>> this is bloomberg "daybreak: europe."

i'm dani burger in london with manus cranny into by. manus: shares jumped after hours. closing ranks, president biden commenced -- commits to sending advanced tank to ukraine, as part of a broad allied effort to support the fight against russia. plus, hong kong trading resumes following the lunar new year holiday propelling asian stocks and european futures higher this morning. treasuries advance. breaking news, it's a flood, it's a feast. take it away on s.a.p.. dani: sap lines coming out, let's get straight to the important bit here. they are letting go jobs, it is a restructuring, affecting 2.5%

of staff. the other headline to break is that they are upgrading their outlook. they are seeing and operating profit of 8.8 billion euros. the estimate had been for 8.6. even the lower end is above that estimate so they are seeing more growth. a company that bought back in 2019, they took it public and they are exploring a sale of its stake. job cuts, a beat on operating profit and a possible sale. a lot of things coming in terms of restructuring. we will be speaking to the s.a.p. ceo on those figures at around 6:45 a.m. london time. manus: and continuing with tech on the near side, nokia, operating margins for this year will be 11.5%-14%.

expansion is the key there. in the fourth quarter, margins doing better at 15.5. operating profit comfortably ahead of what the market had anticipated, one point 15 billion in terms of operating profit, as opposed to 945 which was the estimate. a couple of making lines for you there on those. the other major news piece, we are going to see these markets, equity markets a little bit higher this morning. how much of that is built on the bank of canada and how much is built on tesla. dani: it's so true, let me tell you, we certainly are seeing a big rally in tech shares. we will get to some of the other lines in a moment, but yes, it is all about tech this morning.

some positive results from s.a.p., so possibly that will help us even more. look at the hang seng, it is up to percent, not only because of the tech, but hong kong is back online, a lot of the positive travel story help and. european stocks gaining .7%. s&p and nasdaq, tech outperforming. we also have ibm and tesla earnings and both of those outperforming. fantastic scoop from the team in new york on that auction opening chaotic on tuesday. apparently someone left a program running overnight, so it did not -- nyse did not realize it had close. it was just a very unfortunate fat finger. manus: we will dig into more of the reports. chips will be really in focus.

a red headline on the bloomberg terminal, 4.2 billion and the estimate was for 3.81. the revenue comes in a little bit lighter. across the assets the debate is this, whether you now have a landscape are plausible possibility, they said they were moving into a position where they would expect to hold at the current rate. does that set the table for the fed to perhaps shift their narrative next week? the dollar roll down the short end of the curve. is the biggest drop we've seen since the middle of the summer in 2020. we are looking at a monster repricing across the curve. nymex crude trading at 80.39.

in terms of some of the breaking news headlines, we got to go back and have a quick line on one which is refuting some of the lines from the activist investor on adani. that is calling the hindenburg report maliciously mischievous. dani: that clearly no someone who loves a little bit of alliteration. saying adani is evaluating revisions for immediate -- immediate and punitive actions against hindenburg. so legal action is likely coming on this front manus:.

hindenburg alleges accounting fraud, and they come back and say that a selective misinformation and is baseless. it's one of the most read stories out on the bloomberg terminal in the last 48 hours. we have a bunch of reporters standing by. dani: we will discuss tesla's latest earnings, and the latest on the u.s. plans to boost ukraine's defenses. manus: so the tesla effect, better than expected profits in the last quarter. >> it was a smooth year, actually, without the big-budget interruption, they actually have the potential to do 2 million cars this year. i'm just saying that is the potential. manus: the key takeaways, $20

billion in his back pocket, and bullish as ever on demand. your first take on this order? >> good morning from berlin. elon musk sounded pretty bullish and the key takeaway is demand is great at twice the rate of production in january, that's what said on the call. he forecast 1.8 million cars to be delivered this year. also mentioned the $20 billion cash pile on hand. so that is good news, shares were up aftermarket and the main concern that demand is not where it is supposed to be seems to have faded. partly i think because tesla lowered prices for its models across several markets, so that certainly helped demand. dani: we've seen the reaction,

again for tesla. thank you so much for joining us . now to a different u.s. story, the u.s. will offer 31 tanks to ukraine alongside the 14 leopard tanks pledged by germany. the move is a stunning reversal, where only just last week u.s. officials insisted the tanks were a bad fit for the country. joining us is rebecca. why this change of policy? >> ultimately it rests on germany's stipulation, its insistence that it would not provide battle tanks, those leopard tanks that you mentioned, unless other u.s. allies also offered their tanks. as you say, the u.s. up until now had maintained it wasn't the best suited equipment for ukraine in that particular landscape there.

