Tech Stocks, Zuckerberg’s Meta AI Push | Daybreak: Europe 04/25/2024

Tech Stocks, Zuckerberg’s Meta AI Push | Daybreak: Europe 04/25/2024

Good morning.
This is Bloomberg Daybreak Europe.
I’m Tom Mackenzie in London and these
are the stories that set your agenda.
Stocks in asia follow Wall street along
with big tech making and taking a big
hit as matters earnings report spooks
investors.
The yen extends declines beyond 155 per
dollar as the DOJ meets.
Mining giant BHP approaches rival Anglo
American with a takeover offer in a move
that could spark the biggest shake up in
the industry in a decade.
Plus.
The avalanche of earnings begins in
Europe, with much of the focus on this
morning’s data around the banks,
starting with Deutsche Bank.
And it is a redhead crossing the screen
on that lender, Germany’s largest
lender, coming in with a beat for its
fixed income trading team.
There had been an expectation they would
do well and they have outstripped that
US peers with the fixed income trading
sales and trading revenue coming in
above the estimates, €2.52 billion above
the estimates of 2.41 billion in terms
of revenue.
The bank saying 2024 revenue slightly
higher year on year.
So it’s a beat on the revenue front and
importantly, it’s the fixed income
trading team at Deutsche Bank that’s
doing the heavy lifting in the latest
quarter with that beat in terms of sales
and trading revenue, in terms of the
fourth in terms of 2024, the private
bank revenue is essentially flat year on
year.
And in terms of their expectations, 2024
around FICA.
So fixed income and currency trading
revenue slightly higher year on year is
the expectation.
The bank sees the full year CET1 ratio
to remain essentially flat as well year
on year.
Again, in terms of the net revenue,
€7.78 billion net revenue in the first
quarter for Deutsche Bank, the estimates
had been for 7.73 billion.
So it’s a small beat in terms of revenue
as well.
But again, the importance of the focused
on the fixed income trading part of the
business adjusted costs as well.
We know that was in focus around this €5
billion in the first quarter.
Later this hour, we are going to be
hearing from James from Deutsche Bank’s
CFO that conversation at 6:30 a.m.
staying on the banking space, but
switching to the French bank BNP
Paribas, the redhead on this one.
And it’s a different story for BNP
Paribas versus that counterpart at
Deutsche Bank, because the first quarter
at fixed income currencies and commodity
sales and trading revenue coming in
below the estimates is a mess for BNP
Paribas on that front, revenue coming in
at €1.6 billion.
In terms of ICC sales and trading, the
estimates have been for 1.74 billion.
So a miss on that front.
In terms of the revenue for BNP in the
first quarter coming in at 12.4, 8
billion slightly above the estimates.
So on the revenue front, in the first
quarter, it was a beat for BNP Paribas.
But again, there will be some concern
around the softness in the fixed income
trading part of that business.
Not a huge surprise.
It had been a concern for him, this
leading up to this earnings drop.
But we’re going to get more detail again
with the CFO of that French lender on
the markets today.
Show that interview.
7:15 a.m.
UK time.
We’re also going to bring you the
earnings coming through from Nestlé as
well, a focus on volumes, a focus on
prices for this business.
The stock has been struggling and the
details as well coming through from
this, of course, provider globally, of
course, of all things from nutrition
ingredients to food sources as well.
Those results are coming through.
We’re expecting, in fact, Nestlé first
quarter organic revenue, the numbers
coming in up 1.4%.
The estimates had been for an increase
of just shy of 3%.
So it’s a big miss in terms of first
quarter organic revenue for Nestlé, in
terms of the full year organic revenue
forecast for the full year, they still
see an increase of about 4%.
The estimates have been for 4.1%.
So a modest, modest miss in terms of the
organic revenue outlook there for
Nestlé, they still say a strong rebound
in terms of the second quarter,
potentially first quarter sales coming
in just below the estimates as well for
Nestlé.
Meanwhile, it comes to semiconductors as
the micro.
We know there’s been focus on the
inventories around some of the chips in
the industrial space and autos as well.
They see full year net revenue of 14 to
$15 billion below the estimates of 16.2
billion.
So there’ll be some disappointment that
you would expect from some investors in
terms of the expectations around full
year net revenue coming from SD, micro
gross margins coming in below the
estimates as well, 40% versus 42.4% was
the estimates.
Second quarter net revenue coming in at
3.2 billion.
Also a mess versus the estimates.
So that concern continues around the
inventory build up around some of these
industrial and auto chips, it seems.
SD Micro Now let’s check in on these
markets briefly.
There’s a focus in the currency space on
the yen.
We’ll get the details on that shortly.
But of course, there was disappointment
around the metal results.
The.
Quarterly earnings actually pretty
decent, but it was the outlook coming
through from Mark Zuckerberg and the
uptick in spend, particularly around AI
that caused that after our slump in the
stock.
We continue to unpack that story for
you.
So the ripple across across the tech
space and you’re feeling that in Europe
as well.
European futures pointing lower by just
shy of 2/10 of footsie, 100 futures
currently flat.
S&P futures pointing lower by 7/10 of a
percent.
NASDAQ futures looking at a drop.
