tv Bloomberg Markets European Open Bloomberg April 27, 2022 3:00am-4:00am EDT
divergence. alphabet tumbles on disappointing ad sales. as microsoft jumps. francine: let's take a look at the futures. it's all about the divergence in the corporate stories. the dax are fluctuating. we saw concerns in china, we have the fed, and the corporate results, tech are is down. i like the convergence. there's a lot that these markets have to work through. he saw some pronounced losses on wall street yesterday. the doubt more -- the nasdaq year to date lower by around 20%. we continue to watch that space, is higher yields. xi jinping and china thing that needs to be an all-out effort on infrastructure.
the ftse 100 getting .1%, spanish ibex is lower by about .1%. we continue to keep an eye on the earnings, bring some executive interviews with the likes of credit suisse coming up as a see how that reads across. in terms of the other markets where watching the futures, after a day on wall street -- see how things squaring up. with the geopolitics and the acknowledgment the step by russia to cut pollution -- poland and bulgaria off considered to be an major steps. germany and italy tried to shore up their energy supplies. s&p five -- futures gaining .6%, making up some of the heavy losses we saw yesterday.
csi 300, gains, up 3%. u.s. two year yield came up significantly yesterday, currently at 2.58, 10 basis points. a big pickup in terms of the year to date. in european natural gas futures, we want to highlight this, given what we are seeing, coming up 12%. francine: the energy space, we dig deeper into the sectors. russia goes on with its threat, if you don't pay, you don't get the gases of the european union has said we can't pay in -- that's not what the contract says. that is what's playing out on the markets today is that these individual stocks. it got basic resources of technology, chemicals, they're
on their way up. it is all about rationing, that will be at the bottom of the list if the government decides if you can have some energy, you need to wait, so you can going to production. real estate, travel and leisure on the way down. a mix when it comes to earnings. tom: it is, indeed. a loss for credit suisse, as liability continues to wait on this was lender. a similar picture for deutsche bank, a loss of 3%, particularly around the fixed income part of the business. the shares are down 3.4%. glaxosmithkline facing an activist investor pressures to increase the pipeline. they beat their earnings, up for the first quarter, a lot of demand for shingles vaccine helping to improve sales at that drugmaker, coming up.
francine: let's get over to our managing editor, mark cudmore. if you are looking at valuations in big tech. mark: [no audio] tom: as you can see, it's plummeted to the lowest level in two years, of has a number of people asked me is this the time to buy bargains, but how cheap it's gotten, have we reached a capitulation low. let's look at this chart on a 10 year basis, here's the same
chart. as the last two years, is still above what most of what we saw the previous decade before the pandemic. that is because the financial conditions post-pandemic with the combination of monetary and fiscal policy met we saw extremely fiscal -- extremely easy condition, now what we are seeing is a reversion to the mean. while the phone along ways that they have a lot further to paul. not only is this the more normal environments of the fed is tightening conditions aggressively, we should go to the bottom of the range. there's a lot more pain to come for the nasdaq over many months ahead. francine: thank you so much. mark cudmore with a big dose of common sense. let's get into the key market drivers with -- thank you both
for joining us. let me start with you, we have a lot of corporate earnings, a lot of concern about what european gas means if a lot of the countries decide not to pay in rubles, whether we will see energy rationing. does it automatically become more painful for equity stocks from now? emmanuel: good morning. the market is complex, the macro for europe is very much on schedule. as for the threat of restriction , the embargo is here. [indiscernible] some of that seems to be reflected in sentiment and
valuation, this is a fluid situation, no one seems to be giving benefit. tom: i just want to follow up with that. do you start to see a repricing of some of these equities around the possibility of the likes of germany and italy being cut off? emmanuel: yeah. lucina broader consumer space, though stocks have been -- a downside in last couple of weeks. it seems to me the market is prepared for the worst case scenario. some of the data we track, the positioning [indiscernible] if you were to seat some of this on the front, tighter supply
from gas and energy, we could have a lower side to the market. a combined recession -- you can see the market falling more in light of this offsetting cyclical to some extent. francine: let's also bring in our managing -- our editor. it is in line with requests around 48.7 mcm one day. are we looking at rationing of industries? that would automatically hurt earnings in the next quarter. >> absolutely, that is the next risk markets are trying to -- get their heads around. what does it mean for share prices? what does it mean for the euro? for bonds?
