US Approves Ukraine, Israel Support Equipment, Musk Faces Tesla Headache | Damage of day: Europe 04/22/2024

Good morning.This is Bloomberg Daybreak Europe. I'm Tom Mackenzie in London.These are the stories that set your agenda.Stocks and futures trade higher as Iran and Israel refrain from furtherescalation. At least for now, investors look aheadto earnings from the Magnificent Seven and from Europe's banks.U.S. aid passes the House.Ukraine's president, Vladimir Zelensky, says billions of dollars in new fundingcould help Kiev retake the initiative against Russian forces.Plus, Tesla slashes prices once again.

Amid a drop in sales and its stockprice. As the headaches pile up for Elon Musk,eyes turn to the EV maker's crucial earnings reports.That is tomorrow. Let's check in on these markets then.Unwinding some of those risk of safe haven moves a little bit more optimismthen percolating through these markets. And yes, there is a focus now, a shift,a look ahead to the earnings season. 40% of the S&P coming through withearnings this week. The max seven, about half of thosecompanies starting, of course, with Tesla, as we said on Tuesday.And then you have the data out of the.

US, a growth data.And of course, the Fed's preferred inflation gauge that comes out on Fridaywill reinforce what we've been hearing about Fed officials on from Fedofficials around the need for higher for longer around the interest rateenvironment. Currently, futures in Europe pointing togains in 3/10 of a percent. We're looking at S&P futures as well, up3/10 of a percent. NASDAQ futures pointing higher by $0.05.The context is, of course, that the Nasdaq 100 dropped around 2%, littleover 2% on Friday. And Vidi, it was crushed as well,falling about 10% by the end of the.

Close on Friday.The Nasdaq 100 dropping the most the worst week in fact, this that sinceNovember of 2022. Let's reflect as well flip the board andsee how some of the moves and the unwind around some of those high safe havenmoves. So for example, gold is a little softerin the session so far today. The US, too, yet crossing back about 5%.It's a really big week as well for the auctions.So we'll see the appetite that comes through for the twos, fives and sevensas a lot of debt is auctioned off in the US.And a test then of whether or not yields.

Are looking a little peaky at theselevels. You were at 106 largely as a result, alittle bit of softness coming through for the US dollar.So the single currency at one or six, there's a little softness coming throughfor gold, then unwinding again that move into that risk haven down almost a fullone percentage point at 2369 per troy ounce.Brent also softer in the session, down 8/10 of a percent.We'll be unpacking that story with Amrita Sen in the next 10 minutes.The outlook for crude WTI as well. Let's cross over to Asia now.April holding stand by in Singapore for.

A deep dive on these Asian markets.Good morning. Overall stunning answer you.Yeah, we're seeing that similar play over here in the Asia-Pacific wherethere's a bit of an unwinding of the safe haven that's but that relief rallyamong stocks is under way. That being said, it was more pronouncedfrom early on in the session. The Nikkei now paring some of theearlier gains. The CSI 300 has also flipped intonegative territory. The Hang Seng, though, one of thestandout performers today as Chinese authorities have unveiled measures toboost the standing of Hong Kong as a.

Financial hub.And this includes adding rents. That being said, on the TAIEX, we'reseeing that negative sentiment coming through.No thanks to that Nvidia video tumble last week.And among the AP semiconductor related stocks, those are the ones that aredragging the region's benchmark lower today.And it's crucial for a week where we're seeing the big tech earnings coming upalong with us data. So I'll get to that in a bit.But let's put the board, because it's not just that they're we're watchingthis week.

At the end of the week, we are alsogoing to see the BOJ potentially hold rates after that historic hike lastmonth. And I'll get to what we're seeing on thebonds potentially. But well, let's take a look at thischart which shows you just how the ECB might be unwinding TSMC.This is a stock that has lost more than 00 billion of market value in the spanof about a week. And this is also a chart that shows youthe volume of put options. And at the end of last, we actuallyspoke to the highest level since January.And our colleagues in the newsroom have.

Pointed out that this is potentially thesign of how options traders are dealing with this bearish wave of TSMC.Let's also take a look at what we're seeing in Japan.Bonds, if we can. As I said earlier, it's about the BOJ atthe end of the week and how the Japanese currency has really weakened to anextent that it could shift the inflation outlook for the country.This could mean that the DOJ potentially announces the start of quantitativetightening, and this could be from the cutting of bond purchases.So this could be further upward pressure on Japanese bonds, Tom.Okay, everyone in Singapore with the.

Breakdown of the Asian markets, thankyou very much indeed. And now to the domestic politics of theUS and how that has filtered across internationally.Of course, the US Senate expected to pass $95 billion, $95 billion in freshaid for Ukraine, Israel and Taiwan this week after the end of six months ofpolitical deadlock in the House. This aid will strengthen Ukraine.We didn't lose the initiative there. Now they have all the chance tostabilize the situation and to take the initiative.Okay. Let's bring in Bloomberg anchor ChrisGupta for the details on this Chris.

