>> janet yellen says she doesn't see signs of a u.s. recession. markets, not persuaded, yet fears of a slowdown way unsentimental as the week kicks off. u.s. futures, mostly lower. crude oil declined. tis the season. earnings are upon us. we will be speaking to the bank of italy governor. good morning. reunited, you have come back to the dark side of early-morning tv. good to have you with me. it is bank earnings frenzy and

it is recession obsessed. good morning. >> the banking sector, watched closely. it was dark when i got up so it feels like the darkside. breaking news, we will see, we are all over the banks story and other corporate stories. in london, philips adjusted, 200 16 million euros so missing the estimate of 347.7 million and they are guiding lower. now up by 1%-3%. they are guiding a little lower. some supply chain, there was going to be focus on whether the guidance was sustainable but we know it doesn't and we have updated thoughts from the ceo. we will get into the issues surrounding the recall of the sleep apnea devices and we will

speak to the ceo a little bit later on this hour. on earnings at the dutch multinational. the dutch maker of medical equipment, we will have that conversation later on. you have bank earnings for us. manus: i do. we will catch up a little later on but pretax, 542 million, a significant miss on the estimate. we know deleveraging is part of the story, and wealth destruction across equity markets has been the story of the first six months of the year. the adjusted pretax profits, 542 million. costs are critically important, and the ceo made this point. the cost to income ratio is rising above estimates at 67%, 65.6% was the estimate.

rising above that particular level. the questions we will have for philip rickenbacker in just under one hour will be around the deleveraging story. what is happening in terms of assets under management. we will keep an eye on that as we go through the morning. we also have ryanair, we have the cfo. we will give you the top lines on ryanair as they swing to a net profit, that is what i have in front of me for the first quarter. 45.5 million passengers in the first quarter, net profit of 187.5 million euro so that is on a net basis. you are seeing ryanair swinging into profits but almost zero visibility going forward. that seems to be the narrative. the era of cheap flights may be

over. an executive joins us just after 6:30. anna: may be too soon to provide meaningful guidance for those questions. i wanted to stick with earnings. let's look at where we are around the world. as we think about what we will learn this week, you have the fed in mind and i have a earnings in mind. we will hear from the travel sector. we will hear from energy major, and how is the energy crisis translating to profits? we will talk about inflation, pricing power, labor costs and wage issues. we will talk about that with the earning's stories. we have had profit warnings sometimes around the small dollar -- the strong dollar. the weakness, the demand pressure will be lurking for

many businesses. as we look at the weakness in the data, that looms large on the calendar. manus: absolutely. monster moves in the bond markets at the end of last week. a slight rise in those this morning. this recession is at the lowest since may 2020. what you've got is a bond market where j.p. morgan says 75% chance of a recession is priced into the bond market. the probability of that, it is a question of whether you will see a monster hike. the mike -- the market seems to draw back to 75 basis points as a shoe in or lock in. when it comes to the euro it is rate the other thing that could save the euro is that the cycling europe is tiny compared to the fed. that is the only thing that may put a baseline into the euro. the upside, any rally in this

market in the euro will be capped according to the ing because of energy security. you must determine the scale of the slow down. janet yellen making it clear she doesn't see an all out fully fledged recession, but you have three weeks of losses on the will market, hedge fund stocks, demand spurred in a recession scenario. the dollar, we can debate whether 75 aces points is priced in. -- basis points is priced in. anna: that conversation when we return. a report around the world, it is fed week. we look at the latest state of the u.s. economy. manus: in melbourne, jason will bring us the latest on the monkeypox emergency. we have the big asian moves in

singapore. anna: jerome powell's colleagues are expected to approve a basis point hike and signaled their intention to move higher. janet yellen said she doesn't see a sign the u.s. economy is in a broad recession for now. >> we are likely to see some slowing of job creation, but i don't think that is a recession. a recession is broad-based weakness in the economy. we are not seeing that now. manus: -- anna: joining us now, michelle with analysis. what are we expecting from the fed and the gdp report that comes the morning after? >> i hate to carry the somber tone you have started with but there is an unsettling dichotomy emerging, even more so now between the officials in charge, the policy makers and those