A look at that, a 1.2%.
Let’s split the board across that set.
Then we had another treasury auction
yesterday, relatively well absorbed, not
as well as the two you earlier on in the
week, the US ten year currently at 464
the Japanese yen crossing below that 155
level, the biggest drop you’ve seen in
three decades against most of the other
major G7 currencies, $88 a barrel on
Brent, up 2/10 of a percent.
Let’s get the detail on the yen story
then and intervention.
Watch with April Hong standing by in
Singapore.
April
Yeah, the way that US yields moves
overnight little wonder why we saw the
dollar yen at those levels we haven’t
seen since June 1990.
And back then when it bridged 155 it was
a matter of a couple of days before then
breach 160.
Now we’re seeing a seemingly that pace
of depreciation of the Japanese currency
picking up as to whether it meets the
Finance Ministry’s criteria for
intervention of rapid moves, that’s
another question.
The finance minister, for his part,
speaking in Parliament today saying he
cannot comment on the Forex moves,
although they are watching it very
closely and why he can’t say much.
Well, it’s got to do with the BOJ, that
meeting under way of the board.
Let’s take a look at what we’re seeing
on the yen, not just against the
greenback but also against the Aussie
and the euro.
That weakness coming through there.
So some actually see this as yet another
reason why the finance ministry might
have to step in.
Indeed, they see this coming in post
bulge where the central banks not
expected to move on rates, but could
send more hawkish signals just because
of the yen depreciation and the timing
of it all as well.
Because don’t forget, we have the US PC
numbers coming in late Friday night Asia
time and then on Monday, a holiday in
Japan.
So it would be, as some analysts say,
perilous for the finance ministry not to
move us on the board.
I want to take you to what we’re seeing
in Asia.
Stocks.
There is a divergence, but what stands
out is how quickly sentiment can turn
today.
The losses on the Nikkei on the Cosby
Hour, no thanks to what we heard from
Mehta, but we’re seeing Chinese stocks
pull ahead, Tom.
April Hong in Singapore, thank you very
much indeed.
With the Asian market check and the
focus, of course, on the intervention.
Meanwhile, a big day in terms of
dealmaking, potential dealmaking.
BHP then making an unsolicited takeover
bid for Anglo American in what could be
the biggest shake up of the global
mining industry in over a decade.
For more on this Bloomberg scoop, let’s
bring in commodities reporter Martin
Ritchie.
Martin, how potentially significant
would this tie up be?
Yes, it is a very big deal for the
mining industry and it could be one of
the biggest many deals transactions this
year, as you said, Tom.
And look, this deal, I would say the top
line is it’s all about copper.
The company BHP that is bidding for
Anglo is one of the world’s biggest
copper producers.
And in fact, if this deal goes ahead, it
will become the world’s biggest by a
clear margin.
I think so
If you’ve been following the commodities
space, you find a lot of miners trying
to muscle in on copper because they see
this decade of demand booming ahead of
us.
You’ve seen Rio Tinto try and build its
copper assets.
You’ve seen Glencore, the big
international trader and miner, try to
take over Teck resources trying to get
copper.
And now this is set to be one of the
biggest transactions in the mining space
in many years.
Okay.
Bloomberg’s Martin Ritchie with some of
the detail around that potential tie up
between BHP making that bid for Anglo
American.
We continue to watch that story, of
course, at IS as it evolves.
Thank you, Martin.
Now, disappointing earnings from matter
have investors on edge ahead of results,
of course, from Alphabet and Microsoft
later today matter plunging 15%,
post-market after its second quarter.
Sales forecasts missed estimates and it
announced plans to spend billions more
than expected on a developing that’s
bringing markets today.
Anchor Kristie Gupta for the details.
Pretty what stood out to you, the
disappointment around the spending
plans?
I’m having deja vu when it comes to
media platforms because this is
something that they talk about over and
over again.
These big projects that media platforms
chooses to take on.
They put all this money behind it with a
time horizon that becomes very hazy.
And that’s where you’re starting to see
investors very shaky because they’ve
seen this movie before.
They saw it with the metaverse.
They saw it as well.
When it comes to kind of virtual reality
for for media as well, not to mention
simply the rebranding and trying to
tackle on a a more youthful demographic.
Apparently, no one uses Facebook
anymore, someone tell me.
But I think what’s important about this
as well is that they’re doing that yet
again when it comes to the air space.
And that’s really where you’re seeing a
lot of this.
What’s interesting, though, it’s coming
amid a background where a lot of these
big tech names are rallying on that air
phrase matter, not getting in on that.
And I think it’s that’s a really
interesting precedent for some of the
other big tech names as well that have
very different businesses that are
perhaps more adjusted and more kind of
vulnerable to the air space, which
brings to the forefront the Microsoft
and Alphabet story.
They’re reporting after the bell today.
Microsoft specifically when it comes to
that cloud revenue growth, remember that
Azure business is significant, not to
mention their 49% stake in open air as
well.
So it’s really about the growth there
for Alphabet.
It’s a little bit of a different story
in that they need to reclaim that market
share.
Microsoft was they are the major
players.
They’re the dominant players in the
cloud space, only getting bigger by
that.
