>> good morning from bloomberg's european headquarters. 6:00 a.m. in the city of london. i am anna edwards. here is what you need to know. soars after lifting its profit forecasts. supply chain issues can consist until 2020 three. we get results from vwo this hour. markets flash a growth warning. markets increasingly factor in

policy normalization. the ecb is set to push back on higher rate expectations. president lagarde likely to say two weeks to pull back. welcome to the program. welcome to bloomberg television. we will go straight to the breaking news. microelectronics sees a q4 gross margins at 43%. the estimate was 43.1 percent. higher than anticipated. q4 net revenue also a little higher than had been anticipated. a big focus on the chip sector given the supply chain disruption. companies operating within the chip space benefiting. or are they also victims of these shortages? what is the capital expenditure? what is the plight of customers like apple? the situation where they are pulling back on production numbers, we expect, what difference does it make? that is one stop that will remain in focus for us.

union credit. net income 1.06 billion dollars. well ahead of an estimate of 796.3 million. under profit guidance to above 3.7 euros. yesterday, you won how the higher yield environment is impacting banks. others feeling cost -- comfortable enough. this credit up 50% year to date. talks with the bank over the weekend falling apart. we will see whether it is a long-lived state of affairs. let's get to the brewing sector. narrowing a fully readjusted -- fully adjusted growth. third-quarter adjusting up by 3%. a drop of 1.2% or so. numbers from the third quarter, look to be above where the market had anticipated.

organic revenue coming in and the third quarter. up seven point 9%. this volatility story from the brewing sector over the last one he four hours. heineken -- 24 hours. heineken a disappointment. a big focus on china. two key provinces have gone back into lockdown. that's some of the corporate news. just three minutes. let's get to the global macro picture and tell you what is going on with bond markets. global flattening of yield curves in our headline sequence. that is one of the things we need to focus on. seem to be moving more in the market psychology toward the idea of normalization. flattening curves a result. yields spiking at the short end. you can see that in this charge. central bank globally. not just the large geographies leading this. although they are certainly very much in the conversation. but we are also seeing other smaller central banks, from australia to new zealand,

certainly canada and brazil, there rate increase the largest in almost two decades. a lot to talk about when it comes to certain central banks leading on this narrative. these are a little bit different, the cut in supply from the debt management a good part of the conversation. a lot to say about the bond markets. flattening of curves generally. what does it tell us about growth narrative? let's show you what it is doing to other assets. certainly having a knock on impact into asian equities in the asian equity session. it looks to be fairly weak. not much to the downside. interesting to see nasdaq futures pointing up higher. european equity market futures in focus heading toward the european trading day. u.s. futures looking more buoyant. oil down for a second day. stockpiled over in the u.s.. key questions about iran, conversations between them and europe coming back. we expect a date and next week.

what will it do to the level of supply on international oil markets? let's get to the earnings story and the picture for automakers. ford has surged after raising its profit forecast. a let up in the shortage of semiconductors. a problem still halting many in the auto space. but supply issues can persist into 2023. over at general motors, the ceo says "we have through the worst of this crisis." >> we have seen recovery from the impact in q3 from some of our supply base that caused a little bit deeper impact. i am optimistic we are through the worst of it. we have shared safety protocols with our supply base around the world. that gives me confidence we will see a stronger q4 and stronger q1. even as we get to the second half of next year, continued improvement. anna: let's bring in craig

trudell, who joins us. numbers out of 40, positive messaging talking about things coming to a head in the supply chain, and over the worst of it. what have been the automaker sector? >> the general consistent theme is pretty strong execution on the part of the automakers. they can flex their muscles from a cost perspective, being able to take out incentive spending, marketing, being able to really cash in from financial companies, from lending arms, because of strong values of used cars at the moment. that has helped them get through challenges on the top line, where they have not been able to make as many cars as they would like. we see a situation where it is clear the chip shortage is holding back an industry that would see really strong demand