It seems like it's a done deal.It has to get to the president's desk. Of course, the Senate is likely andexpected to approve. It could happen this week.Big, of course, for Ukraine. What is in the package then?Well, a lot for Ukraine, to your point, $61 billion aid for Ukraine.But it's not just Ukrainians. Israel and Gaza as well.More defense, a kind of replenishment for the Israeli forces against Iranspecifically. That's specifically worded in theagreement, as is about about $9 billion of aid specifically for Gaza.Again, the wording is really important.

Here because Democrats have been pushingfor this in terms of the makeup of this bill as well.This is a bipartisan bill that was seeing a lot of pressure from the farright, as well as Speaker Johnson potentially in the crosshairs from that,but being able to pass this through. There's also money going towards Taiwanand other of its Indo-Pacific allies. So think about the $8 billion, some ofit going to submarine infrastructure and things development there.For example, we're getting into the nitty gritty.But the reason this matters is because Pacific Command, the US naval forcesbasically are historically underfunded.

And have been the least funded part ofthe entire defense budget for the United States.And that's why the summit that we saw a couple of weeks ago with Japan and thePhilippines is so important is because that is kind of helping the UnitedStates have that footprint there in a way that they can't really manage ontheir own. We'll certainly watch for any Chinesereaction to that additional funding for Taiwan.So Ukraine know the impact. What is it likely to be the 61 billionthat you outlined for us in terms of the military resilience of Ukraine?Well, let me break it down here, because.

There are a couple of different piecesof it, but the key pieces are 4 billion of that replenishment.So U.S. defense systems in particular, we'retalking about air warfare, drones, etc., things like that.They need about 13 billion of actual stockpiles through.So that is actual weapons that are going to fighters on the ground, The frontlinetroops, about 13 billion there, about 7 billion for U.S.operations there. So that includes whatever kind of the USintelligence forces, etc.. That's where that funding goes, as wellas nine and a half billion dollars in.

Forgivable loans.And this is important. It's forgivable loans, which by the way,was first brought up by President Trump and then now reimposed by PresidentBiden if indeed President Biden is elected to a second term.It is forgivable and he intends to kind of clear the debt, if you will, forUkraine. But what's important is this is also aturning point for the front line of Ukraine right now.And in the last couple of weeks before this aid was passed through, theexpectation was that Russia was kind of making far more advancements thanexpected.

Vladimir Zelensky overnight or over theweekend really saying that this is going to change the game in terms of gettingthat aid to the front lines and pushing back on that Russian offensive.So thank you very much indeed on the details there on the funding packagethat is coming through the US and the expected impact then on the ground inUkraine. Focus this week shifting to companyearnings. We'll switch focus now away from thegeopolitics to the earnings story. Some of the biggest names, of course, inglobal tech set to report The so-called Magnificent Seven magnificent Sevensnumbers arrive at a crucial time as.

Investors look for a high poweredrebound in stocks. And it is not just earnings.The Fed's preferred inflation gauge also coming out this week, as I mentioned.For more, let's bring in Bloomberg's Emily Strategies, Mark Cranfield.Mark, then, how are course asset risks lying?How are they lining up this week when we think about the big tech earnings, theexpectation around the catalyst in a week.We also, of course, keep a finger on the gauge of inflation.It's huge. I mean, you can't underestimate thisweek at all, especially as the Nasdaq is.

Down about 8% or so from the highs wesaw in March. So for a lot of relative value people,they would see that as being a pretty good entry point to get back into whathas been a very strong bull market over the past couple of years, providing thatthe earnings come in on at least as good as expectations, hopefully even a littlebit better. So you can imagine if we get a set ofearnings, which are a bit inconclusive or even, let's say, slightly below par,things could really look very shaky because those people who've been holdingon, even though the market's down 8%, may decide to give up, especially as invideo, we still get about another month.

Until they report.And we've already heard earlier in the report that Nvidia had a very bad finishto last week, dropping a jaw, dropping 10% in one day.So the market clearly is nervous. So really, expectations are very high.We need a pretty smooth week in terms of getting through.And there's so many people reporting here, it wouldn't be too much forsomebody to make a mistake along the way here.So really, investors are on tenterhooks. And as you mentioned earlier, it's amassive week for Treasury refunding as well.So we've got two year yields sitting.

Around 5% now.They could easily go a bit higher during the week.Yeah, some of that nervousness, as you say, and some of the election, ofcourse, linked to what's happening with inflation.PC coming out towards the end of the week.They expect data, they expect a number coming in at 3.6%.That is the forecast. We'll see what the actual number is.Of course, tying in to expectations and a stronger dollar is the euro.When we link all of that to the euro and the euro zone, Mark, is the euro, theweak the weak currency on this front is.

That the most vulnerable major currencywhen it comes to dollar strength, particularly as we hear increasinglydovish commentary from ECB officials. Yeah, certainly that's what traders arethinking here, because they're they're mapping out the future rate expectationsbetween the ECB, Bank of England and the Fed.And obviously they've got the in the background.You got the Bank of Japan as well. So at the moment, most traders arethinking that the ECB is going to do more rate cuts this year than either theFed or the Bank of England, which obviously puts the euro on thedefensive.

