dani: good morning bloomberg's european headquarters, it is a 6:00 a.m. in london. i'm dani burger and this is daybreak europe. bargaining over payrolls, president biden strikes an optimistic tone on oil surprise -- supplies after wrapping up a trip to the kingdom. the decision remains with opec+. >> we determined that if there is a shortage, we work on increasing crude oil production with our partners. dani: thousands flee homes as wildfires ripped through southern europe. the u.k. braces for the highest temperatures on record and traders focus on energy markets. coalition collapsed, the political alliance propping up mario draghi's coalition comes

crashing down. we finally saw equity markets in the u.s. and higher by 2% on friday, but that was not enough to stem declines. there is some risk support after we sell rate hike expectation back off, strong retails data -- sales data out of the u.s. yesterday. china is getting support after the central bank pledged more support. that is leading the equities rally so far. u.s. futures seeing gains of .4%. both bank of america and all of those on deck for earnings. nasdaq is part of where you are seeing rate hike that's coming off, benefiting long-duration equities, nasdaq futures up .7%. japan is closed for a holiday today, no cash trading, in

equities, nor treasuries. treasury futures are on the upside so far this morning, after inflation expectations eased. let's take a look at the dollar, it is coming off of an all-time high last week. down .2%, allowing the euro and sterling to benefit. the dollar concern that it may eat into corporate profit. we will get into biden's trip to saudi in a bit. oil had fallen 15% last week but this morning we have reports of china's government stepping in to help home buyers, that is helping sentiment this morning. let's get to our top stories, yousef gamal el-din is in saudi arabia covering president biden's visit. leigh-ann gerrans joins us with the latest from europe's record heatwave, and juliette saly will take us through the moves out of asia.

and we will have more on the breakdown of mario draghi's coalition. president biden said he expects more oil from saudi arabia after a landmark meeting with the rulers of the kingdom. he did not rule out an immediate pledge for an output hike, but they are confident opec+ will gradually pump more. let's get more with yousef gamal el-din, is the u.s. pleased with the outcome? >> it was an incredible couple of days. what you had was these leaders from the gulf and the u.s. in this magnificent palace. even though we were chased around by the royal guard pretty much all day. we have the saudi's saying we are sticking to procedures. we spoke to the minister of state for foreign affairs and here is what he had to say. >> it is not about an agreement,

it is about the kingdom's long-standing policy of working to ensure there is adequate supply of crude oil. we've all the supply and demand situation very carefully and determined that if there is a potential shortage that we will increase crude oil production with our opec and opec+ partners. >> that is the saudi foreign minister on foreign affairs. the u.s. view is very different, saying we think there could be more juice coming not just out of saudi but also out of opec+ and we will have to see which of the two arguments prevails. dani: what else came from talks over the weekend? [no audio] we might have a little trouble with yousef's sound, that's

yousef gamal el-din taking us through the latest on the saudi and u.s. meetings. the u.k. is bracing for record high temperatures, heat waves and wildfires are raging in parts of europe. the heat is set to put added strain on europe's energy system, it is already under pressure from soaring natural gas prices. leeann, it is all about the summer of discontent? >> today london will be one of the hottest places in the world, hotter than the sahara and the caribbean. we might reach 40 for the first time and doctors are warning this could risk lives because of the unprecedented heat. we have seen a summer of discontent, uncertainty in politics and soaring energy bills. now we will be using all of our cooling equipment and is the

infrastructure grid going to be able to handle this? and we could see prices soar further with household bills. the national rail is warning not to travel because it is so warm, the infrastructure is not built for it, they will put reduced speed on those cables, too. i want to put this all into context. we are getting this massive heatwave coming through europe, and they are battling the consequences. if you look at france, portugal and spain, the wildfires are ravaging the landscape. we have seen pictures of those. it is affecting agriculture in spain and the water supply, too. agriculture in france, the water supply in spain. lots of people have had to evacuate homes, a region popular in spain with tourists. we have this unprecedented heatwave but at the same time, if you want to enjoy it,

