dani: this is bloomberg daybreak: europe. these are the stories that set your agenda. manus: russia test out a new intercontinental ballistic missile. tesla posts record profit. elon musk's carmaker beat the

estimate and forecasts bump production growth. shares jump in extended trade. the french presidential debate. emmanuel macron warns that marine le pen warns -- risks starting civil war with her policies. good morning. a red headline again from the ecb. policy rates could turn positive this year. the ecb shouldn't over engineer possible crisis tools. he's ready to consider a deposit rate hike in july. this is fast and furious from the belgians. dani: one of the things that stands out to me, saying that policy rates could even get restrictive in order to combat inflation. we spoke to the belgian central bank governor earlier. take a listen. >> i believe without bad news coming from that front, hiking by the end of the year to zero

or slightly positive territory would be a no-brainer. dani: we could hike by the end of the year. one thing i find notable here is , even if russian gas gets cut off, that wouldn't necessarily mean they back off the track of easing policy. pretty hawkish lines coming out of the governing council members. manus: if you add to that -- add into the confluence of other lines we've had over the past when he four hours, the euro rallied at one juncture yesterday, we had this hawkish narrative. they could end net asset per citizen the second quarter. a hike in the third quarter, you then take a hike in july. the technical recession could be avoided. let's have a look at the euro against the dollar this morning. in terms of where we are, we

have a king dollar this morning on the interest-rate differential and the fed narrative. there's a small incremental spike higher on the euro-dollar trade. still the king dollar narrative. dani: i'm really interested to see what german bonds do when they open. we were talking this morning. the bond market perhaps has gone too far. they bought calls on short-term german bonds. the ecb won't be able to normalize as much as they had expected, how will that play out? i want to bring up breaking lines. a patent maker keeping their adjusted target in line, their first quarter operating income coming in at the beach, 230 million euros. revenue upbeat as well. we will be talking to the atlantic -- about that look, manus. manus: let's have a quick look

around the assets. boones down 28 pips. virtually no reaction there. dollar remains resplendent on the board. no aggressive verbal intervention from the finance minister in japan. that unleashed the downside on the end, the upside on the dollar. perhaps you on is what you want to keep an eye on. hitting a seven-year high to the yen. i found that interesting this morning. oil up by 8/10 of 1%. 10-year gilts trading are at 2.86. bank of america saying we are at an attractive level to buy. the mora calling the top and breakevens and that we have run too far, too fast and are breathless expectation on inflation. dani: much like the currencies

and euro, futures not reacting too much to the headline from the ecb. still up 2/10 of 1%. better outperformance from the s&p 500 after tech was hit really hard yesterday. continues to be that netflix story. pretty significant. they are up more than half a percent, a outperforming the s&p. the earnings season rolls on. manus: let's get to reporters around the world. maria tadeo standing by with the latest on the warren regain -- war in ukraine. stephen engle. laura wright with the test the results. macron and le pen. dani: let's start with ukraine. germany's foreign minister says the country will stop importing russian oil and will halt natural gas imports. it's the strongest promise yet from germany to cut itself off

from the russian energy complex. it strongly relies on it and has been reluctant to abandon it. joining us now is maria tadeo. this is something that germany has hesitated to do. is it different this time? maria: it depends on who you ask. you have to factor in that this is a coalition and you see that they aren't in tune. the most hawkish on russia said by the end of the year, we are going to pull out of russian oil. at that point, we want to have a debate on what we do with gas. christian was more muted in that reaction. a lot of this has to do with the german greens trying to push the entire coalition to take a tougher stance. at this point, we don't get the impression that germany is willing to do this overnight but the country is coming under huge pressure to tape -- takes a

measure. this is an internal discussion now in the hearts of the german government where you see huge tensions flaring up between the three sides of this coalition. the criticism that germany continues to fund this work. manus: thank you very much. the potential shifts in the landscape on russian energy. tech stocks in china falling for a third day. covid lockdowns on the mainland adding to the supply disruptions. we know that. what are the details but -- behind these moves? stephen engle's -- david on glass knows what were going through. david: precisely. i'm sitting in my living room right now to give the margaret report. the latest here, look at these automakers, basically talking

