manus: very good headquarters in dubai. i am manus cranny. this is "bloomberg daybreak: europe." the fed inches toward trimming emergency stimulus and jay powell warns there is still a way to go. beijing convenes its major investment banks and the hang seng rallies.

earnings in full swing in europe. we get the conversations going with ceos. two words that strike fear and loathing, credit suisse, the numbers are in. 653 million dollars, that is not the shot. the shock is the investigation. there is one headline that is bruising by its sheer magnitude. risk control architecture was not lacking. this is an investigation into a bank that has now lost $5 billion on lending, scaling up leveraged by 10 times decline. it's below the estimate of 379. the swiss national business is a beat but it's investment banking where you're seeing the pain taken from ark egos.

we will speak with the ceo shortly about how they're able to split a lineup like that, the risk control architecture was not lacking. i don't think we can say that often enough. the ab b and z, if you fancy a type of beer. there seeing revenue growth outpacing the adjusted ebitda but they have missed on the second-quarter numbers. the adjusted ebitda rises 31% and was expected to rise 40%. a little ahead of what the markets expected. let me take you back to the airline industry, to airbus. they have upgraded full-year

outlook to 4 billion from 3.17 billion. deliveries will deliver 600 commercial aircraft this year and a free cash flow of 2 billion euros. the state of play for them is interesting. no further disruptions in air traffic in the world economy, their guidance is based on that but of course we are in an unprecedented environment. i think they're suggesting this is how they see things. let me quickly bounce across to the metals industry. what we've got there is a second quarter ebitda that is pretty well ahead of estimates. against an estimate of 4.78. as i said, it's going to be a full roster we get across the

program. credit suisse, the ceo of volkswagen, nestle, shell, astrazeneca and airbus. it's hard to decide where to start, and i will genuflect to you as to where your personal proclivity is. airbus upgrading the cash flow, saying things are more upbeat. do you share the bullishness with the guidance that i've just read from airbus and the others? good morning. >> it's hard to be overly enthusiastic about markets and growth at the moment. we are expecting europe to -- to do slightly better than the u.s.

, earnings numbers are staggering, up 120%. at the moment are seeing around a 64% beat. these numbers are all off a very low base. the reason we need to be cautious, remember growth is negative at the moment. while markets have done really well, this coupled with unemployment numbers, it's what we're looking to see. on the positive front, you got european pmi's much better than everybody was expecting. and the reopening in the marketplace post-covid.

this should be a great comfort to investors short-term around q2 numbers. and the u.s. is looking good as well. manus: the growth of big tech is phenomenal, but everything rests really on rates. negative real rates. jay powell says this is still the way to go. the fed chair says officials have taken the first deep dive on how to go about scaling back on the bottom line, but no decision on the timing has been made. let's take a listen. >> the committee continued to discuss the progress made toward our goal since the -- since the committee adopted its asset purchase guidance last december. we also reviewed some considerations around how our asset might -- might be adjusted

once economic conditions warrant a change. manus: the fed chair said investors will be looking for any further indications. >> the fax today in this meeting really didn't change. they gave us some clarity, which is we are not going to tell you how we are going to taper, at least until december. >> i felt the fed was going to have to take some steps, get them out of the way and therefore prepare the ground for tapering, which i also think will come in september. >> i think the primary objective was signaling in terms of tapering. i think the fed was reasonably clear in the markets are fairly stable so i don't think we need to be upset with that. >> the problem is the further we go out, the less we know about

what the consensus is. it seems to be breaking apart in terms of where they feel they are comfortable about inflation and for how long. >> i did not hear any encouragement to the view of an early tapering decision and an early launch of tapering. manus: i'm drawn more to dennis lockhart at the end. but policy mistakes are built in groupthink. mohammed said he expects it's one of the -- i think there was a little bit of something for everyone. he said this is the first deep dive. here's what he had to say, i suspect many will agree this is one of the most confusing fed press conferences ever. we've taken the first deep dive,

how confused were you? yogi: i was very confused by that statement and all its implications. bearing in mind gdp growth is -3.5 percent and you've got cpi at 5.4%. irrespective of how markets are doing, irrespective of earnings. the saving grace is inflation looks very short-lived. but we cannot see the fed doing anything at the moment with unemployment as highs it is an gdp growth, i think the narrative from the fed was confusing. manus: you can be as unkind as you want. you can't throw words around like stagflation and expected not to pick up.

