>> this is bloomberg daybreak: europe. these are the stories that set your agenda. more misery for chinese markets as the country's factory output contracts again in january. investors looking ahead to the fed with rate projections in the spotlight. christine lagarde says there is consensus the bank next move will be a cut. wage data will be crucial for timing. plus tech earnings failed to fire. the magnificent seven slide as alphabet and microsoft results leave investors underwhelmed. we have lines crossing now from the drugmaker listed in switzerland, novartis. fourth-quarter net sales coming in slightly below the estimates. 11.4 2 billion u.s. dollars.

the estimates had been 11.6 billion. a slight miss on net sales. core eps a, below estimates at 1.53 u.s. dollars. for the fourth quarter versus the estimates of 1.66. the full year dividend per share of 3.3 swiss francs. that is the top line coming through from novartis. net sales and core eps slightly below the estimate. we are also going to talk about what's been coming through from santander. earnings came through in 15 minutes ago. before we get them, we are going to be speaking to executives at of course novartis, the ceo at 7:30 u.k. time. so let's get to the santander members as well now. the red headline coming through, a big retail exposure. fourth quarter net income coming in as a beat for santander.

2.9 3 billion euros. versus the estimate of 2.5 6 billion. net interest income really important given the focus on the overall rate situation for the fourth quarter. net interest income above estimates as well as 11.1 billion. above the estimates of just shy of 11 billion euros. the red headline fourth quarter, it was a beat for that spanish lender. santander's chair will join our markets today program to discuss those earnings. stay, 7:40 london time. let's get you up-to-date on the markets. we look ahead to the federal reserve decision with a focus of course on the press conference of jay powell. also digesting tech earnings. expectations had been lofty despite the fact that on many metrics, microsoft and alphabet did relatively well, not meeting

high expectations of many investors. european stock futures are flat after the gains of yesterday, pushing into fresh highs on a 12 month basis for european stocks yesterday area ftse 100 futures modestly higher by 0.1%. s&p futures stateside looking to lose 0.4% but the hit coming through for the nasdaq futures on the back of the disappointment around the tech story. 17,447 for the nasdaq, pointing lower by 0.8%. on a cross asset basis, let's start with the u.s. 10 year. looking at yields of 4.01. a little bit of money flowing into u.s. treasuries ahead of the fed decision. will there be detailed guidance from jay powell in terms of the pace of rate cuts? the dot plot is pointing to 75 basis points so far this year. the markets now pairing expectations around the march decision. that remains low for these markets. euro-dollar down 0.2%.

crude down but you are still on track for the first monthly gain of 7% since september of last year. iron ore in focus today on the softer manufacturing data out of china down 1.2% and also more output coming through from brazil area consequential for the market sector. let's get to asian markets and bring in avril hong in singapore. good morning. avril: what is standing out to me is the china data. there is a lot so bear with me. what we are seeing on the gauge of stocks in the region, slightly higher. we saw the australian stock benchmark close at a record high but the drag is coming through from chinese equities. this was a key week, the test was from china pmi's as well as earnings. let's dig through the data further. if you look at manufacturing as well as nonmanufacturing they both improve more or less in

line with estimates. on nonmanufacturing we saw the services part improving, construction declining. let's flip the board and look at subcomponents. that is where it gets more interesting. there was a bit of a pickup. if you highlight the new orders, you see that is where demand is weak still in contraction. this is coming in the week we got evergrande's liquidation order. there was that highlighting of the property crisis in the country. don't forget last week's 2 trillion market rescue package rumors have remained just that rumors. very little amid all of this to lift sentiment on the chinese markets. we see the flow going toward the government bonds. let's look at what's happening in japan because we also are keeping a very close watch on the policy of the boj. remember last week when we heard that hawkish tone from ueda?