in the u.s. we see cars really being sold right off the lots. the truck's that get to dealers. this is a situation where once the shortage does ease, these automakers do expect to really bounce back. so they are in a supply constraint situation that will continue well into next year, potentially into the following year. anna: we talk about the chip issues often. high commodity prices broadly. maybe there is protection. more broadly, it will be something the sector has to deal with. i wonder how much the mix is helping shield automakers. high value cars rather than lower ones. what are we expecting from vw? >> i think that is a really smart observation. it is something that we will absolutely see out of vw. they are prioritizing the portrait brands over the

namesake vwo brand. audi -- vw brand. audi and so on. this is where you have no choice to really be choosy about what you produce. we see the high-end brands prioritized. so we see really strong pricing in the u.s. average vehicle prices about $43,000, sort of unprecedented for the industry. that is something we will see continue as long as the shortage lapsed. we see some let up as the chip supply starts to recover. while we are perhaps the worst of it, the expectation is it will continue into next year. anna: thank you very much craig, good to speak to you. we will look for those numbers later. our global car editor, craig trudell. let's get our first word news.

let's go to hong kong and element -- annabelle droulers. >> russian president vladimir putin has told gas pumps to start refueling facilities in a move he says will ease pressure on the region's energy market. he ordered the giant to start the process on november 8. that is when domestic storage sites will be full. european gas inventories are at the lowest seasonal levels in almost a decade. the boj in japan has left interest rates and asset buying plans unchanged, but cut growth forecast days before japan's new prime minister faces his first national election. in brazil, the central bank has delivered its biggest rate hike in nearly two decades, and pledged unequally large rise into venmo. the 150 basis point increase comes as the annual inflation's top 10%. the uk's annual budget has

increased funding for every government department and offered fresh support for working families. the chancellor unveiled 75 billion pounds of spending, including a tax cut for the hospitality sector and a comprehensive reform of alcohol duties. embracing surging inflation, he ended a pay freeze for workers and hiked minimum-wage by more than 6.5%. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thanks very much. annabelle droulers in hong kong. coming up, boosting for your earnings guidance. we speak to the ceo. this is bloomberg. in fact, we will also talk about the auto sector. reports earnings later this hour. don't miss our conversation with the ceo at 7:00 u.k. our, coming

up shortly on bloomberg tv. this is bloomberg. ♪

anna: welcome back to "bloomberg: daybreak europe." the french tech company reported earnings and boosted its non- earnings share forecast for four years. joining us is the ceo. thank you for speaking to us at bloomberg television. let's talk about your guidance. you boosted your eps of use. and the guidance for the full year. what gives you this point to do that? i apologize, looks like we have lost bernard. the writing is on the wall when he disappeared from view and an

image of him was there instead. we will see if we can reestablish the connection with him. delivered what they called a strong set of quarter numbers. the for your numbers on revenue and eps side look better than anticipated. q3 numbers on revenue anticipated. i think we have bernard back with us. good morning. i wonder what would give you more confidence to upgrade your guidance this morning? >> we have a strong third quarter, a strong year to date situation, and good visibility with the pipeline. i think the double-digit, life science is strong, manufacturing is strong. mainstream industries, as well. visibility is good for the full year. we are raising our guidance on both. anna: visibility is good, you

are raising guidance. what are the most dynamic industrial sector is for you at the moment? where are you getting the most optimism as the european economy, global economy continues to recover? >> the mobility, transportation, there is a strong dynamic. there's a lot of innovation going on. despite the new limitation, in terms of prediction. i think the product before you for the years to come, and moving to electrification, new assisted abilities really driving the innovation process. our growth is double-digit. the same is happening in life science with new vaccines and geopolitics. i think we are seeing the result of the investment we see in science-based innovation for the future.

i believe it is strong visibility for years to come. anna: i don't know to what extent supply chain disruptions have influenced your business. either directly influencing you, or influencing your customers, and their willingness to invest. how do you see these supply chain disruptions that are much talked about by ceos around the world, and how do they impact? >> the supply chain up to now is 30 years of optimization. i think what is happening is there is a new definition of supply chain, a new set that will be influenced by new types of under skilled process. optimizing the logistics. do not underestimate the conjunction of these supply chain issues, as well as the importance for an esg for