contextualize what you mean by stagflation. in 2022, it's different than what we traditionally think stagflation is. will rates go deeper negative from where we are now, given that as your scenario? yogi: absolutely. technically we are in stagflation. we had negative gdp growth in both the u.s. and europe and we have high levels of inflation as well. this isn't typical stagflation, clearly the fed, the ecb all think it's very short-term in nature. we tend to agree with that narrative. that's an environment for a whole range of things such as tapering and rate hikes. the covid variant rate is increasing, not decreasing at the moment.

most are concerned about what is actually going on in the next 3, 6, 12 months. there is a lot of uncertainty. the reality is it's not a sensible thing to be doing at the moment with the numbers we are actually seeing. the fed and the ecb will be looking at anything relating to jobs. this is all with respect to earnings. manus: a quick call on the equity side, the short has disappeared but it's a beautiful, colorful chart. it talks about big tech, the big five. regulation, they've gone from one trillion to 10 trillion.

there is an absolute unavoidable the cecily for the big five in my portfolio, but what percentage should they play? yogi: it is whole -- it is huge. it's a combined $57 billion, that's double the year before and 30% more than estimates. and with supply shortages during covid, the last 18 months of covid that are been stuck since march. the big tech names are driving growth irrespective of covid, that is the nature of the industry. and impacts how we can do things on a day-to-day basis. we want exposure to those big names in technology. the problem is valuations.

some of the names are even higher. manus: we have to go to a commercial break, but let's wrap it up. a pe of 34, are you nervous? yogi: i'm nervous about valuation metrics. it is really hard and challenging at these levels. manus: i still have to do something every month to prepare for it later in life, that is hard to imagine, i know. we are not out of the woods yet. annabelle droulers is in hong kong. >> the senate has voted to move ahead on a broad bipartisan infrastructure package. president joe biden and a group of senators earlier reached agreement on a $550 billion plan. the outcome set the stage for

the next debate over the much more ambitious $3.5 trillion spending plan which includes childcare, tax breaks, and health care. china has dispatched a veteran diplomat known for pushing back against western criticism to serve as its nest -- next ambassador to the united states. he arrived in the u.s. on wednesday at a time with -- when the world's two largest economies are meeting. disney is requiring mass to be worn again in its theme parks after new surgeon cases caused by the delta variant. cdc updated its guidance to recommend that even vaccinated people wear masks indoors in some settings. google, twitter and lived are pushing back plans to return to the office. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in

more than 120 countries. this is bloomberg. manus: plenty more head. the ceo of volkswagen, shell, astrazeneca and airbus. and we're sparking a rebound in chinese stocks. is this an into the volatility? this is bloomberg. ♪

manus: a comfortable beat for nestle, 8.1% in organic growth on the revenue side. the guidance that will grow this

year their sales between 5% and 6%. of course what we want to know, cost inflation has impacted the margin development in the second quarter. this is where we really want a little more detail from them in terms of whether they see it as transient or not. let's not dawdle too much on this because we will come back to it and get more detail on the inflation and price rises. juliette saly, they're trying to calm the market with a nice bounce back in the equity markets. the hang seng up over 3%. it's the technology bounceback that is perhaps the most resplendent. the chinese regulators seeking to talk to all the major bank

executives, targeting -- the latest sign that the authorities have become uncomfortable with the scale of selloff in the stock market on the brink of a bear market. let's get a little bit more with juliette saly in singapore. juliette: certainly those soothing words coming through from authorities and we've seen that yielded through into state media in the week. there's a report that china will allow companies to list in the u.s. if they meet certain regulations. all of that helping to boost these markets. the hang seng index jumping the most since november but it's all about the tech players. tencent jumping the most since january, but remember this is a stock that has been heavily sold off this week. it's lost $170 billion in value in the course of july. it was down 20 people -- 23% in

the month of july. is it going to last? that is the big question. j.p. morgan says you have to look at what they are seeing in inflow. they say there are other indicators they're looking at that could signal the massive outflows you've seen from foreign investors could just be the beginning rather than the end of the outflow phase. manus: $2 billion investment on monday. did he yank any money out of china? a continuation these past seven days has been monumental. have you taken money out of china or is it too late? yogi: we didn't take money out of china, is too early to be thinking about it.

