TSMC Earnings From AI Enhance | Crack of daybreak: Europe 04/18/2024

Good morning.This is Bloomberg Daybreak Europe. I'm Tom Mackenzie in London.These are the stories that set your agenda no rush to cut.More fed officials signal a delay to US rate cuts.Cleveland's Loretta mester wants to see more data.While Governor Bowman warns progress on inflation may have stalled.The governor, Meanwhile, Andrew Bailey, says the UK is facing less inflationrisk than the US, opening up the prospect of cutting rates before theFed's bus chips In Focus. TSMC, the world's biggest semiconductormaker, is set to report earnings this.

Hour, a day after disappointment from aswell. On the earnings front, Nokia droppingright now. The top telecom equipment maker, ofcourse, will bring you those lines with a focus on sales.It's expected to have been a challenging quarter, The first quarter net salescoming in, though, slightly below the estimates for Nokia, €4.67 billion.So essentially €4.7 billion in terms of net sales for the first quarter belowthe estimates of just shy of €5 billion. Here's the red head now for Nokia.They still see their full year adjusted operating profit of between 2.3 billionto 2.9 billion.

So they are holding their view in termsof full year adjusted operating profit. We know that has been pretty solidweakness around the demand, particularly for 5G telecom kit from some of thetelecom equipment providers or telecom operators, I should say.And that has been a challenge for both Nokia and Ericsson.We continue to look for details around a patent dispute with some of the Chinesesmartphone makers as well. But the redhead, they are maintainingNokia, their full year adjusted operating profit forecast.Despite that challenging environment, telco spending around 5G, we know, hasbeen softer than many in this space had.

Hoped.Let's check these markets now more broadly on a day, of course, when welook at US futures once again pointing in the green.But we've seen that reversal before and that we've seen four straight days oflosses across US stocks today, the futures pointing higher as investorscontinue to grapple with the debates around just how long these rates aregoing to be have to be held higher as we continue to, of course, feed.In the commentary from Fed officials currently US futures, S&P is pointing togains of 3/10 of a percent. Again, you are about 4% below now on theS&P, those record highs that were not.

Earlier in the year.The footsie 100 currently looking gains of 2/10 of a percent.Again, Andrew Bailey, the BOJ governor, of course, seeming to be relativelyrelaxed about the higher than expected CPI that we got out of the UK yesterday.Nasdaq futures pointing higher by 3/10 of a percent.So a big sell off some some of the megacap tech stocks yesterday weighingon the nasdaq within video dropping as well and weighing on the nasdaq.European futures currently unchanged. Let's flick the board and look acrossasset. There was a move as well intotreasuries.

They were bid yesterday buying arguablygiven the run up in yields we see and have been seeing the last few days.Yesterday their yields dropping about eight basis points on the benchmark tenyear. You're currently looking at the US tenyear at 457, a little bit of money continuing to move in.That yields down a little on the two basis points.The Bloomberg dollar index a little softer as well.The intervention story is in focus for us today.Arguably, the US Treasury secretary possibly giving the green light to thelikes of Japan and South Korea to.

Intervene in their currencies.I put a question mark around that, but nonetheless, the dollar index is off byabout a 10th of a percent in the session.Keeping an eye on Brent, of course, given the geopolitics, given moresanctions potentially coming through for the likes of Iran and the change indynamic around Venezuela, $87 a barrel on Brent currently just up 2/10 of apercent. Inventories in the US vote in focus aswell. They have risen gold 2375, up 6/10 of apercent. Let's cross over to Asia, whereeverybody is standing by in Singapore.

For a check on the markets there.Overall, what are you looking at? We're looking at that sense of calmreturning to Asian markets, whether you're talking about stocks, bonds orcurrencies. And this is thanks to authorities verbalintervention that's helping to boost confidence in financial markets in theregion. I'll dig into the details a bit furtherand the impact on the currencies market in just a bit.But we can see also how the Asia stock gauge is snapping a succession losingstreak today. It's headed for its best day in a month.And in South Korea and Australia, well.

Highlighting well, we're seeing thematerials index, for example, the stocks there, they are outperforming.And this is against the backdrop of the US president calling for higher tariffson Chinese steel and aluminium. But really the sector we're reallyfocusing on is the chip related stocks. As TSMC'S earnings come out later today,we're watching out for the CapEx plans from the world's largest chip foundry ata time where the US chip gauge as well as in video have fallen into correctionand there is a sense of how TSMC could potentially boost the South Korean andthe Taiwanese stock benchmarks is of course the tech rich gauges.And our my strategist Mark Cranfield has.

