manus: good morning from our middle east headquarters in dubai. this is "daybreak: europe." these are the stories that set the agenda. the treasury -- oil marches higher. wall street slumps, and taking a bite out of goldman sachs.

morgan stanley reports today. plus crisis point, u.s. and russia ready for a key meeting with ukraine firmly in the spotlight. it's all about the chips and ships, dani burger. the company that makes the machines that makes the chips, 3.30 5 billion, for the first quarter. that's what they are seeing, well short of the estimate of $5.36 billion. first quarter net sales well below the estimates. margins getting crushed here in the first quarter. sales growth will be around 20% this year. it's going to be a challenge. they had a fire in their berlin factory, that's what's hitting their winning 22 sales forecast. dani: good morning.

the other chipmakers have had strong quarters so this is surely a disappointment. one of the biggest private equity firms is looking at a full year that beat significantly, the estimate had been just under 950 million euros. perhaps the disappointment might be that their dividends are under the estimate of 2.8 swiss kroner. the expectation had been 3.8. so we are seeing a lot of these bankers and equity giants deal with compensation, perhaps leading to the disappointment here. manus: you've heard the saying, diamonds are everybody's friend. what did you do during covid? bought diamonds. the estimate was for 2.80 8 billion.

watchmakers, i've yet to buy that special watch, 900 77 billion from the watchmakers. what did you buy me that i haven't got in the post yet? substantial he -- sustainably beating 2019. dani: obviously there is a cartier watch on its way in the mail to you, manus. manus: we got to talk about it, this is an explosion in the bond market. we are either at an extreme moment in bond market pricing, how quickly the rhetoric has shifted. standard chartered said no, that's not what the fed is about. dani: you said it before, does

the fed have the chutzpah to hike, like might you dish speaking grandmother would say? is the drumbeat for more right hikes -- rate hikes more aggressive fed? the yields at the highest since february 2020. manus: absolutely, that's the short end of the curve. standard chartered said this is not the kind of federal reserve they expect to see, not what the fed will want to do. if they really want to send a message, look at the long end, we've got the chart in terms -- since the thought -- the start of the 30 basis points. this is why we use the phrase bond vigilantism because at speed up change will unseat the nerve of the fed. dani: very true, manus.

let me get into today's markets because the nasdaq 100 futures, less than two percentage points away from a correction. the pause at nasdaq is only a few basis points away from a correction. we been watching them move higher beyond 1%. this will be the highest level since 2020. one of the strongest days for the dollar yesterday so little bit of reversal of that weakness. weakness has been the trend but we could see a stronger dollar. when crude is up 1.2%, still at its strongest level in seven years which we will get into in a bit with our paul wallace. manus: sony, microsoft buying the video game maker activision blizzard.

juliette saly has all the reverberations from the deal. juliette: have a look at sony, we are waiting for it to close in tokyo, potentially on track for its biggest drop since 2008 as the market reacts to this 69 billion dollar deal from microsoft. really what it means is the industry is shifting away from the hardware-based model. we've been seeing a bit of weakness in some of the other game makers. some suggesting tencent can be a contender for the deal in terms of distributing some of the games but a little bit of weakness in hong kong. let's look more broadly at that impact of not only sony but the overall topix index is actually on track for its lowest close in august, down by more than 3% in the session. we've seen more pledge of

support from the pboc boosting those developments in hong kong. really it continues to be a global story of rising yields, particularly coming through once again in the kiwi 10-year. manus: thank you very much, juliette saly with the latest on the asian markets. a pipeline runs from iraq to the turkish port on the mediterranean sea. rent trade at an eight year high and we have energy and oil commodities reporter paul wallace here. added into what was already a tight market, the turkey-iraq pipeline. what do we know from the fed of late? paul: as you say, another disruption for the market with brent nearing $90 a barrel. in normal times it wouldn't be a

