Bloomberg Daybreak: Europe 04/03/3034

Summary

In this episode of Bloomberg Daybreak Europe, Lizzy Burden covers a range of pressing issues including the aftermath of Taiwan's biggest earthquake in 25 years, impacting lives and chip manufacturing, with at least four reported casualties. The narrative shifts to financial concerns as stocks decline due to anticipated slow pace in Federal Reserve's rate cuts, despite optimistic projections of three cuts within the year. Additionally, the dialogue between Presidents Biden and Xi Jinping marks their first communication since November, discussing significant agendas including TikTok's future. The broadcast also touches on global market reactions, Fed officials' insights on rate cuts, and geopolitical developments, providing a comprehensive outlook on current global events and economic trends.

Takeaways

• 🌎 Taiwan experienced its biggest earthquake in 25 years, causing significant disruptions, including in the chip manufacturing sector.
• 💰 Global stock markets reacted negatively to indications of a slower pace of interest rate reductions by the Federal Reserve.
• 💵 San Francisco Fed President Mary Daly projected three rate cuts for the year, emphasizing that projections are not promises.
• 📞 Presidents Biden and Xi Jinping discussed key issues in their first communication since November, with TikTok's sale being a notable agenda item.
• 🔥 The Taiwanese earthquake's impact was significant but contained, with efforts underway for rapid recovery and minimal long-term disruption to chip production.
• 📈 Financial markets remain volatile, with interest rates and economic data driving cautious investor sentiment.
• 📉 Bond traders are pricing in fewer rate cuts than previously anticipated, reflecting a reassessment of the Federal Reserve's likely actions.
• 💻 Salesforce and other companies are highlighted as ones to watch in Q2, suggesting potential market movements based on product innovations and business strategies.
• 📣 The narrative from Fed officials suggests no rush to cut interest rates, with economic data being a key determinant of future policy decisions.
• 🛣️ OPEC+ meeting focus and geopolitical tensions in the Middle East contribute to oil market dynamics, highlighting the complex interplay of factors affecting global energy prices.

Q & A

What caused the biggest earthquake in Taiwan in 25 years, and what were the immediate impacts?

Taiwan experienced its largest earthquake in 25 years, leading to significant disruptions including toppling buildings and impacting chip manufacturing. The immediate impacts reported were at least four deaths, ongoing rescue operations, and structural and service disruptions, particularly in the eastern part of Taiwan.

How did the earthquake in Taiwan affect the semiconductor industry?

The earthquake led to the temporary suspension of operations and evacuation of staff at major semiconductor companies like Taiwan Semiconductor Manufacturing Co and United Micro Electronics. This disruption is significant given Taiwan's pivotal role in the global semiconductor industry.

What were the market reactions to the US economic data indicating a slower pace of rate reductions by the Federal Reserve?

Stocks slid due to fears of a slower pace of rate reductions by the Federal Reserve, as strong US economic data suggested that the Fed might not rush to cut interest rates. This scenario led to increased yields and a reevaluation of stock investments.

What did San Francisco Fed President Mary Daly say about the future interest rate cuts?

Mary Daly stated that she believes three rate cuts could occur this year, but emphasized that this projection is not a promise, indicating uncertainty and dependence on future economic data.

What were the main topics discussed in the first phone call between Presidents Biden and Xi since November?

The key topics included the full sale of TikTok, with the White House emphasizing this point in the agenda. The call also likely covered broader bilateral relations and strategic issues.

What is the significance of the Fed Chair Jay Powell's speech mentioned in the script?

Jay Powell's speech is significant as it could provide insights into the Federal Reserve's view on the economy, future monetary policy, and rate cuts, which are highly anticipated by the markets and could impact global financial stability.

What was the impact of the earthquake on Taiwan's east region, and how did it affect local infrastructure and services?

The east region of Taiwan, being the hardest hit, faced substantial damage with closed roads and disrupted rail services. The area experienced structural damages and impacted emergency services, highlighting the region's vulnerability to natural disasters.

How did the recent geopolitical events in the Middle East affect oil prices?

Geopolitical risks in the Middle East, along with actions by OPEC+ and market dynamics, led to a significant increase in oil prices, with WTI crude hitting $85 a barrel. These events have caused concerns over supply stability and market tightness.

What are the expectations from the upcoming OPEC+ meeting mentioned in the script?

The expectation from the OPEC+ meeting is to affirm current output cuts, as the organization aims to manage supply levels and influence global oil prices amidst geopolitical and market pressures.

What were the main concerns and discussions around NATO's support for Ukraine mentioned in the script?

Discussions centered on establishing a significant fund for Ukraine and possibly shifting operational responsibility for weapons deliveries to NATO itself, reflecting concerns about sustained support and the geopolitical implications of the ongoing conflict in Ukraine.

Outlines

00:00

🌍 Global News Update: Taiwan Earthquake and Economic Developments

The program begins with a significant earthquake in Taiwan, the biggest in 25 years, causing destruction and impacting the chip manufacturing sector, with a reported death toll. The story then shifts to the global economic landscape, emphasizing concerns about a slower pace of interest rate reductions by the Federal Reserve in response to strong US economic data. San Francisco Fed President Mary Daly discusses the possibility of rate cuts, projecting three for the year but emphasizing that a projection is not a promise. The segment also covers a diplomatic conversation between Presidents Biden and Xi, highlighting the focus on Tick-Tock's full sale and geopolitical relations. The report circles back to provide a detailed analysis of market reactions to US economic data and its implications for future Federal Reserve decisions, juxtaposed with updates on the Taiwanese earthquake's impact.

05:05

📉 Market Responses and Economic Forecasts Amid Global Events

This section delves into the aftermath of the Taiwanese earthquake and its limited impact on market trends, contrasting with broader global economic concerns. It provides an analysis of the semiconductor industry, particularly TSMC's response to the earthquake, and broadens the narrative to include Intel's disappointing financial results influencing global chip stock prices. The discourse extends to currency market dynamics, emphasizing the yen's value against the dollar and speculation about Federal Reserve actions affecting international currencies. Further discussion includes the anticipation of Fed Chair Powell's speech, contrasting expectations of Federal Reserve rate cuts against actual economic data, highlighting the discrepancy between trader projections and official Fed outlooks.

