>> this is bloomberg "daybreak: middle east." good morning, these are the stories that set your agenda. >> russia is cutting gas supplies today. commerzbank with the bigger loss than forecast.

plus big tech, big divergence. alphabet tumbles on disappointing ad sales and microsoft jumps with robust demand. so much going on today but earnings also coming in fast today. rinsing: -- francine: we were told that something like this was coming but we also have changes at the top, if they can finally get some of the concerning news behind them. dani: what used to be the problem child of european banking is fine. big trading coming in, 2.8 million euros is where they landed, 2.4 was the estimate. defying expectations, it looks like costs are little higher than expected but they have wound down some of their loan exposure as well.

that story continues for much of -- most of the banks, benefiting from that volatility in the fixed income market. francine: it was like, are they going to get their act together? we will have our interview with the credit suisse chief executive a little later at 7:00 a.m. london time. breaking news from mercedes, the first quarter dusted ebitda better than expected. whether they have access to some of the chipmakers, but for the moment moment it is better than expected. dani: we will speak to mercedes-benz later, seeing the second quarter come in when it

comes to revenue, 1.32 billion euros, the estimate was for 1.3, so that is more or less in line. their operating margin is higher, the expectation had been for 33.9%. in this environment it is all about cost, so that will be an interesting conversation we have later. francine: earnings season is quite fun. a glutton for punishment. futures pointing to a low start. the focus once again about china's covid challenges, they never went away. there is also the prospect that never went away of aggressive monetary tightening. so it is all about being priced

to perfection or not. we are looking like we will start lower in the trading day in europe. dani: a lot of what happened across assets reflected the growth concerns about china, china trying to step in with more infrastructure. two year yields pushing higher by eight basis points. a rally in the front was the strongest since march 2020. the euro had also fallen to a 2017 versus the dollar. also russia cutting off gas to poland and bulgaria, we will see what gas does when it opens at 7:00. bitcoin below $39,000. francine: meet coin may be the inflation hedge. let's get to our reporters from

across the world. russia's move to cut off gas supplies in the country. juliette saly is in asia with the australian market action. dani: and russia announce it will cut off gas supplies in a major escalation in the standoff over energy supply. our reporter has been on top of the story. how much of an escalation is this an is there a risk that the rest of europe will no longer have access to russian gas? >> it is obviously a significant move, and we are going to find out if indeed rush is to deliver on its threat. the threat being that the deliveries of gas will be cut off. the gas is flowing through the pipeline that carries gas from siberia through poland through

belarus and then to germany. the reason for the cut off is that poland refused to pay for the gas in rubles as putin demanded just last month. obviously the question right now is, from the polis side, we heard from officials yesterday who said we are looking good in terms of supplies, we have deliveries secured. and we are preparing to wean ourselves off the russian gas. we will have a new link with norway tilt or starting from october. there will be links with germany , slovakia and czech republic. so gas won't disappear. the question obviously is what happens to the rest of europe. germany gets most of its gas to another pipeline under the baltic sea but the question also

is whether europe will follow the russian demand to pay for gas in rubles. that is something we are going to see in the coming weeks or days. francine: great focus on this and how to understand what european capitals will do. time for tech earnings, google's parent company alphabet report sales that fell just short of estimates. let's bring in laura wright. what is the latest, and good morning. >> microsoft rallying on a revenue beat while the parent company of google selling all following a rare revenue miss. starting with microsoft, we saw an aggressive performance,

robust demand from microsoft acquired linkedin and directly wrote -- broker 34% year-over-year because of a healthy jobs market. really visual in the ground for microsoft, and xbox hardware sale, up 14% year-over-year. the gaming part of the business also gained in market share over the last two quarters. back to alphabet futures, missing by a half billion dollars on the streets. it's all about tiktok right now and youtube trying to catch up with the challenger platform. also a macro headwind because of the war in ukraine. alphabet still had a strong performance, similar to

microsoft, up over 40%. dani: let's check in on how the markets are faring. let's see how the markets are faring in asia with juliette saly. covid challenges, corporate earnings, there's a lot of risks in the profession today. juliette: absolutely, and for the record, i am not on tiktok. we are at a 21 month low on the benchmark index. concerns about further lockdown in china, and we've seen some upside in chinese markets on the back of that infrastructure pledge by president she that is helping those, and you mention

russia planning to halt those deliveries to poland and vogue -- and bulgaria. let's look at the offshore you want, it had been rising today for the first time in seven sessions. more than just a little in the afternoon session. there still a lot of concerns about headwinds, because of the weaker economic output, anc saying china's economy will not gain much from the currency due to the account surplus and weak domestic demand. dani: coming up, we speak with a swedish executive about their latest results.