about disruptions there. we are moving into earnings season. 500 companies coming out with earnings next week. we are moving into the thick of earnings season in good shape as far as the fluidity of the situation is concerned. hong kong and chinese equities starting to peel away from equity markets. you mentioned the you on, young cross. the mechanical adjustment that needs to happen, given how far the yen has gone. 6.47 right now on the dollar china cross. we are on track for the biggest three or four day drop in about two years. it is starting to get built-in further and further. at about this time of day, beijing came out with the big promise to support the market. this long list of support measures. guess what? we are back to levels of that

date. back to you guys. dani: thank you so much. that's our markets editor. bringing us all the latest on hong kong's talks. speaking of tech stocks, tesla grabbed the spotlight after the bell. elon musk promised to ramp up production as well. joining us for more is laura wright. laura, perhaps tesla reigniting the big name trades. laura: ron material costs rallying subsequently in after-hours trading. record profit revenue up 81% year-over-year for the time. improvement in gross margins implying higher cost efficiency. elon musk joins the call, saying he's never been more optimistic about the company.

the all-important question about shanghai plant, which is now tesla's most productive global hub. it was shuttered for most of march but executives believe that it will catch up in subsequent quarters. importantly, the delivery goals were maintained. elon musk revealing that he believes the company can achieve 1.5 million vehicle deliveries in 2022 and stick to that target of 50% average annual vehicle delivery growth. manus: thank you very much. the french presidential debate from last night. emmanuel macron warned his national -- risks of starting a civil war in france with a ban on muslim headscarves. le pen tried to portray the president as an elitist. caroline, good to have you with us. what do the polls say?

who performed better? caroline: 59% of the french thought emmanuel macron was the most convincing in the debate. there was a lot of punchlines, they attacked each other on climate, on spending power, on russia, on europe. le pen of. -- appeared more prepared than 2017. she kept smiling while he looked serious. on europe, emmanuel macron argued that even though she doesn't want the euro anymore, she's lying on the good and how her proposal equals an exit from the eu. on climate, micron accused le pen of being climate skeptical. she replies come you are

hypercritical about climate. they had punchlines about russia . when you are talking about russia, le pen, you are talking to your banker and your creditor. referring to the fact that she has alone from a russian bank. she defended herself saying, that's because no french bank wanted to lend me money. a lot of punchlines in this debate. it has an impact on the polls. 54% versus 46% on sunday. dani: thank you very much. we look forward to your coverage this sunday as well. along with that, let's take a look at the key things that markets are going to be watching out for today. 10:00 u.k. time, the final

estimate on euro area inflation. that will be followed by u.s. initial jobless claims. then the latest data on russia's gold and foreign exchange reserves. the fed strong powell and christine lagarde due to take part in a discussion on the economy hosted by the imf. manus: coming up, the rate debate. we hear from the san francisco fed chief about the direction of interest rates. dani: expeditious is the word of the week. we are going to get back to the conversation on the french presidential election. more analysis to come with nicholas duncan. this is bloomberg. ♪

manus: it's daybreak europe.

i'm manus cranny in dubai. to switzerland next. organic revenue of 7.6%. the estimate was for 5.08%. price rises. you are looking at pricing up by 5.2%. the estimate was just under 4%. they still see a profit margin of between 17 to 17.5%. a monster beat. cost inflation continues to increase. they will raise prices to help offset inflation. you will hear a lot of that through this reporting season. let's talk about the beige book. the u.s. economy growing steadily through april. high inflation is clouding the outlook. the san francisco fed president sees interest rates being raised to neutral by the end of the year. >> next dishes march to neutral

by the end of the year as the current path. manus: there's that word again. expeditious. apologies for the cough. deepak mehra is our guest. good to have you with us. it's mary day. we will move expeditiously. the clarion call is that we are reaching peak frenzy in these markets. there's a big call out morning. expectations on both sides of the atlantic are starting to be overdone. do you think we have reached peak frenzy on inflation? deepak: i think we are at peak frenzy when it comes to market. we are also at peak inflation. that's our call. i think the consumer spending spree which came with the frenzy after the lockdowns were lifted is getting over. we are looking at many data

points. yeah, early days. i think peak inflation is behind us. manufacturing data came out in march. it says the prices fell. this is exploring food and energy, including used cars. we are seeing demand for manufacturing growth remaining almost stagnant for a few months now. another point to note is the savings rate. imagine if the consumers were not getting enough goods. your savings rate would have been going up. that's another data point that i'm looking at nic savings rate continuously falling over the last few months. now we may be at the same level as pre-pandemic. all these are early days again. some pointers towards peak inflation being behind us. dani: ok. so peak inflation is behind us.