10:06

🌐 Geopolitical Dynamics and Economic Strategies

In this segment, the conversation shifts towards global geopolitics, focusing on the dialogue between President Biden and his Chinese counterpart, Xi Jinping. The discussion outlines the slightly positive but cautious tones from both nations, setting the stage for further diplomatic engagements. Attention is then given to upcoming visits by high-profile US officials to China, aiming to address key economic and policy issues. The narrative explores the broader implications of these diplomatic efforts on global economic policies, including potential impacts on debt relief for developing nations. Additionally, this part highlights concerns regarding geopolitical risks in the Middle East and their influence on global oil prices, alongside commentary on the geopolitical and economic stakes of the situation in Gaza.

15:08

📈 Economic Optimism and Challenges in the Global Oil Market

The final part of the script focuses on the economic optimism tied to the recovery and expansion of various sectors, including the hospitality and automotive industries, as exemplified by companies like Accor and Pirelli. It then transitions into a detailed examination of the global oil market, noting the significant rise in oil prices due to geopolitical tensions and supply dynamics. The narrative underscores the strategic maneuvers by OPEC+ to manage output cuts and the potential for further market tightness. The segment also touches on the US stance on civilian protection in Gaza, providing a bridge to broader geopolitical considerations affecting global markets. It concludes with a look ahead to significant economic indicators and events, suggesting a period of heightened market volatility and strategic adjustments in response to global economic trends.

20:10

🌟 Strategic Investment Insights and Market Predictions

This part provides a strategic overview of key economic events and market trends, including the anticipation of Federal Reserve actions based on recent strong economic data. It highlights the nuanced interpretations of Federal Reserve officials regarding the pace and necessity of rate cuts, framed against the backdrop of a robust US economy. The narrative explores the implications of these economic indicators for global financial markets, suggesting a cautious approach to investment and policy adjustments. Special attention is given to the potential for economic data released later in the week to influence market sentiments and the strategic positioning of investors in anticipation of Federal Reserve decisions.

Keywords

💡Taiwan earthquake

The Taiwan earthquake mentioned in the video is highlighted as the most significant seismic event to hit the island in 25 years, causing structural damage, disrupting daily activities, and notably affecting chip manufacturing. The earthquake resulted in fatalities and prompted immediate emergency responses, including evacuation and suspension of operations in critical industrial sectors. This event underscores the geographic vulnerabilities of Taiwan, especially given its status as a crucial hub for semiconductor manufacturing, impacting global supply chains.

💡Federal Reserve rate cuts

The discussion around the Federal Reserve's (Fed) potential rate cuts is a focal point of the video, indicating market speculation and concern over the pace and extent of interest rate reductions. The Fed's monetary policy decisions are closely watched as they have significant implications for economic activity, investment, and stock market performance. Statements from Fed officials, including the projection of three rate cuts within the year, underscore the dynamic and uncertain economic environment, as well as the central role of the Fed in influencing financial market expectations.

💡US economic data

US economic data, particularly relating to job openings and factory orders, plays a crucial role in shaping market perceptions and expectations regarding the health of the economy. Positive data points can influence the Federal Reserve's monetary policy decisions, potentially leading to adjustments in the timeline or magnitude of interest rate cuts. In the context of the video, strong US economic data fuels speculation that the Fed may delay or limit rate reductions, affecting investor sentiment and market dynamics.

💡chip manufacturing disruption

The disruption in chip manufacturing due to the Taiwan earthquake highlights the fragility of global supply chains and the significant impact of natural disasters on critical industry sectors. Taiwan's role as a major player in semiconductor production means that such disruptions can have wide-reaching effects on various technology markets and industries worldwide, affecting availability and pricing of electronic goods and components.

💡market reaction

Market reaction in the video refers to the immediate financial market responses to various stimuli, including economic data, Federal Reserve policy expectations, and geopolitical events. Market dynamics, such as stock price movements, interest rate expectations, and currency values, reflect investor sentiment and adjustments to new information or developments. The discussion emphasizes how positive economic news can paradoxically lead to negative market reactions due to expectations of less accommodative monetary policy.

💡Yield

Yield, specifically mentioned in relation to the ten-year U.S. Treasury note, represents the return investors can expect to receive by holding the bond until maturity. In the video, the rise in yields is discussed in the context of its impact on investor decisions, particularly the choice between investing in stocks versus bonds. Higher yields can make bonds more attractive compared to stocks, influencing asset allocation decisions and market dynamics.

💡Presidents Biden and Xi conversation

The conversation between Presidents Biden and Xi is significant as it marks a direct communication between the leaders of the United States and China since their last interaction in November. Topics such as the full sale of TikTok were on the agenda, reflecting ongoing concerns and negotiations on issues of trade, technology, and national security between the two global powers. This dialogue is crucial for understanding the current state and future direction of US-China relations.

💡OPEC+ meeting

The OPEC+ meeting mentioned in the video is a significant event for global oil markets, where member countries discuss and decide on oil production levels. The outcome of such meetings has direct implications for oil supply, prices, and consequently, global energy markets. The anticipation surrounding the meeting underscores the influential role of OPEC+ in determining oil market dynamics and energy prices.

💡geopolitical risk

Geopolitical risk in the video refers to the potential impact of political decisions and conflicts on global markets, particularly highlighted in the context of the Middle East and its influence on oil prices. Geopolitical events can cause significant volatility in financial markets, affecting investments, commodity prices, and economic stability. The video discusses how geopolitical tensions and actions, such as airstrikes in Gaza, contribute to uncertainties in oil markets.

💡economic data

Economic data, such as job reports and inflation figures, serves as a critical indicator of the economic health and trends within a country. In the video, upcoming economic data releases are mentioned as key events that could influence market expectations and Federal Reserve policy decisions. This data helps investors, policymakers, and analysts assess the state of the economy, guiding investment decisions and monetary policy.

Highlights

Taiwan hit by biggest earthquake in 25 years, causing significant disruptions and casualties.

Stocks slide due to concerns over slower rate cuts from the Federal Reserve.

San Francisco Fed President Mary Daly maintains the projection of three rate cuts this year.

