>> the morning. this is "bloomberg daybreak: europe." i am dani burger and these are the stories that set your agenda. the ecb prepares to lift rates for the first time in years. policymakers will be keeping an eye on market reaction. nord stream says russia postpones maintenance. plus, targets intact, tesla maintains their forecast. earnings beat the street. good morning. a lot of risk on the horizon. things will return but at what level. political drama in italy and earnings. i have a lot for us to go over. let's start with s.a.p.

we are looking at a profit forecast full year of 7.6 billion euros to 7.9 billion euros. that is positive. they are seeing 500 million euros which is likely to get the stream excited. cloud revenue is above expectations. margins are under pressure. trusting those margin headlines quite yet. it is all about the extra cost. it is all about that topline growth. on to the next earnings, let's talk about the pharma giant. coming in at 11.7 swiss franc,

the estimate was 11.705. we will be speaking to them later. let me top that out. at the high-end, 24.7 billion own -- billion euros. robust demand for 5g. that is what we are expecting for nokia. that is another sign about supply pressures starting to these four companies. with that in mind, let's get a quick market check. we are seeing some weakness in equity features -- futures. u.s. futures are down about 1/10 of 1%. the euro is stronger today.

stronger by 4/10 of 1%. nord stream will resume flow. so far, orders are around 40% of the level before resumed. we also have the ecb. s&p futures are down. google, microsoft, ford slow with jobs. the yen is slightly stronger. not that much strength considering the doj increased cpi target. that leaves the rate intact and that yields target in place. a lot of earnings and market moves.

a lot there, a lot to get through this morning. let's get you some of our reporters. sitting next to me in frankfurt, a preview to crucial meetings. francine is in rome. we will also go through tesla. starting with the ecb, they are set to increase interest rates later today for the first time in 11 years. markets are expecting an increase of a quarter of 1%. reports expect they may go further and opt for half a percent. let's get more. 25 basis points versus de basis points, how to be think about it? >> the ecb has been very specific and sank they're going to opt for a smaller hike. it is the first one in 11 years.

they are concerned about yields, how traders and investors are going to digest the shift in policy. at the same time, they are looking at the inflation rate that will probably climb for the next couple of months. they are looking at forecasts that slow to 2024. if you're caught between a rock in a hard place, there is room for a larger rate increase. they are planning for larger steps in september. there are a lot of people who actually seek to do that today. even though they have signaled smaller steps. dani: the other big thing is the

anti-fragmentation tool, what that looks like. how likely? >> for heather and pushing over the past days to get it done. -- they have been pushing over the past few days to get it done. they think it will slow the spread. they really want this tool. i'm sure we are going to see a lot more. the situation not helped by what the government will is tumbling. that increases the difficulties in the ecb. dani: thank you very much. all only. we will have a coverage and

reaction. roche appointing a new ceo. he decided not to seek reelection. they will have a new ceo starting on march 15. in the next hour, speaking. on to the next top story. italy is government is in turmoil. yesterday, three of his coalition partners withdrew their support draghi after -- their support after draghi forced a confidence vote.

let's head over to francine. is draghi out? francine: it looks like resigning was the only option. we will have elections in the fall. yesterday, he had a compromise. there was a lot of bickering between the partners. they wanted the money, and the confidence with the investors and partners. that did not work. you have the three main leaders not supporting him. the coalition is a bit of a mess. what does that mean for the disbursement of the money also >> -- also?

we will see what happens. i don't see a situation where he cannot resign unless the president does not accept it again. it will be turbulent here in rome. dani: i guess italy is used to turbulence. what has to reaction been? francine: there is so much concern about the money that i feel like this time it is different. they are never dull. after say, they are going after some of the coalition partners. although they said they would support draghi, they did not. i have to cover some of this because they swear on the cover page in italy. they called it the suicide of draghi.

he thought that people would fall in line. this paper kind of showing us attention that is here. human former prime -- even former prime minister's will be on the show to give more insight. dani: looking forward to that. not just a politics lesson, a language lesson. bloomberg's francine lacqua in rome. i cannot imagine that happening in the u.k.. our other top stories this morning. russia has started sending gas to europe, that is according to german news. policymakers are preparing for the worst. a plan to curb gas consumption

by 50%. for more, we have our reporter. what should be expect in terms of how much will be growing to the nord stream pipeline? >> according to initial data, pipe line flows are expected to hit 4% capacity. that is the level before maintenance. you may not see a huge price reaction but the fact of the matter is that it has not been flowing at full capacity. not only is the data suggesting percent, without a -- suggesting 40%, without a key component they will not be able to lift out of more than 40%, there is a risk it will reduce to 20% next week. the market will be looking very