in the meantime, we've seen price moves filter through bond markets. you have a call in ig which i find fascinating. you are looking at a yield at 4.1%. snp earning yield is 1.5%. how strong is that appeal towards yields coming from investment grade going to be? deepak: yes. i think that's a great point. we think, given what the fed is about to do, control inflation and maybe peak inflation is behind us, i think bonds are getting into a very attractive territory. especially up -- after the 11 -- this is one of the most significant directions over the last 50 years. we are now getting into a situation where almost risk-free investment is now yielding.

whereas your earning yields and equities are about 5%. i'm talking about the earnings yield. i will so -- still go for investment grade bonds. globally, institutional money is still overweight on fixed income. they are running after the u.s. treasuries right now. manus: what do you make of the proposition? we are running another thesis here from mortgage backed securities. we are going to start qt. you are going to have rate hikes. mortgage backed securities have risen in yield. the highest yield and the cheapest price since the start of the pandemic. at any juncture -- you want to be ig long, that is fine. i get that trade. are you tempted by anything in the higher spec space? it's a bit of the punchy trade.

may be too rich for your blood. would that trade make sense in the market? deepak: we don't go into such targeted things for our clients. i would stay away from that. i think that the housing market, the mortgage market may be up for a slowdown. the price increases have been phenomenal. interest rates are rising. new housing sales have come down. mortgage rates are above 5%. they are up 300 basis points from where they were. yeah. this is a trade you would not jump into. go in with your eyes open, probably. dani: always paying close attention for us. you are going to stick around, deepak mehra. coming up, tesla posts record profit. elon musk carmaker beats estimates. more with deepak mehra. this is bloomberg. ♪

dani: welcome back to bloomberg daybreak: europe. let's talk tech. tesla has reported better first quarter results with elon musk predicting bumper production growth if tesla can be considered tech. bill ackman has ditched his stake in netflix after losing more than $430 million on his investment in less than three months. still with us is deepak mehra. when you look at the netflix story, how much of this is idiosyncratic to the company itself? do more of us need to think like bill ackman and say, it's time to call time on some of these growth names? deepak: i think i would go with that.

growth names have to be looked at very carefully now. i think investors are seeing what happens with growth. right now, they are focusing towards technology for sure. technology has long-term -- behind it. we are on the cusp of the fourth industrial revolution. we are very bullish technology. we will stay away from the spectrum that represents the arcane innovation fund side of the system. tesla is one of the stakeholders. we will stay away from that specter may go towards the value spectrum on technology and look at companies that are valued well in all sorts of market conditions. look at microsoft. manus: i was going to say. we have this disaggregation on tech. you want to be sap, microsoft, recurring, monthly, or quarterly? is that how you want to approach

that? beyond even i can work out, where else? deepak: remember, they represent 35% of s&p. exactly. if you are saying you are long s&p, you are 40% long these tech names. where do you go? you go for the value end. i'm not saying cyclicals. you go for growth. when the world slows down -- that's my worry. global growth is my worry in the next few quarters. dani: where are you finding that value in tech? is it an apple name where you have a strong balance sheet? what does the value end of tech actually look like? deepak: you are absolutely right. we have to look at the balance sheet.

we have to look at the quality of earnings, the ability to perform in different market cycles. the ability to perform despite different market conditions. apple has been able to deliver lock buster results despite supply chain issues, correct? microsoft doesn't depend upon that. google doesn't depend upon that. amazon or airbnb are businesses that have network effects behind them. it's just fascinating how strong and predictable these earnings, potential in these companies. when we have growth worries in the world, when would you want to be invested? and companies that can produce growth, deliver growth. manus: i'm sad we didn't get to your uranium call. we will save that for next time. you're all in on uranium. you can save that call.