I spent in a way and able to capitalize
on it in a way that media has not.
Now Alphabet has to kind of prove its
own worth and say it can do the same.
And that’s why that cloud market share
is so important.
Can Alphabet then compete with the big
boys, quote unquote, with Microsoft and
us?
Okay.
Kristie Gupta, anchor.
Of course, the market is breaking down
the details around the matter story and
of course, the investor disappointment
around their spending plans and setting
us up as well for another big day of
tech earnings Kristie.
Thank you.
Talking of tech coming up, unicorns and
things, it unveils its new generation of
a AI avatars.
The company’s CEO joining me next for an
exclusive conversation.
Stay with us later as well.
And as opt out, the Aquanaut CEO joins
me as the energy giant reports a
revenue.
Be that interview at 6:40 a.m.
we’ll get his views, of course, on gas
and oil prices as well.
Stay with us.
This is Bloomberg.
Welcome back to Bloomberg Daybreak.
Europe Now unicorns and thieves here is
unveiling its new generation of alien
avatars.
Today, the UK based company says
so-called expressive avatars and you can
see them on the screen now can react
emotionally to whatever they are
required to say, resulting in ever more
human like.
Digital twin so-called digital twins.
The video back company saw its valuation
hit $1 billion last year when it raised
$90 million in its latest funding round.
Joining me now, I’m very pleased to say,
is CEO and founder of Synthesis, Victor
Reppert.
Barely.
Victor, good morning.
Thanks for joining us on set.
Really appreciate it.
Bright and early.
Another update.
It’s a major upgrade for you and for the
business.
What are the what are the applications?
What are the use cases for this and what
have your customers clients been saying
so far?
It’s early days, I know, but what do you
expect the response?
And what does it tell us about the
ambitions of synthesis?
So.
Well, so what we’re seeing so far and we
have seen for the last four years after
we released the first version of these
Avatar technologies that found an
initial great use case for them.
I think most people that saw those
videos, I think we’ve had an amazing
avatar for you as well and say that
they’re great, but they’re not.
It’s not 1 to 1 with a real video yet.
Right.
But as we approach that, we unlock more
and more use cases through the beta
testing we’ve done so far with these
avatars that can show emotion.
They can support empathetic, they can be
friendly, they can be upbeat.
We are not a lot of new use cases.
Health care is a huge one.
It’s a lot of interest in companies
wanting to build more personalized
patient messaging, for example.
But this type of technology is really,
really useful.
We’re seeing sales and marketing really
begin to open up as these avatars are
able to be a bit more excited and have a
bit more energy than what they have had
before.
So it’s a big step for us.
It’s the first version of this.
Technology is based on our Express one
model, which is such as a model that
have sort of decoded the relationship
between what we say and how we say it
about tone of voice, facial expressions,
so on and so forth.
And I think by the end of this year,
we’ll be much, much closer to being able
to generate more advanced types of
videos that have someone just talking at
the screen, actors walking around room
sort of conversations.
And the more we go down that path, the
more use cases ultimately will unlock
with with a video.
And that can happen as soon as this, as
soon as the end of this year.
So we’re going to listen in now, take a
little bit of a sound bite for what some
of your video, at least some of these
avatars can do just to give the the view
as an example.
So let’s take a listen then I’ll follow
up with the question.
I am very happy.
I am so upset.
I am frustrated.
Okay.
So you can see you can see the emotion
going through.
So you see these avatars text and they
react emotionally to that.
This is something we’ve talked about
before.
I know this is a question you get all
the time, but we get this we get this
wow factor when we see this that we saw
that in the newsroom and we revealed
these yesterday.
So some of the producers, the wow factor
and then it’s followed by the fear
factor.
Is society ready for this kind of
technology, do you think, Victor?
I think it is.
But I think, you know, roll this out in
a responsible manner is incredibly
important.
And for us, it’s really important to
actually be the leading company in terms
of responsible AI around video, which is
what’s come out set.
All right.
So we treat safety as a product inside
us enthusiasts around 10% of the head
count that works just on this.
It is automatic systems and algorithms,
but it’s also humans who essentially
make sure that our systems are not
misused.
So I think, as we’ve talked about
before, right, these technologies will
be used by bad people and they will do
bad things with them.
And we need to do what we can to make
sure that that they don’t.
And for us, it’s important to take
leadership in this.
I think if you look at the general
industry, there are some players who
take this very seriously.
There are other players to take it
seriously.
I hope we can set a great example so
that everyone who’s commercially
developing these technologies and have
the state of the art of these
technologies truly care about making
sure that.
Okay, so 10% of the workforce focused on
some of these risk issues and these
safety issues.
It’s a it’s a big year, of course, for
elections here in the UK, in the US and
also India as well, presumably.
Is there anything you’re doing
specifically around around potential
misuse in this big election year?
So, I mean, custom operation is a
continuous evolving product for us,
right?
One of things we’ve done in the last 6
to 9 months is take a restrictive
approach to news like content, which
means that if you’re creating current
events or news like content, you need to
be an enterprise customer, which means
that we know who you are.
We know you are a reputable company and
that is to some extent, you know, trade
off that, that also have negative
impacts.