sustainability of companies with a constraint reopening the optimization of supply chain. i believe it is very profound for the years to come. our friends at bmw are adapting our logistics to optimize and transform their ecosystem. it is a long-term one. not temporary consultation. anna: a long-term change we are dealing with. let me ask you about the political backdrop in france, or the tech ecosystem in france. emmanuel macron's plan for fostering innovation in the deep tech fields is something we talked about before. is it something you are pleased to see, that you are engaged with? >> of course. we want to weld the ecosystem. french roots, we are a global

company, also increase our ecosystem of innovation. if there is a positive dynamic on science, in tech, in france and europe, but the dynamic in china. it is also strong in america. i think the deep tech is going to be applied to manufacturing processes because of what i said. new processes. i think this industry is being transformed. we should really look beyond the current limitation. the fundamental change going forward with a clinical trial in china, geopolitics being developed, i see new processes, bmw announced what they would do

with recycling. millions of companies. there's a lot going on in the industry of the focus on limitation today is an interesting point, but i think in six months to a year, the topic will be among the one i mentioned this morning. anna: fundamental transitions and changes taking place. let me ask about recruitment. is it difficult to find the engineers, software developers you need for your business? has a remote work changed that? made it easier? >> depending on the countries. clearly in america, it is challenging. it is easier in europe. we are a science-based company, so we don't only hire software engineer people, we hire surgeons, biologists. this dynamic is a quite interesting dynamic. you are right.

even in china today, or in india. anna: thank you so much. good to speak to you. bernard charles talking about the transformation he sees with new materials, new processes coming to manufacturing. thank you for giving us your thoughts. coming up, a growth warning. bond curves flan from the u.s. to australia as markets increasingly factor in policy normalization. we have that for you next. this is bloomberg. ♪

anna: welcome back. i'm anna edwards in london. slipping in the afternoon session in asia. annabelle droulers has more details. >> it has been fairly risk off in asia.

led lower by the nikkei in japan. a sub index of minus, leading up around 4%. in china, concerns around a crackdown on private enterprise. also perennial problems in the property sector. concerns evergrande can face default. we do have the kospi, one of the few bright spots. a result of the samsung third quarter numbers. came in better than expected. globally, one of the key things we have been discussing, central banks turning more hawkish. in this part of the world today, attention being paid to this announcement from the rba choosing not to defend its yield curve target. you can see in this chart the reaction we have in yields off of the back of the speculation rising that we could see the rba changing its forward guidance when it meets next week. commonwealth bank are one of those bringing forecasts forward. we could see a hike six months

earlier than expected. that would be around november 2022. economists are focusing on high vaccination rates. there are expectations we could see 95% of people double dosed. they would provide a booster growth to trigger faster wages and inflation. anna: thanks very much. annabelle droulers with an update on the themes dominating the asian trading session. let's stick with one of those. the collapse in the global sovereign debt your curve is accelerating. a foreboding signal to central banks that a withdrawal of stimulus risks triggering a slowdown in economic growth. joining us is mark cranfield. nice to speak to you. we talked about the flattening of the curve, new expectations, what it tells us about growth and growth fears. i suppose it takes us into asking what the flatter yield curve means for stocks. what is your assessment? tom: usually it is --

mark: usually it is not a good thing. the short end of the yield curve rising as much as they have been, it is a strong warning signal central banks have been a little bit too slow to raise interest rates. when they eventually get started, they will probably have to raise at a fairly rapid pace. we have seen this. a few examples of it. we saw the short end of the canadian yield curve racing higher, canada was going to reduce, it ended. as you mentioned about australia, we have seen the short-term rise more than another 20 basis points in one session after having already done so earlier in the week. the rba had a firm target that they would not be raising interest rates until 2024. that looks very much in doubt. they have a meeting coming up next week. some analysts already saying they may need to change the outlook and bring it quite a bit forward.

you've got several disruptions going on. and we have a fed meeting next week. two year treasury yields well above the target for short-term rates. the fed is also under pressure to recognize inflation is no longer transient. it is much stickier than they thought. and we might see a much more hawkish sounding fed next week. anna: a nice graphic that shows the two year bond yield spike in australia, new zealand. showing the impact. bank of canada and the impact of the moves we saw. the u.k. looks different on the chart i'm looking at. it is something to do with supply. tell us how they have been outperforming on bond markets. mark: they had a remarkably good day yesterday. it was up to the u.k. budget, where there was announcement there would be less supply in the market. the u.k. government has enough money coming in that they can reduce the number of bonds it needs to sell in this fiscal year.