we will put it out on twitter later on. deepak mehra. micron and le pen. the risks of civil war in france. that's the accusation. on bloomberg. at xfinity, we live and work in the same neighborhood as you. we're always working to keep you connected to what you love. and now, we're working to bring you the next generation of wifi. it's ultra-fast. faster than a gig. supersonic wifi. only from xfinity. it can power hundreds of devices with three times the bandwidth. so your growing wifi needs will be met. supersonic wifi only from us... xfinity. (announcer) enough with the calorie counting, carb cutting, diet fatigue, and stress. just taking one golo release capsule with three balanced meals a day has been clinically proven to repair metabolism, optimize insulin levels, and balance the hormones that make weight loss easy.

release works with your body, not against it, so you can put dieting behind you and go live your life. head to golo.com now to join the over 2 million people who have found the right way to lose weight and get healthier with golo.

manus: this is bloomberg daybreak: europe. these are the stories dani: dani: in your agenda. upping the ante, russia fires a new icbm. president putin warns it will make the nations and may think again. elon musk shares tesla -- it is

a race in the french presidential debate. macron warns le pen will start a civil war with her policies. we started the hour with breaking news coming from the ecb. much saying that they might have to be restrictive. fed based that's also quite restrictive. a chart that shows yesterday, now that odds for a june rate hike are most in favor of 75 basis points. it used to be 50 basis points. now they are seeing 54 point -- 54% chance that we will get a 75 point basis hike right after 50 basis points in may. manus: this is a hawkish publication, which bullard essentially unleashed in february and reinvigorated this week. with that narrative, the market moves from the position from the extreme left and migrates it to

the middle of the bar of risk. the question, there's is the sense of exhaustion from state street that we are almost breathlessly at the top in terms of inflation. you are now seeing these calls of by bonds beginning to become more consensus tread. the japanese are going to come to the rescue. -- aren't going to come to the rescue. dani: it is going to be difficult for them to keep buying up u.s. treasuries. i continued to be vexed by stocks which came to be -- keep trotting along. today that continues on european stocks, up .4%. nasdaq coming back after losing

more than 1.5% yesterday. we were just talking the pack nejra, it is no longer -- deepak mehra. he is looking for the value side of tech. manus: let's see how the fx space woke up -- warning that the ecb could one the year with positive interest rates and your euro-dollar on the board, it still hasn't evoked any kind of change. the dollar remaining fairly strong across the board in this trade. up against the yen five .25%. the seven year low for the yen against the you on. maybe that's the trade we should been talking more about. oil up 1%. this renewed discussion about german dependence on russian energy. then two-year yields rise, 2.87

28 is where we are this morning. dani: let's get to the latest on francis presidential debate, emmanuel macron warning his nationalist opponent that she risks starting a civil war in france with obama -- with a ban on muslim headscarves with her painting the president as elitist. here we have nick duncan. you compare this to the last time around whereby all accounts, depends performance was/-- le pen's performance was -- -- was disastrous. >> micron has been president for five years. his job was to show her as incompetent, maybe not as

incompetent as five years ago and show himself as trustworthy and point out she is not. for example she owes money to vladimir putin. the fact that her energy program doesn't add up. she made a mistake thinking that zero gp on food would benefit the poor people. he finds a lot of errors and scored some points. it was a ridiculously long debate, almost three hours. more of an endurance contest. just to see who could stay in the ring the whole time. they busted. he comes out about 60-40 ahead. about what he needed to do. he didn't get a bus but probably didn't lose any. manus: good to have you with us this morning nicholas. you said the battle toward

civilization's the selection. sometimes we've been very unprepared for tail risk events, trump, brexit, poland defying the eu. are you worried at all that there is a misreading of the situation in the polls at any level? nicholas: no, because -- for two reasons. one is that there is a third and fourth round. the legislative elections happen after the presidential elections. if the french people elected marine le pen president, they could elect a national assembly that made it impossible for her to put her program into action. there is a failsafe. the other thing which i think is important for bloomberg viewers is the fact that the private