Now, of course.So far, nobody has moved at all apart from the Bank of Japan, But it's goingto be very hard for the European Central Bank to walk back expectations of June.We've already heard Christine Lagarde be pretty forthright in suggesting that isthere in the first interest rate cut is coming.We've had both European Central Bank speakers since then agreeing with her.Mr. Villeroy over the weekend as well,adding his voice in there, saying that oil prices are not going to get in theway of the ECB lowering rates as well. So it would need a lot for people tothink that the ECB is not going to.

Happen in June.But who comes next and how much of the time gap is there between them and thecut, either from the Bank of England or from the Federal Reserve?That's what traders are trying to gauge. And for now, they're giving a little bitof a benefit of the doubt that the ECB won't be too far ahead of the others.But if we see that gap get wider, if the Fed even goes, say, to the fourthquarter, it could be very vulnerable for the euro.He will be the currency most at risk within the G10 group.Okay. Life stressors.Mark Grenfell.

Brilliant analysis once again on a bigweek as he says, a major week for these markets and of course the implicationsfor the euro as we look ahead to that inflation print out of the US and anyfurther commentary from ECB officials the week ahead.Then of course, earnings front and center, as Mark was outlining for US, USearnings, European earnings on the US front, again, 40% of the S&P reportingabout half of the Magnificent Seven. And then of course, you have the likesof Lloyds Banking Group, Heineken, of course, which has that global footprintfor Europe, and then Deutsche Bank, Barclays, BNP.So a big week for European lenders.

And on Friday, NatWest here in the UK, agauge maybe of the health of the real estate market here.And Rémy Cointreau, of course, the French luxury drinks maker.We're also going to be thinking about European PMIs as well.So building out the pictures we hear from the likes of Germany's Olaf Schulzand indeed the IMF, suggesting that maybe German and Germany's economy islooking a little bit sounder, a little bit stronger, of course, from a lowbase. Whether or not the PMIs build out thatpicture, that detail coming out on Tuesday.Coming up as the US House passes new.

Sanctions on Iran's oil sector with alook at the impact on the market for crude.Amrita Sen from Energy Aspects joins us next for the analysis.This is Bloomberg. Welcome back.Now, Israel's Prime Minister Benjamin Netanyahu, has condemned a reported USplan to sanction an ultra-Orthodox army unit over alleged human rights abuses inthe West Bank. According to Axios, the Bidenadministration is planning to announce the measures within a matter of days.Blacklisting the battalion would prohibit it from receiving US militaryequipment or training.

Now the US House, meanwhile, has passednew sanctions on Iran's oil sector as part of a foreign aid package.The legislation broadens measures to include foreign ports, vessels andrefineries that knowingly process or ship Iranian crude in violation ofexisting US sanctions. Let's bring this one and three to sendin Founder and director of research at Energy Aspects.Emily Chang. A great joy and pleasure to have youhere in the studio to kick things off this Monday.Let's start with the Iranian oil sanctions story then.Does it take material, oil, material,.

Iranian barrels out of the market, doyou think? I think in theory it could have animpact. I think what I'm concerned about is theonly country that buys Iranian oil is China.And the only refineries within China are mostly that by Iranian oil.Other what we would call the teapots, the independent refiners, they're not inthe US financial system. They don't use U.S.dollars. So it's not that easy for the US toenforce anything on them. They can continue to buy it and theywill maybe get a little bit off.

Like Iran has been exporting over amillion barrels per day on average, about 1.2 to 1.5.You could potentially get 2 to 500000 lower, but about a million will stillflow into China. Okay.So 2 to 5000 lower. But arguably, given the size and scopeof the Chinese market and the Chinese buying demand, that that continues.There's been a lot of reporting, a lot of suggestion that maybe up until recentevents, the enforcement by the US of existing sanctions on Iran had beenrelaxed. The US and the Biden administrationpushed back on that.

They deny that that's what's beenhappening. Have you been seeing that and has thatnow started to reverse the impact of the lack of enforcement of some of thesesanctions? Oh, I mean, look, the lack ofenforcement is why Iranian exports last year went up by about 600,000 barrelsper day. It was a pretty consistent 7 million.And now it's kind of gone up that much. The Biden administration continues toofficially and unofficially denied, but the numbers speak for itself.But I think so far we haven't seen any stricter enforcement.I think it's been more talk.

Let's see with the new bill and like thenew focus with what's going on in Israel, Iran, whether the US actuallyenforces it. But what I really want to highlight isthat this is a US election year, so let's not kid ourselves.I think all sanctions are sanctions on paper with anything that remotely causesoil prices to go up. I just don't see myself believing thatthey're going to enforce it strongly. Okay.Very interesting. What is the geopolitical risk premiumthat's priced into oil at this point? Not very much.We've had a correction.