today we have the summary of opinions from that meeting and they show policymakers are continuing conversations. they are discussing the prospect of the rate lift off. we did not get any indication of a consensus, of timeline for this. but the discussion seems to be what the market is running with. we also got one policymaker talking about how conditions of a golden opportunity, so jgb futures, you see that on the yen. we are seeing it gain ground versus g10 counterparts except the u.s. dollar because it is after all fed day. let's look at what's happening in the earnings space as well. last one i promise. this is a stock and a company we've been watching very closely to get a sense of the chip sector recovery. if you look at net income, it was double what analysts expected. that is because of tax credits.

what we were really watching out for was it was forecasting the hype and with memory market because that is important for the ai boom and there was very little to change investors perception that it is trailing its south korean rival sk hynix. stocks down on a day when the infotech is the laggard on the asia-pacific. tom: thank you very much indeed. that sets up nicely for a continued conversation and a deeper dive into the tech story with earnings coming through from microsoft and alphabet. both companies falling in late trading as earnings failed to satisfy investors despite both companies making a point of highlighting progress on ai. let's get the analysis and bring in robert lee, senior analyst at bloomberg intelligence. why the disappointment on these earnings that seem to be relatively decent? robert: i think what you said earlier in your intro -- when

you are in a situation where stocks are arguably close to perfection, any disappointment is going to have a knock on effect. i think that is what you've seen with microsoft because the numbers were in mind and microsoft is a diversified business with strong position in the consumer and corporate sector but the games business as well. i do not think there is anything that came up from the microsoft results that made us -- brought any fundamental concerns about where they are going or where the sector is going. it is just it was not quite good enough or it did not quite beat the very high end of expectations as a consequence of profit-taking. tom: so that is the detail and context around microsoft. what about amd and alphabet? where is the concern with those companies? robert: tech is a very disparate

sector with many business models. amd i think, for the factor between these two if i can try to draw that, the reality is looking at alphabet first of all, advertising, search advertising still forms the core of their business. of course investors are excited about the potential long-term upside in ai. but search advertising is where the business is at. the revenue numbers came in slightly below expectations. that raises questions in investors minds about the sustainability of advertising going into a slowing economic environment. also there are competitive factors within the online advertising sector. looking at amd, similar argument. while they are playing catch up on nvidia and ai is a future driver of the business, the reality is their core business today still is driven by the pc sector and the games business. with some exposure to the

enterprise sector as well. we saw weakness there. i think that is why you are getting a more significant pullback on that stock. the stock has been an absolute top performer within the semiconductor sector globally over the last 12 months. tom: valuable insights. thank you very much indeed. unpacking the results from amd, microsoft, and alphabet. talking of ai this is a focus for elon musk. he wants to have more control of ai and part of that is having more control of tesla. that has been given a setback for elon musk. a delaware judge has struck down his $55 billion pay package at tesla after a shareholder challenged it as excessive. the ruling could take a bite out of musk's wealth if it survives a likely appeal. he took to social media to vent his frustration, saying, quote, never incorporate your company

in the state of delaware. bloomberg technology editor ed ludlow has more. ed: the judge kathleen saint jamie cormack is siding with the investor that brought the original suit based on the idea that when tesla's board awarded musk this $55 billion compensation package, two issues. one, they were not clear explaining performance benchmarking. how musk would realize that compensation. but also investor concerns about conflicts of interest or a lack of impartiality in the board awarding the package and the relationship to elon musk. when elon musk defended himself on the stand he basically said i have nothing to do with this conversation -- this compensation deal. i do not set it. the judge has made that package avoided. it was the biggest compensation package in history. what happens next is that

tesla's current board have to come up with a new compensation plan for musk. based on the immediate reaction in tesla shares after hours, the market is taking this really seriously. the outpouring of reaction on social media was in high-volume. our understanding is musk and tesla will appeal this initial decision. ed ludlow from bloomberg news in san francisco. tom: let's switch focus to central banks. the decision of the week, arguably the fed likely to hold interest rates steady but avoid signaling imminent interest rate cut as it wraps up its today policy meeting leader today. joining now is bloomberg's jill thesis. what can we expect in the way powell may attempt to guide markets regarding the prospect of cuts? jill: that is the big question. a pause for january is all but certain. the question comes down to, are we going to get a cut as soon as