massive setback for the oil market. this is an important pipeline, no doubt about it. he carries about 450,000 barrels a day of crude from northern iraq toward turkey's mediterranean coast. however, a shut down is critical at this time given how tight the oil market is. dani: paul, thank you very much. seeing oil at a 2019 high. secretary of state antony blinken will meet with the russian foreign minister in geneva this week, happening as washington is ramping up and moscow is prepared to attack ukraine. we've had talks between russia and the u.s. before nato and russia, all of it seems to end without much progress. is there hope that this time these talks could be different? what are the risks? >> big question, what exactly

can the u.s. do, come on friday and put on the table with its russian counterpart in order to get him to persuade the russian president, because we've seen weeks of discussions and warnings. at this point there is still no concrete agreement between the u.s. and its allies about how to punish russia, demanding guarantees now to not invade. can the u.s. come to geneva and put something solid on the table that would be enough to prevent that? at this point, it doesn't seem so. manus: let's see how the week evolves, we are on tenterhooks, geopolitically speaking, on that upcoming meeting on friday. juliette has the first word news.

juliette: boris johnson will face angry lawmakers in parliament during the weekly q&a session on wednesday. it's reported a group of conservative mps gather to discuss the move against johnson after more damaging headlines over breaking lockdown rules at downing street. p.m. johnson: i can't believe that we would have gone ahead with an event that people were saying was against the rules or against what we were asking people to do. and nobody warned me that it was against the rules. i am absolutely horrified, because i would remember that. juliette: germany's finance minister now is the time to rebuild, speaking in brussels. he stressed the importance of paying attention to government borrowing in the fight against inflation.

>> i'm not a scary halt, i'm a friendly halt. i'm open for arguments, and germany wants to be part of solutions, and not part of the problem. juliette: the u.s. and u.k. will start talks on easing tariffs on metals that the trump administration imposed on national security grounds. the u.s. imposed a 25% tariff on steel imports and a 10% duty on aluminate in 2018. the e.u. brokered a deal to ease similar levies last year. 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. dani: thank you so much, juliette saly there in singapore. let's recount the earnings we've had in the last 10 minute. we have to start with a chip giant asml. it was a miss on sales, coming

in below 5 billion euros. the estimate was for above that. they said they will continue to return significant cash to holders, so some things to way up there for asml. manus: the guidance for this year that sales would grow by 20%. it goes back to earlier in the year. the demand outlook, they're in good position. they will ship 55 of those this year. it's exploding in terms of guidance, in terms of watches, jewelry, online are the areas where they are doing best. pre-pandemic levels would be substantially exceeded and that's what we call a bullish guidance.

third quarter sales up 32%. the market had penciled in 18.2%. dani: that is quite some beat there. coming up, the other big market scene we been watching, the treasury selloff, and we will discuss the marching -- market moves with our next guest. ♪ manus: goleman disappointed the street. we'll talk about the latest today. this is bloomberg. ♪

>> i think we are due for a correction.

the markets have been a bewley in for quite some time. interest rates have been so low -- markets have been a boolean for quite some time. -- the market is anticipating that. dani: david rubenstein speaking at bloomberg's year ahead conference. this call is for a correction. is our next guest breaking for one as well? maria, i know you are a bull, so let's start there, but within a bullish context, are you bracing for possible correction in this market? maria: good morning, you're absolutely right, i've been bullish for quite a while. strong earnings accommodating monetary policy, those things are still there. everyone's talking about the fed removing accommodations. were talking about rate hikes

from a very low level, and looking at long-term expectations, it's still going to be negative real rate for about a decade. it's a little bit less accommodative than before but if we continue to get earnings the equity can continue very strong. some sticking with my bullish views. manus: let's talk about that. we just had asml, i think they're going to return to pre-pandemic demand. these are stormy numbers at the high end. third quarter fiscal sales rose 53%, retail online. can the explosion --