market participants and economists we surveyed. the latter is a growing cohort saying we will be in a recession in the u.s. and the former, including janet yellen yesterday, talking about being able to avert that if the labor market is strong enough. two weeks ago fed governor waller said it was inconceivable to have a recession at this level of unemployment. the fed is all but certain to raise by 75 basis points. that would mark the biggest increase between june and july of 150 basis points total come the steepest increase in the benchmark interest rate since the early 1980's. we refer to that era as the past era of super inflation, something on powell's mind and others as they say the biggest of the bigger mistake would be to fail at that inflation spike than it would be to fall into

recession. they have a fight on their hands. they have to convince the public and economists that they can avert a recession and navigate a soft landing. that is becoming harder to do. the gdp report, out the morning after the fed decision. that is expected to show a slim expansion, but the estimates are all over the map, certainly a danger that we fall into contraction and the second quarter and we would be in the technical recession. we are debating the definition of recession but we will see how that goes with policymakers this week. anna: the question -- manus: the question is whether you believe janet yellen or jamie dimon. thank you, michelle. will the chief of the world health organization -- the chief of the world health organization declared monkeypox a world health emergency and issued the highest alert, paving the way for the international

cooperation to stop the virus. let's get to jason, who has the latest. this is a unique moment where there is a split in the road on monkeypox. talk us through the thinking. >> monkeypox has exploded worldwide. we only had a handful of cases back in early may. we are up to over 16,000 now. it is mostly concentrated in the community of men who have sex with men, but we are seeing signs that it is spilling into the broader community, 72 infections in children reported already. nearly two dozen in kids younger than four. there is the concern that it will be a bigger, broader threat and difficult to contain. anna: thank you, jason. let's bring the market story back front-end center -- front and center.

>> this is the first time the who has declared a global health emergency since january 2020 when we had the covid-19 pandemic declared an emergency. you are seeing these related players like top glove in malaysia rise in the asian session. it is a down day, a little bit of money off the table with caution ahead of the fed. let's take a look at what is happening in singapore. that is an outperform or as the economies started to pick up on tourism. a little bit of a dip but we saw some upside in the likes of singapore air and a hotel chain come arising on that. a different story in hong kong but may arrival numbers up the most in around two years new look at the chart. 180 7000 since quarantine was cut from 14 days to seven. there is a report saying quarantine could be cut to just

five days which would be a boon to the economy. you will see just how low the arrival numbers are compared to what we used to see from hong kong. still a lot of concern about the covid zero policy and arrivals and questions about november. manus: thank you very much. just when we thought we were getting back to normal. you broke the phillips -- the philips earning numbers. let's go through those again. a big week for chips and sentiment. anna: a big week for medical equipment in the shape of philips. coming in lower than estimated and seems to be guiding down on their sales figures. let's talk about this. joining us is the ceo of philips . nice to speak to you again.

give us a sense of how business is going right now because you are guiding comparable sales down a little bit, so how is business going? >> good morning. the second quarter was impacted by a lot of headwinds. china locked down, supply issues and rising inflation. we have taken decisive action in terms of further improvements on the supply chain in terms of productivity and pricing. for the second half of the year, a 6%-9% growth. that is underpinned by a very strong order book. orders continue to come in. if i disregard china for a moment, we saw 6% order growths and 19 hospital groups signing up for partnerships. orders is not the issue. we are well placed. we need to get the supplies and

the chips in place to deliver on that strong order book. we expect we are able to do that much better in the second half than in the first half, leading to a 6%-9% growth in the second half. still, the full year, that means a 1%-3% revenue growth. this is lower than what we had anticipated before. manus: good to have you with us this morning. so that is the table, you say leave china aside for the moment but the world is obsessed with what is happening in china in terms of supply chain and economic delivery and recovery. what needs to happen in china and in asia to materially unlock the blockages? frans: i'm certainly concerned.

in china, we saw this massive lockdown that lasted for more than two months that affected the china revenue itself, but also further disrupted global supply chains. for example we have factories in the shanghai area that were affected. what i understand from the situation now, that it is improving and these massive lockdown's will probably not happen again, but the risk is there. i hope we can see a further relaxation of the policies because we are all dependent on supplies out of asia. anna: so that would benefit the business if you saw a relaxation of the policies. i'm sure many businesses would feel the same. let me ask about what is happening with your sleep apnea devices. you have had to recall some of those. when are you planning, you are repairing and replacing these items. when are you planning to do that?