march? investors have pared their expectations for that. 40% chance. we have obviously seen much fed speak over the past few weeks really trying to push back on the idea that we get something so soon. i think this is going to be a tricky line for powell to walk. in some ways we might be seeing a little bit of easing up in the official fomc statement on policy. maybe they remove the language pointing to a tightening bias. in their official statement they're leaving the door open to be nebulous about their next policy action. pebble is going to be pushed on whether we are going to see something this march. he wants to avoid pricing something immediate because we have still got additional cpi data before the next meeting to consider. we have to look at additional signs of labor market resilience. at this point it seems like, expect the language to ease up,

but i do not expect we are going to get anything exact on timing yet. tom: what is on the risk radar for the fed at this point? jill: at this point they have really got to look out for the timing on when the first rate cut comes. we just heard from raphael bostic pointing out one of the biggest risks or worst-case scenario rather was that they cut rates too soon and end up having to reverse tack later this year. bostick is a voting member of the fomc on these rate decisions. at that point it is the risk of, we have seen cooling off in cpi data so far. but what if we see a reverse turn on that in the next couple months time? you want to make sure as they are guiding these decisions that they do not act too quickly and

then ultimately miss this idea there could be a ramping up of inflation expectations later this year. certainly as we have been saying for many months now, a tricky line for the fed to walk. but i think that has really been telegraphed as a big risk for this year. tom: a great preview of the fed and what to expect. thank you very much. joe biden says he has decided how to respond to an attack by iranian backed militants that killed three american troops in the middle east. we bring you that story next. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak: europe." joe biden says he has made a

decision on how to respond to an attack by iranian backed militants that killed three u.s. troops in the middle east although he did not reveal his plans as he spoke to reporters yesterday. >> the goal is to find the weapons of the people who did this. i am not looking for war in the middle east. that is not what i am looking for. tom: joining me now is bloomberg's emea news director. it is not a surprise you have not detailed what he decided to do. what do we think the options are? it becomes obvious biden is trying to avoid this escalation but needs to retaliate. >> that's right. it is a difficult decision to make, a calibrated response that will come, he signaled he feels the name to retaliate in some fashion. the u.s. is going to have to follow through but what is that

stepped-up level of warning against iran without tipping everything into direct conflict? the big option is to hit iran directly. that is not something the u.s. has done in a long time. we have iran saying if you strike us directly there's going to be massive repercussions. that's the big option but the less likely. more likely as we will see. something perhaps against iranian backed assets in syria and iraq. . because they've already been hitting the houthi rebels in yemen, doing more of that does not send the signal they need to do here. it is probably going to be around syria, perhaps iraq. perhaps it is allowing israel to take the lead as that reprisal against iran or iran-backed militants in the region. tom: meanwhile when you think about containment, arab leaders have said gaza, dealing with

gaza, putting in place a cease fire is key. that is the linchpin in terms of containing this conflict. are they right and how are things moving? >> a lot of it has been the idea that if you just get things to de-escalate in gaza everything else unwinds. the houthis stop attacking shipping in the red sea, hezbollah stops taking pot shots across the border, in lebanon, everything de-escalate's. however, the longer war goes on and the more tensions become direct between iran and others including the u.s., maybe those things decouple. you have iranian backed groups now acting potentially of their own accord. how much are they being instructed by tehran or not? it has become complex quickly. even if things slow down, it is a big have to expect everything else to go back in its quarter -- it's corner. tom: if we are looking for hope,

is the news that saudi arabia is looking to reengage with the u.s. on defense ties a glimmer of hope for us? rosalind: certainly saudi arabia has been most engaged with the u.s. trying to coax some sort of arrangement with israel. saudi arabia cannot do a full rapprochement with israel at the moment but at least keeping lines of communication open with the u.s. and obviously seeing it as a key partner on things like trade. interestingly even with rhetoric from iran it is clear iran does not want full-blown war. they recognize how damaging that would be. there are communications going on with the u.s. at least there is that conversation going and that recognition of how catastrophic escalation would be. tom: thank you very much indeed for tying up the latest developments out of the middle east and broadly what it means as well as we think about the geopolitics, but also trade and implications for energy markets. oil down in the session but up