Presidents Biden and Xi have their first communication since November, discussing important bilateral issues.

Analysis of the market reaction to US economic data and Fed rate expectations.

Taiwan Semiconductor Manufacturing Co. (TSMC) halts operations temporarily due to the earthquake.

Focus on the human toll of the Taiwanese earthquake and the ongoing rescue operations.

Discussion on the market impacts of the Taiwanese earthquake, including the tech sector's performance.

Fed officials' differing views on the urgency of rate cuts and inflation trends.

Preview of upcoming economic data releases and their potential impact on market speculation and Fed actions.

Geopolitical tensions and their effect on global markets, with a focus on the Middle East and oil prices.

Senegal's new president sworn in, marking a significant political transition.

Impact of weather conditions on cocoa prices and volatility in commodity markets.

Bloomberg Intelligence identifies ten companies to watch in Q2, highlighting trends and market expectations.

Tesla's first-quarter deliveries miss estimates, indicating challenges in the EV market.

Transcripts

Good morning. This is Bloomberg Daybreak Europe.

I'm Lizzy Burden in London. And these are the stories that set your

agenda. Taiwan is hit by its biggest earthquake

in 25 years, toppling buildings and disrupting chip manufacturing.

AP reports at least four people have died.

We'll bring you the latest live from Taipei.

Stocks slide on fears of a slower pace of rate reductions from the Federal

Reserve. Following more strong data on the US

economy. San Francisco Fed President Mary Daly

says she still believes there'll be three cuts this year.

I think that is a very reasonable baseline, but I would like to say here

that this is a projection. Right.

Three rate cuts is a projection and a projection is not a promise.

Plus, Presidents Biden and Xi speak for the first time since November.

The White House saying the full sale of Tick-Tock was on the agenda.

Well, a very good morning. And we are going to bring you the latest

on the Taiwanese earthquake, the worst in 25 years.

Later in the program. But first, let's get to the market

reaction to the latest US economic data. Of course, we've got plenty of that

coming out this week. And once again, good news for the

economy has proved bad news for markets and fueled more speculation that the Fed

is going to be in no rush to cut interest rates.

And that's not stocks. That's expected to continue later today,

as you can see from the futures picture. But if we flip the board over to the

cross asset picture, I can show you why the ten year yield at 4.35% currently,

you had it at its highest levels this year, yesterday.

So pretty steady now. But with yields this high, why would you

buy stocks? That is the question.

Some would say it's because if delayed rate cuts reflect a stronger economy,

it's good for equity markets. So isn't it time to buy?

Well, we're going to have that debate with Ben from our live team later in the

program. But in any case, these are choppy

waters, volatile times when we've got so much economic data coming out now, all

eyes on the Fed chair, Jay Powell, he speaks later today.

In the meantime, dollar steady as is gold, having hit all time highs and oil

steady, too, after yesterday's rally. And that's where all attention now on

the opec+ meeting later today. But let's get back to the Taiwan

earthquake. The fire agency in Taiwan is reported as

saying four people have been killed in the strongest quake to hit the island in

a quarter of a century. Let's get more from Bloomberg's Adrian

Kennedy in Taipei. Adrian, what's the latest?

As you just said, Good morning. As you just said, four people have been

confirmed as dead. That's our understanding.

And there are other people who are thought to be missing.

And rescue operations are underway in the east of Taiwan, which was the

hardest hit. So we were struck at about 2 minutes to

8:00 in the morning by the strongest quake to hit Taiwan since 1999, when

more than 2400 people died in a temblor. This time, while buildings shook

strongly in Taipei, the capital city appears to have been only minor, mainly

affected. Some subway disruptions, but the stock

market was trading again today as normal with a little bit lower.

The main impact was in the east in Hualien.

Some roads to the area have been closed. Some rail services have been disrupted.

This is a relatively remote area. It's quite far from the western side of

the island, which is where the main industrial heartland of Taiwan is in

that heartland and that industrial area. Taiwan Semiconductor Manufacturing Co

and United Micro Electronics and some other companies immediately suspended

some operations and evacuated some staff.

But this is something which they do. They go into as a matter of course.

Taiwan is on an earthquake zone. It's also subject to pretty severe

typhoons during the rainy season. And these companies have immediate

contingency plans which go into effect. We understand that one refinery may have

suspended operations briefly, but it'll be back online this afternoon.

So we we are continuing to monitor the situation.

The east of Taiwan, which is less populated than the in the west, and then

Taipei is the main part that's affected. Okay.

Adrienne Kennedy, we appreciate that update.

Thank you. Adrienne Kennedy in Taipei there.

So, of course, the focus very much on the human toll of the Taiwanese quake.

But Vonnie Quinn is with us now and she can bring us up to speed on the market

impact across Asia Bonnie. Well, obviously, continuing to assess

damage, both human damage, of course, and damage to buildings and also to

production lines and so on. We know TSMC already took workers off

the production line for today and many factories.

It, as Adrian said, hit around 8:00 this morning as people would have been about

to go to work or at work already. But if we look at the market reaction,

it is pretty contained, at least for right now.

Right. The macro picture around the world

perhaps contributing more to this market narrative today than the actual

earthquake itself. We are seeing, though, the Taipei main

index down about half a percent and TSMC is contributing a lot of that.

It's down about 1%, but again, 1% in the scheme of things, not a huge move even

as we're seeing chip stocks around the world lower today following Intel

foundry numbers that really disappointed investors yesterday.

I want to point to the Nikkei is off again today, another 6/10 of 1%.

Again, this macro story on a continuing weaker yen playing into that.

As you can see, the yen trading at one 5158 unchanged right now.

But interestingly, Bank of America is out with a note saying it could be 160

per dollar before the Fed cuts rates. There is no point in the Bank of Japan

actually getting involved in this because, you know, that's what everybody

is waiting for. They're waiting for the Fed rate cuts

cycle to begin. And until then, you can forget about

trying to actually control movements of the yen.

But let's flip up the boards and see what's happening elsewhere, because that

intel story really is having an impact as well on chip stocks.

It's not just the earthquake and the aftermath, as you can see.