but it really underscores bidens pressure, his feeling to try and unite nato and to make sure that nato allies continue to be united, continue to put on a strong show of strength. although the department of defense said the u.s., biden spoke with his nato allies yesterday for quite a lengthy period, sources telling us there was quite a lot of frustration on the u.s. side with germany's move ability over this issue in particular. president zelenskyy has been talking about this for quite some time, back at christmas, december last year he was asking for more of this support. it does sort of imitate this pattern we have seen from nato. some resistance from some sides of the alliance to providing more support, but ultimately allies coming together to provide the help that ukraine is

now seeking. manus: rebecca, thank you very much, the latest on the u.s. move to assist ukraine. yesterday was taken up by the activist investor alleging the adani group -- we have a series of headlines, let's just touch on some of it. calling the hindenburg accusations maliciously mischievous. again, this is about the language that is being used. it comes down to possibly action in the u.s.. dani: exactly, they also mention looking at relevant provisions under both u.s. and indian laws for punitive action. so the legal route appears to be the one they are going through.

manus: it was a pretty tough day on a lot of the stocks yesterday. there is everything in here from natural gas, coal mining and trading. let's get to our reporter on the ground for us from mumbai. this is the first response to the accusations, the adani group of companies having a tough day yesterday on the market. what do you make of these first responses from adani? >> thank you for having me. yesterday there was a statement about that. today the group head of adani said it was a reckless attempt

to undermined the goodwill of the adani group and its leaders. it is in the process of raising $2.5 billion right now. dani: thank you so much for joining us, i know you quickly hopped on the phone to cover this for us. coming up, will the bank of canada be the first g20 central bank to stop hiking rates this year? we will discuss, next. ♪

manus: the bank of canada raised rates for the eighth and potentially final time. it was match with market expectations, most analysts did not see it explicitly declaring a potential rate pause. nobody saw it coming. bad bond traders.

good to see you. did you see that coming? they are setting the table for plausible possibility. >> i think they are all on the same trajectory, they are all coming together by spring. dani: they come to the end, but then what happens? the market thinks cuts. what do you think? >> know, i don't think there will be cuts this year. the data is still too strong. if you have pmi's going into contractionary territory, that could be a pause for the central banks by spring. i think inflation at that point will be sticking around double digits. i think you get the inflation situation under control, it

might take until year end. manus: here's the debate, we had it yesterday morning. you go into rate cutting mode by the end of the year, it is interesting because if we get 4.5% by the end of the spring, 200 basis points always -- only takes you back to 3%, which is still above neutral. what is that due to the bond market, rates are only in neutral, does it allow you to continue to buy bonds? oliver: this year, or the turn of the year? manus: swaps are pricing 50 basis points by the end of the year. i'm splitting the difference. oliver: by the turn of the year, if cuts are coming, it might be an opportunity to go into risk assets more than bonds.

i think it will continue for the rest of this year. i think stocks have another leg lower so they won't be the ones to benefit from the big rate cut when it finally comes. dani: can i challenge all of this, this idea that the fed may pause -- this is what happens when you in the studio with manus. i feel left out, so i get combative. but it is interesting to look at financial conditions. we are now in the easy territory, is not some risk that given equity markets have been more boo it and bond markets have rallied so much, we can't stop, we have to push back, and it kind of ruins this rally. oliver: exactly, and you have a great chart on the screen which shows that. it's going to displease the fed, and that's just another reason

why they are not going to make any kind of soundings about cutting any time soon. they're going to talk the talk and walk the walk for the next few weeks. is not going to please the fed. manus: i've never seen a bond manager look so happy. oliver is excited about this bond rally. one thing becomes more interesting, this rush to put on risk. if you want u.s. treasuries lower, do you want em debt, which user will house here. are you prepared to add some european debt, because there is still an opportunity, we are far from done. oliver: whether it's in europe or this part of the world, it has been flying this year. it is a positive environment.