impact, very obvious and commodities. this has broad implications across other markets as well. as emmanuel said, it could be a situation where equity parses -- prices could start to factor in that potential hit to the economy. germany and italy quite vulnerable. more broadly, we are seeing this layout eminently in the euro. i think that is the most obvious and evident macro play at the moment. that five year low speaks to help europe as a region is uniquely exposed to this energy risk from russia. i think this is playing out as one of the worst fears, the idea of russia cutting off supply of energy to europe. that is starting to play out now. perhaps paving the way for further declines. tom: let's bring you in on the tech earnings, as we look at alphabet and microsoft, this up opportunities? emmanuel: the market -- trying
to position for the next risk. if you look at the current situation, it is not that bad. earnings still coming in -- we have 80% of customers -- companies beating estimates. it is a mixed picture as you expect. we have some cost issues here and there, overall, earnings are not that bad. that should cover -- we're seeing much more dispersion, to some extent a lot of dislocations in the market, all these different macro banality, china, russia, forcing us to pick and choose. when not seeing a different type
francine: welcome back to the open. let's get some earnings now. credit suisse has reported another quarterly loss, is a strong bowl with the glowing -- growing burden of litigation costs. manus cranny spoke to -- >> it is good to see positive new net assets. there still at the low level. it is not near our target. >> no cheering. >> note, they are solid, it is a good reflection that we have strong client, franchises across the board in all regions. switzerland was very good. especially our prime clients. business was good, we also had
some solid loss in the middle east -- is a step in the right direction, quarterly assets is nothing -- not something i'm to focus on. >> a number of people said to me this bank is now a takeover target. you fight to the death to keep that brand independent. >> we are very much focused on our strategy, implementing our strategy, this is how we will create value for our shareholders. if we could get back to the 10% by 2024, which is our target, the share price and valuation of this bank will go back where it belongs, so will this brand. >> how do you get back to that return on equity? what's our strategy. >> in terms of the biggest risk we see escalation, russia cutting off gas to parts of europe in the past 24 hours, how
do you see the risk from the war in russia ukraine, what is the biggest unintended consequence for you? >> we see it in all the businesses, whether it's the banking side, the capital market sector, whether it is an asset management, clearly the market resulted in lower assets under management, their primary and secondary effects. >> the biggest headwinds this year? >> it is for all of us, not only credit suisse, markets will recover. we are firstly worried about the people in ukraine set that is what we really care about and hope that things will stabilize their soon. then the markets will follow. tom: credit suisse ceo speaking to manus cranny in europe.
still with us, emmanuel cau, going back to the first of this year, the dynamics of change, how do you look at the banking sector, how much do you want to be adding at this point and how do you spread that divergence across the sector? emmanuel: it is the sentiment, and the banking sector, we do find -- if you think of this as an opportunity, the sector has disconnected from bond yields, earlier in the air, yields are the key driver of the banking sector, now we see it the market focusing on recession risk and liquidity, from an earnings
standpoint,, we see asset quality, and valuation now at the same time positioning from the start of the year, we see a lot of -- [indiscernible] francine: is there anything you would be buying right now given what we just talked about? all the earnings pressure and rationing? emmanuel: we still like energy, is something -- it is a complex situation, oil won't go away anytime soon. i still believe inflation will -- the sector is leaving us to find cheap valuation -- good
valuation, we like some industrial, they're making good numbers, is a market investment, that is going to be helping some of those stocks in the space. some of the cyclicals look to have a two negative macro. francine: thank you so much for all your insights, emmanuel cau, berkeley, head of european equity strategy. -- barclays, head of european equity strategy. this is bloomberg. ♪
now, what progress has been made , given reluctance from the biden administration enter formal free-trade agreements and discussions, what has moved in terms of your talks? and where do things go from here? anne-marie: good morning. we've had some good discussions over the last two days, in london, and month ago in baltimore. where i went to listen to stakeholders across the u.s. to what is important to them to grow what is the bilateral trade relationship, over 200 million pounds per year. we want to figure where we can in a 21st-century way, drive forward the digital trade principles which we agreed during the uk's g-7 presidency last year, how we can support
those young female entrepreneurs of minority groups who are not yet able to get the maximum benefit of our trade. we've been discussing a wide range of areas, hearing from stakeholders, u.k. and u.s., we hurt made great progress and been able to set forward a program, a roadmap going forward. the next step will be meeting in june to discuss in more detail. francine: given the by the administration back on actually holding negotiations of what are the other countries you also negotiate with right now? anne-marie: at the moment we are working in detail on rcc p, are an important market for us, possible indio pacific -- indo pacific, looks to those enormous and growing markets. we are in discussion with the