We are seeing the calls, DAX. So that's the tech heavy index in South

Korea, down about 1%, and that's partially off the back of the Intel

news. The foundry was making losses again for

another quarter. And then you have China continuing to

sell off even as we head into two days of holiday in China.

Hong Kong does trade on Friday, but China and mainland China doesn't trade

Thursday or Friday, down about 3/10 of a percent on the CSI 300 and the main

index, the eight shares down 1%. And again, you're seeing a little

currency trouble, right? We're seeing the offshore yuan trade at

the widest end of its band. There was even speculation that it might

have traded outside of that list because earlier on, some swaps transactions

weren't allowed to go through. So that definitely bears watching as

well. It feels like the whole world is waiting

for the Fed to get going. And we'll obviously hear from Fed Chair

Powell later Wednesday. Bloomberg's Vonnie Quinn in Dubai.

Thank you for that. And we will come on now to the Fed,

because two Federal Reserve officials say that they still expect the US

central bank to cut rates three times this year.

But San Francisco Fed President Mary Daly says there's no urgency to adjust

at the moment. Meanwhile, Cleveland Fed President

Loretta Mester wants more evidence of easing inflation.

I continue to think the most likely scenario is that inflation will continue

on a downward trajectory to 2% over time.

But I need to see more data to raise my confidence.

For more, i'm joined by bloomberg's Jill de.

This morning. Jill, look, we're looking ahead to

friday's jobs report, but just walk us through the latest jobs data that we've

already had. Yeah.

Look, Lizzy, I think that at this point, what we're really seeing there is that

continued resilience within the labour market.

We saw from this JOLTS data that job openings pretty much unchanged in March

versus versus February. Really bang on expectations there.

I think this is all kind of combining to not really give us a whole lot of

knowledge ahead of what we're ultimately expecting for those non-farm payroll

reports once we get those on Friday. Median estimate among economists is that

it's still going to be north of 200,000 nonfarm payrolls.

So we'll ultimately see if we get those numbers.

But it really kind of feeds into this broader narrative, Lizzie, that there's

still this is still a pretty strong economy.

I mean, you combine that with some of this pretty strong factory data, that is

some report that we got pretty recently. This is all kind of, you know, leading

into this reason why there's a lot of confusion over when exactly the Fed is

going to cut interest rates and even if it's going to continue to be by three

times this year as they put in their dot plot.

Yeah, this is the data that Daley and Mestre are waiting for.

But just talk us through the difference between what they're expecting and what

traders are expecting. You got a bit of a disparity, though.

Yeah. Lizzie So ultimately what we're looking

at here, both you've got Nestor and you've also got Daly saying there, look,

I'm still probably three interest rate cuts this year, although I will point

out they did say, you know, we'll see what the data ultimately says.

So just saying it's a reasonable expectation for three cuts.

I think what's really interesting about bond traders right now is that they're

pricing in somewhere around 70 basis points worth of cuts, which is, you

know, because we're below that 75 that's in the DOT plot implies that maybe we're

only going to see two rate cuts this year.

It's just Lizzie, this is such a far cry from where we were just a few months ago

when you saw the markets being pretty aggressive about expectations for a cut

as soon as March. I think it's all just telling you that

there's still a lot of resilience within the labour market.

We're still not seeing disinflation, you know, hit in the way that you'd

ultimately want it to to bring that inflation target back down to the Fed's

annual 2%. It's really, I think, causing some, you

know, some trepidation about whether we're actually going to see cuts as soon

as June as a lot of traders had initially been expecting.

Yeah, markets marginally less dovish than the Fed's median dot plots.

What a turn of events from the start of the Bloomberg still days as we thank you

for that analysis. And now we will get back to the

geopolitics. President Biden and his Chinese

counterpart, Xi Jinping, have spoken by phone.

It was their first one on one communication since November.

And for more, we can bring in bloomberg senior reporter on china's economy and

government. James major.

James, what stood out to you from these talks?

Because I've read your writeup of the readout and it sounds like China was a

little more negative than the US on what was said.

And I think that's a fair that's a fair read, you know, but I also think that

the readout from the Chinese side was a little more positive than they have been

in the past. You know, there was a lot of talk about

stability and how, you know, that they were actually seeing some real actions

and since the two leaders met in November.

So there was a lot less sort of copying or complaining about US actions.

And I think we've seen in previous statements from from the Chinese

government. So there was a both sides had a long

laundry list of things they discussed and things they wanted to make very

clear about. Obviously, China made the point that

they always do on Taiwan. But I think generally the discussions

seem to have gone pretty well. And then now we look forward to Janet

Yellen coming in a few days. But overall, it seems that, you know,

the both sides had a reasonably cordial discussion.

And how does this set the stage, James, for Janet Yellen, The U.S.

Treasury secretary is visit in the coming days and then.

Anthony Blinken, secretary of state's visit in the coming weeks.

I think both sides have been you know, Janet Yellen's been out.

She had an interview with The Wall Street Journal just before she's, you

know, made some comments recently, gave a speech where she was, you know, laying

out the things where she was going to speak to, you know, with the Chinese and

very specifically on questions of overcapacity, which the US has been

talking more and more about and whether that's where, you know, she will

actually go into the details of various sectors I think will be will remain to

be seen. But clearly the US government is

concerned about what they see is Chinese overcapacity leading to a flood of

exports going overseas. And there was also a discussion on a

number of the other issues that they have.

Obviously fentanyl is a big one and it we'll see if Janet Yellen actually

speaks to that. But when they the working group on

fentanyl met here earlier this year, there was members of the Treasury,

people from the Treasury and people from the People's Bank of China who were part

of that, trying to look at work about trying to talk about how to stop

currency flows and illicit currency flows related to the drug trade.

So, you know, there is a lot of different things that that they have to

work on. Yeah, we're also heading to the IMF

meetings in a few weeks. And so questions of debt relief for for

developing nations and how, you know, countries like Zambia and other places,

how does China and the US cooperate so that those countries can actually see

real debt relief, I think will also be high on the agenda for Yellen's visit.

Okay. So this phone call really setting the

stage for much more diplomacy to come. Many thanks.