what timescale can you give us? frans: the recall of our sleep apnea machines is very large. it affects around 5.5 million units. although the incident rate of actual foam degradation is below 1%, in the meantime also, tests look favorable, but we will complete this recall. we have in the meantime produced 3 million devices already, so we are well underway. by the end of the year, we expect hopefully 90%. my heart goes out to all of the patients because they are waiting and it takes a long time from their perspective. that is not good. but we are making progress. manus: the reality of this is that you have made an 885 million euro provision, you set that aside for the recall but

you haven't made any provision for legal action. is that imprudent? can we expect the beginning of provisions for legal action? if so, what size and scale? frans: it is difficult at this time to make a provisions -- a provision for legal action. we are at the early stages of potential litigation. i don't expect it is estimatable before 2023. at this moment, with the conference of testing program, -- comprehensive testing program, we are able to characterize risk associated with the machine. we have been able to take off the risks of many items. for example, on organic compounds within iso norms, inhalable particles within safety norms. we have done visual inspection

of the 60,000 machines and have found it is less than 1% likelihood that foam degrades. the risks are starting to look more contained. still, it will take time to get a handle on the litigation. anna: the risks are looking more contained. could you clarify for us when your business and when you found out about the issues? you say they are rare, 1% incident, but what year, how far back do we have to go? frans: when we found out, we immediately took the safety notice out. last year in april. when you look back and you look for signals, you can reconstruct how this is happening. it is clear by now that for

those people that use ozone cleaning methodologies that clean their machine, that has massively aggravated the issue. that is more so in the united states. we have seen even lower incident rates. manus: let's pivot again to your global perspective with china. we are debating, every show on bloomberg, the scale of the global recession or how precarious the global economy is right now. do you think we are at a make or break moment? are we at a precarious moment in the global economy? frans: i would definitely say so. there are so many forces at work with regards to first of all covid, the pandemic is not over yet. we see all these supply disruptions. we see inflation. the war in ukraine.

it is something that in recent times, the world has not experienced. from an inflation risk point of view, i think we need to go way back to the 1980's. at philips we are focused on what we can do. we have been able to mitigate supply risks leading to a much better situation in the second half of the year. we are taking action on productivity and pricing. perhaps best of all is the fact that our customers really like our innovations. the world will have health care needs, whether there is a recession or not. manus: i hear those messages. you give us a list of issues ceos are dealing with but as a european ceo are you ready for a power crisis in europe? are you ready for that? is that the next major risk you face? frans: as a european citizen, i'm definitely very worried about the upcoming power

situation, let alone when winter comes and how that is going to be contained. but as a human being, that is me talking. i think europe is not yet out of that situation. manus: we will catch up with you i'm sure next quarter. we will see how the global challenges play out. thanks for joining us. coming up on the show, against the backdrop of soaring inflation, potential recession, we look at the european earnings report card as we get underway. a monster week for global earnings, right here on glue -- on bloomberg. ♪

anna: welcome back.

it is a busy week for earnings, with some of europe's biggest banks reporting as well as oil giants, airlines and automakers. investors will look for how inflation and supply chains play enter earnings. -- play into earnings. we are joined by leo who is here unset in london. we have heard from u.s. banks on fixed income trading, revenues. impressive in some cases. have you heard the same from european peers? >> deutsche bank should beat estimates but it might not reach the 30% growth achieved by u.s. peers. credit suisse has warned of losses. what could be a bright spot for credit suisse is resilient fees from deals that were selected by

the bank in its latest profit warning. manus: let's see what credit suisse delivers on wednesday. potential job losses. let's talk about inflation. unilever, the question is how much cost inflation they are able to pass on and other we are at the top of that. what is your reckoning? >> unilever has raised prices slightly in the second quarter probably 9%. further price increases are expected for the second half. yuma lever has guided -- unilever has guided for the profit margin to be in the lower and so profit is taking a hit from inflation. what could help unilever is m&a. it added an activist investor to the board which should help speed up the slower growing brands.