that was a huge relief in the bond market. you have quite an interesting contrast going on. on one hand, the government is cutting back on the amount of bond it is selling, but on the other hand, from the u.k. chancellor, it was so aggressive, there was a risk of the u.k. commonly overheating. what you are seeing is the derivatives market is aggressively pricing for quick rate hikes in the bank of england, even though it is not going to be so much supply. the curve is all over the place. it becomes very interesting. anna: increasingly live. it discusses the live event by some of the people. we will look to that for some market excitement. mark cranfield, thank you very much. global flattening season. also in the u.k. with reduced supply being flagged during the budget. coming up, sticking to the transitory script. christine lagarde faces a task of readjusting rate expectations.

markets have been mainly getting a little carried away with translating higher rate expectations in other geographies into the ecb. we will go to frankfurt with a primer on ecb decision day. this is bloomberg. ♪ (announcer) looking for a better way to lose weight and feel good? how about the one with the 98% success rate and the more affordable weight loss solution? that's golo. there are no monthly fees and it's guaranteed to work or you don't pay. how can golo offer all of that? because it's not like any of those diets you've already tried. it's the new way to lose weight. no stimulants, no starving, just results. results you'll keep for life. no more sacrificing to lose weight only to put it back on. no more sacrificing, period. it improves your lifestyle and delivers incredible results. with over 2 million satisfied customers, golo is the new way to lose weight. this is the only program i have ever done that i have never deprived myself of anything.

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anna: good morning from bloomberg's european

headquarters. we get results from vw just hitting the bloomberg now. bond curves flatten as markets increasingly factor in policy normalization. the ecb set to push back against those high rate expectations. christine lagarde is likely to say pressures remain too weak to fall back on support. good evening, everybody. vw first quarter adjusted operating profit of 8 billion euros compared to an estimate of two .9 billion. there does seem to be a pullback of expectations because of those deliveries, now saying they will be in line with 2020. perhaps prioritizing profits little over bond yields.

we heard about it from ford and gm as well. we heard from mary barra at the top of the program, so we are certainly watching for details. results of the third quarter, the -- according to her, the gm ceo, showing we have to price volatility into the volume sector. in the drug space, if encz drugmaker listing its full year outlook. it now sees eps up around 14%. strong third-quarter performance drives guidance up. we are certainly looking for an update on depicts and, how that has been going down. ubs saying there is a chance of an up raid, but not likely. the market might have been caught off guard a little bit. we will be looking for what flu vaccines look like and the pricing of those.

they seem to be still a pre-pandemic levels, and that has weighed on a number of drug companies. now to micro fixing, and that is the big story, a couple of them breaking. let's get to the bond market story. we have talked about the bond flattening theme and what that has done to markets. it has certainly taken the edge off the asia-pacific session. the brent crude prices down by 1.8%. it is of the second day of weaker oil prices. stocks have been rising in the united states, and there are questions about iranian supply, when that comes back on stream. it seems the tech sector still very much reflecting the earnings story, fairly mixed. it is decision day for the ecb. president christine lagarde faces the task of readjusting

rate inflation. joining us now is our reporter maria tadeo. no further action is expected, but it does seem to be joining the debate about policy moving forward. we are exciting pushback around market expectations. maria: yes, anna. the market is very well briefed, so we are not going to see any actions into monetary policy today. nonetheless, we are being told that inflation will be the key theme in this governing council meeting. there is until now or has been a line that this is just a one-off, that this is temporary,

that inflation in the european union and the euro area in particular is heating up and

will cool down and this is just a temporary blip. having said that, we are seeing a roaring debate. sources are now telling us that today will really be about inflation and that ongoing debate as to if this is temporary has big monetary implications. when you look at the ecb potentially hitting inflation rate guidance and its goals ahead of time and what it could mean for monetary policy going forward. anna: it looks as if it might be a bit chilly there, things getting colder, which reminds me -- we are headed into winter. a lot of questions about the pandemic program the ecb put in place. are we expecting anything on that today? maria: you know the market was keen and excited about finding out what happens, you know that gray area when it comes to the ending of the emergency pandemic program and going back to the program, and it has been that transition that has the market keen on finding out if we will see added flexibility, but again, we are being told that the governing council wants to stress that this was very much a meeting about macro expectations, that it was very much about inflation, and before you exit the fed program, you have to get the assessment around price pressures done right before, so again, we are not really expecting anything major on the monetary policy front to come out today. we are not expecting any hints, but this is really about the new incentives on inflation. if the governing council agrees it is a one-off, they still hold onto that. anna: thanks very much.