There’s lots of like a great people who
do journalism where it doesn’t sell work
at a big company, but we think it’s the
right thing to do to be a bit
restrictive on these technologies until
society is kind of adapted to it
properly.
Right.
And I think that that is happening
rapidly, but we believe that’s still the
right thing.
And you touched on some of your
competitors.
Who do you see as your main competitors
right now?
I think there’s a bunch of companies.
There are some startups, there are some.
The bigger companies like this is
clearly I think everyone understands now
that this technology is very valuable.
It’s going to be a huge market built
around that and people are approaching
it from different sides.
There are some some companies going more
for like the bottom end of the market,
which generally means more focus on
social media content.
They have a lot less safeguards and
we’re more focused on the enterprise
market.
But we’re also beginning to see big tech
companies beginning to begin to showcase
early iteration of this tech, right.
So yeah, I think that’s great.
What advantages do you see that some
things you has versus for example, open.
Saw, which is a text or video product
that they have.
So in general, we don’t see ourselves as
a research company building foundational
models.
Opening, I think, wants to be the
company that provides the infrastructure
for other companies to build on top of.
We said it applied layer.
We’re very focused on a very specific
use case which is talking Head Start
content for enterprise use cases.
So, you know, something like a star is
like, give me a video of a dog running
on the beach, the paraglider in the
background.
That’s not really what we operate in.
We operate much more in building a
product for the enterprise.
We can create fantastic videos for
patient communications or training or
sales and so on.
So I think as long as we focus on our
kind of sliver of the world, we can be
the best at that.
And that is goes much further just off
the air models.
Ultimately, people buy products, not
just access to air models.
And that’s where we play, right?
Like that.
The models are a big component of the
product.
But I think what we’ll see this year is
that the companies that win out are the
companies that build real products, that
solve real problems.
And I think we’ll move away from this
very model centric view of the world,
which the last 12 months have been this
model, that model, this model.
Yeah, I think I think ultimately, you
know, when the dust settles, people buy
products.
People want to solve problems in the
business.
They don’t just want to buy technology
for the sake of technology.
Well, and look, you allude to this you
guys set up in 2017.
You’ve been around doing this for a long
time.
But before all this froth arguably kind
of came to the fore, the sugar rush, the
funding into A.I..
You look at companies like Mistral over
in France, they’re at a $5 billion
valuation now off to like, what, 12
months or something?
Is this are we are we in a way, in a
bubble at this point?
I think you could say they’re bubble
tendencies.
I think, you know, what what we’re
seeing right now is that traditional
SaaS has become for investors very
boring, not very attractive multiples.
It’s like basically any other business,
right?
AM focuses down I, I think to some
extent, you know investors have found as
a part of kind of redoing some of the
things that led to what happened in
2021.
But the bubble kind of burst, I think is
a very real shift in technology.
I’ll give you one example of this.
Last year, I think was a year of
experimentation.
Lots of companies, everybody was piling
in to try out these things.
Right.
Which they also did with, you know, VR
and all the kind of previous crypto and
other kind of bubbles we’ve been
through.
And this is going to be the year of
letdowns.
But I’m seeing the enterprises that even
though people have done pilot.
A lot of them have not lived up to the
expectations.
People are running more pilot projects.
That was not the case with VR and
crypto, where people sort of let it
down.
So I think the value is definitely
there.
Valuations maybe a little bit out of
whack, but I think over the long term
it’s going to be truly, really, really
interesting.
Victor Republica Synthese, thank you
very much indeed.
The last time I spoke to you said I had
about a two year timeline before I was
replaced by one of your avatars.
It sounds like that time frame is short.
And Victor, thank you very much indeed.
With the latest generation of their AI
avatars, plenty more coming up.
We continue to keep across all these
earnings for you.
This is Grim Bay.
Welcome back.
Happy Thursday.
Welcome back to Bloomberg Daybreak.
We have a big day, of course, on the
earnings front.
We’re going to get the latest lines for
you crossed in the last couple of
minutes from Puerto Rico.
Of course, the company behind the likes
of Absolut Beefeater and Malibu, the
drinks and liquor maker.
And it’s a sizeable mess in terms of
third quarter organic sales from this
company coming in flat 0% in terms of
third quarter organic sales, the
estimates had been that they’d see a
pickup, an increase of 2.8%.
That did not happen.
In terms of what’s happening regionally,
we know there’s a focus on the Americas.
LatAm, of course, within that mix, third
quarter Americas organic sales
contracting by 7%.
The estimates had been that it would
contract by just shy of 4%.
Third quarter sales overall for Puerto
Rico coming in at €2.35 billion below
the estimates of 2.48.
We know there’s a challenge as well in
terms of the draw down from some of that
customers.
The build of inventories, particularly
in the US and the Chinese market, have
been in focus as well.
The interim dividend per share at €2.35.
Coming up, Deutsche Bank’s first quarter
FDC sales and trading revenue beating
estimates.
Our interview with James von Malka
Deutsche Bank CFO, is next.
Do not miss that.
This is Bloomberg.
Good morning.
This is Bloomberg Daybreak Europe on Tom
Mackenzie in London.
These are the stories that set your
agenda.
