the big
one this week, one of the most important
ones.
I think matt is going to be crucial as
well in terms of the input for tesla,
all the woes that are happening at this
company, the price cutting the China
competition.
And as a result, you are seeing short
interest in that stock soaring.
Don’t forget, it’s dropped already
around 42% year to date.
So scrutinize those numbers when they
come out from Tesla.
And again, expectations that that
competition with China is continue to
threaten that company and the margins
question as well as they cut those
prices.
Let’s flip the board and look at Apple,
a very different story when it comes to
Apple.
Yes, they are also down, by the way,
year to date, they’ve taken a hit this
stock year to date.
But Bank of America, interestingly,
because there’s the China challenge for
Apple as well coming out, one of its top
picks for 2024 is Apple.
It says this is a remains a relatively
defensive has a defensive moat, has all
of that cash of course, to play for.
Some are saying there isn’t an AI
strategy yet for Apple.
They haven’t clarified that.
Some have also concern points the
concerns around the Chinese market.
We’ve seen the dropping sales of their
iPhones in that market.
Nonetheless, though, Bank of America
saying this is one of the top picks, by
the way, the context is it has one of
the fewest now buy ratings since early
2020.
You can see the buy ratings in the blue
line and of course, the white line
representing the price of this stock.
Bank of America, though, saying that the
fortunes of Apple will turn around.
There’s plenty more coming up this
morning, including a conversation with
the CEO of Novartis.
They’ve upgraded their forecast for the
year.
That is going to be in focus 8:15 a.m.
UK time on the markets today show plus
Jeff Curry remember him Carlyle chief
strategy officer at energy formerly at
Goldman Sachs joining the post 9:30
a.m..
His views of course on the oil markets
always worth listening to and finally
going can speak to be speaking to the
CFO of SRP 11:30 a.m.
UK.
Time up stay Up next this is Bloomberg.

Bloomberg Daybreak Europe is your essential morning viewing to stay ahead. Live from London, we set the agenda for your day, catching you up with overnight markets news from the US and Asia. And we’ll tell you what matters for investors in Europe, giving you insight before trading begins.
On Today’s show with Tom Mackenzie, we cover the latest European earnings, the UK’s controversial Rwanda deportation bill and previewed Tesla’s upcoming earnings report.

00:00:00 – Bloomberg: Daybreak Europe Headlines
00:02:26 – Novartis Raises FY Guidance
00:04:41 – Markets Check With Avril Wong
00:12:00 – Tesla To Report Amid Turmoil
00:16:39 – Situation In Ukraine
00:20:16 – Rwanda Bill To Become UK Law
00:24:18 – Europe PMI Data
00:38:13 – Woodall On Tech and AI

——–
More on Bloomberg Television and Markets

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