china is a $14.7 trillion economy. valuations are reasonable and it is essentially back in its territory after this morning. despite the regulatory crackdown. there have been some changes in senior government positions and some challenges. they have focused on a whole range of sectors, particularly technology. and the education sector in particular. remember, china is way ahead of the rest of the developed countries in terms of bringing covid under control. the currency markets have been reasonably stable, and we are

more inclined to see inflows rather than outflows but we are cautious short-term, obviously the heightened regulations are concerned that we have to stay focused on. of course the surging political tension with the biden administration. remember, china is a great -- domestic growth story and that's what we remain focused on. that story is still robust. manus: my guest in the last hour talked about trying to focus on china air shares which placed to your theme about the domestic play. he's going for renewables, new vehicles, domestic consumption and new infrastructure. onshore versus political, social, and geopolitical risk offshore.

yogi: there is definitely a focus toward those sectors but we didn't want growth on growth exposure. there are very significant players in that regard and you would be unwise not to have broad exposure when it comes to china and japan and anything linked to china. china is just growing. this is often forgotten. in the u.s., gdp growth is minus three point 5%. in europe, it's -5.9%. we are plus 2.3% here. china continues to grow bigger than europe and japan added together by quite some margin. so that's what investors have to stay focused on. a lot of it is short-term noise but a lot of it is politics. is having an impact on earnings and relations with europe and the u.s..

we are long-term in -- investors so it is a long-term story here. manus: i am with you for the long haul. my guest host this morning. coming up, amazon second-quarter earnings. what did you order, what did you spend? there is nothing for free. they are expected to show slowing growth. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." credit suisse made money in the quarter but less than the market anticipated.

light by 100 million. so what went right and what went wrong in the earnings quarter for them? the remaining long and short position, that trade that cost them 5 billion swiss franc so far. there were only exeter's in early june. let's look at some of the details when it comes to net income from fixed income commodities and currency's out of the business and revenue. there was a drop their. the global head of wealth management, there are two words that reverberate around it. we will have that conversation this morning. anna edwards will talk to the ceo shortly. but coming up, shell is expected to resume share buybacks.

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manus: a very good morning, it is "bloomberg daybreak: europe." i am manus cranny. the stories that set your agenda. taper talk, jay powell warns there is still a way to go. respite in china, the hang seng

rallied. the earnings season is in full swing in europe. we have the conversations that matter joining the bloomberg team. from autos through two big oil, the numbers hitting the tape. volkswagen cutting their full year targets. volkswtting their full year delivery on-chip shortages. they are raising the operating return on sales to 7.5%. the cash flow for the year is stronger year on year so that they are upping guidance on the operating return but they have got the bottlenecks which come from chips. what is that going to do to productivity? that is a question you need to

ask yourself. let me pivot across for a moment, some see 12% earnings growth, the cfo saying there's a potential in china, and covid vaccine trials remain on schedule. that is the top line against rating from sanofi or vw, warnings about bottlenecks from volkswagen but of course there is this most amazing opportunity in china. as long as you don't get regulators. where your pricing structure change in your ability to raise capital change. let's talk about shell. they will join the smorgasbord and analysts are expecting them to resume share buybacks.

allowing it to direct more cash to shareholders. what really matters in big energy? a year ago, 18 months ago, everybody was asphyxiating over debt in the oil companies. it would appear now that debt does not matter as much to oil companies, it's all about buybacks. what matters most to you? that is the big question as we dig into shell and bp. >> the oil companies have surprised the market in terms of being able to generate cash flow and bring down costs. the question is how much they will generate between now and 2025, how much of that will go

back to the shareholders. this is clearly very important for much of the street and we'll go back to shareholders. giacomo: in our view it leaves an upside to shoulder for the quarter. i think expectations are around the lower end of this figure. i think that will probably want some breathing room to grow as we get through 2022. annmarie: -- manus: i'm reading a couple of inference stories around the price of brent. we try to assess what they assess. many people say you will still have a tight market even after opec puts therefore hundred thousand barrels back on the

market between now and christmas. do you agree, and how does that affect brent going into the start of next year? i know it is a long way away and there are many caveats, but take me through that timeline and those nuances. giacomo: the market i think is tight right now. the announcement to increase output every month is going to increase supply less than what demand will grow. for the remaining part of the year it is a bigger question mark. whether we have the range of volume hitting back at the market, whether we will have growth in the u.s. supply, there are number of other variables