Bloomberg's James Megha in Beijing. Well, we've got plenty more still ahead

on the docket for today, lots of eco data.

At 8 p.m. UK time, we get Turkish inflation.

Economists reckon it jumped again in March from already 67.1% in February.

There seems to be no stopping it. Our economy is seeing it hitting 70% by

May, which puts into perspective euro area CPI that lands at 10 a.m.

UK time. It's expected to have inched closer

towards the ECB's 2% target in March with a June rate cut.

So looking increasingly like a done deal.

And then finally, at 5:10 p.m. London time, we'll hear from the man

himself, Fed Chair Jay Powell. So we'll keep an eye across all of that.

But coming up, US President Joe Biden says Israel isn't doing enough to

protect civilians in Gaza after seven aid workers were killed in Israeli air

strikes. We'll have more on that for you next.

This has been back.

Welcome back to you, Bloomberg Daybreak Europe.

Now we're going to get the latest on the geopolitical situation in the Middle

East next. Of course, again, the human toll really

is the focus, the death of aid workers in Gaza.

But it has to be said that the geopolitical risk is feeding in to the

oil price. And we have seen some pretty immense

action in the oil space. You see WTI crude hitting $85 a barrel

for the first time since October, currently trading at $85.18.

And you've seen Brent $89 a barrel as well.

Now, questions are flying as to whether this is really because of the

geopolitical risk and China optimism or whether it might be actually about

falling inventories. I got a note yesterday from BP's

commodities team pointing out that and I quote, Not a single drop of oil has been

lost due to recent events in the Middle East, except for some rerouting around

Africa. Rather, what you've got is a tight

market and a steadfast OPEC plus. Now, Opec+ meets online today.

It's expected to affirm its current output cuts.

But if we just flip on, we've got a chart of this.

In fact, you can see that OPEC is still producing above quota.

So there is still room to cut. There is still room for further

tightness in this market. We will keep across the oil price for

you. As I say, it may be it is at least to

some degree affected by the geopolitical risk in the Middle East, and we can get

into that. Now, President Biden says Israel is not

doing enough to protect civilians in Gaza.

That's after an air strike by the Israeli military killed seven aid

workers in airstrikes. Let's get more now from Bloomberg's

Stewart Livingston. Wallace.

Stewart, great to have you with us. I wonder whether the deaths of these

Western aid workers is going to be the last straw that really brings home the

impact, brings the U.S. and the U.K.

to bear down on Israel and stop the invasion of Rafah.

Yeah. Morning.

I mean, I think the short answer to that question is no, it's probably not the

last thing. I mean, in terms of the current Israeli

government have made it absolutely clear that they still have this singular goal

of eliminating the Hamas leadership. And again, they can't do that unless

they're sort of active on the ground. So, you know, will this be the final leg

of the war? Possibly.

It depends what kind of timeframe you're looking at.

But, you know, is this basically the end of relations or international relations

between Israel and the rest of the world?

No, I don't think it is. Yeah, it seems to just be tough talk

still. And I also wonder whether we've had any

more clarity on what Iran's response is going to be to the strike on its

consulate in Damascus. Do you think that it's going to

retaliate against the US because of its relationship with Israel?

Yeah, I mean, we have a bit of precedent to work with here and obviously it's

always quite dangerous to predict what Iran's government may or may not do.

But if we think back to 2020 when they, the US, eliminated Soleimani, who was

sort of one of the key leaders in the Iranian military,

it didn't really trigger any sort of major response from Iran.

And I think Iran has always been quite careful about confronting either the US

or Israel or Western allies directly. You know, by and large, it doesn't like

to play that game. It prefers much prefers to operate

through its proxies across the region. You know, in some respects it's always

at arm's length. And I think that if there was to be any

sort of direct attack on Israel, that obviously raises the risk that both

Israel and the US would respond in kind, if not more severely.

And that's probably not something that Tehran really wants to get involved with

right now. Okay.

Bloomberg, Livingston. WALLACE Thank you for that update on the

situation in the Middle East. Now coming up, Senegal's new president

sworn in, becoming Africa's youngest ever elected leader.

We'll discuss what investors should be watching out for.

That's next. This is Bloomberg.

Welcome back to Bloomberg Daybreak Europe.

It's 623 in London, but we'll head to Africa now because Senegal's new

president, Bashir Demy, has been sworn in and he becomes Africa's youngest

elected leader. Less than three weeks after being

released from prison to run in last month's election.

For more, we're joined by Bloomberg's on a Ganga in Kigali.

Under President VI's economic policies are really quite different from the

former president, Macky Sall. What should investors brace for?

Investors should be looking forward to having a leader in President Bush zero

five. He's adopted a very diplomatic and

leadership tone. He says he wants to continue working

with Senegal's foreign partners and deepen their relations.

Though he had said that he's going to renegotiate contracts that might delay

projects that have already delayed fathers.

So what they're going to do is review these contracts individually and see if

there's an opportunity to make more revenue for the country.

KOSMOS Energy is expecting a business friendly environment.

BP says they're hoping to build a conducive working relationship with the

president. US and France are hoping to deepen their

relations. So everybody is quite optimistic.

And Phis also named his prime minister. Why is that significant?

Because these are two opposition leaders that went from being in jail three weeks

ago to presidency and premiership, respectively, during the campaign season

that lasted barely two weeks. We saw Opposition leader Ousmane Sonko

back then rally his support behind Fianceé Moya Sonko.

And so we saw him winning the elections 54%, the first time that an opposition

candidate had ever done that in office. Since his appointment, Usman Sonko has

said that he is not going to leave fire alone to leave the country.

In fact, he's already prepared a list of appointments for ministers that he will

present to the president for his approval.

All right, Bloomberg's on Dario Ganga with the latest on the Senegalese

election and what to expect as we move forward.

Thank you for that. And as a reminder, don't forget to catch

Africa amplified. It comes this Friday, our monthly deep

dive into Africa's biggest stories. This week, the show takes a look at the

historic rise in cocoa prices. Ouch.

Like chocolate and white, the same factors are impacting other soft

commodities on the continent. So don't forget to catch that at 5:30

a.m. UK time.

Well, speaking of cocoa, if we just stick on the Ivory Coast, specifically

the weather there and its impact on this commodity, just take a look at that.