she will be live from frankfurt throughout the day reporting on the christine lagarde press conference. our next guest is european economist from hsbc. do you think we can expect to see pushback against market expectations of rate hikes? will that be the main theme here? >> i think the challenge here is that, as maria was saying, it does not have anything to deliver. it does not have a new set of forecasts that they could use, and the current inflation forecast is not credible because it is completely out of date and therefore not good enough for underpinning some of those market expectations, and also

does not have anything to deliver in terms of politics. they have to rely on communication, and with communication, we have seen quite a strong pushback by boardmember's, but the market is worried first of all about confusion on inflation and how likely it is that these energy concerns pan out in the future but more importantly, concerns about the council -- anna: let me ask you about that. we were just showing a graphic, and there are these central bankers that come in many varieties, and you make the point that decisions might be based on how evident decisions

on monetary policy are. do you think we will get any sense on how the conversation is here, given that we know biden is on his way out, of course. >> it will be interesting to see if christine lagarde can give a sense as to if there is unanimous agreement within the council that this shock is transition every. i suspect it will be difficult to achieve because it is pretty clear that the views are medium-term. we still feel quite confident. we think even if the governing council is divided, that seems to be quite unanimous in their assessment of medium-term

inflation. i think for the medium and december meeting, the ecb will be able to deliver more stimulus for next year, but of course, you know, the uncertainty remains, and i'm not sure to what extent christine lagarde will be able to convince the market that the ecb will be able to deliver such stimulus. anna: we have been talking about a jump in two-year yields in various geographies. about australia on the inflation front or canada on the rate hikes. certain emerging markets on that rate hike pack -- path already. does it make sense that the ecb will be behind others when it comes to rate hikes? will christine lagarde find herself perhaps having to justify that lag? >> the market has been eager to translate things happening in other geographies all over europe.

i think europe is in a different place. the cycle started later because of the reopening cycle. we have not seen yet some of the pressures because of the services sector. little pockets of inflation, the tourist sector, but certainly not to the extent we have seen in the u.s. or u.k. the type of stimulus we had in the u.s. created a huge wall of demand pitted against limited supply. plans submitted to the european commission show increasing pessimism. and you have specific issues in the u.k. where brexit has compounded supply chain shortages. overall, we are seeing that it is perfectly justified that the

ecb will have a debate cycle, and that's why we don't see any increase between now and 20 23, which is the end of our forecast horizon. by the end, the ecb might be in a position to consider rate hikes, especially the way the market is pricing at the moment, i think it is reading too much, and also it is not fully internalizing the changes we saw in july, which i think are important. anna: thanks so much. really good to speak to you. really good to get his perspective on the ecb meeting. sticking with things european, later today, the eu commission president will speak to bloomberg, so don't miss that interview a little bit later on in programming. let's get a first word update. annabelle: the u.k. has hit back

at france over proposed retaliation measures in their dispute over brexit -- post-brexit fishing rights, calling them disproportionate. the u.k. maintains it granted 98% of applications since brexit. iran says negotiations to revive the 2015 nuclear deal will begin november but expects the u.s. to release $10 million in reserves as a gesture of good faith. sources tell us that activist investor dan logan saw a $750 million position in oil dutch shell and is pushing for a

breakup. in a letter to investors, he said shell would benefit from breaking off its lng renewables and marketing businesses into a standalone company separate from its legacy energy business. shell says it welcomes open dialogue with all shareholders. and samsung's third-quarter profit has exceeded analyst estimates after a prolonged semiconductor shortage boosted prices for memory and system chips. net income rose to $2.3 billion in september. the world's biggest maker of memory chips and smartphones has seen higher prices as the global economy recovers around the covid-19 pandemic. global news wendy four hours a day on air and on bloomberg quittake powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you. lots to catch up on this morning. coming up, we preview what analysts expect to be a banner