everyone is saying to do so as safely as you can. drink lots of water, keep hydrated, where sunblock and stay cool. dani: always good advice for people in this country who seemed to never be able to find it. that's leigh-ann gerrans with the latest on the heat waves. two italy, where the prime minister mario draghi is under pressure to reverse his pledge to resign and avoid chaos as economic warning signs are building. we are joined by bloomberg's rome bureau chief, alessandro, it is a crucial week for italy and heading into the ecb decision, what are we expecting and do we have any indication of what draghi will do? >> good morning, good morning. if you read the papers, you would think there are signs from draghi's staff. the situation is still very much

in flux. there is pressure on him to reverse course on the decision to resign. there is a very fractious coalition. the five star party which triggered the crisis appears closer to splintering between those who want to stay in the government and those who want to go back to the coalition. the right-center is blocked, they are pushing for an election because they feel an opportunity to get back into party -- to get back into power. dani: alessandro, thank you so much. we had our mliv survey showing that there is concern that we might see italian spreads blowout ahead of the ecb meeting. the chinese central bank has

indicated it will step up implementation of prudent monetary policy. let's get more with juliette saly who has been digging through the data. juliette: hey, dan a. china is facing a raft of problems including property sector woes and lockdowns. they have lowered the forecast to three point 3% for the year. you can see the regional index which closed with a positive session, heavy lifting being done by the tech players, it is lifting the hang sack -- hang seng tech allowing it to narrowly avoid a correction. after new zealand's inflation hit a 33 year high, -- 32 year high, since 1990, when inflation

topped 6%. the comfort zone for the rbnz is one 23%, so we will have to see more aggressive hikes. anz saying you can see the cash trade top out at 4%, up from their original forecast of 3.5%. we are seeing rising prices in developing countries few of these inflation forecasts. it is above forecasts, 7.3%. dani: it is hard to see how central banks can backup of raising rates until we can see concrete signs that inflation has eased. juliette saly there. coming up, a profit beat from nordea in turbulent trading, we will talk to the ceo of the biggest nordic bank. we also have novartis, roche and asml all do to report this week,

we will dig in later in the show. this is bloomberg. ♪

dani: welcome back to bloomberg daybreak: europe. it was a profit beat from nordea in turbulent trading as rising interest rates heralded higher net income for the biggest nordic bank. let's speak to the ceo, frank vang-jensen. all of wall street and european banking is turned to net interest income which fell bang in line here. your full your outlook is unchanged, how have your expectations changed, with rising rates at both scandinavia and the ecb? frank: yeah good morning.

it has been a volatile time period during the second quarter , and also concerning what is happening around us. we come in in line basically with our forecast. that is due to continued high growth within all areas, across all countries, and also a strong net interest income. all in all, we have cap things on a very high level during the quarter. looking ahead, higher interest rates will down economic activity in societies and nordics. it should also be seen as a healthy adjustment that will

gradually bring us back to more normalized market conditions, and if we create a foundation for sustainable growth, but it will be painful. dani: where will be the most pain, frank? frank: interest rates is coming up very fast. this is that time we will talk about for many years with interest rates in the euro zone, which was a very big experiment. now we are transitioning to a more normalized level of interest rates and that will of course, hit the consumers. and it will be painful. but also companies, have to start to see lending costs, investments and to carry a risk,

and of course, that transition will be painful. but we have to remember that is where we are, how are educated is how you are born. dani: fair enough. the results have come in strong, how does that manifest into the full year look ahead at nordea? frank: we confirm our outlook as we stated at the beginning of the year, a return on equity above, meaning better than 11% and a cost to income including regulatory fees in the range of 49-50, and that we reconfirmed in this quarter. we will have to see how it plays out during the rest of the year. dani: it is interesting because

we just came off of this period where banks were paying out for talent and there was a men's competition. now there was a slowdown in activity, have you revisited remuneration or your pace of hiring? frank: we, 2021 was a crazy year when it comes to investment banking. and there was very high turnover when it comes to people working with m&a deals, bond market and equity market, that has come down. it is a much more healthy market i should say now. the activity has been subdued but let's see how it will play out in the second half of the year. when it comes to the drawback, on the retail and corporate bank there has been no change. it was not that hyped last year and is quite stable as of now. dani: does that mean in investment banking that you

consider the corporate activity sector, that you would reconsider the pace of hiring or pay? frank: we always sleep with our boots on. one of our three key drivers is operational efficiency. but i should say the activity within the lending area is very, very high. the growth of our large corporate lending during the second quarter was 60%, compared to second quarter last year. so there is higher activity but when it comes to m&a deals, equity market in general, fonda deals, -- bond deals --it has been subdued compared to last year. but last year was a very exceptional year and in