Pointed out that back in January whenTsmc's quarterly earnings drop, that actually coincided with a bullishturning point for both these indices out of the ball.Let's take a look at how currencies are faring today.As I say, that sense of calm is returning that reprieve.Thanks to jawboning, we got the US, Japan, South Korea joint statement thatspurring intervention that we got PBOC see coming through with a statement onWeChat that is trying to prevent the risk of overshooting from the exchangerate. But you got to wonder how long all ofthis is going to last, especially with a.

Fed narrative that simply higher USyields potentially as well as a support at greenback Tom.Over in Singapore. Thank you very much indeed.And we unpack that part of the story in more detail now with the Fed's latestBeige Book survey suggesting that the US economy has expanded slightly since lateFebruary and firms are reporting great difficulty in passing on higher costs.Fed Governor Michelle Bowman, meanwhile, saying progress on inflation has slowedand perhaps even stalled. What we've seen over the past first fewmonths of 2024 anyway, is that inflation progress on inflation has slowed and andI expect maybe it's even stalled at this.

Point.Okay. Let's bring in Mary Nicola now fromBloomberg Life's Team Bloomberg's Emily team for that kind of wrap and themarket reaction to the comments Rebecca getting from these Fed officials.Mary, where do we stand then? Do we have clarity on where the Fed isand how the markets are thinking about the sequencing going forward?Yeah, we know from not only from Michele Bachmann and from Loretta mester thatthere is going to be delay in cuts. But also what we heard from JeromePowell this week also just solidified that the fact that the Fed is likely tobe delayed, that they had three months.

Of data showing that there was a therewas a pullback in inflation in terms of that there wasn't that much progress oninflation as much as they had expected. And undoing what we saw at the start atthe end of last year. So now the Fed has to wait for anotheranother trend, another trend that's going to come through to show thatthere's disinflationary pressures coming.And so at the at the end of the day, they're going to have to delay their thestart of their easing cycle. So higher for longer persists and dollarstrength as a result also persists. Yet in the divergence that we'regetting, at least on the rhetorical.

Front from the likes of Andrew Bailey,the Bank of England and Jay Powell has been quite stark in the last few days.Mary. What do we know in terms of the healthof the US economy? The Fed Beige Book giving a little bitmore detail, the 12 districts they look at.Where does that leave our understanding of the US economy?It's it's it's quite exceptional that we see that us data after one after theother continues to prove us exceptionalism exceptionalism and thatUS exceptionalism coupled with rate differentials.And as you mentioned, the comments from.

Andrew Bailey and the fact that the ECBis likely to start cutting as soon as June.So there is that divergence. There is the divergence whether it's onrates and whether it's on on on growth. And that is going to keep the dollarsupported. And so, yes, you could have some sort ofa reprieve. You could have some sort of resistance,especially with some of the comments coming out from the finance ministersand from the jawboning that we've seen.But at the end of the day, the underlying narrative remains, and thatis that US growth remains exceptional.

Rate rate differentials continue towiden in favour of the dollar. So it's hard to see where that wherewhere the dollar really the dollar declines coming through.Okay. US exceptional exceptionalism being abeing crystallised, it seems. Bloomberg's Mary Nicola from M Life, theM Life team with the analysis that what we've been hearing course from Fedspeakers and the Fed Beige Book as well. What it tells us about the state of theUS economy and potentially where that Federal Reserve goes next.Thank you very much indeed. To geopolitics now, domestic politicstying into geopolitics in the US, where.

US House Speaker Mike Johnson is movingahead with new assistance for both Ukraine and Israel.That's despite threats from Republican hardliners to oust him.Let's bring in Bloomberg's Bruce Einhorn for the details.Bruce, what is Speaker Johnson's plan to get this age aid package passed?How likely is it? What is the resistance he's facing?Give us the update. Well, Tom, this has beenseveral months in the works. The Senate passed a package of $95billion in aid to Ukraine, Taiwan, Israelback in February.

Since then, the House hasn't doneanything. We now know that Speaker Johnson isplanning several votes. That would be this weekend that woulddivide the Senate's package into different different votes.So there would be one vote for Ukraine aid, there would be one for Israel,there would be one for Taiwan. The thinking is that by splitting it uplike this, Speaker Johnson can get them all through the Ukraine aid.By having one vote on that, you'd get more Democrats, even though he'd loseRepublicans who are opposed to it. With the Israel vote, he would get moreRepublicans.

He would lose Democrats who want toimpose conditions on the aid to Israel. The Taiwan One probably would sailthrough without much opposition from either side.There's pretty bipartisan agreement on the Taiwan part of it.The speaker also is planning, including one more vote that wouldimpose further costs on Russia, that would include seizing assets of Russiain order to defray some of the costs of this package.If all goes well, this would all happen this weekend, Tom.Still a lot that could go wrong now between now and then.Yes, Some potential pitfalls in line for.