prime minister of the weekend, how we progress on india, we are also working with the number of other countries, key partners like canada and mexico, who are partners, but also important trade partners, looking to progress those as well alongside israel, switzerland and another -- number of other countries we are keen to build those relationships, liberalize trade and make sure the values of free and fair trade that the u.k. believes in are ones we can establish and maintain across the world. tom: what is your message to small businesses across the u.k. who have lost out in terms of export opportunities in the european market? illustrated in stark terms by the study. anne-marie: some of the main challenges in their exporting the last couple of years, in
parts are covered challenges as well as some of the changes to the rules and regulations that the new framework of the new relationship of the u.k. with the eu. also we set up our tech support service, to help those smes who want to know how to do trade with european countries, or an issue they want to help resolution with. we had a huge use of that in the last month, which supported companies who have issues trading with ukraine, and the sanctions against russia and belarus. francine: thank you for joining us. too short a time, you will have to come back to have a lengthy discussion in the studio. coming up, we speak exclusively to nick walker, a conversation about gas prices after russia escalating to say if they are
francine: welcome back to the open. 30 minutes into the trading subcarrier top stories. weaponizing energy, russia cuts -- threats -- zero hits a five year loan -- low. credit suisse posts a big loss. alphabet tumbles on disappointing add sales as alphabet -- as microsoft bumps on -- jumps on five demand.
we look at the gas supplies, what happens if there's no gas going to germany and italy if they don't pay in rubles? tom: the risks this morning we are seeing lower moves across benchmarks, down by 1%. concerns about that decision by russia to cut off poland bulgaria, particularly acute as we shift our focus to the likes of germany and italy as they become the next target. stocks down .1% -- stocks down 1%. the only sector in the green, energy, you had talked from xi jinping about infrastructure. the regulators on technology -- let's see how things are playing out sector by sector, earnings
from -- a mixed bag when comes to the earnings, as well as tech, alphabet not doing so well, microsoft vote, cloud services doing well. resources up 1.3% on the back of soaring gas prices, brent is elevated, after that trip to cut off poland and bulgaria. at the bottom of the list, you fall more than 2%, financial services also lower, the likes of credit suisse and the liabilities there continuing to haunt them with the shares are lowered this morning. francine: moscow has cut off the gas supply to poland bulgaria is up escalating the standoff with europe. the choice now of accepting his demand or -- to pay rubles or the prospect of energy race --
rationing. how much pressure could this put on european energy markets? >> we seen prices rise strongly this morning off news that gas flows have been cut. the coming not so much from the impact of these two countries, but the wider impact of what this could signify. we have a series of deadlines for which the contract payments will come in the next few weeks. at the end of may, we have germany, probably the biggest taker of gas from russia and germany, there deadline at the end of may. these two contracts, poland bulgaria both expired. this is showing that this is what russia intends to do if contract deadlines arrive and companies have not paid -- country's the page rubles. we are expecting to see reaction
from the european union, from germany, the netherlands and italy, as to how they will deal with the situation. whether they will change the approach or facebook to putin and put in place -- face up to putin and put in place -- there will be an impact if we suddenly see a cut off in russian gas supplies, even though the weather isn't cold. tom: bloomberg editor rachel morrison, thank you for getting that dust us up-to-date on that decision for putin to weaponize gas supplies. we will stay in the story, gas prices shooting up as well as oil. the company beating estimates for the first quarter, joining us as nick walker's of the ceo of london energy, -- lundin
energy. let's start with this geopolitical story and that decision by putin to cut off poland bulgaria. we focus on the short-term impact, what are the medium-term impact of this decision across the energy space? nick: i think this highlights the importance of universal access to secure low-cost energy. in the long-term, it puts more debate about energy security and the energy transition and the recognition that hydrocarbons continue to play an important role in the energy mix. it will also accelerate investments in the long into energy transition, we all wait -- all racy governments moving in that direction. francine: racing it will take much longer to transition or will it accelerate?
or you are selling your exploration to someone else, do you regret that? nick: no, we think it's a fantastic decisions of we built a great company, we felt to be prosperous through the energy transition, last year we looked around, how we could create that in our combination without -- europe's largest -- that transition will close at the end of june, is a fantastic business which will deliver long-term returns, you are seeing that in both companies already. what's left over, we have kept back our renewables business, we intend to grow that, that business is relatively small, but in great position, it's got low debt, great condition to grow, and for people to take advantage of renewable expansion
opportunities. we are heading in both directions, it's transformational to the business. cracks give us more details on that if he could, what are your ambitions in that space, how do you plan to make them a reality? >> the business comes down to the great position was year's assembly bill renewable transitions -- the business is debt-free, it can create free cash flow by the end of 2023. got a bed management team, we've demonstrated -- we take that business without strong leadership team and expand into the rest of europe. francine: nick, what are you working on exactly?