sector is in france will not be affected by this election. the private sector is in good shape, there multinationals at an global industries except i.t.. in 1981, when the present nationalize the economy, there is no danger for french business, french finance or french society. most of what she suggested was wrong with french society is wrong. there's an integration problem not an immigration problem. francis in much more solid shape now that was seven or five years ago. dani: if i could go back to what manus mentions up when you say this is a battle for civilization, what you mean by that? nicholas: the fact is, it is class warfare. it is the know nothing person who is a populist, a french version of trump, maybe a little

wilder, versus somebody who relies on facts and figures. and five years of experience. who is a committed european. she would be highly disruptive to france's -- france domestically. to transatlantic relations and relations with russia. if that happens, it will cause france's political and defense security influence to reduce in the world, much in the way it is happened to britain. britain is no longer a leading voice in international affairs. consequently, france could end up in the same situation, which would have negative impacts for the european union. he is a legitimate candidate, she is not. part of the reason for that, he doesn't have a legitimate candidate to run against. manus: hopefully you don't have

coffee with wine, that might take on views the u.k. doesn't have a global role anymore. i leave that with you. you say that macron -- >> u.k. has lost influence. manus: absolutely. this ukraine work his reposition. we are talking about france. let's not cover it. macron, say he is in a trap of his own making. he blew up the old left, the old rights of the stop not put him in a stronger position? -- does that not put him in a stronger position? that i have no alternative. nicholas: no, that is not the case. if that were the case, marine le pen would not be in the second round. if there were no alternatives, she would be at 10%, he would be

at 90%. the fact that it is so close. the problem is that having blown up the old left old left -- and all right, he can only run against in a legitimate candidate. if you want to vote against macron, you either have to abstain or vote for le pen. as for the brexit issues of is not the question, the point is a france pulls out the international system in the way that britain has, it will lose influence the way that the u.k. has lost interest -- influence in international affairs. manus: thank you very much. let's see if we have to go to the failsafe option in a couple weeks time. our guest this morning on the

morning after the night before the economic debate. headlines from around the world. laura has us from london. laura: russia's risk of default just escalated. they have been inching closer after jp morgan halted interest payments the country owes. they demanded for the -- i'm wednesday, the credit derivatives determination khamenei says the ruble payments are potential default. chinese president is urging coordination of global efforts to fight the pandemic, even as debate pros over the cause -- cost of his covid zero policy. speaking by video link, he alleged china would continue with its commitment to open up to the world. he also took a few slides of the united states, and calling for an end to so-called alliances. >> we need to work together to

defend people's lives and health. safety and health are the prerequisites for human development and progress. laura: wimbledon has barred russian and belarusian contestants in response to the war in ukraine. event organizers say they have a responsibility to limit russia's global influence. the men's tennis called unfair saying entry should be based solely on ranking. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: thanks very much. coming up, germany's foreign minister talks about the possibility of ending oil imports from russia by the end of the year. this is bloomberg. ♪

>> we are standing firm on sanctions on russia. we support all sanctions which isolate russia politically and economically. we have to consider which sanctions hurts -- heads putin's -- in which section in the short term hurts us more than him. all sanctions which now and for the foreseeable future hurt him more than office -- then us as international community we are in full support of. when it comes to coal, oil, commodities and natural gas, you have to differentiate the

schedule. >> i spoke to european officials, they said germany is still the hold out on oil. is there an opening to work around direct sections of oil? >> there are talks in the european union, we are preparing the sixth section package on the financials, on oil. we are in open debate. it is crucial to hurt putin more than we affect our own people and economies. >> you are open to oil being included? >> it depends on the timetable

and the question how can we reduce our dependency on russian oil imports? it the fasters, the better. manus: germany's finance minister speaking to bloomberg. they said the russian energy starting out, joining us as our european correspondent maria tadeo. germany, he wouldn't go there in terms of the ability to go over the line on an embargo on russian energy, would you describe it is warming up? is there more pressure from the allies? maria: this definitely adds more pressure. what is incredible is the video, christian lindell or an -- is part of the same government. you had him in deceit, sink we don't want to hurt our economy, we have to hurt putin more.