anna: we are watching the oil industry. heil -- higher oil prices putting pressure on consumers. energy giants have fallen and the benefit. what can we expect from shall? >> shell benefited across the board. the focus will be on buybacks, and shell completed an $8.5 billion share buyback program. they expect another $6 billion buyback for the second half. manus: let's see if the buybacks work. leo with the latest on the earnings front. it is all about the equity markets, dipping ever so slightly this morning. anna: playing catch up with what we saw later in the day in the

united states, markets spooked by some of the earnings stories. we will look into the european session this morning. futures pointing lower. we get back to the european corporate agenda and some companies reporting today, europe's largest discount airline beating estimates. we speak to ryanair's cfo. that conversation coming up shortly. how disruptive should we expect travel to be? we will get guidance on the year ahead and ink about some of the challenges facing their success.

manus: this is bloomberg:

daybreak europe. with me is an edwards -- anna edwards with the stories that set your agenda. anna: first and foremost. treasury secretary janet yellen says she does not see signs of a u.s. recession. markets unpersuaded. fears of a slow down on sentiments as the week kicks off. asian stocks and u.s. futures are lower and crude oil declines. 'tis the season for earnings. earnings season is upon us. we will speak to ryanair and julius baer also on the agenda as well as a conversation with the governor from the bank of italy. manus: ryanair has reported their first quarter numbers after dodging the worst of europe's travel disruption but the irish airline says it is cautious about the outlook

yonder the busy summer season. we are delighted welcome in the ryanair cfo neil sorahan into the studio. i have done five airports and 15 days and we are needing revenge tourism. will the summer season be longer? can you squeeze the load factor higher? neil: i think it is great, everyone is back flying again and i hope some of those 15 flights were with us. it is a busy summer. a lot of pent-up demand. as month we had a 95% load factor. -- last month we had a 95% load factor. the plan is to grow from the 149 million customers pre-covid to

165 million. i think people are keen to get back out and keen to get back to the beaches in the cities of europe and we are well placed to get them there. anna: you are keen to take them. let me ask you though about your resilience in the face of what many call the cost of living crisis and many parts of europe are experiencing this already or expected to over the winter. i know you tell me that that is an environment that customers will trade down but is not enough to save your business plan? neil: we have been very busy over the last few years pushing down our costs. we toques 73 of the game changer aircraft which are more fuel-efficient with more seats and we are buying them at the right price. that will drive our costs down further. we have been knocking out airport deals.

we are growing strongly across europe. our experience in the past whether it is the financial crisis are the previous recession is that people do trade down and travel in numbers but they become more price conscience -- price conscious. manus: do you still see resilience and demand as prices rise? and they have been squeezed quite a bit higher. any sign at all on the forward bookings of a tail off in demand? can you endure these higher prices? neil: we had a poor percent in reduction in the first quarter compared to pre-covid. our prices are sticking very well and customers are still getting huge value with ourselves. i would anticipate we are moving

into a couple years of higher fares particularly if you'll will remain at the level it is that an capacity is coming out of the market. customers are booking in numbers. 95% load factor last month. i would be disappointed if we did not have a high 95 load factor for july. anna: you have had to reach new wage deals. is that a process that is completed? is there flexibility in those contracts? neil: in context, we took a decision at the start of covid to keep all of our people and not let them go. the deal with the unions was that they would take pay cuts as a result of that. we started pay acceleration discussions with our unions and 80% of our pilots have agreed and a vast majority of our cabin crew. we hope to have the majority of

the remainder done in the coming weeks. i think we're making good strides in that. our objective is when we get to pre-covid profitability that we restore all the pay for all our people. manus: give us a sense, in terms of european airports, you are a little unscathed. delays are limited relatively in dublin relative to the rest of europe. where is the biggest mass in europe -- mess in europe? what is a real solution to that? draw a picture for us. neil: it is not a cap by the airports. the biggest issue is unprecedented air traffic control delays whether it is in germany, the italian air-traffic controllers going on strike or the french as they always do having disruptions rout the

summer. this was an issue with us pre-covid and is still with us post-covid. with less capacity on the market this summer, we are seeing particularly high number of air-traffic control issues. this is something that the various governments across europe need to address and address quickly. we take 10% of needless flying out overnight if we allowed point to point as the crow flies across europe. this is something that governments will have to grapple with. anna: for anybody looking -- you have set out some ambitious growth plans. anybody thinking about climate change and the environmental impact of all of this flying has heard a lot from airline executives about sustainable aviation fuel?