", you have a daring and uncompromising attitude in oil exploration? what does that mean for renewables? what do you worried there is not enough nickel, lithium, how do you get around this problem? nick: i don't think those relate -- the business is focused on renewables, with current they have the hydro part -- project in norway. we have two windmills -- windfarms in finland. we continue in that direction with renewables, longer term we will start to think about whether there some other energy transition opportunities the business could take advantage of. tom: 1.8 9 billion u.s. dollars above the estimates, what do you do with that profit increase? do return cash to shareholders or put to work with acquisitions?
>> we set out dividend policy earlier in the year, that is returning cash to shareholders, increase the dividend by 25%. with the combination of our business -- we talked about it ends with the much bigger company. that company is a great position to expand returns over time. when the transaction completes at the end of june, that is a broader question you need to place to bp. the joint company is in a fantastic place to grow shalt the returns over the next decade. >> is $100 a barrel the new normal? >> i think we are going to see strong prices for some time. i think we could see above $100 for quite some time.
>> thank you so much, in the meantime we have the reaction from the president, saying that the action is unjustified and unacceptable, saying the eu was prepared for the possibility. they are talking and coordinating contingency plans. i'm not sure whether that means there are strategic reserves that will be released further? it seems like all hands on deck to try to mitigate this escalation in russia versus eu. >> almost 22% spike in oil futures, as a result of this decision, $106 per barrel for brent,, coming up we are going to speak to mark read, that is next. this is bloomberg. ♪
going to go to live pictures of spacex, the latest launch to the iss. they haven't launched yet, that is expected at 52 minutes past the hour. the astronauts are strapped in and prepared for that countdown. a little under 10 minutes. this is a spacex crew formation to the iss launching from kennedy space center in florida. they are going to be conducting lab experiments. >> i'm still quite moved when i see humans going to space. the -- wpp has raised its guidance for the year, including brands launch -- past the post lockdown search. mark read, great to have you on the program today. thank you for joining us. advertisers are spending now, what is your main concern going forward?
we had covid, interest rates going higher as of the war in europe, what is one thing you can't control that could be a downside? >> i don't think we can control any of those things. we did have a good first quarter, up 9.5% after strong growth last year, from brands like google, coca-cola, strong demand for services, technology, e-commerce. our business has done extremely well in the last quarter as well. there's good demand, we are still mindful of the economic risk coming into the second half of the year, as we learned of the last two years of there's many things you can control, we've been there before, we will get through over the course of the year. >> some would say that is a bold call, given the risks francine
just mapped out. what gives you the confidence you could meet that guidance given all the uncertainty? what conversations are you having with your clients that gives you confidence that spending will continue? there's two things. first, kimi out perform our own expectations but 3% or 4% in the first quarter. we see the rest of the year unchanged, we haven't yet seen any major withdrawals from the market, to protect their budgets, we are dealing with inflation, they need to invest more in marketing and brands in that environment, continue to invest in commerce -- e-commerce. trying to protect their spending, a very different passion for what we saw two years ago today when they were in the mind of cutting. >> where do your clients actually want to spend their dollars? is there a traditional
advertising that is hot right now? is it all into the social media platforms? >> traditional tv, pray strong, up 17% in the u.k. the first quarter of the year. traditionally, it has been strong, besought google, alphabets results last night. obviously some disappointment in the markets, i wouldn't be disappointed by 23% organic revenue growth. alphabet is a third of the global advertising market outside of china. you are seeing that strong growth from the world's biggest advertising sales company. there's good demand still, they're looking to reach consumers where they are, which are digital channels. >> maybe netflixes an opportunity, you can expand on that. we are not talk about -- now
talk about twitters and must once to -- elon musk to acquire it. >> i think twitter has got about $5 billion of revenue, i don't think he's going to pay $44 billion for a company and then effectively eliminate its revenue line. there's no doubt, twitter could be a stronger product, many of the ideas around improving the algorithms, and the customer experience will be great for the platform. pray for our clients. the spacex launch should be about -- against elon musk. no doubt some people are concerned about the content on the platform, he's made it clear he believes in free speech within the law. i think that kind of approach may work, it may not, we will