>> it's an enormous amount of money still on the sidelines. the average consumer gained a lot of wealth, what a lot of stimulus came in. so people add money to spend. corporate have been able to perform at a very low rate. it will probably continue and that will ultimately end up in corporate p&l accounts. so we think stability can continue to be strong for some time. and the inflation were seeing right now, you look at companies like richmond and a lot of

large-cap cyclical companies expect to maintain the margins. i think expectations will be the same for a number of upcoming quarters. dani: i do wonder if there's any concern about wage pressure. i know you have specific views on banks but we did see from the big banks that that is a concern. we can get into that sector in just a minute specifically but as a whole, are you expecting wages to be a problem for more sectors within global equities? >> it's an interesting point, because for me the most interesting way to look at wages is to look at germany, it's one of the most unionist countries, the unions are really strong. what seems to happen is that companies are prepared to pay

bonuses to retain staff and attract staff but they are reluctant to increase wages consistently. so in terms of overall impact on economies, i think wage growth is something to keep a close eye on but it doesn't seem to be a tipping point. manus: i'm going to let dani get to you on banks. when anne-marie was with us, it was her pet subject. it's written in large letters here, i love u.s. stocks. it's written bold and written large. when the nasdaq corrects, which presumably it will, do you see a bear market? will you see rolling corrections give way to a bear market?

>> i think you have a very substantial correction in equity markets when interest rates are rising very fast. the yield curve looks steeper and real rates will go above growth expectations went market start pricing higher, when we get all those, interest rates are high but yield curves are almost as flat as they have ever been. the fed needs to raise interest rates very quickly but the hike cycle will be shallow because we can't take much pain. that is not an environment where financial consistent -- conditions are decided.

is not a major threat to equity markets. as long as earnings remain strong, which we expect. so to us is not an environment of correction. what we should say is good earnings stories like u.s. stocks. it's amazing how strong it was before the pandemic and post-covid it's going up even more. u.s. stocks are still seeing the highly -- highest earnings and it continues to be there. manus: land of the free. you just realize what you called every equity trader out there. stay with us to the end, state street market senior in asset

strategies. we'll get more on the latest market action. ♪

dani: welcome back to bloomberg "daybreak: europe." it is bank earnings season and so far we seen the major banks tumble over concerns of expenses and lighter trading volumes. our guest with us for the hour has told us before you have to pay her to buy banks so she is clearly not a fan. it seems like perhaps more people are agreeing with you this earnings season. you no stranger to controversy so on going to put you in the hot seat. later in the hour we will talk to a portfolio manager who holds

both bank of america and j.p. morgan. what would your warning be to someone like him if you have this major exposure to banks? >> we have been negative on banks for quite a while. the reason we word about banks, what we have in the economy is very low interest rates and explosion in credit lending and mortgages and things like that. so banks locked in and the loan book is not growing. what banks were able to complete earnings on is trading side, investment banking, and our concern has always been that those revenues are cyclical, they come and go, and that is what we are seeing right now with j.p. morgan. lending activity is not picking

up. that has been our concern and now the markets are paying a lot of attention to the compensation costs and wage growth. for us it's the underlying problems in banking. it's difficult to make money in lending. that's what european banks have been complaining about for almost a decade. that is what is coming to the u.s.. on top of that is, as far as i understand it, the banks are probably quite crowded. stock prices have come up. we have real fundamental concerns about the economy. manus: so it's all priced in. a breaking headline on the oil market, we understand the pipeline will resume flow, the

estimate was 450 thousand barrels. turkey is looking into the allegation of sabotage on the pipeline. the fire was extinguished at 2:00 a.m. this morning. dani: will talk

dani: good morning firm bloomberg's european headquarters. it's 6:30 a.m. in the city of london. manus cranny is live from dubai. this is bloomberg "daybreak: europe." the treasury yield search smashes stocks. the nasdaq edges toward a correction. wall street slumps, and taking a bite out of goldman sacs.