Stocks in Asia follow Wall Street lower
with big tech taking a big hit as
matters earnings report spooks
investors.
The yen, meanwhile, extends declines
beyond 155 per dollar as the DOJ meets.
Mining giant BHP approaches rival Anglo
American with a takeover offer in a move
that could spark the biggest shake up in
the industry in a decade.
Plus.
The avalanche of earnings begins in
Europe with a tale of two lenders
Deutsche Bank’s fixed income trading
revenue base.
But at BNP F ICC traders Trail for a
fourth straight quarter.
Let’s recap those Deutsche Bank earnings
then, because the key one that jumped
out, as we said in the headlines the
first quarter, fixed income sales and
trading revenue coming in at a pretty
solid beat for the team over at Deutsche
Bank, €2.52 billion, the estimates now
being for €2.41 billion.
Don’t forget, in terms of the stock
performance as well, the stock is up
well around close to 62% in the last 12
months.
The broader picture when it comes to
Deutsche Bank, first quarter net revenue
coming in at 7.7, €8 billion, again
above the estimates modestly above, but
still a beat.
The estimates happy for 7.73 billion.
And in terms of their outlook for 2024,
they’re seeing revenue slightly higher
for 2024 year on year.
But again, it’s the fixed income team
that did the heavy lifting is the
lending part of the business was a
little softer and Deutsche Bank
outperforming many of their US rivals as
well.
First quarter adjusted cost by €5
billion.
We’ve been speaking to Deutsche Bank CFO
James Smolka.
Take a listen.
The market tends to focus on the
investment bank.
We’re pleased.
We’re very pleased with the results
there.
13% up year on year, our FIC business
and also within that, the financing
business doing very well at origination
advisory for the corporate finance
products for us also quite well at 54%
up year on year.
So we see very strong momentum and
client engagement there.
We’ve we’re also seeing resilience and
growth across the other three
businesses.
And so it’s nice to have a shining star.
But but seeing resilience on the more
balance sheet, sensitive businesses of
our corporate bank and private bank is
encouraging.
And there’s also fee and commission
income growth there and assets under
management and revenues in our asset
management business also growing
strongly.
So we’re encouraged by the momentum
we’re seeing across the business and
casting us a little bit into the future,
I should say the recent past in April.
What have you seen in terms of fees and
trading there?
Look, I think the trends from Q1 have
continued into into April in our and our
fixed income and currencies businesses.
That would really be a slower macro
environment.
Volatility has been relatively low, but
but continued momentum in in credit
trading and emerging markets.
And so that’s been a an okay mix for us.
We do think that the recovery in the
wallet in corporate finance will
continue across the year.
Q1 was obviously very strong in debt
products, so investment grade and a
recovery in non-investment grade.
We do expect that to continue and
hopefully see see a further recovery in
M&A and equity activity.
And to take us to M&A and IPOs and the
animal spirits within Europe, obviously,
we have the rate story sort of
percolating.
Here Are the animal spirits back in
Europe last time we spoke, you’re very
optimistic on M&A.
Has that come through?
You’re coming back?
Yeah.
If you look at announced volume in the
first quarter that that has recovered,
obviously the fee revenue that that
generates is always delayed.
But but we’re that trend is there.
To be fair, it’s been more reticent than
than I would have expected, especially
with equity markets sort of sort of at
all time highs.
So I think there’s a degree of
uncertainty still out there.
As you mentioned, path of rates and and
geopolitical uncertainties.
So there are some things still holding
the animal spirits back a little bit.
But but the momentum is there.
And before we get to rates, I want to
talk quickly about just trading, given
how you’ve outperform and FICC
particularly versus the US peers, are
you looking to build that business out
further, perhaps doing more on U.S.
rates?
We’ve been investing steadily over the
years.
So so no dramatic change, but I think a
continued targeted investment around
Nayak and his team have been very
deliberate in in just filling in gaps
that we have.
We’ve talked about flow credit, for
example, where we’ve we’ve made
investments around the globe and that
that is showing through.
We we have and continue to invest, as
you say, in U.S.
rates and we’ve built our business
there.
So it’s been it’s been filling in, if
you like, the white or wider spaces.
And we’re very encouraged by by the
platform We now have not just people but
also technology and connectivity with
clients.
And in terms of the ECB, what are you
expecting from the ECB this year?
And I’m trying to get a sense of how
that works itself through the business.
We saw a little bit of weakness, a
little misses on the private bank, the
commercial bank, AIB outperforming.
Is that the story now, net interest
income dead?
We’re going to.
Well, no, I mean, so so there was
certainly and we talked about this with
investors on the 1st of February, a year
on year decline in net interest income.
Absolutely.
We called for and we’re seeing that
pressure roll through those businesses.
Interestingly, the the the performance
there is better than we had anticipated.
And so so deposits, particularly in the
private bank, by the way, in here in
Germany, deposit margins have held up
better than we thought.
There’s been some volatility in sort of
what I’ll call non-repeating elements of
non-interest income.
But the underlying performance has been
quite stable in the banking book
business at about 3.3 billion of
revenues on a quarterly basis.
And so the path that we think we’ll now
walk from here is a little bit further
down in Q2 and then a recovery in the in
the back half of the year and interest
income in those two business.