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dani: this is bloomberg "daybreak: middle east." francine: deutsche bank now saying it will raise its forecast. it's amazing how long has gone from three or four years ago with a lot of being able to attract, saying there confirming their full your revenue forecast but revenue is doing quite well in a changing environment. dani: joining us is allison,

thanks for joining us this morning. you talked about your sale of swedish towers, closing sooner than expected, ahead of plan. in terms of proceeds, will they all be in the form of buybacks or are any dividends planned? >> it's great to be here and i'm delighted to be reporting is very strong start to the year with gross momentum accelerating across all of our businesses. as you say, yes, we will now be closing the transaction reported earlier, due to a desire to return all the proceedings by age share program. that should happen toward the end of this quarter. francine: what is your biggest

challenge right now? you have to make sure you are up-to-date with everything going on. what is your priority in the next 12 months? >> our priority is to maintain the great momentum we've seen coming out of last year and now going into this year. we are undergoing one of the boldest digital transformations anywhere in the world right now. we are in year two of that and through richer content offerings and through better celebrity orchestration, our customers increasing the need. at the same time as we modernize we are improving customer expedience. all of that is allowing us to defy inflation. so really we have never seen trust needed anymore.

dani: to the point of a secure network, sweden has been looking at joining nato come as have their neighbors, and of course you operate in the baltics as well, in prior times in russia, we've seen cybersecurity really be the main threat. how concerned are you, especially when it comes to the telia business from russia and again, that cyber security threat. >> providing the most critical national infrastructure, we provide the highest standard, highest quality of services today. we are always fighting against cyber threats, and clearly in this era, we are increasingly investing in the security area so that we can continue to be the partner of choice to some of the most important government

agencies and security services and all of our most important customers whether large, small, or the vegas enterprises. as it has been since our founding 170 years ago. francine: can you give us an idea of how much you are spending to make sure you are protected, especially for the immediate threat coming from that region? >> we don't disclose the actual investment there, but it is not just an investment for us, we are seeing companies want increasingly more secure services and the enterprise in which we operate, we are investing in new tools, new products and services, to support keeping them safe and secure and also fueling growth from our security services but

also our core communication services as well. it is an important part of our growth agenda. dani: you mentioned costs before, and analysts have expressed concerns about cost it comes to the overall inflation environment and at the same time where you spend money about spain and sweden. what are the steps you're taking to rein them in? >> our program is to take out $2 billion in structural cost and we are very much on track with that. we have taken in around 200 million this quarter. we are taking operational expenses and that is defying the inflationary pressure. we are seeing some energy inflation that costs about another $18 million this

quarter. but all of the transformation we are doing is defying that inflationary pressure. at the same time as we invest in improving our products and services, we are able to boost the revenue momentum up as well. overall we are doing a great job of applying inflation pressure in our business at this time. francine: is there anything that you can do better, and there are a lot of telecom companies that say -- should they help you in paying for some of that crucial infrastructure overhaul? >> i agree it is not sustainable to have increasing capacity in our demand, internetworks, and those that put the content through our network will not --

we are really focused on ensuring that we can keep giving the most trusted and secure communication services and then using our digital transformation to be ensuring that we improve the services over the coming years. francine: let's get straight to the first word news with juliette saly. juliette: state media reports authorities may not advance protection -- construction projects. satellite images meanwhile show china's lockdown could cripple construction activities at levels before the first covert outbreak in 2020. the world bank is extending $600 million to sri lanka to help

address its economic crisis. it will be the -- delivered in our drove faces. it will help the country beat agricultural food security and gas needs. 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: juliette saly in sydney, thank you so much. coming up, we will take a look at the implications of russia's move to cut off gas supplies to poland and bulgaria. that is next. this is bloomberg. ♪