start to earnings season for some of the oil makers. more on that next. this is bloomberg. ♪

anna: welcome back to bloomberg daybreak: europe. i'm anna edwards live in london. oil companies begin releasing earnings today starting with royal dutch shell. we also have some into vista -- interesting activist news as well. will kennedy joins me in the studio to take us through what could affect a very good

morning. a shareholder once a breakup of shell. what is your take on this news overnight? will: it is a bit of a bombshell to start earnings with, and it shows what a tumultuous time it has been and how activists are really looking carefully at this. this very radical plan for shell, which is, as you say, two businesses, a legacy oil business that would just produce cash and cleaner energy in shell which investors can concentrate on, and i think press and analysts will be focusing on this plan when they talk to the ceo today. anna: activists are motivated by

different things. is this the same story? will: there were certainly similar themes. the two similar themes were stop spending on the existing oil business. let that is in us just carry on and gently run down and take that cash flow rather than invest in growth. the second theme is you have to think about what the firm's strategy is going into the energy transition into a lobar -- lower carbon world. those are the two broad picture things. anna: that does tie them together. we have seen a period of much higher oil prices. this is to do with recovery from the pandemic and negative oil prices as part of this, so seeing a big recovery in prices. we expect a period where we do not have enough or nubile's and

investing out of the old stuff. will: if you look at where we were 18 months ago, businesses were in very good health. oil majors are expected to produce the most cash they have done since the year before the financial crisis, i think, so the recovery is huge, but the things we have reported about in terms of investments are really important. the investment community clearly do not want the oil major to close existing businesses. they do have this problem where investment is lower than it used to be, and that means there's is real concern that over time, you are going to get this slowing down between what the oil industry is producing and what the global economy needs, and that probably means absent an economic slowdown at longer period of sustained higher prices. anna: or does it mean we end up

relying on parts of the industry that are a little more out of the spotlight? will: there is some of that. you can see private equity in the u.s., and it will mean opec nations show a strong position, but i don't think people should underestimate what a challenge this is. the big offshore oil projects are really the expertise of these companies, and without them, we don't know what will happen. anna: thank you. fascinating overnight developments. a lot to talk about when it comes to the energy sector. coming up later, volkswagen backs its profit target for 2021 after the company hit third-quarter results, dialing back on deliveries, on volume.

don't miss our conversation with the ceo. matt miller will bring that conversation in the next hour of programming. this is bloomberg. ♪

>> 211 million people use twitter every day all around the world. 20% of those are in the united states. the rest are outside the united states. the top of funnel is really healthy, so we get a lot of that

act. we just need to do better to us to help converting people into making twitter part of their daily life. anna: that was twitter's cfo talking about twitter. the company plans to pass raw material increases onto clients. they have raised prices overall by 9%. they saw third-quarter inflation of 25% and plan to pass that on. inflation will remain a big theme. we will get the ecb rate decision. the bank looks to reassure consumers that inflation is transitory. facebook's connect conference kicks off, bringing together did digital and real world. they believe the digital space will supplant smartphone apps as the primary form of online interaction. and results from apple and

amazon. we should see what effect supply chain pain has had not just on hardware manufacturers but perhaps even on some software names. we talk to a ceo from a company that raised their profit forecasts. we will keep our focus on the markets, of course, as well, also getting news out of south asia, the saudi arabian business, third-quarter profit 5.5 billion reels. the estimate a little higher than that, which is interesting. rhett start to propose a 5% digital increase and a share buyback. the first of the oil majors to report this morning. they are proposing to increase

their dividend and buyback 35 million shares. shell numbers are next. we have a conversation with the ceo, and ursula von der leyen, the eu commission president, will be on later. this is bloomberg. ♪ moving is a handful.

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anna: good morning. welcome to bloomberg markets europe. the cash trade is less than an hour away. here are your headlines. one activist investor thinks shell should break off its renewables and marketing businesses. we get the oil major's results shortly. supply chain pain. plus, it