closely at the physical data from the morning. if it does not hit 40%, we could see european gas isis jump again. if it goes above 40%, gas isis could fall. market prices are sensitive to a happens today. dani: lots of risk in the pipeline. thank you so much. ceo elin musk says they have been through supply chain hello. there -- supply chain hell. >> the past years have been tumultuous. dani: let's bring in our

bloomberg reporter emma. give us the key takeaways. >> that was unexpected and nice to see. so some positive reaction in the market. she thing that projection of the increase in sales volume intact, and optimistic vibe to the earnings, also a little bit cautious. they talked about the hit from the supply chain issues that have been weathered better than some automakers. he bit into detail -- he went into detail about getting into that game and pushing entrepreneurs to get into lithium.

he also talks about china which is key to the record sales volumes being projected. the one in shanghai getting the biggest uptick. it is very much on the cards. while that could be at risk. -- that outlook could be at risk. dani: inc. you very much. coming up, hitting the brakes on hiring. microsoft, we will focus on the sector, next. this is bloomberg. ♪

dani: welcome back to "bloomberg

daybreak: europe." microsoft has become the latest tech giant with the brakes on hiring. the company said they have many open jobs in the cloud business. microsoft look -- joined google, both pausing hiring. jobs report flashing about 80,000 jobs. we are talking to william hobbs. what is this hiring pause, what does it tell you? william: first and foremost, when you seek headlines slowing hiring, the first thought is

that central bankers are trying to cool. with regards to tech, when we entered the year it looked to be a little bit of frost in some parts of the market. there was too much disinflation. i would not read too much into it. dani: i love this idea that some of the slight pain in the tech sector is above monetary policy. i love what you write about inflation in your notes. it has been an ongoing theme for some months.

would you want to fade this inflation trade? william: if you look at the uncertainty, not preview you covered many of the inflation expectation swirling around. if you look at the last couple of months, there has been good and bad news, the bad news has reduced the number of paths to safe landing ahead. that is something you want to be wary of. we have become a little bit more short-term pessimistic on the outlook. they have produced stock exposure. it is a slowdown with added

duration as well. we are more prepared for the idea that we are a little bit underestimating. dani: you say overweight p.m. versus e.m.. there are so many event risks just today alone in europe. william: i would not single out europe but the overwhelming centers around that trait that dm is a slowdown trade. in a relative value sense, you accept all those points. at the end of the day, he could

have multiple potential outcomes. dani: i promise i take zero credit for that. it is the bloomberg team working behind the scenes and sometimes in the front. you are going with overweight markets because of that. when i look at currencies, some of the usual trades do not seem to be working. is it all about the king dollar? william: that is an interesting question. we're starting a little more contrarian here. we would lean against that little bit. there are some incredibly attractive opportunities. you have to prioritize how you pick them. dani: thank you so much, william hobbs, ceo from barclays. coming up, could energy markets

be breathing a sigh of relief? russia resuming gas shipments. we will discuss that, next. this is bloomberg. ♪

>> we have to reduce our gas consumption. i know it is a big gas for the european union but it is necessary to protect us. every member should reduce the use of gas. dani: european commission president speaking about the urgency of reducing gas consumption. russia started sending gas roots biggest pipeline to europe -- sending gas through its biggest pipeline to europe. i have seen some headlines that

we are starting to see some data about the flow of gas. how optimistic should we be, given that this was above what they started for maintenance? >> very unlikely rules see levels above where they were for maintenance. 40% capacity is what we are seeing. that is what it was with maintenance. it has been at that level since early june because moscow reduced flows. a vital part was under sanctioned by canada. 40% is that magic number. you could see some weakness for gas prices. there were some traders

theorizing that it could not come back at all. 40%, better than nothing. it is not 100%. if it stays at that level up through winter, it will be very challenging for europe to rebuild inventory and hit that peak demand. demand per gas jumps when it gets colder or heating and electricity use. dani: does this change ursula talking about the reduction for european countries. the fact that nord stream restarted, does that change that or does that plan still be on? >> you have to look at, can you even trust russia anymore? while this is good news that nord stream is restarting, how long will be online?