francine: this is bloomberg "daybreak: middle east." european gas future spiked after russia announced it will cut off gas supplies in a major

escalation in the standoff between moscow and europe over energy supplies. let's look at that and other developments moving the markets today. it is early for you. what about the possible oil embargo, given the direction of travel, and how much are they just worried about tech and the fact that they can do pricing to perfection and it may go much lower? >> on this russia story, i think this is a significant escalation. people should not be surprised that russia is pulling the plug on supplies for which countries will not be paying. i think it's going to make the european summer absolutely crucial. they will have to get there supplies from lng and that means

i will compete directly with europe. we are not even sure if there are enough terminals and enough gas to get through the winter. as they get it all the way to germany and the other countries, it makes this summer absolutely crucial for getting ready for the next winter. dani: we have seen markets, the impact has been felt more by tech. are you saying this development will keep things as it is, russia and ukraine not being the main concern but more the impact of it? >> i think it stays on the forefront. it keeps pushing inflation higher, as you say.

in the ecb may even have to push rates higher sooner than they might have liked. i think this is an escalation. but as you say, we have a lot of things to talk about, with the european banks for instance that have fallen victim to some of what is happen. it's a combination of all the factors, everything that is still going on in the global economy that should be worrying and clearly is at some prices. francine: what are you looking at with the covid china policy and where we are at interest rates? >> i think the last six months,

the women are rapidly changing the world at the moment. what it tells us about what they see going forward, we look at companies like texas instruments which can tell us something about when it still needs to bleed through two other countries. a lot of people have -- dani: i just wonder about the precarious situation that european banks are in right now. of force there is an optimism about higher interest income, but also a threat on

investments. how do people have to weigh up these two never -- two things? >> there are extremely low valuations on a lot of them. but there is always hope that higher interest rates in europe would arrive and that would be good for the banks. at the same time, as people are taking out new loans because they cannot buy houses because interest rates are being pushed higher, that hurts the banks bottom line. it is a real balancing act. as with everything in the moment, it is becoming a stock picking market. there will be others who begin to really hurt, that are being

impacted by being in the russian situation. we are really looking at a stock pickers market. dani: eddie, thank you very much. going through these earnings again, you're talking about credit suisse earlier, deutsche bank, they have raised their outlook across the board. it is remarkable to see this continued beating up expectations when it comes to things like trading. how long can banks keep delivering on these figures? francine: credit suisse has other problems, they just keep having to put money to one side to deal with the legacy issues. you wonder how long it still has to last.

dani: and then you wonder if there is a structural issue, deutsche bank is in example where some of those improvements do not last after five years. let's take a listen to this. >> we have been working hard to bill sustainable revenues and sustainable profit and we are 15% up year on year. it comes against a stronger first quarter last year. we're are seeing is increased client engagement. a focused approach to the business, the benefits of technology and people investments over the past several years, and also frankly success in risk management has been an area we have prided ourselves on for years obviously in a very volatile quarter, it was a key part of the performance. >> will you be updating your

outlook for the year? >> we are sticking with the revenue outlook we provided in march of 26 to 27 million euros. that is growth on last year and well ahead of where the market consensus is. it reflects a solid performance in momentum than all of our core businesses. we talked about the investment bank business. we had 11% growth in our corporate bank, 7% in the asset management business, and 2% in our private bank which as you know is still feeling interest-rate headwinds. with all of that top line and underline growth, we are seeing the momentum in those businesses we have been calling for. >> overall strength in the investment bank but one fly in the ointment is advisory, which fell. are you seeing concern among clients or fear that reflects that decline? >> it is two things. one, the normalization of business volumes all of us expected after very strong years

in 20 and 21, influenced by the reaction to the pandemic. but on top of that of course the environment, the uncertainties and the horrible events we saw begin to unfold in the first quarter. they naturally affected business confidence, confidence in board rooms, and the volatile capital markets environment affected issuance volumes. we think that trend will continue into q2. but with more stability and confidence we would imagine levels will pickup from here over time. annmarie: what is the biggest threat when it comes to geopolitical uncertainty? >> the war in ukraine dominates our thinking because it is on the news every night and we are all horrified by the pictures that we see, but for the economy, there are other effects out there. of course supply chain