7% this month as a result of those tensions. pakistan's former prime minister imran khan has been given another jail sentence, this time for 14 years in a corruption trial. last year he was convicted for three years which disqualifies him from elections. a separate court sentenced him to 10 years for breaking secrecy laws. he rejects allegations of wrongdoing saying he has been victimized for having differences with powerful military. stay with us. this is bloomberg. ♪

tom: welcome back to bloomberg daybreak: europe. epic games says apple has not complied with a court order to

allow outside payment options on the app store. apple has said it would allow third-party apps in the u.s. to include outside lings for payments but it is still asking for a commission of 27%. epic says it disputes apple's compliance with previously ordered changes. amd shares tumbled after a week revenue forecast even as the chipmaker predicted new ai processors would generate more money than expected this year. amd says first quarter revenue will be $5.4 billion short of analyst estimates. shares in china's see atl -- catl are soaring after profits rose by as much as 48% last year due to strong sales. the company's preliminary data shows net income as high as $6.3 billion. the latest data from sne research shows catl's share of

the global battery market at 37%. vivendi is proposing to break up its sprawling media and entertainment empire into four separately traded companies under a plan cleared by the board yesterday. vivendi is to be split into film and tv studio, a communications firm, investment business, and an entity holding the majority stake in the publishing group. for the day ahead let's have a look at what else is worth noting on your calendar this wednesday morning. inflation prints from france and germany. france, 7:45 u.k. time. germany, 1:00 u.k. time. this as we weigh the prospects of an april cut for the ecb. christine lagarde saying she continues to watch wage data. that comes out after the april meeting. the trajectory of inflation has been grinding lower across the euro zone.

data out later today we'll build the picture for us. from the ecb to jay powell, the fed's decision arguably is a less interesting decision because the consensus is there will be no change. it is more interesting to focus on the press conference and whether he pushes back on market pricing. it has faded around the potential for a march cut area the language of jay powell in focus for us later. and boeing reporting their earnings. of course the spotlight will be on anything the executives say around the 737 max 9, when they expect those aircraft to be back in the air and how they are addressing safety concerns. santander beats with net income better than expected. this

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>> good morning, this is daybreak euro. if i am tom mackenzie. misery for chinese markets as out put contracts. the fed later today has rate projections in the spotlight. christine lagarde says there is consensus that the next move will be a cut but wage data will be crucial for timing. tech earnings failed to find a slide as alphabet and microsoft results leave investors underwhelmed. let's check in. beats coming through and a big one, novo nordisk with focus on obesity and diabetes drugs.

fx plus 18% to the top line of 26%. sales growth is being forecast above estimates of 23.3%. strong guidance coming through. the question is what extent the competition from eli lilly will start to grip the demand or ability to build out the sales picture. that is a positive outlook. the ceo saying sales rose by 31%. they are seeing a share buyback of 20 billion danish. we will do a deep dive in the next 10 or 15 minutes. tomorrow the japanese lender, third-quarter income contracting

24% year on year, ¥50.55 billion. we will unpack that. santander was a beat. will be speaking to novo nordisk. santander reporting better income at 2.9 billion euros. talk to us about santander and what drove the upside. >> set of results and what is pushing income higher is bringing in more customers. that's an interesting part of the trend. it was bringing in customers, which is why i think the market will embrace that. given what you said it is a

clear indication that banks need to find ways to drive the bottom line. tom: yes, they are bringing more customers and driving loan activity. how does it compare? >> net interest income fell which offset it with other types of income. santander had more customers, more lending. tom: divergence among spanish lenders. focusing on switzerland when you think of switzerland you think ubs and as they integrate the credit suisse business, not good news for the headcount. >> some are heading out and i'm expecting this to continue. we have earnings next weekend we been clear on the message that