This bill in the days ahead.Bruce, talk to us. Ukraine, of course, has been screamingout for aid. Why is it taking so long?Well, there's been this long delay. President Biden initially proposed thisback in October last year. There was Republican opposition thatquickly got together and effectively stalledeverything because Republicans said that they couldn't passany sort of aid package without first addressing what they called the crisisat the southern border. There was a bipartisan deal thatsenators worked out on that that ended.

Up collapsing after opposition fromformer President Trump as well as from Johnson.And so since then, we've been in this stalemate position.Another thing that Speaker Johnson has to consider is that there's a rule inthe House that all it takes is one person to propose a motion to vacate thechair, in other words, to unseat the speaker.And there have been Republicans who have threatened to do that.Most recently, Marjorie Taylor GREENE has said that she wants to have a voteto vacate the chair to get rid of Speaker Johnson.Another Republican, Tom Massie from.

Kentucky, has said that he would supportthat. All in all, they now need is one morebecause the Republican majority is so small in the House thatSpeaker Johnson can't afford to lose another vote.If one more Republican says that if this aid package vote goes through, thenthey'll vote to get rid of him, Then Speaker Johnson would depend onDemocrats to keep his job. So a lot of different factors in play.One other thing to keep in mind is, in addition to all this, Johnson has saidthat there will be, as part of this package, a vote from the House thatwould condition some of this this aid on.

A tick tock bill that would forceBiden's to sell tick tock in the US. That's something that the House hasalready voted on. The Senate has not voted on.So if that were to be in the package, that could slow things down a lot.Tom. Okay, Bruce Einhorn, thank you very muchindeed. We'll continue to watch to see if theycan get this bill across the line, of course.Thank you for the update. Let's give you a little clarity onwhat's coming up today. Some of the big topics and agenda itemsto focus in on 7 p.m.

U.K.time, We're going to get new car registrations out of the EU, the 27members of the European Union. So a little bit of detail there in termsof the demand coming through for the auto market.5 p.m. UK time, we're going to get lot outsales as well. So within the retail slash luxury andcosmetics space, that could be interesting.5 p.m. UK time and then US earnings looking atNetflix and Blackstone as well. So of course very, very differentbusinesses coming through with their.

Earnings story.Later today you can get a roundup of the stories you need to know to get your daygoing. In today's edition of DAYBREAK, Tumblrsubscribers can go to the AYP. Go, of course, to check that out.Top items so far today, Tick tock. And Bruce was talking about this, thepotential divestiture story as it gets tied in to that bill for aid aroundUkraine and Israel. So tick tock and the fortunes of theowner bytedance in focus. Loretta mester is going to be speakingso further commentary on the state of the US economy.The expectations around rate cuts of.

Course expected and then UBS one of thetop. Corporate stories of the day for us.More job cuts. More than 100 job cuts.In fact. UBS is said to be planning anotherrounds of job cuts as it continues to trim headcount following its rescue, ofcourse, of Credit Suisse sources telling Bloomberg that they also expected toaffect more than a hundred positions across its global investment bank in thecoming weeks. Cuts are also expected in its WealthManagement and Markets unit. Sergio Amato, of course, the CEO of thecompany, has not detailed exactly how.

Many job cuts will be coming througheventually and ultimately, but has said they're looking for $6 billion worth ofcost savings. We keep across that story for you.Coming up, the U.S. eyes, new sanctions on Iranian oil.More details on that next. And what Israel is thinking about apotential response to that Iranian attack.That is next. This is Bloomberg. Welcome back to Bloomberg DaybreakEurope now. US House Republicans have included newsanctions on Iranian oil in a wider.

Foreign aid package for Israel andUkraine, as we were discussing before the break.Joining us now for the analysis on the Iranian component to the story isBloomberg's Patrick Sykes, who is in Istanbul.Patrick, thanks for joining us. It wasn't that long ago the USenforcement efforts around Iranian sanctions were easing off a bit becausethey wanted to get more oil into the market.They wanted inflation down. That dynamic clearly has changed.What are the details around these proposals in this package and what couldthe consequences be?.

Point something?Yeah, I think it's interesting actually. You know, introducing the sanctions andenforcing them may be two different dynamics, right?There's the there's a scenario where they could pass these sanctions and sendthe message that we're trying to restrict Iran's oil revenue as a measureof support to Israel. But meanwhile, not actually enforced itall that strongly in the way that you describe we've seen recently andtherefore keep oil flowing and keep prices as best they can, relativelymuted. But I think this one of the few measureswe've seen overnight where the movement.

On the sanctions seems to be to expandthem. Oil was one in theEU as well. We also saw some G7 countries apparentlyconsidering sanctions on Iran's national airline, Iran Air.That also seems particularly symbolic to me.But we are seeing the scope widened from the initial drone and missile programthat followed the attack, which was very directly to the nature of it, to Iran'sinterest income more broadly. And meanwhile, the extreme suffering, ofcourse, of the people in Gaza continues. The UN looking at some attempts toalleviate that.