morgan stanley reports today. plus crisis point, u.s. and russia ready for a key geneva weeding with ukraine in the spotlight. we are well underway in this earnings season but it's the bond market that is really dominating the pace of markets here. i put it to you, it's a 15 basis point hike by march that some people in the market are preparing for. we do see swaps at this moment pricing in more than 25 basis points in march. manus: it's amazing how we go to extremes. we convulse, we so overreach to the upside, it's a classic story of travel, equities correcting on the nasdaq. is this the speed that the fed wants to deliver 40 basis points in the first three weeks of the year? no, says standard chartered.

the fed isn't going to get that far, that's why they don't want to own banks. so you have extreme bearishness and still the bullishness that you take from the equity traders. dani: thank america doesn't agree with that, they are more bearish in the market. there are definitely a lot of differing opinions in the market at the moment. the fed blackout period certainly doesn't help us get the narrative right. manus: that's what tim's me toward, or were going to see rolling corrections? we are off the lows, 2020 is

still the high on to your paper. people say you will get a 15% drawdown, but we are three quarters of the way there now. brent is up .6% and the iraq pipeline said to be starting in the next hour. anthony blinken will hold talks with his russian counterpart in geneva at the end of the week. the meeting comes as moscow ramps up warnings that moscow is preparing to attack ukraine. bruce einhorn is with us. the agenda this week, it's a pre-clarion call of european global politics. what should he put in his gun as

he sits down at the table with lavrov? >> we are seeing what could amount to the last big diplomatic push to avert war. we see that tony blinken is scheduled to arrive in ukraine today and will be meeting with the ukrainian president and the country's foreign minister. then he will go tomorrow to germany and medium berlin with the german foreign minister, and after that, it's off to switzerland to a meeting in geneva with russian foreign minister sergey lavrov. the state department is saying the fact that they are having this meeting shows that there still possibilities that diplomacy can solve the crisis. dani: there's a lot of potential diplomacy that the u.s. and other nations need to deal with, a lot of geopolitical tensions popping up. what else is happening on the

diplomatic front? bruce: in addition to all the travels of tony blinken, we know that the german foreign minister had a meeting with the russian foreign minister yesterday in which she warned him about how germany might retaliate against the nord stream 2 gas pipeline which russia once deactivated, so that is one thing that the united states and its allies are holding out there as possible retaliation. we also know that president biden has a meeting on tuesday with the finnish president which is significant because he is said to have close ties with vladimir putin. that might be a way for the two presidents to --

manus: what do we know of the latest preparedness for war by russia? what is the next peg, the next evidential pegged that we have that russia is preparing for war? bruce: while all this diplomatic activity is taking place, the united states is saying they are seeing further indications that the russians are preparing for an invasion. the latest is that a u.s.-born official tells reporters that it seems the russians are now moving troops into belarus, which could then become a new front for an invasion. so you would have invasions from three sides into ukraine. now there are indications that diplomacy is still going on.

and they are getting ready to move ahead with the invasion. dani: bruce, thanks so much for keeping us updated on the geopolitical front. let's get to the first word news with juliette saly in singapore. juliette: germany has become the latest nation to record more than 100,000 new covert infections on monday, as the omicron variant spreads. so far the administration has avoided imposing sweeping lockdown measures. a government program to send free covid test to u.s. households has informally launched. a website to access testing kits is operating at a limited capacity ahead of an official launch on wednesday. boris johnson will face angry lawmakers in parliament during the weekly q&a session on wednesday. this after former aide accused him of lying to the u.k.

parliament. it's reported a group of mps gathered to discuss whether to press more charges. shares in sony fell substantially today, one point down almost 13%. the biggest intraday drop since 2014 after microsoft announced a deal to acquire activision blizzard. the world's largest takeover since the start of the pandemic wrapped up his spending spree to secure game services. 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: thank you very much, juliette saly in singapore. coming up, u.s. bank earnings, it will discuss the disappointing results.