asia, hong kong, they are up 13 points. that's crazy. in terms of the ten-year treasuries range, i think it could go as low as three and can maybe bounce back up to four if inflation stays. i think it is a good environment . dani: what about high-yield? i just came back from two days in sunny cannes, which i know manus is jealous of. you have to be an optimist if you want to get jobs done. wonder what your take is on what this default cycle will look like and what you do with high yields in the meantime. oliver: i think we are probably heading for a conventional recession in the second half of the year. corporate balance sheets aren't much better shape than they were proving in terms of what that

means for spreads, european high yields are currently at about 470. last year there were 670. in a conventional recession with the slowdown in growth and earnings, i just can't see how yield spreads will say where they are, i think they go back up. u.s. credit spreads probably go wider by a similar amount. manus: the yen has had a monster rally. take that lid off, you say there is a tail risk. how will it dislocate everything you just said if yield curve control is removed earlier than the market anticipates? some saying september. oliver: it could be, and that is what scares us.

it's not a best case scenario for us. as a new governor comes in and wants to make his mark, it starts raising rates and rattles markets, then of course it will impact international bond yields, it will not be good for any of us. but hopefully the new person comes in and does it in a slow and orderly and almost boring fashion so that we can all absorb it. but it's what we are watching for. dani: i think we will have to leave it there. oliver is always watching out for the tail risk. always great to have someone there in the studio there with you and voicing caution. coming up, it's all about the battle for succession to the many houses of lvmh. the recent management shuffle

fuels speculation. we will bring you that story next. ♪

>> there is no better place than cannes on the french riviera to talk about luxury. the groups fashion brands are regulars on the red carpet. along with jewelry makers, champagne is often flowing behind the scenes. in total, they count 75 luxury

brands. the founder and ceo of the french conglomerate became the world's richest man last month after the net worth of elon musk tumbled. he can stay at the helm of his luxury powerhouse until he is 80 after the company lifted the maximum age. over the past few years he's been carefully crafting a succession plan, slowly elevating his five children to bigger roles. his only daughter has just been named ceo of the code tour brand dior. his eldest son now holds the family holding of christian dior. the third son has been a vice president at tiffany which his family acquired during the pandemic in the most high-profile luxury m&a saga.

the youngest one, 24 years old, is developing louis vuitton watches. all five of the billing errors errors are vying to take over their dads luxury empire. incidentally, europe's most valuable company. dani: lvmh reports its full-year earnings later tonight. coming up, we will discuss more earnings and speak with allison kirk be. that is next. this is bloomberg. ♪

manus: it is bloomberg

"daybreak: europe." we have the stories as set the agenda. dani: production turbocharge. elon musk pledges to accelerate output on continuing demand. shares jump in after-hours trading. president biden commits to sending advanced tanks to ukraine as part of a broad allied effort to support kyiv in its fight against russia. hong kong trading resumes following the lunar new year holiday. treasuries advance. great to be back in the studio, oliver was telling us about the continuation of this bond market rally, but watch out for high yields, he says. manus: he sees 3% by the end of the year. inflation could be sticky and that could dislocate everything.

bank of canada raising rates for the eighth time in a row. let's have a look across the assets because yields drop. could it be that the fed moves into cause mode, two-year yields rolled down. the biggest monthly rally at the short end of the curve since the summer of 2020. you've got good flow of gas in europe, in the u.s., crude up .25% this morning as we see a good news flow on covid from china. one has to perhaps be a little skeptical on some of that recovery data in china because it doesn't look like anything else we saw anywhere else in the world. dani: no skepticism here on that reopening story, at least when it comes to uncalled stocks.

a 2% rally from the hang seng, it's all about the recovery story, some of the travel and tourism data. euro stoxx 50 futures moving higher, the tech story is an important one. ibm earnings beat and also another story of staff reductions, they will be letting go of about 3900 workers. manus: now are looking at tech job losses, up over 100,000 so far from the industry. adjusted fourth-quarter ebitda meets estimates. allison joins us. i'm looking at your guidance, no single service revenue growth and flat ebitda growth, it's

fairly underwhelming guidance. a tough year last year, underwhelming items. what is your tailwind? allison: it's actually flat to low single-digit earnings growth as well. the tailwind is the macro situation. we are in the midst of one of the broadest transformations of any tail cause in the world at the moment. while we've been in the midst of that, we've been struck with many macro challenges. from a positive point of view, we are seeing the business return to growth. after many years of declines in our nordic markets, we actually returned our revenue to around 2% growth last year. particularly markets like finland, sweden, sweden enterprise has not grown in two decades. as we are modernizing our

networks and transforming the company, we are getting the topline growth, but last year was such a talented year for the macro headwinds -- challenging year for the headwinds. we intend to sustain the topline development. we recognize we still face some uncertain macro challenges. dani: on the macro challenges, if i can just get to that before we move on to other areas, one of the macro challenges are higher rates and interest rates. what are you doing to stave off that headwind? allison: we have done a lot of necessary refinancing already over the course of last year. we are always looking at what is the right mix of fixed and floating rates. we have good visibility into next year and the following year now, so we can better plan for