You've had cocoa futures hitting a fresh record yesterday.

Then they took a bit of a dip, but cocoa prices having more than doubled this

year on lower West African production. The 60 day measure of volatility, is it

about its highest in 15 years? So another corner of the market, you

might say, where volatility is the watchword.

Not so good, however, for our favourite confectionery, which is making me a

little peckish at this time of the morning.

But coming up, volatility, as I say, is the watchword as we have all of this

U.S. economic data this week, and it's been

dampening hopes of further rate cuts from the Federal Reserve.

We've had more strong data on the US economy, which we'll bring you more on

next. So stay with us for that as we look at

futures stateside, pointing to a lower opening this morning as they do here in

Europe. Euro stoxx 50 futures flat to the

downside. S&P is down 2/10 of a percent and so on.

Nasdaq futures. We'll have more on the markets for you

coming up next. This is back.

Good morning. This is Bloomberg Daybreak here.

I'm Lizzie Bird in London. And these are the stories that set your

agenda. Taiwan is hit by its biggest earthquake

in 25 years, toppling buildings and disrupting chip manufacturing with at

least four people reported dead. We'll bring you the latest live from

Taipei. Stocks slide on fears of a slower pace

of rate reductions from the Federal Reserve following more strong data on

the US economy. San Francisco Fed President Mary Daly

says she still believes there'll be three cuts this year.

I think that is a very reasonable baseline, but I would like to say here

that this is a projection. Right.

Three rate cuts is a projection and a projection is not a promise.

Plus, Presidents Biden and Xi speak for the first time since November.

The White House saying the full sale of tick tock was on the agenda.

Well, good morning. We're going to bring you the latest on

the impact of the Taiwan earthquake, its market impact in just a moment.

But first, let's get you up to speed on these markets.

As you can see here, futures pointing to a lower opening on both sides of the

pond and it comes back to the latest US economic data.

Good news for the economy proving bad news for markets.

Once again, you've seen traders paring back their bets on Fed rate cuts.

In fact, at the margin, the market looking actually less dovish than the

Fed. Now, what a change from the start of the

year. But as you saw yesterday, if we flip the

board over to the cross asset picture, the US ten year yield hitting the

highest level this year off the back of this repricing of Fed cuts.

And then that leaves the question why buy stocks when you've got yields this

high? You might say you should buy stocks

because the reason for the repricing is because of a good economy, which is

surely good for equities. We're going to get into that debate with

lives, Ben, in just a moment. But in any case, this is a volatile time

and we've got much more economic data to come this week, of course, the US jobs

report on Friday. And in the meantime, we get the Fed

chair, Jay Powell speaking later today. As we await that, you've got the dollar

steady, gold pretty steady as well, having hit all time highs and oil pretty

steady there to Brent to $89 a barrel as attention turns to the OPEC plus meeting

at which we're expecting those supply cuts to be confirmed.

But let's get back to the Taiwanese earthquake and how it's impacting

markets in Asia. I know the things that are happening at

Asia markets. We've got Bloomberg's Vonnie Quinn on

stand by for us in Dubai. Fani, what's happening?

Well, as we're continuing to see fallout, particularly as regards

officials inspecting in sites and buildings that have fallen down, we know

at least 26 buildings have collapsed and that unfortunately, four individuals at

least have died. That's according to the local fire

service. Markets wise, we know that some chip

factories, for example, have evacuated workers and so on.

The earthquake hitting at around 8 a.m. local time.

So around the time people would have been going to work or at work, that

includes TSMC and that did take a hit in trading.

But some of the macro factors that are affecting stocks around the world that

are trading are also impacting Taiwanese shares at the moment.

And as you can see, the impact is fairly contained, at least market wise.

We're down about 6/10 of a percent on the TAIEX and then Taiwan Semiconductor

down about one and a quarter percent for now.

Don't forget, there is a pull over chip stocks today at the moment anyway,

because Intel's foundry business reported that it had a loss yesterday

and also revenue that was much less than expected.

So shares around the world, including in South Korea, in chip stocks, are lower.

I want to point to the Nikkei to it is down again, another down session for

Japan shares, but 8/10 of 1%. So we'll have to see where that money is

flowing. There was a suggestion it might start

flowing into China. We'll see about that.

The yen trading at one 5159 Bank of America out with a note today saying

that the yen could go to 160 and that if the BOJ does intervene, it will matter

anyway until the Fed started cutting cycle.

Let's move off the boards because it does appear that many central banks

around the world are waiting for the Fed to start its cycle and not just central

banks but economies in general. So we also have China waiting for this

to happen, right? We have better economic data out of

China, also not helping China shares. So the CSI 300 had another down day, the

Shanghai Shenzhen Stock Exchange really just not feeling the better data.

It's not lifting sentiment. We also had that currency trading at

very close to the weakest part of its band onshore.

And that's something that's very unusual and shows that the central bank is

trying to defend its currency. All right.

Bloomberg's Vonnie Quinn, thank you for that impact of central Bank Federal

Reserve cutbacks being repriced on Asia markets.

We continue our conversation now about the Federal Reserve because two

officials have said that they still expect the US central bank to cut rates.

Three times this year. San Francisco Fed President Mary Daly

says there's no urgency to adjust at the moment.

And meanwhile, Cleveland Fed's Loretta mester wants more evidence of easing

inflation. For more on this, we can bring in Van

Ram from Bloomberg's AM live team. Van, I promise that you'd settle a

debate for us here. We've seen the impact on stocks where

good news seems to be bad news once again.

If you've got a stronger economy, surely that's good for equity.

Surely it's time to buy. Absolutely.

You're hitting the nail on the head, Lizzie, because that's exactly how

equities have been trading. And that's why we've seen the humungous

rally over the past few months. Now, there are two sides to the equities

coin. One is the interest rate story, the

other is the growth story. If you look at the interest rate story,

yes, rates are sticky, but they are going to go lower from here.