disruptions, the lingering effects of covid including lockdowns in china, and naturally high energy prices that actually existed prior to the war effect. all of those i think are having an impact on the economy and business confidence. we also stand in front of what will be a relatively historic rate rise cycle that is beginning in the united states. people are calling for it in europe as well. that adds to the uncertainty. we will need to travel through that uncertainty. the future and the business performance scenario dependent, but those worries are present for the markets, no question. >> your economists are more pessimistic than most when it comes to the future scenarios, be it a recession in the u.s. and now is an, russia announcing they will no longer be servicing gas to poland and bulgaria. perhaps for europe the

worst-case scenario might be coming true when it comes to high energy prices. what impact would this have on deutsche bank? >> are economists have been on the leading edge of considering inflation to be more persistent, arguing the central bank actions would need to go beyond what markets expectations were to really impact inflation as they would like to. and of course they made a recession call a while back and reemphasize that with some work they published yesterday. for the european economy there is no question that is an overhang. the price insufficiency of energy into the european economy is something that has come under question. there are efforts underway to say no, to find other sources. we need to re-factor the economy and our industrial base in some senses around the energy supplies we have, and of course the transition to a green economy. so there is that uncertainty. i think the event yesterday

essentially crystallized that uncertainty to some degree. we will see what the future holds now in terms of continued gas supplies to europe. annmarie: -- how much of that is reflected in your 290 million euros? is that a worst case scenario? >> it is early days so far. we incremented the position quite considerably. influenced by the war in ukraine and those events. the underlying credit environment and performance is actually very strong. you have these factors at work as we stand here today, we don't see yet the larger impact in terms of credit of the events, the war is ukraine and the knock on impacts. it is too early to say. we are encouraged so far by the second-order impacts.

energy prices, energy sufficiency, the risks are still there. there are naturally downsides to gdp growth. right now that is not the base case. >> deutsche bank's cfo talking about the threat from a higher energy complex, but remaining a confident outlook. >> we are getting more earnings. dani burger demanded more earnings and there they are. abbott. -- ebitda better-than-expected. it will be interesting to speak to the chief executive to try to understand how they see the transition, what kind of components they are missing with the technology they need to get on track to electrify europe a little bit more. they still see the full year direct operating costs per barrel around three dollars 60.

we will speak more about the transition, the lundin chief executive officer. do not miss that conversation on the european markets open. >> the energy story is crucial to understanding yesterday's trading session. here is the look across assets. brent crude up 0.4 percent. yesterday we learned russia was cutting off gas supplies to poland and bulgaria. we are expecting futures to shoot significantly higher. growth concerns resulted in a two year which has been up the most since march 2020. today that is giving back. euro-dollar hovering around its lowest since 2017, slightly higher today in a reversal yesterday. also a reverse of yesterday, bitcoin gaining, but cannot manage to get above $39,000. is this an inflation hedge?

who knows, but it reflects risk appetite which is strong today. >> i feel like every day the market is trying to focus on something and yesterday i think 80% of companies in the usb estimates apart from technology so we had the energy brinkmanship, disappointing results over earnings for alphabet and texas instruments, and that is sewing doubts about the outlook for markets. the mood is fragile because of the fed and china covid and you see the euro stoxx 50 futures down. s&p futures and nasdaq futures holding up ok. let's get now to the first word news with juliette saly in sydney. >> lael brainard has been confirmed as federal reserve vice chair. she one over -- won over public

and -- republicans after her confirmation hearing. the google parent alphabet has reported revenue that fell more than estimates. the rare miss reflects lower ad sales in europe and lackluster performance by its youtube video service. the company says youtube saw a slowdown in growth. microsoft has reported quarterly sales and earnings that topped analyst projections. also robust growth in cloud demand. the world's second-biggest cloud infrastructure provider posted 46% growth matching the rate in the previous quarter. xbox and personal computer sales are better than predicted. a study suggests brexit related trade barriers determine a 6% increase in u.k. food prices. researchers say inflation for food products britain tends to import from the eu were more

pronounced than things like tuna and exotic fruits that come from other nations. the study covered two years to the end of 2021. 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. dani: coming up, we speak to bernard charles on company earnings next. this is bloomberg. ♪