this is bloomberg. ♪

manus: this is "daybreak: europe." dani burger is in london. we've just broken the news that the iraq-turkey pipeline is going to restart in the next hour. that's have a look at the oil price, no doubt about it the oil markets are lit up in terms of the next move. it's hard to find a bear out there in the markets at the moment. dani: so true. here will be my attempt at an elegant segway. the s&p 500, the only two sectors in the green so far are

energy and u.s. banks. i want to talk about bank earnings. bank of america and morgan stanley, results both expected today. so far they've been disappointing. goldman shares have tumbled the most in more than 18 months after the firm posted a lackluster fourth-quarter. let's bring in david scanlan. why are expenses soaring? jp morgan, city and does that mean we will see it for the rest of earnings as well? >> quite likely, there has never been a better time to be on wall street than right now. you mentioned goldman sachs, about 33% last year, an astounding number. most of that is just compensation. are they paying the people? ? they are hiring more the headcount going up at goleman and jp morgan.

they are feeling under threat from hedge, from private equity, from fintech, who are threatening to steal their best people. they are blunt about it, saying we will pay more to keep our best people. the result, expenses are rising, affecting the bottom line, and the stocks are falling, as you mentioned. manus: so what are we getting from morgan stanley? ? and bank of america or we invested more in the long group -- long growth or the banking side? we are worried about loan growth, aren't we? >> certainly, and that has been the missing piece for the last couple of years. it's been a great run for trading and investment banking, but not for lending. morgan stanley and bank of america a pretty strong investment banking businesses. bloomberg intelligence points

out the numbers were pretty strong on that front, reflecting a good pipeline for deals and ipos. as long as that continues, the number should look pretty good. the big question will be expenses. it's hard to imagine that morgan stanley and bank of america would be immune from the same challenges we saw from goldman and jp morgan. i would have to pay more to keep their best people, and it has an impact on the bottom line. manus: david, thank you very much. no one will be escaping the pain of the wage price spiral. let's start there, sticky wages last only as long as profits remain sticky, according to someone over a standard chartered. how hot will it be for wall street overall this quarter? >> those hot wages will stick

around as long as the banks are active on the banking side for trading and whatnot, but to your guests point on loan growth, that's really where the opportunity is in the bank. we own jp morgan and bank of america. we are not long the idea that the pipelines will be full into years. they will be empty into years and that wage pressure will be missing is they will be firing people left and right. dani: so if it is all about the loan growth, does that mean you want to pivot more toward bank of america, more toward lenders who have that greater consumer exposure? >> it's a great question. yes, but what i think people are missing, and jamie dimon talked about this last week on tv. he said underlying all of this is this incredible economy where

labor is in such big demand and there is tightness all over the place. there is a lack of supply of labor. so it is a great economy to be someone working, and the big fallacy, and heard your guest commenting are there, i think the fallacy in this market is that if stockmarkets do poorly, if bond markets do poorly, stocks will do poorly and therefore the economy must have to do bad based on that. what jamie dimon is trying to explain to people is that

the question is, will the stock market be impacted by that? we would argue yes, rates going higher will impact stockmarkets. the rates going higher are because of how strong the u.s. economy is, the u.s. consumer, and how ready to borrow these households are. manus: one of the themes that has been touched on by many people, getting back to pre-covered levels, i want to belong bank of america, wells fargo, and retail, versus jbm, goldman sachs, and other investment banks. do you believe the fed will stay the course rather than wimp out? >> the bigger risk in rates, we will see like a 1994 where the fed goes 200 basis points to the upside in short-term rate and people just watch their faith melt away. that's the bigger risk capital markets right now. the question is, how does the consumer react to that? we have the lowest debt service ratio since 1980. does the consumer have room to borrow? there is a trillion dollars of

unspent stimulus money still sitting out there in the economy as we speak. we own homebuilders, those are cyclical businesses. i would ultimately, you guys mention oil financials being the winners this year. we own over 20% energy. energy is the proxy of economic optimism. oil is going up, and yet people are -- people have a misguided view. people want rates to not move that much. dani: it is pretty interesting to hear you talk about this, because in some ways we put you had to head with maria over at state street. both of you are calling for this stronger economy. does that also mean that if you like banks, you see a stronger economy, but it doesn't make sense for you to own tech stocks