What are the details there, Patrick?Yeah, it was around 2.5 billion. They're seeking dollars.That is, of course, a big number and is a ten times increase of what they wereseeking way back six months ago at the start of the war.But it is still short of, I think, around the 5 billion that there were of4 billion perhaps they were seeking in total.And they're also making very clear that that what they can actually deliver isvery limited, limited by the operational constraints on the ground.I think to have a real substantive impact, if not only got to overcome thesort of current hurdles of getting aid.

In, getting those backlogs cleared andthen distributing it once you're inside Gaza.But more broadly, that, you know, distributing this in a war zone is anoperational nightmare, and it's only really a ceasefire that's going to seethose increasingly high numbers translate into proportionally effectivehumanitarian responses. Yeah.And Israel continue to face criticism, of course, from a number of differentparties, international aid groups, of course, and leaders around the world forwhat they describe as the hold ups that Israel is putting in place around aroundsome of that aid.

Of course, Israel pushes back on thatnarrative, but nonetheless, the critique is certainly there.Patrick Sykes in Istanbul, thank you very much indeed.On the latest in terms of trying to get that much needed aid into Gaza and thepotential Iranian sanctions as well folded in to that package that's workingits way through the US Senate as we speak.Coming up, it's Zimbabwe's sixth attempts at establishing a functioninglocal currency after years of hyper inflation.We're going to hear exclusively from the country's finance minister.We're going to pivot to a fascinating.

Story around Zimbabwe and the changearound the currency. The conversation is next.Stay with us. This is Bloomberg. Welcome back to Bloomberg DaybreakEurope now. Zimbabwe's finance minister says thecountry's new currency, backed by bullion and foreign reserves, is animportant milestone for the country. He spoke to us exclusively about how thezinc shortfall Zimbabwe gold can face down those inflationary pressures.We all thought maybe the Federal Reserve was going to move in there and cutinterest rates, But but they haven't.

But that that's that's where it is.They're also worried about inflation risk in the US.You're right. This does put pressure on countriesaround the world in emerging markets, but ours, the ZIG is linked to two togold. And we are right that, you know, there'salways some deflation risk. But you know out there and we are aliveto that. But we don't see that being an issuebecause for us, the quest has been to restore stability is the first order ofbusiness, but also to contain inflation is the first order of business.So maybe a bit of deflation is not.

Necessarily a bad idea as well as to asa way of re anchoring expectations on price movement into the future.Could you give us an update about your efforts to resolve that situation, The$6.7 billion in arrears that Zimbabwe does owe to outsiders?You write that the the arrears d'etre is an albatross around the Zimbabweeconomy. We could be growing faster looking atthe growth of 6.8% on average over the last three years.Imagine if we didn't have the albatross of the debt, that growth could be higheraveraging 8%. So it's an issue that we need to dealwith.

We'll put a process in place where we'reworking with the the creditors in the first place, the the 17 Paris Clubcreditors and also bilateral creditors with the World Bank, the IMF, theAfrican Development Bank, with a champion in the form of PresidentAddison of the African Development Bank. We have a high level facilitator, theformer president of Mozambique, and they're all helping us to close the gapbetween Zimbabwe as a debtor with a with all the creditors.One thing that I wanted to ask you was why was this currency introduced by viaa statutory instrument, which is, I guess you can say, legal instruments,almost like a subsidiary law, though.

It's not a law.What? It's not a bill that went throughparliament that was approved by lawmakers.Why not introduce the currency by introducing a bill to parliament?Let lawmakers debate it. It becomes an act.And then and then imagine you have a currency volatility and a weakeningdomestic currency. And then we are having this long debatein parliament about the next currency and so forth.It would be a mess. You can never do it like that.But the way to do it is to do it the way.

We did it, which is you need astructural instrument that allows you to do things quickly, efficiently, withoutrevealing too much information, including how the currency is priced.So so the having a structural using a structural instrument is actually aclever way to do it. And then once that is done, the councilis introduced again, then always go back to what to Parliament to then endorsethat through a normal bill or decide this acting in our case.So so this is a better way to do it. Okay.That was Zimbabwe's finance minister speaking to Bloomberg's Matthew Hill inWashington on the new currency this week.

And some of the debt challenges as well.Let's check in on these markets. Commodities getting a bit of a lift thismorning. The big story, of course, as you saw, a3% drop in oil yesterday, reversing but only at the margins today, Brent, at87.55, up 3/10 percent. And gold continued to get a lift, up6/10 of a percent at 2376 per troy ounce.That hedging mechanism, the risk off mechanism or at least the hedge that itprovides gold sitting seemingly still an appetite there.We continue to look at European futures, of course, which are looking a littleflat currently just gains a bit about a.