there. but i think opec has showed over and over over the last year or so that they want to keep the market under control and i think they will act accordingly in order to keep oil prices within the new bandwidth we are in. we may have some spikes above $70 but that's the level they are comfortable with. manus: you are at home in london so i want to get a sense of what the london market is saying. we've gone through a spat between saudi and the uae. in that narrative, does it have veracity in the london market? do the fundamental traders in london think the uae will

eventually rip and run on a? giacomo: the uae has become increasingly difficult in admitting. that all started in november last year. they shove their interests increasing their output. they've made investments and they want to get the benefit for. i think they sort of got what they wanted. they are getting a little bit of increase in 2022. the question is once we are in may 2022, will they asked for further increases or will they be happy with what they've got? manus: when i caught up with the

oil minister, he said we don't sweat anything. tell him to give us a call, he is very quiet. you say that performance is inextricably linked more so to the price of oil. contextualize the dividend policy in this current market structure. giacomo: the company has linked its remuneration policy to the oil prices. we're are looking at it yield that is around 10%, one of the highest in the sector. this policy makes sense, the company is more linked to the oil price than many of the other vendors.

there is larger up string -- upstream exposure. we will know this for sure with their results. manus: great to have you with us this morning, great conversation. it's a big week for tech as well, in case you haven't noticed. amazon is due to report their second-quarter numbers and the economic giant is expected to show stronger, following in the footsteps of facebook, but will they have a warning as facebook did yesterday? we will break down the latest results with alix. good to have you with me. a warning from facebook.

alex: if you classify what apple is doing on its operating system , apple has cracked down on the ability of apps to track user behavior across different apps and then on web browsers on your desk top there are also new tools that come into effect that make it hard to track user behavior there. that is a double prong strategy. it's about seeing what products you buy on other websites, what products you browse, gathering all that data and giving you ads on that basis. that could curtail growth in the final calendar quarter. that's what investors have been a little bit shaky about. manus: what about amazon? we will hear from them later

this evening. this will be a battle for the cloud and e-commerce as well. what do you think the market is going to be most focused on here? alex: the pace of growth in the cloud actually slowed slightly from microsoft. they'll be looking to see if that is reflected at amazon. maybe amazon is benefiting, but they will also be looking to see whether the huge increase in capex to fuel the greater demand for next day delivery during the virus, whether they've actually managed to conserve that cash flow. in previous quarters that has been the case but if someone is just ordering one small item, but if you got 20 people on the

same street ordering one small item, it's very delivered. the ability of amazon to not just gain in revenue from the lockdowns but convert that into profit, that will be particularly interesting. manus: you know what could come next on amazon prime? some space rocks or things that went to space. alex, great to have you with me, our quicktake reporter. let's get to hong kong, annabelle droulers joins me with the first word news. annabelle: the fed has kept its benchmark rate unchanged, unofficial signals they are close to tapering. the current rate of asset purchases will continue until substantial further progress has

been made. the economy has made progress toward that end. the u.s. interbank said risk remain to the upside but it remains transitory. robinhood markets has priced its ipo at the low end of the market range with one of -- one of the year's highly anticipated listings. it puts the fully diluted market value at about $33 million. volkswagen has reached a deal to buy back euros. the german carmaker sees major profit potential in mobility offerings and is trying to remodel itself into a company defined by software and services. it's his second crack at your car ownership, having sold to a firm back in 2006. i'll speak to the ceo of

volkswagen just after 7:15 a.m. u.k. time. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: coming up, will the senate move ahead on abroad bipartisan infrastructure package? this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i am manus cranny in dubai. company seeing earnings hit by the shortage of microchips, but

relief may be on its way. an infrastructure deal is working his way through congress. to enhance america's capability to produce leading edge chips. >> fundamentally, the only way to solve the problem is that we need to make more semiconductors in america. there is a bill working its way through the house right now which is a $52 billion investment in the semiconductor industry. that is absolutely essential in order for us to solve this problem for the long run. fundamentally we just have a lack of supply. we don't make any leading edge semiconductor chips in america, zero. so we have to stimulate that production. >> is part of a larger bill working its way through congress. let's assume for the moment that gets done. you said we need to make them in