hindsight, probably not as healthy as it should have been when it comes to [indiscernible] dani: it sounds like we are in this period of reconsideration. repricing in the market and you spoke about your concern for the consumer as interest rates rise. but tell me what is your biggest concern as we go through the second half of the year? frank: there are many concerns we will have to work with. the war is one, it creates great uncertainty and it is terrible what happens. we are just monitoring it every day. on the other one is the food prices. probably not for the nordics, but the food prices is creating a social problem.

but that is more of a global problem i should say. and then we have the energy situation and course that is also concerning. i'm sure we will find solutions over time but it will take some time, and that will be painful, both concerning and painful. dani: frank, thank you so much for joining us. that is the ceo of nordea. the tussle for control of it u.k.'s ruling conservative party continues. candidates clashed over taxation policy in last night's tv debate. we will get more of that. ♪

dani: welcome back to bloomberg daybreak: europe, and dani burger in london. now let's get to the first word

news with juliette saly in singapore. juliette: the international monetary fund will cut its global economic outlook substantially as finance chiefs grapple with shrinking options. the managing director has told bloomberg that governments need to seriously target inflation but not in a way that threatens the work of central banks. italy's forza and the league saying their alliance backing mario draghi has been broken. he announced his resignation last week. italy's political groups are preparing for possible snap elections. draghi will address parliament on wednesday. thousands of europeans leaving their homes as wildfires threatens woodland and property. buyers have does -- fires have devastated wine growing

bordeaux and spain. there is record-breaking heat up 40 degrees celsius. covid cases in china climbed. shanghai is rolling out mass testing in nine districts after reporting 17 cases yesterday. my cow is extending a citywide shutdown with all nonessential businesses to stay closed through july's 22nd. new zealand's inflation rate accelerated more than expected to a 32 year high, the seventh .3 -- the 7.3% raise the odds for continued aggressive rate hikes. global news, 24 hours a day, on air, and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg, dani? dani: i'm happy one of us can pronounce our employer correctly.

thanks much, juliette saly in singapore. the economy took second stage at yesterday's second u.k. conservative party leadership debate. >> you know what, this is something for nothing economics is not conservative, it is socialism. >> under your plans we are predicted to have rescission -- recession because you have raised tax, cutting back on growth and preventing companies from investing and taking money out of people's pockets. that is no way to get the economy going during recession. dani: or more, we are joined by lizzy burden. who came out on top of the debate last night? >> we got a flavor of how abrasive it was. one of the candidates described it as a dogfight in a phone booth. rishi sunak is projected to be the front-runner.

the focus was on the economy again. his closest rivals are penny mordant and the foreign secretary liz truss. he presented himself as fiscally responsible because he will not cut taxes until inflation is under control. there was an embarrassing moment for liz truss when all the candidates were asked to raise their hands if they voted for brexit, and she was not able to because she was not around for the referendum result in 2016. there was a moment whether they were asked if they would have forrest johnson in their cabinet and none of them raised their hands. we have another tv debate tomorrow and a final vote thursday to knock it down to two names. but for now it seems like a race for who will take on rishi sunak. dani: even the boe came under

some fire during the debate. >> liz truss has said she would like to look at the bank of japan's model for how to change the mandate. she will not touch its independence but that raises an eyebrow because japan has had deflation. one of the other candidates said mps have not been marking the bank of england's homework well enough. rishi sunak emerged because he said over the 25 year history of the bank of england, arguably it has been a success. dani: lizzy burden taking us through all the latest u.k. politics. we will take a look at the start of the start of earnings season. novartis, roche and asml

dani: it's bloomberg daybreak: europe. i'm dani burger in london and these are the stories that set your agenda. president biden strikes an optimistic town on oil supplies after wrapping up a trip to saudi arabia. prude edges higher as the kingdom says decisions remain with opec+. >> we determined if there is a potential shortage, that we work on increasing crude oil production with our opec and opec+ partners. dani: scorching heat, thousands flee homes as wildfires ripped through parts of southern europe. the u.k. braces for the highest temperatures on record, with traders focusing on the consequences for energy markets. a political alliance propping up mario draghi's government in the literally -- in italy crashes down.