and say will want to end all imports by the end of the year, that we can talk about gas. with this shows is the huge tensions we are seeing in the german coalition. they will come to a boiling point, sooner or later. this is a trial for the german coalition, but a boon for european sanctions. we have seen repeatedly from the french, the heads of the commission saying the conversation around oil will have to happen. president macron says he wants it done quickly. the germans, this is complicated for them, you have to undo years of tricky relations with russia, depending on cheap gas, all this coming to bite. the germans trying to do two things is that they want to be tough on putin, at the same time they don't want to take the cost. everything has a cost.

how much is germany willing to pay for it? the answer is not clear. dani: those costs coming more into focus then perhaps the need for europe to do more when you have russia tasting nuclear capable missiles. how does this change the picture? does it? what does it mean and how bright -- europe approaches russia? maria: it is interesting the whole set up around this, it was done on national television, vladimir putin was overseeing the launch. he commented and said this should be a warning to everyone trying to threaten our country. they should think twice about it. a lot of this, i don't want to take away from the seriousness of the united states did say they were expecting a test like this. but is routine. we know russia has been working on this for years, they do not see it as a direct threat to the

united states. this launch is happening at a time in which russia has been reeling and hurting about the sinking of the moscow sit -- ship. they needed something they can prop up the public, a lot of this done for domestic consumption to show the russian people russia is so very competitive in this war. dani: thank you. that is bloomberg's bureau correspondent keeping us up-to-date on all the latest of the wars in ukraine. coming up on the program, tesla posts record profits. we go into the details next. this is bloomberg. ♪ ♪

manus: this is bloomberg

daybreak europe. tesla shares rallied in the after hours trade, better-than-expected q1 numbers. with elon musk predicting bumper production growth. dani: meanwhile, in the earnings story, ackman sold his stake in netflix. that took place in less than three months. we've been all over the tesla and tech story. manus is going to yell at me, all i am able to do is talk about bill ackman. let's talk about tesla. you've been digging through their earnings, what were the key takeaways for you? laura: another important thing -- the world's wealthiest person did join the earnings call, he says it will be able to achieve 1.5 one million deliveries this year and a 50% average annual

vehicle delivery growth. also record profits up revenue up 81% year-over-year, improvements in efficiency. the only question is that shanghai plant shuttered for most of march because of lockdown in china. in elon's word, it is back with a vengeance. >> we may pull a rabbit out of the hat hat three or q4 in regards to vehicle production. that is going to be a parent -- inherent on the new factories. that is going to be the future. what have you to say about that? laura: the new factories in berlin and austin, texas, they have raised prices slightly on their vehicles to deal with the supply chain congestion and higher material costs. robo taxi, it is going to be the cheapest form of transportation cost per mile for customers.

cheaper than subsidized bus ticket, according to elon musk. the ultimate robot tax -- achieve following production by 2024. elon says it has been underestimated by the market and it will become more valuable than the car business. another product launch from them was a -- dani: i welcome our new robot overlords. let's talk about bill ackman. a big loss on his part, ditching netflix, what is the story? laura: he got pulled feet because of the dust cold feet because of the results. it is interesting to note that in 2022, his fund is down 2%. it is a loss of confidence in netflix, some might argue it is

a precipitant exit. arguably the direction of travel is more direct to consumer content. yes there is stiff competition from disney+ and amazon prime, but netflix is pumping out more content. manus: let's see whether we will all begin to stop sharing our logins on netflix. laura wright with the latest on bill ackman. it was the only thing dani b did want to talk about today. -- dani did want to talk about today. dani: if we are talk about things is important in the worlds of bill ackman is not the most important. ecb really fascinating, they might need to get restrictive to contain inflation. manus: i think that narrative is

building. across the hawkish narrative at the ecb. you saw a ramp in the euro yesterday, king dollar continues. so does -- programming with bloomberg markets: europe. this is bloomberg. ♪

dani: good morning and welcome to "bloomberg markets: europe." i am dani burger and mark cudmore joins us to take us through the market action in this hour. here are your top headlines. record profit. elon musk's tesla beats estimates. at the same time, bill ackman ditches netflix. pierre wunsch