10th of a percent.US futures pointing high by 3/10 of a percent.Still ahead, we are counting down to the TSMC results, of course, what it tellsus about the demand for a AI chips. Will they see the pick up that manyexpect? Those numbers expected to cross in thenext few minutes. Stay with us.This is Bloomberg. Good morning.This is Bloomberg Daybreak Europe. I'm Tom Mackenzie in London.These are the stories that set your agenda.No rush to cut.

More fed officials signal a delay to USrate cuts. Cleveland's Loretta mester wants to seemore data. While Governor Bowman warns progress oninflation may have stalled. But U.S.Governor Andrew Bailey, meanwhile, says the U.K.is facing less inflation risk than the US, opening up the prospect of cuttingrates before the Fed's plus chips in Focus earnings for TSMC crossing rightnow, I'll bring you the top lines. The first quarter net income for theworld's biggest chip maker coming in with a beat 225.5 billion Taiwanesedollars.

The estimates have been for 214.So it's a beat in terms of net income gross margin as well.Coming in slightly above the estimates, 53.1%.The estimates have been for 53%. In terms of gross margin for the firstquarter, we know that CapEx is really crucial for the analysts watching thisstock. So we look for the details on that.Quarterly profits of 6.97 billion USD. That's the equivalent when you do theeffects conversion, that is a beat on estimates.Again, the gross margin also coming in higher, marginally, 53.1%.The smartphone part of the business, we.

Know that's a little bit cloudy, butit's the high demand that was expected to have lifted these results.It seems like that's what's coming through.We wait for more details, of course, from TSMC making the key producer.Of course, in terms of the chips for the likes of Apple and Nvidia CapEx, here wego, reaching 5.77 billion USD in the first quarter.We want the forecasts around CapEx. The latest estimates have been thatCapEx for the year would be around 29 billion USD.If it comes in line with that or above, you could see a lost lift to this stock.The CapEx coming in then for the first.

Quarter, 5.77 billion USD in the firstquarter. Again, net income for TSMC in the firstquarter beating estimates, we continue to look ahead to the forecast and see ifthey get upgraded or adjusted around that CapEx spend because that tells usso much about the demand picture, of course, for their customers like invideo and Apple. So some of the key lines crossing forTSMC when you break this story down for you in more detail in the next couple ofminutes, it's a major story for us. Of course, the read across across thebroader chip space. We had ASML dragging on semiconductorsyesterday with softer demand for some of.

Their high end ultraviolet lithographymachines that demand a little bit softer in terms of the orders being put throughby the likes of TSMC. Nonetheless, the high demand seems to belifting this company, at least for now, even as the smartphone business looks alittle bit more murky. Let's check in on these markets where,of course, you've had four straight days of losses across US stocks.Futures, though, turning a little around a bit, suggesting that maybe there'ssome upside that comes through for the US markets.Let's see if that holds, though, because that's the narrative that we've seen inthe last few days and then it's adjusted.

Towards the middle of the day.European futures point to modest gains of about a 10th of a percent footsie,one of two futures pointing to gains of 25 points and S&P and they still belowthat 5100 line. But looking to get into 3/10 of percentagain after four straight days of losses.And it was in video, in fact, that weighed on the Nasdaq yesterday.The Nasdaq, though, today points to gains of around 89 points, up 5/10 of apercent. Let's flip the board.Look, cross our set, because you did see a bid actually for treasuries yesterdayafter the sell off that we've seen in.

The last few days.Yields coming down about eight basis points on the benchmark ten year.Currently, you're seeing a move lower by an additional two basis points for 56buying the dip, it seems, on US treasuries.The Bloomberg dollar index a little softer as well.So giving some reprieve to Asian affects so far in this session.The intervention story remains in focus, of course, Bloomberg Dollar and it'sdown a 10th of a percent. Brent is up 4/10 of a percent.But after a drop of 3% yesterday, US inventories back to levels we haven'tseen since June, gold's 2376 up 7/10 of.

A percent.Let's get the details, the analysis then on the story Right now, the yen gainingagainst the dollar. Then following a joint statement fromboth the US, Japan and South Korea, noting, quote, serious concerns aboutthe depreciation of the two Asian currencies.Let's bring in Bloomberg's Mark Cranfield from our live team.Mark, what is the message to traders from G-7 speakers?Was Janet Yellen really giving them the green light over in Japan, in SouthKorea, to intervene in their currencies? Yeah.Basically if you're telling traders, if.

You're long US dollars, your time isrunning out. This wonderful trend that we've beenseeing for for several months where the dollar strength against everythingreally not just U.S. major currencies, Asian currencies,Latin America, wherever you look the dollar has been on the tail of us issupported by high yields good strong economic data out of the United States.But clearly there are several countries getting very uncomfortable with whatthat dollar strength is doing to their currencies.And we had a rare joint statement today from Janet Yellen and the financeministers of South Korea and Japan,.