. the nasdaq sold off more than 2.5% yesterday. would you go in and buy that dip? >> not a chance. that's where the pain is going to crush peoples heads in. you can wake up in 10 years and people will have lost nominal money to the s&p 500. i apologize for saying this, but go look for the money is not. 3% of the s&p 500 index is sitting in oil. it's probably the scarcest trade in the world, but on the back of that, the inflationary pressures everywhere in the world right now just beg people to go out and buy tangible assets. these futuristic, long-duration stories, we can see that heavily impacted. you talked about sony, competition just woke up at their door and look what the stock is doing today. that's not a good place to be in

the next three or four years. manus: you're throwing prime steak at as here so let's chew on a bit of it. what do you make of the microsoft active vision blizzard -- activision? ? blizzard deal it puts me in mind of at&t many years ago. that just went so wrong. cole: your sentiment on it, i would not necessarily disagree, but i will give you another lens to look at this. we are having this discussion around the regulation of these technology companies. ultimately, we are having the discussion and talking about media companies like facebook, etc. what microsoft exactly buying is a media company. gaming is a media business. where they really make a lot of money is kids less than 30 years old.

are you telling me the politicians of america are going to be very comfortable with big technology company getting more involved in people's lives under the age of 30? i don't see that happening. they are praising it like it is a win. dani: give me your regulation call. does it go beyond microsoft? are you in the camp of all these giants coming under increased regulatory pressure, and how soon could that happen? cole: i'll give you some historical context. ibm was sued in 1969 by the federal government. the government never won, but neither did ibm. the relevance went away forever after that. it just slowly dribbled off because the executives in the management team were so chaotically looking at other things, they took their eye off the ball. that's what commonly happens in business when big things like that happen.

once the u.s. government and all these politicians figure out they are not the most powerful people in the room, they will make sure they become the most powerful people in the room. dani: fantastic to have you on. what an exciting conversation. colesmead. inflation is sitting much of the world, but how bad is britflation? that's next. this is bloomberg. ♪

dani: welcome back to bloomberg "daybreak: europe." i'm dani burger in london, with manus cranny in dubai. let's talk data out in just a

few minutes, expected to confirm an ongoing surge in inflation. expectations are high. how high are they exactly, and what does this mean for the boe? >> inflation will hold steady at 5.1% in december, driven by airlines hiking prices to make up for lost trouble during the year. things like caterers, furniture, people staying at home sprucing up their living spaces, and you will also see car prices up because of the supply crunch in the industry. what it means for the bank of england, the november cpi, you can see what tipped the bank of england over the edge with the december rate rise. it makes a rate rise almost a certainty.

markets are already pricing in a february rise. if we get that, it would be the first back-to-back hikes since 2004. manus: it's all about the labor market in this debate. we had a strong showing yesterday, unemployment of 4.1%, the best since june 2020. take us under the hood of what it looks like in the u.k.. lizzy: real wages were following late last year, and that was even before the cost-of-living crisis pete in the u.k. at that moment, bloomberg economic sees inflation peaking at 6.5 percent. even though you've got record vacancies, it's not translating into pay rises across the board.

that's why the bank of england seems to have them vindicated in raising rates in december. manus: we'll see what the pound prices on the back of that. inflation numbers are up shortly. that's it for us. this is bloomberg. ♪

anna: good morning and welcome to "bloomberg markets: europe." mark is here with us to take us through all of the market action at this hour. here are your headlines. the treasury yields surged with crashing stocks in the nasdaq. oil has gained as the key pipeline returns. wall street jumped the cost of the talent toward.