+ this --francine: this is "bloomberg daybreak: europe." revenue and profitability beat expectations for the first

quarter. joining me is the chief executive officer, bernard charles. there's quite a lot of good news price in. you seem to be on track. there's also so much headwind in terms of stagflation or a possible recession. are you worried that recession is coming? >> we are always worried, but what is a characteristic of the system is the diversity of the industries we serve. i think the investment we have done, we have seen big investment on life science. this is a sector where there is massive investment with future is asian -- futurization. the transition in manufacturing is a big factor. the substitution of materials, transition of suppliers. we know about resiliency and the

issues, is a big one. we have seen big investment in defense. dani: when it come to these investments ed morse -- investments and more spending, you have been able to raise your outlook for your operating margin. how have you been able to do so in this environment where everything is really biting corporations right now? >> companies have to to arbitrate on where they spent. our clients, i mean. when it comes to portfolio, look at mobility. look at the energy sector. companies are investing. they need to save money. this is where we are on where we play. we benefit from that position.

it is a long-term investment but this is basically the line. we invested more than 10% more long-term. + francine: are you speaking to your goal of growing in 2022? >> we have the visibility to maintain double-digit growth as well as the eps. if i was publishing in dollar the u.s. gross would be 16%. the effect is on the top line. but we are quite well hedged when it comes to eps. dani: when it comes to europe there is this growing concern with the economic outlook will be. especially after we learned russia is cutting off gas to poland and bulgaria. what does it mean for your

european clients if we enter recession in europe? >> we are in a sector wherein it is not saturated. companies are not going to stop doing business. most of the companies asked to build a portfolio in the future. new architecture, new solutions. this is where the system is. investments are happening. we are doing breakthroughs -- francine: which is incredible. >> when you think about the vaccine. we will have the same thing for oncology soon. francine: how ambitious are you in the medical field? if you put a big bet on health data, how much bigger can this grow? >> as big as the business we have been doing in

manufacturing. we see that is almost on par on a longer-term. the production is there. on the medical sector, it was really in terms of digitalization even in the medical practices. we are doing surgery on living heart. so welcome to the new century. dani: where else do you want to grow if it is so important to the new business? >> it is so big. tech inside. the combination of med tech, the personalization of health, are factors where when you look at big pharma, they are finding their own playground. this is where the metadata platform is playing a big game.

francine: there is a lot of talk and people wondering about a succession plan. can you update us on what the plan is and how that will maybe change the group? >> i think it is a very stable structure. we have a holding company. there is no change there. the family is controlling the company. francine: we were told the chairman would retire in 85. i believe mr. adelstein is turning 85 next year. is he going to step down? >> we will inform the market at the right time. he has extended two more years because he is having strong energy and we work well together. you might notice he has been the

chairman since 2016. we do not do short-term planning. part of the company for almost 40 years. my friend is well prepared to increase his confidence in the company. dani: when you look at licensing sales, you said they will grow in 2022. does this field different than what the rest of the industry is doing? i talked to sap, it is all about the subscription. why are you concentrating on just the one time licensing fee versus what the rest of the industry is doing? >> keep in mind that 80% of our revenue is already a recurring subscription revenue. it is already a large percentage. will be increase it?

can it be 100% at some point? i don't think so. some customer on some project may want at the beginning to invest for the entire lifetime with the product. so 80% can become 85%, but we will not go over that in terms of subscription. dani: thank you for joining us. dassault systemes ceo bernard charles. alphabet falling short of estimates. we are going to break down the numbers for you next.