Right.So I think the market has been expecting a potential escalation.We haven't seen it. It's been quite calibrated, measuredkind of on both sides, both Israel and Iran.That's why prices have been coming off a little bit.We're not expecting massive downside, but we are expecting, you know, smalldownside in prices. Physically, this is the weakest periodfor oil anyways. We're very bullish the summer.But right here, right now, I think, you know, things will probably calm down alittle depends that bullish view when it.

Comes to the summer is that the demandstory is that supply story is that I mean it's a it's a combination firstquarter. We didn't build inventories, which ishuge. Usually we always build stocks.This Q1 was a counter seasonal draw we are building now, which is what itshould be April and May, June onwards, we get the decline in stocks.And you know, we are calling for over 2 million barrels per day of inventorydrawdown in Q3, even with our assumption that OPEC might bring back volumes verygradually. How much is that?Is that evidence still is that is the.

Compliance, that is the discipline thatthey're still within within opec+? Are they holding the line on these cuts?I mean, Opec+ as a whole? Yes, there will be a few countries youguys reported all the time. I mean, there's always a few culpritswhere compliance slips from time to time.But Saudi Arabia is very much leading from the front.Right. And they try to always get the grouptogether in terms of cohesion. Overall, OPEC compliance remains veryhigh and definitely been well over. Kind of a lot of people have beentalking about 50, 60%.

It's well above that Bloomberg dollarindex up about 4% year to date. What level does that does the strongdollar start to start to crimp that demand?Yeah, And I think for me, it's not just the strong dollar.If you look at the overall backdrop for risk assets right now with what Treasuryis doing, Treasury yields are doing, that's all to why I'm saying oil pricesprobably do soften a little bit in the near term.It's not necessarily all kind of go green and going for oil.I do think I mean, right now the dollar is okay versus, you know, where oildemand is and it should be.

But if the oil if the dollar continuesto rise through the course of this year, a lot of emerging market then starts tofeel the pressure. And on emerging markets, how well howwell supply does China at this point if we if we put it into the M category.Yeah. I mean yeah, that's a big question.I'm actually heading off there. Tonight, so I'll probably have more foryou when I get back. But I think that for me, the biggest orthe most interesting thing on China has been they have been buying quite a bitfor their strategic reserves. So just like the US is depleting theirreserves, China has been buying it and I.

Think at $90 oil they pose a little bit.Now the question is if we pull back, does that come back?I think China has been concerned about what's going on.Underlying demand and user demand is pretty solid, especially for gasolineand jet People are traveling around the weaknesses in diesel.You know, the economy still isn't doing great.So it's a different composition. We seeing much more driving and flyingby people, but not really manufacturing China, which is what we are all used to.A little bit of near-term softness is what you see a little bit morebullishness when it comes to the summer.

8653 on Brent.Now give us give us give us your forecast on Brent or WTI by year end.So we've always called this year for Brent to be $85 average, which kind ofwe were very much in the camp that we would trade well above nineties in thesummer. And right now we'll be in the eighties.So we came a little bit late. It's come a little bit early, but westill holding that view because again, it goes back to we tend to talk aboutgeopolitics from the bullish side, but with the US election, I think they'regoing to try and tamp down the bullishness as we approach theelections.

That's our biggest concern in terms ofthe bullishness, of course, look, if you get an outage because of geopolitics,we're going to go much higher. I think the US electoral component isreally, really fascinating, Amrita said. Thank you very much.Not carving it some time out of your busy schedule to give us the analysis onthese oil markets. Amrita Sen, founder and director ofresearch at Energy Aspects. Coming up, Ghana's bonds jump as thecountry's finance minister says he expects a draft agreement from hisofficial creditors by May. We bring you the details of that storynext.

This is Bloomberg. Welcome back.Happy Monday. Let's get an update now on Ghana's debtsituation. The country's finance minister says heexpects a draft agreement with official creditors next month.Following the agreement in principle reached in January.Let's get more then from Bloomberg's Jennifer Spicer in Jo'burg, standing byfor us with the details. Jen, what is the latest then on Ghana'sdebt restructure? How significant is this?This is significant, Tom.

I mean, and especially that we'rehearing from Ghana's finance minister that this draft M02 is potentially goingto happen in May. And because really this is the nexttranche, this is the next step for Ghana in their talks in restructuring theirdebt. And this has been really ongoing talksthat they've been having and they've hit a snag over the past few months.So the fact that he sees potentially this draft MRU coming with some ofGhana's biggest creditors, including China and France, is very significant.Now, what happens next is really where these talks go.You know, they're in this $3 billion.

Program with the IMF, and they had hit asnag because there were just disagreements over what what exactlythese haircuts would be between the country and also the investors.And so the question is, what are the haircuts going to look like?Are they going to live up to what the IMF is approving of?And will this then unlock this next tranche of funds for Ghana?Now, if we just talk about more broadly what we're seeing within the region, theIMF did paint a rather rosy picture, which is pretty good for the regionconsidering the past few years. We heard from the IMF Africa directorwho talked about his expectation that.