the interest rate challenges ahead in a better way than we could when it hit us during the course of last year. that's why our strategy as we move into this year is going to be better equipped to mitigate some of the headwinds that were so extreme in 2022, we needed time to offset them. either through higher pricing or further cost taking that is coming through our transformation. manus: you say in the release this morning you have to step up the pace of execution and the transportation -- transformation agenda. let's break that down. is that going to involve more job cuts? let's deal with the employment situation, where are you going to step up the pace in that transformation? first of all to jobs and headcount, will that be reduced

in 2023, and by what percentage? allison: we kicked off our transformation two years ago, we said we would reduce our workforce by about 1000 resources per year. to date we have reduced 10%, that's a mix of old employees and also contractors that we work with. it is our intention to step it up this year. we have already announced a round of further cuts that will exit in the first quarter. always a difficult decision. that will ramp up over the year and will probably be closer to 1500 leaving the business this year rather than the 1000 we have seen in each of the last two years. dani: given some of these headwinds, i wonder whether you can confirm whether your dividend will remain in place. allison: we have announced that we are sticking to our dividend policy. we are reverting to the floor of that dividend, and the reason

the board are committed to that is our strategy is delivering. we are transforming the company. we were targeting topline growth. we have now reached 70% of the nordic population with our 5g rollout. and our digital transformation is delivering to plan. so if you put aside some of the macro headwinds that take time to offset, the strategy is delivering and therefore the board and are sales are connected to the dividend policy. manus: sometimes i get the opportunity to sit down with ceos and they have written businesses -- written down businesses into oblivion. do you sit on these assets are do you say, i'm not going to sell assets now because they are already written down to near zero. what is holding you back, what

is dragging you down, i'd love to jettison this portion of the business and i can concentrate on higher margin. what is holding you back? allison: a number of the markets had been sitting with goodwill. the goodwill right down, i think about how can i extract the best return on each of those businesses. if i don't believe that we can do it ourselves, then i'm absolutely not emotional to selling the assets if i can extract more value for our shareholders. but the write-down itself doesn't make me change my strategy. the underlying cash flow and how the business is developing in light of our strategy is what makes me decide whether i should keep the business or whether it is better to use opportunities

of consolidation or exiting them. dani: if you're not emotional and willing to let something go, what is on the chopping block? what would you let go? allison: you know i would never talk about that publicly, but clearly there are some assets as we focus around our core assets, there have been some businesses that were acquired over the years that are not delivering the return on investment that i would expect. so we will always be looking at whether we should be the right holder of those assets. dani: clearheaded, nonemotional allison. let's get to the first word news with adrian from hong kong. >> the u.s. has confirmed it is joining germany in sending battle tanks to help ukraine repel russian forces in the east.

the first batch of tanks from germany could arrive within three months. the new york stock exchange has blamed a manual error for the wild price swings and trading halt at tuesday's market open. lou burke understands an employee failed to properly shut down the company's disaster recovery system before the opening, causing the problems. 84 stocks were impacted. meta says it is reinstating former president trump's facebook and instagram accounts after two years. meta says it doesn't want to get in the way of open debate and that trump will face tougher penalties for any repeat offenses. according to a survey of accountants, u.k. business confidence is at its lowest level since the banking crisis. companies in the reeves tech --

retail property and manufacturing sectors are particularly downbeat. carmakers in the u.k. had worst year since 1956. the global chip shortage hammered output in 2022, leaving it well below pre-pandemic levels. 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. manus: thanks for the roundup. coming up, sap earnings. we will have a conversation with christian klein, the ceo. ♪

dani: sap says it will start a

restructuring that was see 2.5% of employees go. this happens as a german software giant looks to find ways to boost profit. were joined by the ceo of sap, christian klein. strong numbers amid this transformation. your operating profit for 2023 up to 9.1 billion euros. what are you squeezing out to get that improved outlook? where is that coming from? christian: first of all, sap is more relevant than ever because we are helping our customers to solve their most pressing needs that they have these days. coming out of davos, the major topics were about resilient supply chains and turning them into sustainable enterprises. our q4 earnings were very strong