Acknowledging that people are getting abit concerned about the weakness in these currencies.So it doesn't mean to say that the United States is going to supportintervention directly, but they are probably saying, look, if you want to goahead and give your currency some specific support, we are not going toget in the way. And you effectively you have our greenlight doesn't mean to say it's going to happen immediately.But clearly we're getting closer to the point where these currencies have fallena long way and those respective countries, particularly South Korea andJapan, but it applies to many other.

Places.We've seen it in Asia, we've seen in Latin America, even to some extent withthe euro as well. These currencies are falling a long wayand clearly it's about time that there was some stability.So it's the first warning shot to foreign exchange traders.We've seen a bit of a pullback already. It's probably got a little bit furtherto go in terms of what it means globally is obviously giving a bit of a lift tothe mood in Asian equities and equities in general.So we're probably going to see a decent day because the risk mood can calm downand now people can go back to looking at.

The data.The rate differential, as you well know, remains extreme, of course, particularlyin terms of the Fed and the DOJ. And some would argue that's going toremain a challenge to kind of any any intervention.So to us about the Fed rate pricing, particularly given the least the mostrecent commentary you've been hearing from likes of Michele Bachmann, who saysinflation may have stalled. Yes.I mean, you're still getting slightly mixed messages from the Federal Reserve.But Jerome Powell has also spoken this week and said he's in no rush.Other Fed members have said the same.

Thing.Even misspoken really has indicated that they can take their time.The data is supporting a very strong U.S.economy. Jobs growth is very strong as well.Inflation is still a bit too high. Everything points to the fact that thedata is telling the Fed that there's no need to to take it too quickly.Of course, the last thing they would want to do is to get themselves in aposition where they did an early rate cut and then had to go backwards andhedge from it because inflation surprised them later in the year.Better for them just to hold where they.

Are and see how the data plays out.Now, in terms of what that means for for other risk assets, it probably meansthat the U.S. Treasury market continues to be in a bitof a range. Yields are probably don't really gooutside the kind of numbers that we've seen in the first quarter or so of thisyear, but it's probably supportive for the equity market.And then, of course, you've got the US dollar, but that will also be affectedby what happens. On the flipside, Bank of Japan meetingnext week is a very big one because although the consensus in the polls thatjust came out is that the Bank of Japan.

Will not change interest rates.There is certainly a risk of surprise because Governor Yoshida has repeatedthat the yen plays into the inflation picture in Japan.The hand is too weak and he certainly might want to respond and show that he'sgetting on top of that as well. Okay, Always valuable analysis.Mark Cranfield from Bloomberg Markets Life Team.Mark, thank you very much indeed. We just had numbers going back to thecorporate earnings space and then from the macro to the micro around thecorporate space. The world's biggest chipmaker, ofcourse, TSMC, reporting a beat on first.

Quarter net income in terms is the firstprofit rise, in fact, in a year for TSMC.Let's bring in our senior analyst at Bloomberg Intelligence then to breakdown the numbers we've seen from TSMC, Robert Lee.He's standing by for us in Hong Kong. Robert, what stands out to you at thispoint? Okay, Thanks for the intro.You've already run through the numbers. So as you've said, these seem on theface of a decent beat, roughly just under 5% beat at the net income level,roughly around 1% beat the operating level.So that will give the market some.

Encouragement that the company'sreturning to growth after a somewhat difficult 2023.However, there are some potential question marks on the horizon.I think yourself and your view is well aware about the weakness that Apple isseeing within the China smartphone business at the moment.And by our estimations, Apple accounts for between 20 to 25% of TSMC revenue.That's one thing. And very quickly overnight, we saw theor from an Asian perspective, we saw ASML results.They were great. But their order intake on these keybleeding edge EUV machines was weaker.

Than expected.I think that has no impact on TSMC for the next couple of quarters.But it does raise a little question mark about the demand into the tail end ofthis year and into 2025. But the key thing for TSMC stock, as yousaid in your intro, is what's the CapEx outlook?We don't know that yet. We're here on the call later on.More importantly, what's the guidance for next quarter and the year as awhole? Again, we'll have to wait and see onthat front to see what the management say.Okay.

So we looked to the net in terms of thecall, and then you're pushing all the way out to 2025.Brilliant analysis. Rob, give us a quick view, though, onthe second quarter and how the rest of the year is shaping up for TSMC.Well, yeah. Okay.Apologies for the dull answer, but it's all I know by having video mixed inthere. So I think the near-term outlook doeslook good. But again, just taking a step back here,14% or so of the company's revenue comes from the automotive sector.We've seen incremental weakness coming.