And so what are you expecting from the
ECB?
Do you feel that inflation is under
control in Europe?
We would align with the market sentiment
that June is is the beginning of the
sort of cut and cutting rate cycle.
You know, Europe has been, if not in
recession, in a much slower growth mode.
I think the transmission mechanisms vary
across the countries here, but have been
felt in the economy of of interest
rates.
And so, you know, we think that that
second cyclical sort of point has been
reached and which is actually
encouraging for growth.
As I look to the back half of this year
and into 25 and as you’ve seen more
recently in some of the numbers in
Germany have started to to increase as
well, manufacturing activity, what have
you.
So that seems like an encouraging
outlook to us.
So when you when you speak to clients,
what’s driving their decisions right
now?
Is it the fact.
We get that first cut in June, isn’t the
fact that we’re actually going to get
fewer cuts than anticipated or is it the
Fed?
I think it’s the general outlook for the
global economy.
So so our clients, especially corporate
clients, you know, manufacturers are
looking at growth in their in their
sales markets and how they’re positioned
to to meet demand.
You know, one indicator for us is going
to be loan growth, which is has also
been slower to start to build than we’d
anticipated.
We’ve been running flat essentially in
the past couple of quarters and have
been anticipating some some some
increase in demand.
Now, there’s a variety of factors at
work there as well, but we do think that
momentum is there and will begin to make
itself felt.
Do interest rates play a role?
Sure, they play a role, but I think the
general outlook and confidence in the
economic direction is is more more
powerful.
And you think that that is going to be
there’s gonna be a catalyst for growth
in Europe in the back half of the year
because I think a lot of people are very
reticent to give that forecast.
I think the catalyst, the general
environment and catalysts are there
again in a move away from interest
rates, although a declining interest
rate environment will be supportive of
growth.
I think just as you as you go through
the back end of a cycle, I mean, take
real estate as an example in the
construction trades here in Germany,
that’s been through a really a two year
decline and eventually it finds a floor
and a point from which, you know,
developers and and builders, you know,
find confidence with the the prices in
the in the real estate market, you know,
help find a floor and we grow from
there.
James Mendonca, Deutsche Bank’s CFO,
speaking to Bloomberg’s Oliver Crook on
the back of that beat for the earnings
coming through from Deutsche Bank with a
particular focus on the fixed income
trade team and the trading and sales
upside that came through that.
Staying on the earnings story, Athos,
the French I.T.
company, of course, it struggled with a
number of accounting issues and of
course downgrades coming out with its
latest earnings.
And it’s a mess in terms of the first
quarter revenue, €2.48 billion.
The estimates had been for around €2.8
billion year on year.
They have seen a little bit of holding
back in terms of some of their clients
not signing on to new contracts and
important as well, delaying a deadline
for some of these new creditor proposals
as well, pushing that deadline back from
Friday of this week to May the third,
and saying they may need to raise fresh
funds and cut more debt as well.
So those are some of the key lines
coming through from that French I.T.
company and first quarter revenue coming
in with a drop, a contraction of 11%
year on year switching focus from tech
to the drug space.
And it’s a different story coming
through for Sanofi.
It’s a beat, in fact, particularly when
you look at the sales numbers for this
French drugs maker sales at 10.4, €6
billion, the estimates have been for
€10.3 billion.
So beat that in terms of the sales for a
business.
That again is also trying to try to
restructure and focus on some of its key
drugs, trying to carve off other parts
of the business, less well-performing
parts of the business.
And in terms of the new drugs in its
pipeline, one really standing out, which
is focused on its hemophilia products
and one of its hemophilia medicines
getting strong pick up in the US as
well.
So investors will no doubt be
scrutinizing that.
We know there was going to be a lens on
some of their new drugs within that
pipeline.
The stock, by the way, down about 11% in
the last 12 months.
They have reaffirmed their financial
guidance, Sanofi for 2024.
They’ve reiterated that EPS guidance for
the year and again, first quarter EPS
beating the estimates for Sanofi.
There’s plenty more coming up, including
more earnings of course in the banking
space.
We’ve had BNP Paribas, we’ve had
Deutsche Bank, a beat from Deutsche
Bank, analyst from BNP here in the UK,
Barclays earnings dropping 7 a.m.
UK time.
Really interesting given the
restructuring happening at that lender
as well.
Meanwhile, at 4:45 p.m., Boeing West
yesterday, their key rival Airbus
reporting earnings 4:45 p.m.
later today, Boeing earnings as well.
So think about whether or not they get
an uplift from the challenges of Boeing
getting more aircraft out to, of course,
their clients is a key challenge for
them as well.
Meanwhile, US earnings, big tech, of
course, still in focus.
The disappointment, the concern around
matter, well, it switches the focus to
alphabet.
Of course, Google apparently today and
Microsoft, Amazon and Intel.
To what extent is the story proving a
drag in terms of costs for those
companies or in fact, coming through
with a bit of a lift?
Those details out later today.
Coming up on the energy front and is up
and up the Aquanaut CEO joining me as
the energy giant reports a revenue beat.
That is next.
His views on the outlook for oil and gas
and how they’re shifting to renewables.
This is bloomberg.