have to see. >> mark, give us a sense of how your china activity is going given the strong policy we still have over there. >> we had good growth in china in the first quarter, there are lockdowns. one of our offices in shanghai, everyone was locked down over the weekend with no notice. lockdown having an impact on our people and the economy, we will have to see how zero covid policy progresses. ironically, it takes some of the pressure off commodity prices and lower demand. china is about 6% of our business, about 8000 people there. it is within the bounds of the year. >> this is an attractive environment to make decisions? >> i think prices are still
high, despite the tech selloff, they remain high, where we would like to make more acquisitions, and build out our expertise. we will invest -- british marketing, specializing in clients like netflix, helping the build influence and marketing programs. there is tremendous innovation in the advertising business. a lot of demand, innovation, with elon musk investing in media assets, some traditional, to some digital. it is not going to be a boring year,. [laughter] >> you got that right. there seems to be a link between billionaires and going into space. this is were we going out,
spacex, we are looking at life pictures, for astronauts on board for a six month stint, being sent to the international space station. the launch -- part of the commitment of the spacex to periodically fly astronauts to and from the orbiting lab. a little different than what was seen spacex do. >>. spacex has been very successful, to the reusing of their rockets. let's bring in alex webb, the talk is around whether it spacex could potentially benefit from some of the fallout around ukraine and the russians may be stopping their services to the iss for nasa. next since michelle stopped
running, -- since the shuttle stopped running, nasa has depended upon largely russian rockets to take its astronauts into space, increasingly we are seeing spacex take that over. we have seen some whisperings from russia that may leave carrying those astronauts into space. therefore, it could be a benefit, and the immediate to long-term for spacex, elon has the solution. >> one of my favorite stories was from a french astronaut who just came back it was telling us about an experiment in space. there were two experienced flyers and to rookies, jessica watkins also making history with her flight, she will be the first black woman to live as a long-term crewmember on the space station. what kind -- what does the lunch
mean? is it a battle between nasa and europe? is this the next frontier for world dominance? >> the thing that is fascinating about that question, over much of the past 30 years, that hasn't been the case. the international space station has been a great example of international cooperation. we have seen european astronauts, russian cosmonauts, and those from the u.s.. the thing that has us worried at the moment, maybe there is a bit of it another company that -- we're seeing the launch there. >> talk us through what it processes with lunches like this is who watch it happening live. >> a lot of it is run remotely from control room. the guys on the ship had very little role to play, they are along from for the ride. if something goes badly wrong,
they have something to do. a lot of this is run from a control room in texas. what we are seeing here is some astronauts holding on, and hoping everything goes to plan. >> the controls from texas, live pictures, this is the spacex crew for permission to the international -- mission to the iss, the launch, successful, they are heading up to the iss. spacex has taken the lead on this when it comes to private space exploration. >> i'm finding it amazing to hear what the astronauts are hearing. this mission called for fort, human flight mission to the iss for nasa. you can hear the commentary,
also the people on the ground. it seems to be a successful launch. spacex launched its first crew to the iss back in 2020. i remember thinking time usually works for a number of reasons. i find it amazing. just look at it. >> i will process -- i will process, called gravitas. elon musk is never unimaginative. >> that is the thing, a used to be that if you're sending up in space, used indian rockets, they were cheap compared to what the rest of the world offered, spacex is undercut that. that was why was about to say
when we think about the tensions internationally, oneweb, the british company that lunches satellites has managed to use the soyuz rocket, russia says we are only going to do that if the u.k. guarantees the satellites will be used to spy on russia. now they are spacex to send their satellites up, not on this mission, on another one. does speak to the intentions we are seeing when it comes to space exploration, not quite the level it was in the 1960's, >> geopolitics of space, as we watch this live launch. alex webb, act -- excellent insights. >> surveillance, early edition is up next. we will continue watching the spacex launch, we will have a full round up of all the market news you need to know as well as
>> there was clearly an impact from a couple of one offs including our 700 million provision. >> we are sticking with the revenue outlook we provided in march of 26 billion euros. that is growth on last year and well ahead of where the market consensus is. >> in terms of revenues the impact is that we suspended commercial activities in russia. about 1% of google revenues were from russia. >> this is "bloomberg surveillance: early edition" with francine lacqua.