There are going to be bright spots,excuse me bright spots going forward for the region, and especially if we thinkabout a lot of the risks that are in play, including a stronger dollar.And of course, we're seeing a lot of geopolitical risks.But he still believes that in the long term this could be good.They actually said that the economic outlook for the region should nudge upto 3.8% this year and 4% in 2025, which is significant.But the one downside, maybe the one criticism that we did hear from the IMFis specifically about Nigeria, which of course, is a big player in this region.Take a listen to what a Baby Selassie.

Told us.For a country like Nigeria, Africa's most populous country, with all of thosedevelopment spending needs, we think it's problematic that tax revenue to GDPis only eight 9%. So that was just a bit of what he wastalking about with Nigeria. But still on the long term, he stillbelieves that because this region is so rich and critical minerals, criticalminerals that are, of course important for the green transition more globally,he still sees things brightening up for the region.So hopefully good news there. Okay.Bloomberg's Jen is up beside you with.

The latest in terms of Ghana and itsdebt restructuring plans. Thank you.Coming up, Tesla slashing prices amid slumping sales and swelling inventory.A tough time for Elon Musk. We bring you the details.This is Bloomberg. Good morning.This is Bloomberg Daybreak Europe. I'm Tom Mackenzie in London.These are the stories that set your agenda.Stocks and futures trade higher as Iran and Israel refrain from furtherescalation. For now, investors look ahead toearnings from the Magnificent Seven and.

From Europe's banks.US aid passes the House. Ukraine's president Volodymyr Zelenskysays billions of dollars in new funding could help to retake the initiativeagainst Russian forces. Plus, Tesla slashes prices once againamid a drop in sales and its stock price.Well, as the headaches pile up for Elon Musk, eyes turn to the EV maker'scrucial earnings reports tomorrow. And it is, of course, the big week interms of the earnings story both for us tech with half the max seven reportingTesla as we said reporting on Tuesday but also European banks and futures infocus for us today as well.

We check in on the markets on a day whenthere is a bit of relief it seems permeating across asset as well with theupside coming through for equities and a little bit downside coming fruit forthose haven assets, the likes of gold oil and the US dollar.European futures then pointing higher by 3/10 of a percent.The FTSE 100 up by 62 points so far in the session.We look at the energy story as well, given the oil has come off a little, seehow that feeds through into the Footsie 100 at the start trading at 8:00 UKtime. S&P futures holding just above that 5000level points of gains of 3/10 percent.

After a very challenging week last week,Nasdaq futures pointing higher by 5/10 of a percent after the worst week forthe Nasdaq 100 since November of 2022. Looking to repair some of those lossesat least gauged on these futures. Let's split the ball and look cross ourset then as we focus on the Treasury space.It's a big week in terms of auctions, so that will test the appetite out therefor these US bonds. The two year above 5%.Currently the US two year yields are edging higher again as some of thesegeopolitical moves unwind in the Treasury space.Euro dollar currently up a 10th of a.

Percent, reflecting a little bit ofsoftness coming through for the Bloomberg dollar, or at least the USdollar I should say. Gold at 2370, dropping 9/10 of apercent. Brent at $86 a barrel, down $0.09.Amrita Sen telling us she sees a little bit of near-term further softness foroil before some upturn later in the year.That's the check crossed asset. Then let's get to what's happening interms of the implications of this bill that's working its way through the USpolitical chambers and what it could mean for tick Tock, because that billforcing tick tock is Chinese are to.

Potentially bytedance to divest.Its ownership is on a fast track now to becoming law in the US.The legislation was included in that aid package then passed by the House overthe weekend. That package expected to be signed offby the Senate and then of course, given the green light by the US President.Let's bring in Bloomberg's Rebecca Wilkins for the details on this with thetick tock component in Focus. Rebecca, Tick Tock.Of course spent years lobbying in the US.It seems that that hasn't really worked out for it, at least so far.The concerns about it being a national.

Security risk remain that their effortshave failed, it seems. Yes, absolutely.That looks as if that's sort of the place that we have now arrived at.As you say, various US actors have tried to roll out restrictions or curbs ontick tock to tackle that perceived national national security risk,including by President Trump, of course. But it seems like this framework, thissort of divest or ban framework, was able finally to thread the needle whenit came to seeking enough bipartisan support to take it through.And we have very much moved from this sort of phase of discussions around whatthe US can do, what it should do with.

Tick tock to a process of legislationand, you know, ultimately very likely litigation, because tick tock itself isthat it is going to exhaust all possible channels, all possible legal channels totry to push back against this. Rebecca, what has been if there has beenone, the reaction from Beijing so far and we haven't had one yet.What could we expect? Chinese authorities, their response beto the to this piece of legislation? Well, Beijing has so far been quiterobust, at least in its rhetoric, in pushing back against this.It's previously accused the US of bullying China, for example.But it is important to note that this.

Broader context that Beijing, by andlarge, amid for example, the a plan by Biden to potentially raise tariffs,tripled tariffs on steel, for example, and Chinese imports of steel, all of theother EU probes into unfair practices and subsidies and so on.Beijing throughout this has remained relatively restrained, relatively muted.And it's in part because ultimately bigger picture, China is relying ondemand from the US and that demand and boost and support for its exports to tryand help with growth. So although sort of front of house, wesee Beijing being a little bit more sort of reserved and behind the scenes, we doknow that it's been reported that the.