with snap elections likely. it does look like a bear market rally. you have easing inflation expectations and the latest from the university of michigan, strong retails data, that is all propping up risk assets. china's li saying they are willing to continue to lend support. european stock futures are up more than half of a percent. the s&p with a strong rally friday, up more than 2% but lower for the week. we have to earnings on deck from bank of america, goldman, but the standout is tech. it is all about backing off of interest-rate expectations, we are pricing about 80 basis points for the next meeting. last week it was 100 so a pretty big change there. a change you also see reflected in the bond market.

futures are bid, cash markets are not trading considering japan is closed. easing off of record highs for the u.s. dollar is also helping markets. careered is moving up after biden's visit to saudi, first it fell with the energy envoy saying there would be oil put on the markets. iron ore is rallying off of the china story. i mentioned bank earnings, so let's get the latest there. citi's second quarter profit was driven by unexpected large hauls from currency, commodity and interest-rate trading. for more, let's get to bloomberg's david scanlan in singapore, just to sum up the numbers we have seen so far. any narratives showing through?

>> it has been a good quarter especially considering the environment we are in. citi with strong numbers, 13% on friday, the biggest gain in two years. wells fargo missed estimates but it was dragged higher by the citi numbers. there are two things really driving this. one is the trading, a citigroup executive told us that volatility is our friend and it was this quarter. the other side is the net interest income, you mentioned rates going higher. that makes consumer and corporate loans that much more profitable for a bank like citi. wells fargo relies less on investment banking. it has been slow for mergers and ipos as well as new debt issuance, so it has been easier for banks like citi and wells fargo to prosper in this

environment. dani: jamie dimon reiterating this whole hurricane thing but still sounded optimistic. what is for since we got for the outlook among the banking sector? >> on the one hand there is some caution. several banks including citi and jp morgan are pausing share buybacks. that tells you they want to reserve a little cash perhaps for capital ratios or so they can increase loan provisions. but more upbeat than many expected. you heard dimon saying if we get into recession, the consumer is in much better shape than the or. - than before. they don't think we will have a deep recession. it is a sanguine outlook for many of the big banks. dani: what about dealmaking because that took a hit this quarter. if we continue to have these global risks, has the outlook

changed or is it still rough times ahead as we go through the second half of this year? >> it certainly looks like it. we saw that in the morgan stanley numbers, they were not great. goldman sachs is one of the biggest dealmakers out there. on the one hand, you have rates helping some parts of the business but it is not a great environment for dealmaking. it has been tough for companies to pull the trigger on deals. when you have the volatility and higher rates it is not good for investment banking. dani: we have bank of america and goldman all later today. david scanlan from our bloomberg finance team. let's get to the business flash with juliette saly in singapore. juliette: the world's top two planemakers will wrap up deals worth $21 billion ahead of the air show the united kingdom. delta is seen as one of the big buyers.

it will provide a measure of the strength of the global aviation market. delta is expected to own over 100 737 max jets. embraer says supply chain disruptions will make it hard to meet delivery targets. an executive told bloomberg the company is doing everything it can to mitigate problems. the small regional jet maker is maintaining guidance to deliver 60 to 70 of the planes this year. suncorp banking will be bought for $3.3 billion. the deal adds a profitable retail and lending network in one of the country's high-growth regions. they should get a boost sap replay -- as a pure play

insurer. a battery maker could build a plant in mexico. the company is eyeing an investment of as much as $5 billion. texas is the home of tesla's new factory. marvel movie "thor: love and thunder" top the u.s. box office for a second straight weekend. estimates are $46 million, the industry came roaring back this summer after two years of closures and film delays caused by the pandemic. that is your bloomberg business flash. dani: juliette saly, thank you so much. let's get into some of the big european earnings. for more, we are joined by leonard. we have novartis and roche, they are usually guaranteed to have

steady growth, do analysts think they will keep up? >> novartis sales are expected to take a hit from the strong u.s. dollar, but adjusted for fx they should be on track to meet full-year guidance of mid to single digit growth. roche which reports on thursday might even raise their forecast due to strong growth. dani: it is strong that dollars impact. there has been a lot of crosscurrents, tsmc pretty good, mike braun -- micron maybe not so much, asml, what are we expecting? >> last week they raise their sales forecast but also said they would delay spending. this could impact asml as well. investors might still be worried about demand, so any forward-looking comments on-demand will be a key thing to watch. dani: and finally, sap, one of