the bank will shrink and focus on wealth management. i suspect more news like this. tom: sergio wants cost savings. tom metcalf, thank you. earnings from santander and earnings from ubs, further cuts from the lender. let's check in with a focus on technology on one level, when it comes to earnings with the nasdaq looking vulnerable. it is the decision around the federal reserve that will be consequential. european futures gained under 2/10 of a percent, notching up a record higher. softness coming through, futures lower by a 10th of 1%. ftse futures unchanged. worth looking at the miners given that iron or has softened

in terms of pricing on the concern of real estate in china and increased output from brazil. s&p holding the 4009 hundred line, but pulled lower. pain coming through, a bit of profit-taking after expectations around ai were not met for some investors. lower by 8/10 of a percent. let's start with the u.s. benchmark 10 year yield as we count down to the federal reserve decision and scrutiny of what jay powell will have to say around market pricing. 4.01, euro-dollar softer by 2/10 of a percent. brent at 82, set for 7% gains this month, the best month since september.

arnaud futures are down 1%. the spanish prime minister has weeks to win over lawmakers to avoid government crisis following defeat in parliament. pedro sanchez must either convince deputies to support his amnesty law or re-white the plan. -- rewrite the plan. outline the significance for us if you have not been aware of what is unfolding why this is important. this defeat and the politics of spain. >> good morning and congratulations on your new our anchoring solo. this has been on the back burner. we see how much shaky ground the government is standing on. a rejection to an amnesty law

put forward by the national government. they would pardon the independence in 2017. yesterday pro-independence lawmakers say that it does not go far enough, they want further concessions in the bill. the issue for the prime minister is the more concessions he gives, the weaker he looks. he risks triggering tensions where the idea is unpopular. the prime minister does not have room to maneuver. he needs votes or he does not have a majority. yesterday we saw how shaky the basis the government is formed on is standing at and it makes

it complicated to see how the government will get anything done if they managed to last. if these are the dynamics week in and week out. tom: if the government survives it seems the policy will be stifled. one is the assessment about the aunts of a government collapse? >> yes, you could see the government collapse. this is a stark choice the prime minister will face. the more concessions you give, the more unpopular you become because it continues to be a toxic issue for the average voter. he does not have room to maneuver. the national government believes it can get a compromise and salvage the bill.

when you have a budget that would secure time in office. this is complicated. the spanish prime minister repeated his goal was to get reforms done. the country is facing instability, but you see an interesting dichotomy between politics and the economy. the spanish economy was the outperformer in the final quarter of the year and we've seen an economy that runs ahead of others. sometimes politics and the economy do not go hand in hand. tom: that's an interesting point, the challenges for pedro sanchez. thank you very much. we are going to get further clues on the european economy

and eurozone. inflation prints from france and germany after the spanish print. yesterday the euro area dodged a recession in 2023. imf chief economist pierre spoke about risks that the european economy faces. >> we expect growth that is not stagnating. .5 percentage growth last year and we expect 0.9% this year. it's a low number but it is not stagnation. we are seeing a region hit by energy crisis for force and the tightening of monetary policy. the risk for the central bank is twofold. they need to make sure inflation in the system will come back and

hit targets. the baseline is sometime towards the end of 2024. if they keep interest rates high while inflation comes down there and say risk they could tip into recession. as we discussed they are expecting to keep rates where they are, see where the numbers will come in and see whether that is consistent with that inclined toward the target at which point they would ease rates. there is still a little too much inflation. tom: that was the imf chief economist speaking to bloomberg about challenges of the euro zone economy and we will get data from europe today. christine lagarde says the central bank's next move will be a cut but wage data will be

crucial for the timing. the bank of japan has focus on wages and the minutes from their most recent meeting suggest they are getting closer, there was more discussion about ending loose monetary policy. mark cranfield with the details. talk about what we've been hearing and how close this takes us to a scrapping of loose monetary policy in japan? mark: quite a surprise. it sounds as though the boj is forming a consensus that the time is right to move away from negative rates. they do not give a timetable but considering they have been defensive, this was a hawkish opinion. it looked as though the governor

was leading the way, but he has friends in japan. it's too early for them to move in the short term, but they will have enough data. they are looking for wages to go up. the spring round is about to start and they think by april they will have sufficient information. you can expect the market betting heavily on bank of japan doing something in april. some think july but the market move today in the direction where they think interest rates are going up we heard from hedge fund saying 2% yields is coming. that would be dramatic and interesting because it's the only part of the bond market that seems to look for higher yields.