Chinese embassy, for example, has triedto send its staff to set up meeting with congressional members of Congress andtry and sort of lobby from that side. It does seem, as we've said, that,however, those sort of efforts are failing so far.But, yes, I think in terms of a Beijing response, I don't think we're going tosee sort of too much fire here. Okay.Bloomberg's Rebecca Chang working on the potential Chinese response to that pieceof legislation that could see, of course, the divestment of TikTok fromits parent company, Bytedance. Thank you very much indeed.So the fortunes now of Elon Musk and.

Tesla, it's been a tough couple ofweeks. Elon Musk postponing a trip to India wasmeant to have happened over the weekend, blaming pressing issues at Tesla.We spent the weekend cutting prices for its cars and its driver assistancesoftware. This ahead of earnings due out tomorrowthat are expected to confirm a first revenue decline for the company in fouryears. Musk has also staked the company'sfuture on a next generation self-driving vehicle concept called the Robo Taxi.For more on today's big take, then let's bring in our global business editor,Peter Vercoe.

Peter.What is going on at Tesla? It's a fascinating question, Tom.It's been a wild week at Tesla, even by Elon Musk's standards.It started last weekend with those swingeing job cuts that we saw.That was sent out in a late night email to Tesla's global workforce, tellingthem that 10% of the the workforce was going to be cut.We've had reporting that people were turning up at work for their shift thenext day and they didn't know whether they had a job or not.In the week we saw, in the following week we saw the seemingly strategicpivot towards the Robotaxi attempts by.

Tesla's board to revive that $56 billionpay package for Elon that was struck out by a court in January.Friday was a recall of the Cybertruck B for an accelerator pedal issue.And then the news didn't stop on the weekend.We had price cuts in the US, price cuts in China, price cuts in Europe, the cutsto full self-driving and that last minute postponement of his planned tripto India this weekend or this week. So it really puts a spotlight on theearnings call on Tuesday. We know the earnings are probably goingto be disappointing given the slump that we saw in first quarter sales.But I think what analysts and investors.

Are really looking for now is someclarity on the strategy of Elon Musk and Tesla going forward.There's been some debate. This is unpacked in today's big site,which is really, really worth a read, Peter, when it comes to the debateinternally within Tesla about whether or not to go for the cheapest potentialmodel, a mass market, a true mass market.Tesla $25,000 or so or the fully autonomous option that he seems to bepushing for. Talk to us about that debate, the natureof that debate and what it tells us about the tensions within Tesla and itsfuture.

Yeah, well, very interesting that threemonths ago on the previous earnings call, Musk was really talking aboutprogress that they had made on this $25,000 car, the so-called Model two,And that's really seen by investors and analysts as a really needed measure byTesla to fill that sales gap that they've got and to start to compete atthe lower end of the market, where we're seeing companies like BD really comingout with a whole range of decent EVs at those lower price points where Teslajust can't compete. But now, and this is his comment duringthe week that Tesla was going to go balls to the wall with an autonomousvehicle and a robo taxi.

It seems to be a big pivot.You know, nobody's really nailed autonomous driving yet.You know, even Tesla, that market's full self-driving, but we know full well thatit's not full self-driving, it's not autonomous.It still needs constant supervision by a driver.And it really does seem to be tension within the company over whether swingingaway from the model to mass market car towards the autonomous robo taxi is theright way to go. Okay.Global business editor Peter Vercoe. Really, really fascinating in terms ofthe travails.

For now at least, a test that we lookahead, of course, to that important, important earnings story as well.The details coming through on Tuesday. And Peter setting us up brilliantly forthat with a big take. Worth reading today.Certainly worth your time to the European earnings space now, whereEurope's biggest banks are picking up the baton this week after mixed resultsfrom Wall Street. According to Bloomberg Intelligence,with sector stocks trading near a six year high, the outlook for lenders maybe right for a reset. That's if earnings disappoint.Of course, we continue to weigh up what.

ECB officials have been saying aboutpotential cuts in June, what that could mean for net interest margins as well.Let's bring in Bloomberg's Chloe Malley now for the details on this, a preview.Chloe, what are the main things to look out for this week when it comes toEuropean earnings in the banking sector? Yes, it's a very busy week for bankearnings this week. And as with the last couple of quartersand probably with the next few, the main theme is really the slowdown in netinterest income. And that is even despite the fact thatthere's been the expectations for rate cuts have been scaled back a little bit,the net interest income is going to be.

Quite sluggish for for most, if not all,lenders reporting this week. So that's kind of across the board.And if we look at specific banks for companies like Deutsche Bank, BNP andBarclays, the performance of the investment bank is also going to bequite important. And any kind of indication that theactivity is picking up a little bit is going to be welcome.Yeah, Has deal flow the flow picked up there, more IPOs in the pipeline, morefund raising going on. So all of that as well.In terms of the broader outlook for for the banking space in 2024, what what arethe kind of potential headwinds or.