germany's big tech companies, they have reoccurring revenue that might shield them from some of the downturn, will that be their saving grace this quarter? >> sap has a lot of recurring revenue. a lot of the portfolio is tied to the back office and that is the first area that gets hit in a downturn. bloomberg intelligence expects a decline in new lessons sales -- license sales. sap might not deliver the protection it normally does. dani: leonard walking us through some of the earnings to come this week. wall street banks are boosting second-quarter earnings. we will decide --dive into the results so far as well as those to calm.

dani: welcome back to bloomberg

daybreak: europe. happy monday, i'm dani burger in london. let's get into the earnings story. our next guest says earnings expectations in general may be too high given recent macro data. let's bring in richard saldanha, equity fund manager at aviva. in the u.s., we have a range of outcomes, that is one of the widest on record, how important is this earnings season going to be for you to divine where we end the year for the equity market? richard: i think it is super important. back to the point around earnings expectations, we think they are too high in general. when you look across the u.s. and europe where there are double-digit earnings growth forecasts, which is too high from a consumer standpoint.

we will see relatively robust headline earnings but the guidance will be key here. inflation pressures are still squeezing margins. the demand environment remains strong but on the other side you have got supply chain bottlenecks. you have got the volkswagen ceo talking about using in semiconductor shortages which would be welcome, if that is the case. supplies are a challenge right now. that is not talking about fx. the strength of the u.s. dollar will have an impact, particularly for multinationals. the guidance will be important. it is likely you will see companies adjust guidance to reflect the likelihood of slow growth in the second half. if we do see that reset, that would be welcome just in terms of setting expectations. dani: are there any sectors you are worried about resetting

expectations significantly lower than what the market is pricing at the moment? richard: it's interesting, in my view, the sectors you are likely to see this are where you are seeing the share prices reflecting that. the share prices are already factoring in downwards earnings revisions. i think of the tech sector and the semiconductor industry, we will see asml results this week. the share price is already reflecting a significant slowdown if not mild recession. it's very interesting for us and we have seen this, share prices tend to bottom out well before earnings revisions do. in many ways, particularly in the semiconductor industry and some other industrial names, companies that are exposed to china because we know the lockdowns have had an impact in the first half. there are many areas where companies will be vulnerable to guidance cuts. but the reaction in share prices may not be that negative.

dani: that is fascinating. bank of america is essentially saying the opposite, and reasonable people can disagree, he says if earnings finally disappoint, i.e. when we finally get the capitulation, that will finally turn sentiment. you think there is validity to that? richard: i think there is some validity. i would argue that expectations need to come down. you almost need to see that reflected in the companies reporting themselves. long-term, we are still seeing some pretty attractive structural drivers whether it be semiconductors, industrial, auto, chips, energy efficiency and given the heat waves right now across europe, probably more important than ever that people look at energy bills that they are paying right now.

long-term structural drivers are in place, yes, we need a shorter-term reset, but i think longer term there are plenty of opportunities. we can almost take that reset as an opportunity for some of these companies when we think long-term, the drivers are still very much intact. dani: richard, in terms of volatility, it has not just for an but political as well. italy really at the center of this with a coalition behind mario draghi seemingly falling apart in the span of a week. what do you do with italian equities, especially banks, are these going to turn for you into toxic assets given the political uncertainty? richard: right now i think it is very difficult for the italian banks given that political instability as you just said. until we see a bit more visibility, it is hard frankly

to look at those names. there are other names in the italian market that are quite interesting, some of the utility names have a big role to play in terms of that decarbonization. we still think there are tractive opportunities within the italian market itself. what is going on right now is weighing a lot, particularly from a sentiment perspective. dani: italian banks perhaps not. what about u.s. banks, do you take solace in the interest income moving higher? trading was spotty but do you like american banks right now? richard: we are going to get more results this week to give us a better idea, right? what we're seeing on the interest rate aspect, net interest margins, the u.s. consumer remains relatively robust i'd say in terms of the lending side, despite elevated mortgage rates.