And that's what at least barring a reacceleration of inflation, that's how

the lay of the land looks. But if you look at the growth story,

that's where investors are getting really excited, because if you're going

to get corporate earnings growth of 20, 25, 30%, and you have seen those numbers

on underpinning, you know, the tech stocks in particular, I mean, those are

humongous earnings blow out numbers and those are what that's what is

underpinning stocks at the moment. If you look at the S&P 500, you could

get an earnings yield of just about just under 5% at the moment.

Prospective earnings yield. If you look at the Nasdaq, you're

getting a prospective earnings yield of less than 4%, but that 4%, less than 4%

needs to be seen in the context, as I said, of overwhelming earnings growth

and potential. And with the coming on the horizon,

that's exactly what investors are lining up for.

And so far, they haven't been disappointed.

Okay, so that's the US stock story. But how much risk is there for European

currencies as Fed seem an ever more distant prospect, at least to some?

But definitely the dollar has found its alphabet in the past few months,

notwithstanding what happened yesterday. But, you know, European currencies and

even the yen, no going to find it wobbly from here because, you know, the pound

has already given up its gains for the year.

And that's going to be a continuing story through the second quarter,

because if the Fed is not going to cut rates, real rates in the US are going to

stay elevated. And we've already seen the ten year

really back up to 2% levels in the US and that provides humongous comfort for

investors chasing real coupons. And that means that the dollar is going

to continue to be on the front foot, putting the European currencies somewhat

wobbly, you know, somewhat wobbly position.

Okay. Euro dollar currently 107.

We'll keep an eye on it as we await that European CPI figure at 10 a.m.

London time. We mugs Ben Rome.

We thank you for your analysis. Now, Bloomberg has learned that NATO's

secretary, Jens Stoltenberg, is proposing to establish a fund of

contributions worth 00 billion over five years for Ukraine.

This comes as foreign ministers from the alliance gather in Brussels to mark the

group's 75th anniversary. Let's get more now from Bloomberg to me,

a news director, Ross Matheson. Ross, what more do we know about this

proposal? How significant is it?

Well, as you say, there's two aspects to it, actually.

One is this fund, which would be 00 billion over five years.

The other part of it is actually backing the operational responsibility for

weapons deliveries into NAITO itself. Right now, it's being led largely by the

US, what's known as the Ukraine Contact Defense Group.

And what they'll be doing is absorbing that back into NATO's as part of this

proposal that could be discussed at this meeting today and tomorrow.

And the idea really is to ring fence this aid to Ukraine over a protracted

period out of concern, partly because of the US political environment and the

prospect that Donald Trump may be back in the White House after the next US

election. Of course, he's been quite critical of

the aid to Ukraine, critical of NATO's also over the years and suggested the US

could pull funding for both. And the idea is given the political

climate in the US, whether it's Donald Trump or Joe Biden right now back in the

White House, there is that sort of sense of concern about whether the US can

continue to support the aid to Ukraine. We've seen that $60 billion package is

still stuck in Congress many, many months later.

And so the idea is really to sort of shield some of this by the time

machinery. The question is, will that be

successful? It will be discussed today.

There may not be entire support for it amongst NATO members, but certainly it's

the most important thing on the table for discussion.

Yeah. I was going to ask you what happens this

funding if Trump gets in, but what else is going to be on the agenda for Nieto

members at this meeting? Well, aside from this that the

leadership of NATO's itself is going to be discussed.

Of course, there's still that question of who's going to replace Jens

Stoltenberg at some point. There had been a coalescing around the

outgoing Dutch Prime minister, Mark Rutte said he seemed to be the lead

candidate. But now some of the Baltic states have

put some support behind Romania, the Romanian president, Klaus, that he might

actually be someone that they want to support.

It does seem as though in most of the support, again, is behind back rooted.

But there will be that conversation about who's going to lead NATO's into

possibly a really different environment over the next five years.

You've got not just the conflict in Ukraine still going.

You've got fundamental questions about Europe's self-defense in an era where

Vladimir Putin might be casting his gaze further towards Europe.

You've got the conflict that's going on in the Middle East.

You've got tensions still between the US and China in that complex environment.

You need someone who is going to be able to lead NAITO and all the members in

some sort of unity. So it really is a fundamental question

that's going to be the other major topic, the discussion today.

You know, historic times don't drop out when they mix in the news.

Director Rose Mathis Matheson, thank you for that preview of the ATO meeting.

Now to some other stories that are making news.

Intel shares fell in US extended trading after it said its manufacturing

operation losses have deepened and the business may not reach a break even

point for several years yet. Intel Foundry, a new division

responsible for manufacturing, had sales of nearly 9 billion in 2023, down from

28 billion the previous year. Elsewhere, Endeavor Group, the

controlling investor in WWE, the Ultimate Fighting Championship, has

agreed to be acquired by private equity company Silver Lake Management.

The 3 billion buyout follows through on plans announced in October.

Endeavor said at the time that it was evaluating strategic options out of

frustration with the company's languishing stock price.

Coming up, we're going to discuss the companies to watch in the second quarter

remake Intelligence gives us their top ten picks next.

So stay with us. This is Bloomberg.

If I go back to Bloomberg Daybreak Europe to the corporate.

Now Tesla shares slumped after the EV make his first quarter deliveries missed

estimates by the biggest margin in seven years.

Tesla shipped just under 387,000 vehicles, an average estimates with a

449,000. We can find out why now with our Asia

transport reporter, Linda Loo. Then just talk us through what's gone

wrong for Tesla. There's this whole range of factors that

Tesla is really finding challenging. The global demand is softening right now

across markets like the US and EU. You've got Tesla's second largest

market, China, going through just an intense price war and the auto market

with a lot of EV makers discounting prices.

And you've also got supply chain disruptions with the Red Sea attacks by

the Houthis that have led to production disruptions on Tesla's Berlin plant.

So all of those have added together to paints.

Quite a bleak picture for Tesla, and we're seeing that in their delivery

numbers. And rather selfishly, Linda, I'm

wondering what could be the read across for Europe and the wider industry, of

course, as well. Yeah.

And Europe, the markets actually had a strong start to the year and January.

The sales of battery electric vehicles rose

more than 20%. But coming into February, that slowed

down a little bit. So that could cast some balance with how

well demand is going to hold up for the rest of the year of demand continues to

soften. And Tesla, which only sells battery

electric vehicles, that could really impact Tesla's sales going forward.