Tailwinds for the sector that you andthe analysts will be looking at? So related to this idea of net interestincome slowing down is obviously the idea of cost control.So there's this metric called operating Jaws, the difference between revenuegrowth and cost growth, and that is likely to turn negative for quite a lotof banks. So that's going to be in focus.I think it's about a 15 out of 25 big European banks are likely to slip intonegative Jaws this year compared to just three in 2023.And you know, there's also this idea of rising loan loss provisions so that itwill not be necessarily seen in the.

First quarter, but the gradual increasewill come in through 2024. And there's also, as you mentioned, thebeginning of the conversation, The stocks are trading at near six yearhigh. So there could be a resurgence inrevenue downgrades if earnings disappoint a little bit.So we thank you very much indeed. Setting us up for a big week, of course,for European bank earnings and what to watch for.Chloe Malley with the details in the preview.They're coming up. The greenback is back, if you hadn'tnoticed, going more than 4%, gaining.

More than 4% year to date, a little bitof softer softness coming through in the session today.But of course, the upside has been that it's been pronounced.We discussed the dollar's dominance next, the ripple effects and whetherit's expected to continue. Stay with us.This is Bloomberg. Welcome back to Bloomberg DaybreakEurope. Now the dollar is lower, goes to mostmajors this morning, but of course, the greenback has been on something of atear yesterday, up about 4%. Of course, in that time frame, fueled byrising geopolitical risks and shifting.

Views, of course, on US interest rates.And those views really came into focus last week with the rhetoric comingthrough from those benefits. And of course, what we heard from JayPowell higher for longer seems to be the new mantra, whether or not we do indeedget any cuts this year as well, all being weighed up by these markets.Let's bring in at this point Michael Pfister, an analyst at Commerzbank.Michael, I want to start with the view, the top line view on the dollar.We heard from one of the top strategist at Vanguard saying essentially there isno option at this point but to buy the greenback.Do you agree with that view?.

Yeah, I totally agree with that.Right now, it's hard to find any reasons to bet against the dollar.Actually, we've seen quite a rally over the lasttwo weeks after the inflation surprise. And on top of that, we have a stronggrowth advantage and a very hawkish Fed. So it's hard to imagine any reasons tosell the dollar, actually. How vulnerable is the euro with it?Within that context, you see further upside for the greenback.We've heard from ECB officials reiterating that they expect to go withthe first cut in June. Does that leave the euro vulnerable andhow does that percolate through the.

Through the through the exchange ratethen? Yeah, I would say view is one of themost vulnerable currencies against the US dollar right now because we have avery dovish ECB which actually wants to cut back to back.No right now. So they are talking about a few morerate cuts this year. And on top of that, we have adisinflationary process which is making far more progress and ends with and avery weak real economy. So right now, viewers very vulnerableagainst the level that you're targeting is is parroting something that we shouldbe they should be factoring in fit for.

That for this year, or is that going tofall on you? I think the parity is going a bit toofar because the US was already very weak against the US dollar.So we are targeting like levels around 1.2, 1.04, so a bit above parity butvery close. Okay.What I fall back on at 106, so a little bit more softness is expected from youin the team at Commerzbank. What are the major currencies arevulnerable to this to the wrecking ball of the US dollar at this point?Well, we have the Swedish krona and we also have a central bank which is verydovish right now.

So they were already talking about ourfirst rate cuts in March, which they did not deliver in the end.But actually they're also very vulnerable right nowand the real economy is also suffering over there.So they will probably start cutting in May already, which is even further aheadfrom the ECB. So also not a good sign right now.Euro Swedish krona, What about the Japanese Japanese yen?We had the BOJ. The meeting is expected on on Friday.It's expected to be a live meeting, but the estimates are that they're not goingto go again with another hike at the.

Meeting this week.We'll see how that transpires. Of course, intervention watch is infocus when it comes to the Japanese yen. Is there a support level for the yenthat you're looking at? Is one 6170?What are we looking at in terms of further softness for that potentialmove? So we're expecting 160 towards the endof the year. So for us, again, weakness and becauseright now we can't imagine Bank of Japan hiking even more so inflation is verylow and we see no reason to hike in the end.Is that assuming that they intervene, is.

That assuming the intervention doesn'twork So they could intervene, but it'sprobably only a leaning against when they do not have the firepower to keepthe yen stable at 155 or even lower. Okay.So targeting 160 on Japanese yen intervention is not we're not reallygoing to cut it for that currency. We turn back our focus to the UK and thepound in light of that dollar strength. Then there's concern about theinflationary impact here in the UK given our need to import.When it comes to your view on Sterling, how is that shaping up?So we see the pound like in between.

Between the EU and the US dollar, wehave higher inflation and a more hawkish central bank, but the real economy isnot very good. So right now probably the Bank ofEngland probably wants to cut sooner rather than later, but it's just notpossible right now and that's why we expect them to cut later.And then the ECB. But before the Fed, and this is why wepositions of power in between them. We have an m life Pulse survey for theweek where we gauge the views of various strategists and others within themarket. And the question for this week is whichwill move rates by more in 2024, the Fed.