dani: welcome back to "bloomberg daybreak: europe." googles parent company alphabet reported first-quarter sales that just fell short of estimates. on the earnings call, the cfo

said russia's invasion of ukraine impacted results. >> the most direct impact is the fact that we suspended the vast majority of our commercial activities in russia. about 1% of google revenues were from russia in 2021 and primarily from advertising. in addition, from the outset, there was a pullback in advertiser spend, particularly on youtube in europe. francine: joining us now is laura wright. what is behind the disappointment at all? >> really a trio of reasons. macro headwind from the war in ukraine has led to a pullback in advertising spending while companies primarily hit in europe. youtube was a laggard, advertising revenue below $7 billion for this quarter. that was half $1 billion less

than the street estimate. gen z kids are using tiktok and youtube is struggling to catch up with that challenge. also a headwind from apple privacy changes which means it is harder for advertisers to approve user data. that makes youtube less monetizeable for them. dani: take me to the safety of millennial xl spreadsheets and microsoft. what were the key takeaways? >> the company was founded back in 1975. strong performance from the three key divisions. interestingly linkedin revenue up 34% year-over-year. a healthy job market. record engagement with linkedin sessions. you may see those training videos, they are doing quite well. azure is really the jewel in the crown for microsoft, 40 6% growth year-over-year in revenue

for that cloud infrastructure business. that surpassed the cfo amy hood's expectation. and xbox gaming, we are seeing a real improvement in supply-chain congestion. the kids are gaming again. xbox hardware up 14% year-over-year and they are gaining market share in that part of the business. that is your cloud that i mentioned -- that azure cloud i mentioned is all part of the intelligent cloud business at microsoft. microsoft cloud behind only amazon's aws in terms of market share. dani: thank you very much. laura wright walking us through the tech earnings and let us bring in alex webb on this point as well. looking at tech overall, getting hit hard yesterday. is this the shine being taken out of what was once the bull market star children? >> i think we start to notice how much of the tech industry is

exposed to advertising and advertising had a pretty good year this time 12 months ago, a good quarter. as economies reopen, as lockdowns ended, it has been a hard comparison with a year ago. you tie that up with the crackdown on aos -- on ios, that has made life hard and that carries over to these gleaming ad tech companies which facebook and google are. francine: i cannot stop thinking about dani burger as the xl spreadsheet and i had her down as a meme queen. is it price to perfection problem? or is it that these companies will do less well? is the post-pandemic world different? >> they still post quite remarkable growth numbers given

the existing sale. slight wrinkles make people skittish if they -- you saw trading down 3%. we are starting to see more sophistication in terms of not just lumping these companies together. facebook is now a sort of 600 billion stockwell the others are all up there in the trillion dollar valuation. they are different businesses. so as they become increasingly mature, apple and microsoft and others, closer to 30%, you are seeing that sort of evolution out of tech stocks into -- facebook and google, add text, microsoft is cloud computing, apple consumer, and so on. dani: i may not be a meme queen

but we have to ask alex about the king, elon musk. francine: i have a good one of him i will put out. dani: the meme queen has found a new crown. we saw tesla get wiped out yesterday, some of that is elon musk selling tesla to fund his twitter bid. he has this huge margin loan on tesla shares themselves. surely the banks must look at the price action and tesla yesterday and get a bit nervous about the load they have taken out for elon. -- the loan they have taken out for elon. >> the valuation for tesla remains very beefy. i do not know the full extent of his exposure. there is some speculation he might have other capital we do not know about. maybe he did have a big early position in bitcoin we were not aware of and that might be secret financing he has got.

plenty of people have ended up with a slightly muddy face as a consequence. it is quite tight, but the possibilities of him pulling things out of a hat always remains. francine: now let's get to all things banking and focus on credit suisse. the bank had a net loss of 273 million swiss francs in the first quarter. it reported second straight quarterly loss. this is all about the growing burden of legacy costs. legacy is 1, 2, three quarters and it continues to better the reputation. when do we get out of this? when can they put their problems behind them? dani: you also have to wonder, you have these micro issues that credit suisse is facing, but then there is the macro outlook which is uncertain for banks right now. be it recession, be it energy,

be it recession in europe and the u.s.. if they move away from individual themes, they have this other big thing to contend with. francine: if you are doing wealth especially in asia, things are affecting that part of the world as well. >> the first quarter was clearly impacted by a couple of one offs including number one, are 700 million provision which relates to legacy cases which are 10 and 12 years old. we already said we have a more proactive approach to dealing with those legacies. that was one of the main factors impacting our pretax loss of $400 billion. if you then add russia, losses of 200 billion, that explains our adjusted pretax income, which is still below our targ