i think u.s. banks are interesting. for us in terms of the overall market, at the start of the year, the more defensive parts like health care, telecoms and utilities have outperformed particularly as investors seek safe haven but those investments do feel crowded right now. the other sectors are more interesting, the financials, industrials, technology sectors where if you can find reasonable growth in resilient businesses, the valuations are looking quite reasonable here. you have to start shifting away from that defensive mindset because you are seeing short-term rate expectations reset very quickly and actually focus on where there is growth, but where the longer-term valuations are reasonable as well. dani: pretty remarkable to see how fast markets backed off of that 1% interest rate expectations that's richard saldanha, equities fund manager at of the above.

the best of aviation, the farnborough air kicks off today. planes abound. we are live at the event next. this is bloomberg. ♪

>> we do need to tackle seriously inflation, meaning monetary policy tightening. but fiscal policy could unintentionally go the other way. dani: the ing managing director there, she told us governments need to focus cost-of-living support on the most vulnerable to avoid undoing the central bank's work fighting inflation.

expectations that central banks would back off of hiking 1% drove equity markets higher, and a drive into bonds. we saw that in the futures session. we are seeing this rally and the commodities complex. nymex crude almost back at $100 a barrel. the weakening dollar is supportive of risk assets, will that be undone if we are concerned about inflation? if some of that commodities unwind gets put back onto the market. the sectors feeling the pain is the air show is in farnborough, it is one of the biggest events in the global aerospace industry. what else is ahead, but tuesday, the u.s. treasury secretary will visit south korea. a topic of her talks is to build momentum for the effort to cap prices of russian oil.

wednesday we get the eia crude oil inventory report. wednesday is that ecb rate decision and then on screen one pipeline is scheduled to be reopened. there is fear it could not. a lot of euro options pricing volatility around that day. the farnborough is starting today, it is the first time the event which alternates between paris has taken place since 2019. laura wright is there, what are we expecting today? >> it's a beautiful morning here at farnborough. over the next five days, 1 ,200 exhibitors will welcome around 80,000 visitors. this year is not open to the public, focusing on business to business engagement. there will not be any russian

presence because of the country's invasion of ukraine. a number of themes will be in focus including space, defense, that feature of flight. there was a backdrop of chaotic scenes at airports because of capacity constraints. eyes will be on competition between boeing and airbus. the duopoly are expected to bring around $21 billion of deals. delta has ordered 130 737 airmax carriers. a polish carrier has made a purchase of 60 airbus models. it is heating up on the ground and in the deals space. dani: there are concerns for the

industry given all of the macro weights, will at -- what are executives saying about the long-term horizons? >> guy johnson has a list of great interviews, he will certainly be asking about the macro pressures. executives are also looking to the future of urban transportation. we will see prototypes from electric flying taxis. this is not blade runner, this is farnborough '22. a couple of key players to watch for. this is the first electric vehicle that can go from hovering to being windborne. whisk is another name backed by boeing which invested $450 million in the electric taxi maker and was starting to see nascent regulation in the space. the european aviation safety agency released a report or what

it would want to see to allow these ventures. boris johnson is expected to be here announcing the uk's jet zero sector, or how aviation can reach net zero by 2050. on a day when the u.k. is expected to reach record temperatures, it is salient. dani: can you convince anyone to take me home from the office in an electric taxi? i would be forever grateful. laura wright will be providing coverage throughout the day. equities moving higher, will that be curtailed by an energy complex on the front foot this morning? dollar easing. we will continue to walk you through all of this. this is bloomberg. ♪

psst. girl. you can do better. ok. wow. i'm right here. and you can do better, too. at least with your big name wireless carrier. with xfinity mobile, you can get unlimited for $30 per month on the nation's most reliable 5g network. they can even save you hundreds a year on your wireless bill, over t-mobile, at&t and verizon. wow. i can do better. yes, you can. i can do better, too. break free from the big three and switch to xfinity mobile.

so many people are overweight now and asking themselves, "why can't i lose weight?" for most, the reason is insulin resistance, and they don't even know they have it. conventional starvation diets don't address insulin resistance. that's why they don't work. now, there's golo. golo helps with insulin resistance, getting rid of sugar cravings, helps control stress and emotional eating, and losing weight. go to golo.com and see how golo can change your life. that's g-o-l-o.com.