. the cloud business is booming and has grown again by 90%. we also have to make sure sap is being even more competitive, even further expanding our market share. this is what we are doing with a targeted restructuring. manus: microsoft told us about their sap business, it is growing at 50% of what it normally does. how is your cloud business growing at 90%? are you cutting pricing, stealing market share? how are you blowing the lid on cloud when everyone else is a bit more hesitant. you are smiling, why? christian: i'm very happy with the partnership we have with microsoft. it is strong. we also have partners like aws,

we have partners like google where we just closed one of our biggest deals ever in the u.s.. this morning we have doubled our stake all in on sap. so microsoft is a great partner. there are many other partners who join the movement in our transformation. dani: part of the concern is that it is economically a difficult time. a lot of companies are cutting costs, yourself included. are you not seeing any of that pain of the european recession and are you not concerned about it? christian: when we moved into the pandemic, there was a huge demand in our commerce business. we are still benefiting a lot in our supply chain business. but in a high inflation environment, what do customers need? they need to automate their core business processes.

they need our technology to d carbonized supply chains. we are giving them this transparency. this is where sap is at the heart of it. this is why we are giving such a confident outlook for 2023. it's a very targeted exercise to further invest into our momentum in the cloud and further grow beyond 2023. manus: part of that restructuring is the sale of four x. what does that sail mean to the operating profit? why is now the moment to make that sale? christian: it's important to mention that our guidance is including qualtrex. today we announce the intent of their sale. why we are doing this from a

business perspective, it is a great asset. it tripled sales since its acquisition. we said we can further enhance the benefit for our shareholders by getting more independent. they can close further partnerships like they have with sap. we can focus on the core of s.a.p. where we are growing heavily. dani: the other part of your restructuring, the headcount reduction, where will those layoffs be concentrated? christian: first, will we did this restructuring, we're not going by region. we are winning in cm when we can connect our solutions to the supply chain. this is where we are winning, and now we are combining those

things to further optimize our portfolio. this is where we are doing the targeted restructuring, to have the ability to invest. manus: i've rarely met ceos that can deliver a tough restructuring and still do it with optimism. is there nothing you are frightened of in 2023? christian: of course when you talk to the ceos these days, if you had asked me nine months ago , of course everyone was expecting a deep recession. now the environment is not great out there. again, technology, to offset inflationary pressure. supply chain resiliency and sustainability, this is sap. this is why we are confident.

dani: what about your concorde business, how has that look, especially as china has reopened, but in the same vein, travel cost is a pretty easy way for companies to cut costs. christian: i'm not sure about you, but i'm traveling again, partners want to see me, i'm not doing all the internal meetings anymore. we are expecting further growth in 2023, so we are very happy with this business. and we are continuing to invest, we are delivering a few more innovations this year so we are very happy and content about our travel expense solution as well. manus: the one thing that is a nightmare on some peoples telephone boards here at

bloomberg is my name, because i'm a disaster with technology. she travels a lot. dani: i was going to say, no one wants to see me. i think that's what i just learned today. manus: come into the studio in london and we will work with you anytime. we wish you well with 2023. coming up, we will discuss the gdp numbers when the chart hits the wall. this is bloomberg. ♪

dani: later this afternoon we will get a big call of u.s. data. let's get straight to valerie, for gdp, what are we expecting? >> this is the first reading of the fourth quarter gdp, and it will be key. the annualized number is supposed to drop to 2.7% versus 3.2%. i will keep an eye on the personal consumption component. there were strong revisions to the personal work component that drove the third quarter revisions higher in the previous quarter. also keep an eye on the core pce. this is the fed's favorite measure of inflation. it captures a broader range of data than the cpi. it is expected to fall to 3.9%. all of this taken into account,

the survey median is 3.9% on the core pce data. it is unlikely to shift the fed in the february meeting, we know they are going for 25. this is all about what they can possibly guide for march. manus: of course it's all about wages and jobs. we will get jobless claims briefly. do you think we will get any surprise? >> we are expecting a clean reading. first it was the upset around the weather disruption that happen in mid-january. the number came in very good last year -- last week at 100 90,000. but economists continue to say we are seeing softening in the survey data when it comes to these unemployment indicators. we're just waiting for to show up in this hard data of weekly jobless initial claims. manus: valerie will keep an i as

it drops across the bloomberg terminal. coming up on bloomberg markets europe, anna and the team will speak to a chief executive. stay with us for that. we've had one of the best lines of ever heard, unemotional about selling businesses. that is a line that will be edged in my mind for every ceo. dani: that is the tough decision ceos are making this quarter. it's not a time to be emotional. more earnings interviews to calm. this is bloomberg. ♪

anna: good morning and welcome to "bloomberg markets: europe"