Welcome back to Bloomberg Daybreak
Europe.
Now, Ecuador has reported a decline in
first quarter earnings as a result of
lower gas prices, but the Norwegian
energy giant’s numbers were better than
the previous quarter, with higher
liquids output offsetting some of that
weak natural gas demand that we’ve seen
in Europe.
Let’s bring in and the CEO of Equinor
and his update, of course.
The Norwegian government is the largest
shareholder in this company.
And as your take on these results and
what it tells us about how the business
is positioned for the quarters ahead.
And good morning.
Yes, we are well positioned to the to
the future.
We had very strong results this quarter,
as you mentioned, driven by production
growth in in oil and gas and really
solid operation, enabling a very strong
cash flow from operations of 5.8 billion
U.S.
dollar.
We have an active project portfolio both
in renewables and also in oil and gas.
So we are well positioned for future
earnings as well.
And of course, we focus on the European
gas storage story, which is seeing what
quite a remarkable turnaround, of
course, in the last two years on this.
What what is the investment case for
Ecuador?
Now, you were essential during the start
of that conflict, Russia invading
Ukraine and the gas challenges there.
There’s an argument that you’re less
essential now.
What is the investment case for your
business at a place and a time when the
inventories and the stockpiles of gas
here in Europe are full?
You’re right.
Of course, the gas prices are
substantially lower prices now than they
used to be, you know, pre-war and also
just before the war and during the war.
And it’s been so essential that we’ve
been able to produce gas to Europe to to
have energy security for Europe.
But we’re still producing at an
extremely high level for gas production
from Norway.
Remember, we can deliver a gas to all
the liquids hubs in Europe and we can do
it at a very low production and
transportation costs.
So we are very much well-positioned for
future gas investments from the
Norwegian Continental Shelf also to to
gas, deliver a gas to Europe that will
need it also in the future.
And also, remember that the gas prices
in Europe are now set by the LNG price.
Before, it used to be set by the pipe
gas
costs and now it’s set by the LNG cost.
So we see a very good investment case
for gas also in the future towards
Europe.
What’s your outlook for gas prices then?
Towards the end of this year,
particularly when we think about the
Middle East tensions as well and as.
Yes.
So what what you said earlier is Europe
is in well position in terms of gas
storage now.
It’s been another mild winter in Europe.
So Europe in a good position in terms of
storage for next year and are able to
fill up the storages.
But we know that the weather, the energy
supply, the demand increase in China,
also some industry demand pickup in
Europe will all affect the prices.
We see the market is fairly well
now balanced, but there are, you know,
small changes in energy geopolitics and
the supply chain disruption, you know,
can have big changes in the into gas
prices.
So we are think it’s a slight upside
risk to higher prices in not in the
future.
Okay.
It’s interesting that you try in
politics the Labour Party here in the
UK, well positioned according to the
polls to take over as the next leaders
of the government here in the UK.
The Opposition Labour Party saying that
they would they would remove the current
investment allowance for oil and gas
projects in the North Sea.
If that happens, will the economics of
the Rosebank project that you have there
still hold up?
First of all, I would like to say that
it is important for any government to
make sure that we have stable frame
conditions for this long term
investment, both in renewables and also
in in oil and gas.
It’s a little bit too early to say the
effect of a proposal that might come if
they get into government.
But of course we will have to look at
this type of proposal and see what it
means to our future business and then
make kind of the necessary decisions.
All kind of these changes and proposed
changes create an additional risk that
we need to bring into our risk
management of the company.
There were some unplanned maintenance
issues for some of the projects last
year.
You had the strikes as well, the
disruption there.
You talk about some of these
uncertainties and does what is your
expectation around potential disruptions
as we look to the summer season?
Those disruptions.
They were kind of one offs due to
special cases we have seen over the
first quarter solid operations, very
high production efficiency.
We are also also this year planning some
maintenance, but this is planned
maintenance and well communicated to the
market.
So our production guidance as we
presented earlier, is stable and we
expect good production from all from
from EQUINOR also over the next quarters
according to our guiding.
You talk about the new projects that are
coming online, there will be some some
of your investors, some of the minority
shareholders, the likes of Saracen and
partners here in London, who would say
that that runs counter to your targets
around around the Paris Agreement on
climate?
Is that is there more that you can do
specifically to address those concerns?
And is.
What we are focusing on is really to
lower the emission, both on the methane
and the CO2 emission while we’re
producing oil and gas.
And this oil and gas is definitely
needed these days.
I just visited the hall of a fair and
talked to the German industry and they
really need oil and gas for Norway while
they are transitioning.
At the same time, we are also building
up our renewable portfolio,
transportation and storage of CO2 for
the heart based industry.
So we are over time investing both in
oil and gas, lowering our emissions, but
at the same time also into new energies
that will have a lower carbon emissions
over time.
You were recently in northern Norway
talking about potential production
increases out of out of Barents.
What are the plans there, Anders?
What can you bring online from from that
part of the world?
Well, in the northern Norway, we have
the Hammerfest LNG, a really important
LNG plant for energy security to to to
Europe.
We are taking this and using power from
shore now so that we can actually
produce energy from this plant from 2030
and onwards without any CO2 emissions.