putin has already indicated that it can go down to 20% next week. what will stop russia from cutting it to 0%? i think that european commission understands that risk. because of that, who countries through -- the countries have to do what they can. that includes curbing demand. that will help them reach that goal by winter. dani: thank you so much. bloomberg's energy reporter. coming up, we will speak to bank julius baer's chief economics, david kohl. this is bloomberg. ♪

dani: this is "bloomberg

daybreak: europe." i'm dani burger in frankfurt. these are the's residence set your agenda. frankfurt watches rome is the ecb prepares to lift rates for the first time in 11 years. policymakers will be keeping an eye on the economic reaction to the crisis in italy. nordstrom gas, russia resumes, restoration of delivers will be gradual. tesla maintains its production forecast, the supply chain crunch may be easing. good morning. a lot of earnings to go through this morning. we should get tosca in a moment. i'm going to talk on that and take us through the market action. at the moment, we are seeing european stock futures, weaker this morning, down about .2%. we are also looking at weaker

u.s., we had microsoft slowing hiring, google as well. ford cutting jobs. this is the future, not what monetary policy is doing. we are looking at bond buying this morning, the euro is higher by about .4%. nord stream, we are going to talk in just a moment. finally, the boj maintaining everything as is except their forecast, upping that to 2.3% from 1.9%. the end holding steady. -- the yen holding steady. the operating profits for the second quarter also abates. this is another sign some of the supply chain issues are easing.

what does the future look like? their eps is a mess, 4.6, the estimate had been 5.3. let's move on to top story of the day, it is decision date the ecb. the bank is expected to increase rates for the first time in 11 years. will they opt -- joining us now is the chief economist at -- as a going to be 25 or 50? what do you think. >> we think the 50 basis points is open. this is because the starting point is the low, really signaling getting back to neutral now. this would be an option. anna: dani: what do you say when people say we've got political turmoil in germany, -- local turmoil in italy. >> i don't think these

situations -- it is more the guidance they've given. i'm curious at the ecb say central banks are moving away from guidance. what you don't want to achieve maximum monetary policy. now it is policy that could be neutral. getting there without further delay would be worse. other central banks of done it. it will be important to show we are again -- have been -- out would be to lose that tool if they say we are extremely data-dependent and we are not going to have the strong signaling again. >> forward guidance are usually is only while you have the tool, on interest rates, zero or below

, you do public guidance, all those tools when interest rates are not available. inflation being there in the fight against invasion -- inflation for central banks. it is normal exercise. 10 years, they haven't done it. there, you have to deal with inflation. go back to the monetary policy, at the same time, no forward guidance. going back there would acknowledge the economic situation we are in. dani: but say we get 50 this time. is it just jumbo from here on out? do we get another 58, or do they back off or 75 even? >> we think neutral rates.

the arizona economy can deal with one percentage straight. but is not a problem. real rates are deeply related by that. we are not tightening monetary policy. dani: still very easy. if you search raise rates, you have electricity, landlord journal. tell me about the strength of the european ledger -- labor market. >> it is strong for a. all these headwinds, we don't have demand problems. all supply-side driven.

how you respond to that probability in the economy, you usually hide more. the solution for most is more economic growth and not less. that makes it easier to have in the current situation. for monetary policy, it means don't get inside this response. go back to neutral and don't go over there. when you don't go back to neutral as quick as possible, you risk that you have to take it off. dani: the other thing we are looking at from the ecb's anti-fragmentation. it could take different contours, but in itself, what is the viability of that in its

ability to curb some of the spread? how easily or difficult will that task be? >> the first one is to announce it a day early. then, basically the exact same details are important. don't put a limit on what you want to intervene. when you do that, you address -- invite every superhero. the only advice i have is baby did not pay for 50 years -- the baby -- how to manage yields. look at japan.

sometimes it up have to buy any. it is by the announcement. dani: what about this idea could be challenged in court. bloomberg.com >> it will be challenged, the question is when will it get there. there will be a result of the challenge, or into your time, so you can press ahead, the ecb knows by now what to say, how to construct the tool. and that is to say, is ensuring that germany, france, italy and the other eurozone countries have the same monetary conditions, this conditionality is important. dani: thank you so much for

joining. wonderful to get your thoughts ahead. that is david cole, chief meteorologist at julius baer. we will have the fed this -- ecb decision and aftermath. abb says revenue declined in the second quarter. weighing on companies robotic units, this was maker reported -- joining us now is bjoern rosengren. thank you for joining us. i'm looking at orders rising despite the kind of closures hurting production. the market is curious, especially from a macro point of view. we heard from other sectors, she needed normalization. >> good morning, danny.

thank you for having me on the show. the supply chain has been challenging during the first half of the year. we see it easing up, we do expect the improvement in the second half. >> at what point do you start to move that supply chains -- what we have here during 2023, we should be about 15% done. when you look at the macro trends, we have the right technology. this is a a quality company. we are already moving toward 15%. we still need to deliver that for two years.