Or the DOJ?Where do you land on that question? Probably the Bank of England, but not bymuch. So as either the Fed or the BJP actuallythink the VOA is going to move rates more.Yeah, okay. Within that, within that context, and asthey in terms of the sequencing, how how are the same economies bank right nowthinking about the sequencing of cuts you buy into the view that the ECB goesin June. Where does the Fed land, where does theBRI land? So we now expect the Fed to startcutting in December, which is quite.

Late, and the Bank of England inbetween. But then.So in August, the first time when new forecasts are published and inflationmakes more progress. Okay.Not until December then for the Fed is the view in terms of the first cutcoming through that in in the commodity currency space.We've obviously looked at the run up in oil in the last couple of weeks.It's come off today given there's been a lack of geopolitical catalyst over theweekend in the commodity currency space. How are you thinking about the role thatChina might play if there's an.

Inflationary move there?That's a good question. So we've seen some good growth ratesfrom China recently, which is probably an advantage for currencies like theAustralian dollar or currencies that are largely in relationship with the Chineseeconomy. So it is that we are seeing a positiveimpact. But further than that, I would notexpect much right now. Okay, Michael, thank you very muchindeed for bringing the analysis this morning.In the space, of course, with dollar strength in focus for us today, theripple across across the space, of.

Course.Michael Pfister, ethics analyst at Commerzbank, thank you.Now for some of the other stories making news this Monday, Bloomberg learningthat BNP Paribas has hired close to 30 people to launch a new securitiesoperation in China. After receiving regulatory approval, theFrench bank will build out its brokerage research and asset management units.This comes as the lender opts out of investment banking amid a deal slump.U.S. Commerce Secretary Gina Raimondo saidHuawei's latest phone shows that China remains behind on cutting edge chiptechnology.

Huawei unveiled a smartphone powered bya homegrown chip last August. In an interview with CBS, Raimondodownplayed the company's claims of a breakthrough, vowing to take thestrongest possible action to protect US national security.And U.K. Prime Minister Rishi Sunak is pushing topass a law declaring Rwanda a safe country for the deportation of asylumseekers. The bill in the House of Commons todayseeks to circumvent a Supreme Court ruling from last year.This comes as soon as it makes a 48 hour Europe trip to defend his record ondefense and regain momentum.

Ten days, ten days ahead of a key set oflocal elections. An official says he is optimistic on hiscountry's economic prospects. Speaking at a major trade fair inHanover, the German chancellor highlighted record employment andslowing inflation thanks to falling energy costs.The potential economic turnaround so far has not helped the electoral prospectsof his Social Democrat Party. There's plenty more coming up.Stay with us. This is Bloomberg. We're hearing it's all big tech rightnow.

So some of the headlines are thisquarters about big tech. Big tech has great balance sheets with alot of cash and very little debt. Megacap tech companies that aregenerating extraordinary amounts of cash flow, they're still actually doing verywell. Tech is a big part of the quality storyand we still would expect for this quarter in particular for many of thosecompanies to lead on earnings growth going out for 1 to 3 quarters.I mean, it is going to start broadening out.You can't have tech be the only thing that does well if you're starting to seeeconomic weakness in other places.

We're just ramping up earnings seasonnow, and I think that's going to be a good distraction for the market to beable to sort of have a look what's actually going on, see whether the loftyvaluations are actually supported by the fundamentals.Bloomberg TV guests, of course, on US tech earnings, a major week for thoseearnings with half of the Magnificent Seven, the so-called Magnificent Seven,at least questionable whether Tesla deserves to be within that bracket.Reports this week, Tesla earnings coming out on Tuesday.So maybe they can push back on that view.Here's the broader picture in terms of.

The views, at least the guidance, theoutlook when it comes to earnings per share EPS for these companies, the S&Pand of course, quarterly, you've still seen gains in the quarter in the stocks,even though you've seen that downside pressure particularly pronounced lastweek. You still see in the upside year to datein terms of the stock performance, the S&P and the earnings outlook hasactually been revised higher, 3.69%, 3.7% is that blended forward earningsper share view then in terms of the S&P. Within that, of course, tech is playingand doing the heavy lifting. Let's flip the board and see how thingsare shaping up.

In terms of the RSI, the relativestrength then indicates is coming through.That momentum, of course, has faded. The momentum around the S&P has faded,and you saw its worst week in over a year last week.The RSI now is closing in on overbought territory, a levels last seen in Octoberof last year, which did mark the bottom at that point.And then you saw a turn around. Are we in a similar position right nowgiven that RSI is pointing close to oversold, oversold, not overbought,oversold territory, I should say? And will the catalyst kick in this weekand propel things higher?.

That is a key question for us this weekwhether or not these companies are able to implement the structural level someof these gains. Don't miss our exclusive interview, bythe way, with the chairman of a luxury fashion house, Valentino.That's at 9:30 a.m. on the pulse markets today, though, isnext. Stay with us.This is Bloomberg.

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