In on the EV side.So I think that's one thing people need to keep an eye on.Smartphones, again, I've already mentioned about Apple, which is theirlargest single customer. So again, there are some question marksthere. So I think the if we're going to seeincremental upside to earnings estimates and potentially the share price, theupside in it needs to outweigh potential weakness elsewhere.One last thing. We had this unfortunate earthquakerecently. Luckily, the loss of life was fairlyminimal, but there was some disruption.

To Tsmc's business.I think that's a question mark whether there is a near-term margin hit into Q2.But again, well, we'll wait to see what the management have to say later on.Okay. Senior analyst at BloombergIntelligence, Robert Lee with the quick fire, an immediate take there on thenumbers crossing in terms of the earnings from TSMC.Really appreciate it. Thank you, Rob.There's plenty more coming up. Stay with us.This is Bloomberg. Welcome back to Bloomberg Daybreak.Europe now.

Europe is watching as industrial policyin China and the US threatens to leave the continent behind.That is the backdrop for the EU leaders meeting in Brussels today.They face, of course, tough decisions on keeping the region competitive.Will they move from rhetoric to policy implementation?Let's bring in Bloomberg's Oliver Crook is standing by for us at that meeting onthe sidelines. Can be covering all of this for us indetail. Olli, alarm bells then ringing clearlyin European capitals, European leaders, some of them wringing their hands aboutthe lack of action.

What have you been hearing?Yeah, well, listen, Tom, listen. Alarm bells are ringing, as you say, andit's a lot easier to impose tariffs on China than it is to deal with your owncompetitiveness. But at a certain point, the mirror, youneed to look into it and decide what does Europe need to do in order tocompete on the global stage with the United States and yes, with China.And you think if you think you've done here are hearing from Mario Draghi onBloomberg Television, you are wrong because he is one of the authors of thereports that sort of try to illustrate how Europe needs to stay competitive.And, you know, he's a man who chooses.

His words with grand deliberation.So maybe we should hear it from him, because he put it very clearly and verysuccinctly. China, for example, is aiming to captureand internalise all parts of the supply chain in green and advancedtechnologies. The United States, for its part.Are using large scale industrial policy to attract high value domesticmanufacturing capacity within their borders.We are locking in strategy for how to keep pace in an increasing costthroughout race. It requires us to act as a EuropeanUnion in a way we never have before.

So for Mr.whatever it takes, whatever it takes in Europe right now is radical politicalchange. He closed that speech by saying thereneeds to be a re-imagining of Europe that is on the same scale as basicallythe founding of the Coal and Steel Union 70 years ago, unfortunately for Europe.This is exactly the kind of thing that they're really bad at.Huge issue, very difficult political negotiations.And the urgency is not today, tomorrow. It's sort of the long term obsolescenceof this economy. So only what are the measures then theEU leaders are proposing discussing to.

Address some of those issues highlightedby Draghi. Yeah.So Draghi was one of the one of the authors of the competition report.The other is another former Italian prime minister, Enrico Letta, who put a147 page very detailed report about the single market and its future.And we're sort of highlighting a couple of things that need to happen.One. A stronger energy union within Europe,another sort of consolidation within the telecom sector.They were talking about there are 32 telecom companies across Europe.In the United States.

You have to.This breeds all kinds of inefficiencies within the market.And then, of course, the Capital Markets Union.Tom, we've heard about this for a decade now.Does this sort of need for investment? Does it will give the impetus to getthese rules in place and get the political initiative there to get thatcapital flowing across Europe? And then, of course, the last one,defense spending and potentially the question of joint debt in order tofinance it. Where is the money going to come from?They're really banking on these two.

Things.But, Tom, all of this means one thing that is a bigger Europe, a Europe thatacts more like a nation rather than an assortment of nations coming ahead of aEuropean election where Euroscepticism is on the rise.On the monumental challenges facing the EU being outlined that some of thepolicy prescriptions potentially in focus.Bloomberg's Olly Crook thank you very much indeed with the detail there interms of that EU leaders meeting on it will be covering that for us throughoutthe day. Of course, switching focus, BerkshireHathaway has priced more than ¥260.

Billion of bonds doing ¥60 billion ofbonds. It's Berkshire's largest yen debt dealsince 2019 when it first began sales in the Japanese currency.Let's bring in the detail, get more and bring in Bloomberg's Asia credit.Reporter Ayatollah misawa, for the detail.I why is this deal then from Berkshire hathaway important?What was the focus? Yes.Thank you. So it was one of the most focused dealsin Japan because it's one of the first and the biggest bond deals from aforeign issuer since the Bank of Japan.

Ended the world's last negative yieldpolicy last last month. So what's being focused then, and alsohow much it can attract demand from investors will bealso interesting because, you know, Warren Buffetthas a history of investing in Japanese stocks and especially Japanese majorJapanese trading houses. So it has a implications, significantimplications to the stock market as well.And Buck Berkshire is of course, a frequent issuer of of yen, but some maynot be aware of that. But they are.Why?.