is the industry pending too much hope on how you can get down to net zero by 2050? neil: it cannot be staffed by ourselves. on our own path to carbon zero, our report accounts for about one third of our path to that. another third of the reductions we will achieve. these aircraft are 16% more fuel-efficient. the biggest difficulty is that it is not being produced in sufficient quantities. that is something governments need to get on top of. they need to produce huge amounts to make this a viable product not just for aviation. anna: the sector does not need to scale back its growth plans. neil: if you are flying with ryanair, you are already getting 50% lower co2 per kilometer.

we are growing in a sustainable manner. passengers should start to realize that they can reduce their carbon footprint just by flying with us. anna: neil sorahan, thank you for joining us. let's get back to the broader picture for the markets. the immediate picture -- this is what futures look like. we have negativity on european futures and u.s. futures, a little bit weaker but we are factoring in friday's selloff on friday driven around tech. the snap story having an incredible impact on sentiment. telecoms players raising questions about how resilient consumers are going to be and the face of inflation and higher costs. that will be something we we -- we will be looking at through the earnings season and the supply issues. covid has not gone away from the philips perspective. manus: not at all. and the next crisis is energy

and in terms of energy caps. of the bond market is front and center. we will get a fed decision this week. the market seems to settle back to 75 basis points. our surveys suggest that peak rates in the u.s. will be pre-.4-3.7. janet yellen does not see a broad recession. i love what bank of america had to say. by now because the only time you will see this level of pessimism and not made money by being a contrarian was during lehman. the euro what saves the euro? it might be energy security caps the euro rally. you also see a consensus building at self-parody down -- self-parity. and oil has been battered for three weeks in a row. let's see what the strength of the dollar does to that story. ilia sally has the first word

headlines. >> the u.s. as a cruise missile strike on odessa sport. the deal is intended to facilitate ukrainian grain exports through the port on the black sea. cranes president says his country has about $10 billion in grain waiting to be exported. australia's prime minister says his government is -- has introduced the toughest ever security measures to prevent an outbreak of foot and mouth disease. concerns have been going after traces of disease have been found on imports. the chief of the world health organization has declared monkeypox and international emergency. the director general overruled a divided panel to issue the group's highest alert. the move paves the way for more international cooperation to stop the virus. richie sunak has promised

tougher border controls they -- as they battle to become the next prime minister. sunak says he will tighten the definition on who qualifies for asylum. truss says she will increase the border force by 20%. this is bloomberg. anna: juliette saly and singapore. how high will the fed in the hiking cycle? -- how high will the fed go in hiking the cycle? we will have the latest from a markets live pulse survey. this is bloomberg. ♪

manus: it is "bloomberg

daybreak: europe." reunited with and that edwards and london. -- anna edwards in london. the aussie rates imploding. a lot of that is on the back in u.s. treasury on friday. you are seeing the king dollar story absolutely fervent this morning. the canadian dollar trading at 129 down 0.2 percent. the dollar remains victorious. up 0.8%. this is the backdrop going into the federal reserve meeting where it looks like we are issue in for 75 and we have backed off a double paul volcker hike. anna: with the fed meeting this

week, investors are pricing in an interest rate hike of at least 75 basis points. how high will the fed go? and with a recession, will the fed keep raising rates? here is how investors responded to the latest survey. >> we think the dollar can still rise further. the dxy will rise 112. >> the fact that the ecb is going to be increasing their interest rate and shoring up the euro. >> in some ways our expectations call for the leveling off of the dollar relative to other global currencies. >> i don't think there are expectations among fed fund futures that the policy rate will rise by more than 75 basis points. >> the broader dollar may be reaching its peak year. >> there are some things on the horizon which would -- which

could cause the dollar to pull back. >> there is a possibility that the euro-dollar could fall back towards record lows. anna: mixed views. joining us now is garfield reynolds who has been thinking about this extensively. let's deal with the interest rate differentials. the ecb has started hiking rates. does that add some impetus to those that think the dollar has peaked? garfield: the fed gets to return serve this week. it is certain to hit with 75 basis points. the question is --what does it do going forward? there might even be some wiggle room for some expanded expectations depending on how the data goes and on how forceful the fed is.