everyone else is looking for lower yields. >> april is a live meeting and as we try to chart out with the banks land, the boj is an outlier. we look ahead to jay powell later today. if they push back aggressively how vulnerable are treasuries? mark: it will be sharp and the curve. we had a big inversion and people are looking for a big staple, the next big money maker. if he pushes back it would be too early for the steepening. that will be a disappointment and you will see a deeper inversion. the two year yield will stay high relative to the tens.

next week there is a tenant 30 year auction that will make them more difficult. any hint that may is on the cut keep steepening alive, but if he says there is no timetable for a fed cut the second half of the year, we will not see people get aggressive on the steepening. it will have to stay on hold. tom: 432 on the two-year. thank you, mark cranfield from our team. get more from the team on the block on the terminal or bloomberg.com. novo nordisk sees profits soaring. setting a strong forecast in terms of sales and profits. we bring you the details, this

is bloomberg. ♪

♪ tom: welcome back to daybreak euro. novo nordisk says souls will surge thanks to its obesity shot. revenue could grow 26% but possibly up to 29% as sales fell short of innospec to him and. the details around the earnings and how it sets up the biggest market cap in europe going into and through 2024, a group picture, what stands out?

>> as you said it expects growth to continue, so that sounds positive. one concern is capacity. name invested into capacity and the company said it's going to invest six and a half-billion into expanding. they're trying to allay fears that it going to run out. these drugs are treating 40 million people. tom: ok, so demand is forecast to hold the. eli lilly has been described as

breathing down the next of novo nordisk. how much of a risk is that through this year? >> a lot of companies are getting into it. how long will the patent last? it is expected to be through 2029 the company will produce the drugs without generics. those are risks alongside capacity constraints. we don't really know how the drugs will be funded, whether they will be state-funded, whether people will pay for them individually. we are seeing people do arbitrage. there are pharmacies that are sold out where you can buy the drug for less than the u.s..

tom: you can imagine people crossing the border. that's fascinating. would you think will be the broader read on the back of this forecast? >> for the health care sector everyone will want to get into these drugs. for a society, people being on these drugs instead of the cost of obesity, these things have become huge issues in rich countries. that will change what diseases we have to treat and have knock on effects. in the consumer space, we have seen how there is evidence that

these drugs make people not want to drink or eat junk food. it alters what food and drinks companies will be selling to people on these drugs. it is early days but growing so quickly that businesses like nestle are considering impact and trying to find ways to benefit and the impact on junk food sales. tom: interesting ramifications as a result of demand for these. thank you for the context on those earnings on the back of strong cast. we will be speaking to the ceo, an interview you will want to stay tuned for at 9 a.m. u.k. time.

this is bloomberg. ♪

♪ tom: welcome back to daybreak europe. the focus for many will be the federal reserve decision for the press conference from jay powell. analysts are divided in what they expect from the fed chair as markets have paired bets on a cut in march. the plots appointed to 75 basis points. bank of america saying the change to guidance, before any cut. there is potential impact from

what we've been hearing from the fed. barclays expects them to remove the tightening bias in the language. capital market say the fed has not shown urgency. the soft landing scenario is in play. earnings interviews are a major component to the market. we will speak to the santander chair and novo nordisk in terms of sales of obesity drugs and ukraine's allies as russia wears down their defenses. do not miss our conversation with ukraine's presidential advisor at 8:45. ♪

>> this is bloomberg markets today.