And all eyes are also watching for the results of the anti-subsidy

investigation into Chinese EVs. And if there's going to be additional

import tariffs on Chinese EVs that could slow the arrival of more affordable EVs

from China into the European market, which can contribute to this weakening

demand for EVs. All right, back age Asia transport

reporter Linda Loo. Thanks for that update on Musk's woes

and of course the China story and the European potential read across as well.

But we're going to stick with the corporate.

Bloomberg Intelligence has identified ten companies to watch in 2020 for the

second quarter, spanning various sectors and regions.

They're part of a larger group of high confidence focused ideas that by

analysts flag on an ongoing basis. Well, we can get more now from Bloomberg

Intelligence director of Research and European strategist Tim Craighead.

Happy Q2. Before we start, Tim, like and it's not

April Fools either. I love this piece, especially the

illustrations of companies as apples. They remind me of Humpty Dumpty.

Brighten my morning. Why have you picked these?

How did you get to the what's the methodology?

Yeah. So

these ten are, as you had said, part of a broader group of what we call focus

ideas. Focus ideas have three elements.

One, a high conviction fundamental view. Number two, that we think is different

from what the market is thinking. And number three, quite critically,

there are catalysts ahead to bring the market around to our point of view.

And these ten specifically have important catalysts coming up into.

Q Therefore, the ten companies to watch in the second quarter?

Okay. Well, it's it looked like a bleak day on

the markets this morning. So for anyone who wants a little

inspiration, just talk us through the three out of ten based in Europe.

Yeah, sure thing. So it's quite diverse.

Accor Pirelli and Standard Chartered.

So Accor the hotel company wide range of properties in particular with a lot of

exposure to Europe and Asia, we see a travel recovery continuing to progress

surprisingly better than is better than expected.

And in specifically for Accor, don't forget we've got the Paris Olympics

coming up in this French company into cue should give us some early insight on

how bookings are coming up. So interesting in a little twist the

other wins in a nutshell, Pirelli, the tyre company, we all know them.

If you watch F1, you see either their tires flowing along, they've gotten an

important mix shift, going higher in higher end, and they're shifting

production to lower cost areas such as Romania or in Mexico.

We think there's there's a profit surprise to come.

And the last the Standard chartered on the big bank with a big Asia focus we

think they have resolved their China risk when it comes to property exposure,

but there's not enough appreciation for what's going on with our wealth

management business, which we think can surprise.

Okay, that's interesting, because we've often had Bill Winters, the CEO right

here on Bloomberg Daybreak, and he's been telling us that story.

You believe him over fees. And let's just also compare this to the

list that you released at the start of the year is an ongoing basis.

You do this. Are there any newcomers, another any

broader themes that connect some of the other companies to watch on the list?

Yeah, absolutely. So it's absolutely new comers, an

interesting one. It's not a European company, US company

called Penumbra. Frankly, I wasn't aware of it until we

picked up coverage. Yeah, there you are.

They make computer assisted vacuum technology and you say, what is that?

It's essentially little micro items that go in and they suck out blood clots for

stroke or pre stroke victims. Much better in ways than using

anticoagulant drugs that have all sorts of other issues.

So cool technology, cool company, and they've got new products that are coming

through. Another one is sort of AI related

Salesforce, the big infrastructure software company.

There's a I.T spending cycle that continues to gain steam and you really

need their data for training certain elements of AI within corporate

projects. And so we think there's two wins behind

Salesforce to drive better than expected results.

And you're not the only one is behind Salesforce.

Of course Albert Einstein's estate has faith in them.

They're just giving them the IP to his face to be the logo.

But so what are the headwinds that could potentially face these different

companies? You've touched on China.

What else could knock these winners you've picked?

Well, indeed, I'll I'll keep on China. There's two that are negative of the ten

and both of them happen to be China oriented items.

One is Chow Tai Fook big Hong Kong jeweler retailer

it's representative of a broader focus idea we have on the Hong Kong retail

where we do think that there is risks ahead and Hong Kongers are going across

the border and shopping in China and elsewhere for lower prices and it's

impacting Hong Kong retail sales. Another is CSC Financial, which is a

very large Chinese broker, and they're with a focus from a policy perspective

on the markets and sort of containing supply.

We think that the IPO market and other listings are going to disappoint.

And CSC, you know, is in the front of that.

Okay, Tim Craighead, thank you for that. And as I say, definitely worth checking

out. Bloomberg Intelligence director of

research and European strategist Tim Craighead with Bloomberg Intelligence

says ten companies to watch. I love the apples the size of companies.

Plenty more still to come. Stay with us.

This is Bloomberg.

The most likely scenario is that inflation will continue on a downward

trajectory to 2% over time. But I need to see more data to raise my

confidence. Some further monthly readings will give

us a better sense of whether the disinflation process is stalling out or

whether this start of the year readings reflect a temporary detour on the

downward path back to price stability. Three rate cuts is a projection, and a

projection is not a promise. And I think that's really important

because a projection is saying here's how the economy is expected to evolve

and here's how policy evolve should that occur.

But you have to maintain this ready position.

And I feel like we're at a very good place to be ready.

We have to be ready for what if inflation stickier than we projected or

I projected. If I look at my projections and I say,

well, what if inflation stickier? We may want to cut less.

So Cleveland Fed president last semester and Mary Daly, the San Francisco Fed

president, speaking there on the US policy outlook.

No rush to cut rates is the conclusion from both of them.

Will that narrative be confirmed by Fed Chair Jay Powell when he speaks later

today? Probably is what the markets reckon and

why it comes back to data dependent is, of course, we've had more data

surprising to the upside Yesterday, of course, we had job openings and then we

had factory things as well. You can see it here rebounding from that

January slump and there's more data to come this week.

The main jobs report, of course, on Friday.

So a lot of potential for volatility if we flip the board.

You can see Citi's global economic surprise index near a11 year high.

And if we flip again, you've got trade is pricing fewer than three cuts from

the Fed this year. What a change from the start of the

year. Markets marginally less dovish than the

Fed. They're going to talk about that on

markets today next. So stay with us.

This is Bloomberg.