we just continue to need to develop. dani: there were talk in your early -- earnings statement, the ac temporary pressure on customer deliveries in china. this idea of being temporary, china doesn't seem to be abandoning zero covid, so what is your outlook? bjoern i think the quarter -- shut down the entire shanghai. we have our -- if you look at china today, with zero-tolerance, they are not a

large ones, it was sawed in the beginning of april. it is difficult to know where this is going to go. we are monitoring every day. it is important for abb. dani: these things are almost unknowable to a degree. perhaps another unknowable, but may be understanding, we had a nord stream, it started. but we did have her talking about a proposal of having eu members cut down to function by 15%. what sort of impact with that have on your operation? >> number one, is a look at our production facilities, the only place to use it as a galvanizing as well as painting. our supply chain, we saw gas in

the production. mainly we use gas for heating in some of our factory. we are moving away to that. we have committed ourselves to be neutral. we are moving more and more to renewable energy in all our operations. for abb, this is not a big thing. dani: you also announced today that you will exit russia. talk to me about those plans. have you found a buyer for it? >> i'm not actually selling it. we are more or less importing money into the -- importing product into the market. russia is only about 1%.

we adopted this over many years, we would like to take care of all our employees, that is of great importance. we started to wind down already when the war started. we are moving out of, falling all the sanctions. i can get proof that there are no winners in this work. dani: certainly is. to the point of restructuring in general, yesterday you announced you're spinning off your turbocharging business. you previously had postponed taking public your immobility division because of market turbulence. you hope said he would have an update in summer, it was 40

degrees in london a couple days ago. do you have the timeframe for when you might take it public? >> number one, immobility has been part since the beginning. the reason why we were part that was to govern these people, more like a growth machine. need special caretaking in the driveway. also more cash in acquisitions and abb has a strong financial position. since war broke out, i think the financial markets, a rebate on anything to go tomorrow. we don't think we should give

the discounts on that. dani: you are sending off this turbocharged business in october. clearly you see some relief, some window? >> we are giving it to our shareholders. for every clean you share it you will get to share. this is more giving. dani: thank you for the clarification and for joining us this morning. coming up, as natural gas deliveries resume with nord stream on pipeline, we bring you all the news you need to know. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i'm dani burger, in frankfurt. let's get to the first word news. juliette saly in singapore. >> latest show that the gas deliveries to the nord stream on pipeline from russia have resumed. european governments and gas traders have been waiting to see if it would restore after maintenance. president putin signaled they will receive it at lower rates and with conditions. a u.s. official says a price cap on russian oil should go into effect along with the system under implementation of the german restrictions. the treasury says u.s. aims to make sure the global in order to

-- janet yellen has been pressing allies on the idea of introducing cap on russian oil. the bank of japan is left the stop -- rock-bottom interest rates unchanged. the boj lowered its medium 20 growth forecasted 2.4%. the downgrade follows mark -- lockdown in china. italy's government is close to collapse after they withdrew their support. it could plunge the country into months of political turmoil as economic warning signs. the former chief is expected to resign thursday. emergency elections could be called. president joe biden says he

expects to face the chinese leader xi jinping in the coming days. a is deciding whether to curb effort -- sanctions. global news 24 hours a day on air and bloomberg to -- quick takes a by more than 2700 journalists and analysts and 120 countries. dani: coming up, the final two. foreign secretary versus former chancellor. we bring you on the latest on the race to succeed boris johnson. this is bloomberg.

>> look at these proposals

carefully. the value stability, public finances that they recognize inflation pressure is corrosive to the economy as a whole. i think they will see, so neck has a plan to deal with that. let's get more on that story. foreign secretary liz trust is said to take on sunak. lizzie is standing by with more. the focus is shifting to the grassroots tory party numbers just members. >> a very different kettle of fish. with the mp's, was a favorite. they just told becca. speaking to one of his allies

yesterday, he said he is very competent you can turn the tables in the six weeks of campaigning. perhaps confident that given the -- she can get ahead quickly. they are to different candidates. when it comes to the economy, so neck saying -- trust saying she will do from day one. he said yesterday, they want them on different timescales. the ecb restraint between on monday to see if faultlines developed between them. thank you very much. lizzy burden there.

as we close out the show, quick update on the markets performing. it is all about the event risk. the euro is moving higher by .4%. as rick -- they got there news that -- that might lead to difficulties. perhaps we are not fully pricing in a restoration of european gas. futures winning higher safari, up .5% as we wait for ecb decision. , looking to feel like it.