the undercurrent has been that the fed will be willing to or has to be willing to risk a recession in order to bring inflation under control. although the other data series have been coming in more poorly, so far most of the inflation readings and of the partials towards inflation have remained pretty high. the question is can the fed afford to ease back? and there is an interesting thing that after this we will not have a fed meeting until september. more than a month of no meeting just talk and speculation which could mean some overpromising initially that might give a fresh spurt to the dollar if rates are seeing as potentially going higher faster then traders are currently pricing in. manus: maybe the only thing that

saves the euro is that the fed might pause. i thought that was a lovely line from some of the houses. when i look at the hike complex, the aussie the cad, all crumbling. in the eye of a material slowdown globally, which currency suffers the most? aussie yen, aussie outright, commodity --? garfield: the straight aussie and cad are both exposed because of the commodity complex and because aussie yen faces the potential but if you get a recession, a global recession or slow down fears, the yen has already come back a bit and

could come back a lot from the 24 your lows it hit. i would be looking for the more direct aussie kiwi -- it is less linked to hard commodities but it is a very growth sensitive currency especially it is at the forefront of what happens if you get recession fears because the bank of new zealand was one of the first to really go hard on inflation. if it ends up easing off, that could bring the kiwi dollar down. anna: we saw the u.s. 10 year yield head up towards 3.5% and then a quick retreat from the middle of june. that gained momentum last week. where do you expect that to move to in the near term? garfield: i am suspecting it is not going to get above 3%, famous last words, just because

the driver for higher yields is inflation concerns but that is likely to bring a fed response. so unless the fed indicates its reaction function is changing substantially, the higher inflation goes the more of an inverted yield curve you will get. we have just seen waves of buying come in -- whatever the 10-year u.s. yield gets to 3% or a bit beyond. i think 3% is going to be a very hard nuts to crack on a sustained basis. i think you are more likely to watch it fall towards to .5% if we get the kind of inflation recession mixed that you are going to get -- basically policy era rid large for the fed -- written large for the fed.

that will bring the 10 year even lower. manus: i think that is the debate. how quickly it trades to 50. we have a power crisis and an italian government crisis. is there a more material downside risk to the euro then perhaps we are seeing at the moment? garfield: the difficulty with the euro is the risk is so hard to price. it is a little bit like in the old days when we had the korean crisis and north korea would start lobbing missiles -- how do you price in for an escalation in that conflict? we are not necessarily talking about pricing in war between russia and europe but an energy

war -- that is those sort of thing that could do so much damage to the european economy that it becomes difficult to properly price that in. i suppose that is a long-winded way of saying yes, there is a potential the euro could go a lot lower if worst case scenario plays out. if it does not come i think it will be hard for the euro to go below parity after we had such a strong test of that level that failed over the last few weeks. manus: ok, well we will keep an eye on the left-hand and the tail risks. let's check in -- garfield, thank you very much. a little bit of breaking news. uniper. they will hold the withdrawals from storage. this is a company that is in a bailout from the german government and this is the energy crisis writ large for

germany. anna: it became a poster child for the energy crisis. the uniper in germany saying it has halted withdrawals from storage which sounds like a good thing at the margin. we will wait to see if we get any reaction in the european benchmark gas price but that is not open yet. we will have it in the next hour. manus: and the nord stream -- for europe in terms of averting some kind of a significant energy crisis into the autumn. coming up, we discussed the ousting of the ceo of vw next on

bloomberg. ♪

anna: welcome back to "bloomberg daybreak: europe." volkswagen's dramatic move to oust its combative ceo was put in motion a week ago. the ceo is out he pushed for electrification but ruffled too many feathers. manus: he did. and a few projects did not go to technical plan.

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anna: good morning and welcome to bloomberg