america. does that include overseas companies making them in america? would you be in favor of giving them money as well? >> i would certainly be in favor of them having operations in america, absolutely. samsung, tsmc, there are companies that are in allied countries and we certainly want them operating in america and producing chips in this country, yes. >> there are other supply chain issues as well. you are monitoring what is going on. where have you seen other problems in the supply chain in the u.s. that needs to be addressed? >> lumber, all the related supplies, glue, adhesives, and you see it playing out. home prices are high. if you go to home depot or lowe's you see prices a little bit high. that is all because the lack of

supply, just disruption in the building supply supply chain, mostly due to covid. we are working through that. the president convened a supply chain disruption task force and we are working feverishly every day. you are seeing improvements, and we will continue to see improvements in supply chains as we put the pandemic in our rearview mirror. >> the overall mission of the commerce department is to create conditions that promote economic growth and opportunity. let's talk about the labor force. how challenged are we in the labor force? we hear anecdotally that they're having trouble finding the right skilled workers for the jobs that are available. >> there are a few components. one is, women are still struggling to get back into the workforce because of a lack of child care, quality, affordable

childcare. that's why the president is so strong on this point. we need to invest in childcare infrastructure so women can fully participate in the workforce and be productive. also we have a skills gap. every company i talked to says they have many jobs available for people that have tech skills, digital, cyber skills and they cannot find enough people. which means they have to invest in job training, tech apprenticeship and get americans get up skilled so we can close that skills gap. manus: gina raimondo, the u.s. commerce secretary there. derek, i am drawn to the numbers in terms of voting. 17 republicans came on and two

independents. this is good news for biden and overall policymaking? is that the backdrop? >> absolutely. this is a bipartisan infrastructure deal, despite large segments of the pup -- republicans wanting to go higher , as well as headwinds from the right side of the republican i'll and especially former president donald trump who said his fellow party members got played. they stayed the course. it looks like this is going to advance with democrats broadly in support, roof -- republicans come in in fairly decent numbers. mitch mcconnell always like to say that winners make policy and losers go home. joe biden won, and he wanted to

do things a certain way, and this is the way it is going. tons of caveats here, but it is a good sign of bipartisan dealmaking. the interview you just played was really instructive in a lot of ways. talking about the numbers, it isn't necessarily roads and bridges. $7.5 billion to build a nationwide network of charging stations for electric vehicles. there is some drinking water money in here. there is money to help shore up electric power grids. there's a lot of stuffing here in terms of hardening the american ability to do things but also providing some of those investments like these charging stations that help some of these nascent industry start to have the infrastructure necessary to grow more.

manus: i think having traveled a little bit and seen some of the infrastructure issues around europe, there are two green charging stations. bernie sanders says he has the 50 votes to pass the budget resolution. where are we with the bigger spending agenda for the democrats? >> it is a phenomenal question and i will try to stay out of the weeds here, but there's basically two things that need to move in lockstep to have all of the votes. there is this bipartisan infrastructure deal on one side, but then progressives really want this $3.5 trillion package

that will come through only with democratic votes. and the bernie sanders plan sets the motion for that. right now there are 50 democrats on board for that. we are hearing signs at in the center of the democratic conference, maybe your joe manchin's of the world, you don't necessarily have 50 votes locked up for doing as much as bernie sanders wants to do in the next phase of this. that makes problems for this bipartisan infrastructure deal. aoc went out and said to sinema, basically, good luck getting your plan through the house if you're not going to be on board for hours. so there is some complicated politics coming. joe biden was able to unite the left and center of his party and get through. he will really have to do that here if he wants it to go.

manus: thank you so much. anna edwards will join me shortly to discuss big earnings. ♪

and there you have it -

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anna: good morning. welcome to the european market open. we've got a host of earnings out this morning, so we are going to take you shortly to our recorded interview with the quite its ways -- credit suisse ceo. to recap, messily upping their guidance. sanofi in the drug space also guiding higher. vw guiding higher, although they have been cutting their delivery estimates. quite a lot of positive

momentum. it is a different story at credit suisse. they have problems with risk management. also want to get a sense of what the company can do to stem the tide of management losses. what is the real story around turnover? i started by asking the ceo about the numbers and what had underperformed estimates. >> we had very resilient second-quarter results. we had income of 813 million swiss franc. we are back in profit after the 5 billion swiss franc loss in archegos, which was an achievement in itself. we had, on an underlying basis, 1.3 billion of pretax income. we chose the resilience of our business. very satisfying. record levels in wealth m