Why would the US company then raisebonds in in the Japanese currency? Right.So, yes. So some non-Japanese companies wouldraise yen bonds for they have different reasons.But for Berkshire Hathaway, it has bought Japanese trading houses,shares in the past. And then it's said that it will it wantsto buy up to 9.9% of trading companies stocks.So it still has room to buy more. So, you know, people are expecting thatthe company will continue to buy Japanese stocks and and BerkshireHathaway, Warren Buffett said that, you.

Know, he likes value shares and values.Stocks in Japan could include other sectors, shares like financials and ofbanks and insurance companies, which got a boost today.So their stock prices rose today. Okay.So that's why they're going to be bringing the funds to play arguably isin is in Japanese stocks, Japanese equities, as they as they have done inthe past. And Warren Buffett's been quite clearabout the prospects and the opportunities that what implication,i.e., does this have in other asset classes?So.

Yes.So credit market, of course. So in the past,foreign issuers have been able to raise more than ¥100 billion over the pastyear especially. So that means that,you know, investors are looking for attractive deals from non-Japaneseissuers, and that's an implication to the credit market.But for the stock market, Warren Buffett has, you know, helped the equitiesmarket to rise to all time highsearlier this year. So, you know, people are expecting thatif the company announces more.

Share buying for Japanese companies, ithas a significant impact to the equities market as well.Okay. Bloomberg's Asia Credit Reporter II,Tommy Sarma with that detail on the Berkshire Hathaway debt sale in Japan.Thank you very much indeed. And the broader implications now forsome of the other stories making the news this Thursday, Bloomberg haslearned that Micron, the largest US maker of computer memory chips, ispoised to get 6.1 billion USD in grants from the Commerce Department to help payfor domestic factory projects. According to sources, Micron, like Inteland TSMC will also accept loans as part.

Of its award package.The plans are part of US efforts to bring semiconductor production back toAmerican soil. Bloomberg understands Microsoft's 3billion investment in open API is set to avoid a formal investigation by EuropeanUnion merger watchdogs. We're told the Commission has decidedthat the tie up doesn't merit a formal probe because it falls short of atakeover and that Microsoft doesn't control the direction of the infamousA.I. company.And the owner of Britain's Royal Mail has rejected a £3.1 billion cash bidfrom Czech entrepreneur Daniel Kretz.

KOZINSKI Because it quite significantlyundervalues the company's shares in international distribution services 28%yesterday, but remained well below the offer price.IDSA says the approach doesn't reflect the prospects for the company under itsnew management team. There is plenty more coming up.We'll focus in on the inflation picture globally and give you a bit of detailaround what's happening in the oil space as well.Stay with us. This is Bloomberg. What we've seen over the past first fewmonths of 2024 anyway, is that inflation.

Progress on inflation has slowed and andI expect maybe it's even stalled at this point.We're in the position where we're seeing this process of disinflation.I expect that next month's number will show quite a strong drop because we havea particularly unique energy household energy pricing system in the U.K.And that's one of the most interesting pieces of rhetoric that has formed overthe last week. And it's backed as well by the data isthe divergence that we're seeing now between what we're hearing from thelikes of Andrew Bailey on the relatively benign picture, as he would characterizeit, around U.K.

Inflation versus US inflation over inthe eurozone. Christine Lagarde also suggesting thatshe's relatively comfortable, certainly not pushing back on the idea that Juneis almost essentially baked in in terms of the first cut from the ECB.Here's what's happening then in terms of that inflation move lower, the progressthat's been made, given that run up that we saw during the pandemic, but where itstalls out and I want to zero in at the end of this chart and the yellow linethat is US inflation versus headline inflation versus the white lines of theU.K. and the light blue of the Eurozone.And you can see that divergence.

The US inflation picture on the headlinebasis edging higher. The U.K., though, having stalled andflattened out, edging lower 3.2%. Yes, it came in above those forecastsyesterday marginally. It doesn't seem like Andrew Bailey isoverly concerned at this point, but this is the concern for the US 3.5% level andthe fact that it seems to as has that has stalled out, but you are still wellabove, of course, those targets for the central banks on all of these ECB andfed. But you can see now the divergence thereand since the headline numbers and that is feeding into what we're hearing fromthese Fed officials and Bowie officials.

Let's flip the board and quickly have alook at the oil story Because of that, of course, the energy component is therein the mix in terms of inflation looking a little bit more benign on the back ofinventories building up in the US highest level since June.And of course, you have the inverse relationship between inventories andprices and you're seeing that play out again, particularly yesterday with that3% drop markets. Today is next.Stay with us. This is Bloomberg.

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