And I think that is hard to compete
with.
In addition, this year we will start up
the Casper field in this area and we are
also focusing on see how we can come to
our side of the twisting field.
And we also have exploration activity in
this area.
So the activity level in the bar and sea
is quite high at the moment.
Before we let you go on this, I just
want to get your view on on something
that a lot of our guests talk about,
which is this valuation gap between
European oil and gas majors and their US
US counterparts.
Do you think that closes any anytime
soon?
Does it concern you?
Do you expect that valuation gap to
reduce in the quarters and years ahead?
While it’s difficult to say, it’s really
the investors that will decide on that.
What I can focus on is to really ensure
that we are delivering oil and gas, high
production efficiency, making our
business more resilient and
demonstrating high value creation to our
investors.
And then I’m sure that we put the right
price on our stock.
And is up or down.
Thank you very much indeed, the CEO of
Aquila.
We appreciate it on the back of those
earnings.
Now for some other stories making news
this Thursday.
Spanish Prime Minister Pedro Sanchez
says he’s considering resigning due to
the attacks that he and his wife have
faced in recent weeks.
This comes as a court launched an
inquiry targeting Sanchez’s wife for
alleged influence peddling.
The Spanish PM has halted all public
duties and says he will be announcing
his decision on April 29th.
US State Secretary Secretary of State
Antony Blinken has raised concerns over
unfair trade as he began talks in China.
This comes amid a worsening rift between
the world’s two biggest economies, with
a threat of US sanctions over Beijing’s
support of Russia.
And President Biden has signed a $95
billion national security package into
law that includes fresh assistance to
Ukraine.
The move allows the US to quickly resume
arms shipments to Kiev.
Officials also acknowledging for the
first time they will include a longer
range ballistic missile system long
sought by Ukraine.
There’s plenty more coming up.
Stay with us.
This is Bloomberg.
As we’re scaling CapEx and energy
expenses for we, we’ll continue focusing
on operating the rest of our company
efficiently.
But realistically, even with shifting
many of our existing resources to focus
on, I
will still grow our investment envelope
meaningfully before we make much revenue
from some of these new products.
Okay.
Matter CEO Mark Zuckerberg trying to
assuage those concerns about the uptick
in spending and the slightly softer
outlook coming through from Matt to the
first quarter results.
We’re actually pretty decent in terms of
the revenue that came through in the
quarter, actually up 27%.
And you saw profit more than doubling to
12.4 billion USD.
None of that, though, really mattering
as far as investors are concerned, even
though smart investors, quote unquote,
that matters CEO was alluding to because
it is the outlook and it’s the spent a
close to an up to 40 billion USD is what
they planning to spend around A.I.
and that increase calls that concern and
you see that reflected after ads in
terms of the move lower.
And it is a sharp move lower for a
stock, by the way, that, of course, has
rallied year to date on the optimism
around the AI bets and how that’s
folding in to platforms like Instagram,
Facebook and WhatsApp, which of course
all fall under the matter, umbrella down
15%.
And so far, of course, those words from
not really doing much or say those
concerns, like smart investors see that
the product is scaling well, they have
questions, of course it spends and it
takes a lot of money to build out that
infrastructure.
Let’s put the ball and see the read
across to other big tech.
You see the reports across the Asian
markets, of course, and this then was
that ripple to some of the other big
names Amazon, Alphabet, Microsoft, by
the way, those big companies, Amazon and
Alphabet, Alphabet, I should say, and
Microsoft reporting later today.
So we’ll see if the A.I.
story for them is slightly different.
And Microsoft, of course, with that huge
stake in open Air, Another story that
we’re focused on today, above and beyond
the tech story is what’s happening with
the Japanese yen.
Did they intervene before that decision
from the DOJ?
The DOJ is meeting right now, but
volatility expected volatility at the
highest level that we’ve seen.
Oh, yeah.
155 You’re at three decade loads for the
Japanese yen.
Do the interview.
Intervene before the policy decision
from the DOJ remains a key question.
We get that decision on Friday.
But also, of course, so much of this is
about the US story and that key
inflation gauge, the p e that comes out
of course later on Friday and could be a
factor as well in terms of how we think
about the rate differential between the
Federal Reserve and Japan.
We’ve had comments from the finance
minister over Japan saying that he is
continuing to monitor what is happening
with this currency.
And again, one of the worst performers,
if not the worst performer amongst the
G7 currencies, one 5564 As we continue
to watch potential intervention for that
currency, the volatility as well, let’s
flip the board and see that volatility
story again, spiking kind of the levels
that we haven’t seen all year around
this potential intervention move from
the authorities hasn’t happened yet.
They’re on watch.
Plenty more earnings interviews coming
up here on Bloomberg, including
exclusive conversation with C.S., then
cancer of the CEO of Barclays.
That’s in about 5 minutes.
Plus interviews with the CFO of BNP
Paribas and AstraZeneca, and later, the
Airbus CEO speaking to us.
That conversation.
7:40 p.m.
UK time Marcus today next.

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.
Today’s guests: Victor Riparbelli, CEO and Co-Founder of AI startup Synthesia, and Anders Opedal, CEO of energy company Equinor.
——–
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