manus: good morning, it's daybreak europe. all the stories that set your agenda. stocks and futures rally with the prospect of a higher fed rate cycle failing to dispel the optimism. u.s. growth remains resilient. same positive, standard charter strikes and optimistic tone despite missing profits with the lender raising the output and planning a billion-dollar buyback. we speak to the cfo, shortly. plus, airbus delays production targets on a key model. the playmaker sounding more cautious even amid a resurgence of air travel demand. a very good morning, a warm welcome to the show. we have a feast of breaking news for you. renault with an operation margin

, that's what we are starting with. they are going to reinstate the dividend, perhaps the most important aspect. its symbolism, it is about the restoration of the dividend for them. of course they have new models coming on board, and this is really what they were looking for, the reinstatement of a dividend at .25 per share, above the estimate of 5.6. so it is about new models. so what else can i give you from that in terms of a full year net loss? it is a considerable improvement of the loss that we were expecting. that margin is going to be incredibly important. the chief executive said the

fundamentals have been thoroughly cleaned up and there is no turning back. that is the auto sector. we will keep an eye on that. to commerzbank, let's see what we have for you there. buybacks there have been a key issue in the banking sector. that they see lower loan loss provisions, this is important, this is about europe, no slow down, material recession in europe, so the loan loss provision is below 900 million. they see net interest income for this year of 6.5 billion. net interest income will be well above 6.5 billion, that's the material point here, strong capital buffers, 14%, slightly better than what we anticipated. so i think the guidance on the

loan losses will be particularly important. they see the upside potential in net interest income in the forward mirror. those are the two key stocks that we will keep you apprised of. it's been a heavy morning for the earnings, and of course we have the conversation for you throughout the day. we have the commerzbank cfo, and we have the ceo from airbus. a little later on we will have another guess. to the markets, stocks are not listening to the parabolic moves at the short end of the yield curve. all hail the consumer, the strongest core number in two years. there is a morning, goldman sachs nonprofitable tech companies rose by 4.4%, up 30%

this year. for all the vexation and the angst intact on rising rates and nonprofitable tech, that's what you call long risk. let me show you across the assets, bitcoin is up 11% in the past couple of days. throwing the bit come baby out with the bathwater quite literally, so bitcoin has not had a bad run, up 2% over the last couple of days. he depends on which curve you want to look at. a little better this morning, bitcoin flying higher, ignoring all the warning signs and christine lagarde delivers a strong message. 50 basis points is common. we will return to that in a moment.

the u.s. economy is holding up, it's remarkably strong, highlighting what is robust, keeping inflation elevated and putting more pressure on the fed. let's unpack the dead and the rocket moves. a really robust core retail sales figure, it is surprising, isn't it? it gives note landing for veracity. enda: car sales, furniture sales, the u.s. consumer is holding up despite that big garage of rate hikes last year. that's why the that officials are out warning that still have further to go with the rate hiking cycle. at the very least it certainly

questions what was accepted at the end of last year, that broadly speaking, inflation was low and there was a soft landing heading for recession. manus: let's take it across to valerie. i was going to look at three-month, tenure paper, but it is all just telling the same story. so translate that into reality in the bond market. valerie: the bond market really didn't react very much to this number. i will tell you the narrative why that was so. if you look at the retail sales trend, if you just ignore the blip we had in november and december, the trend remains intact. if it isn't the beginning of a new trend, the market just kind of shrugs it off. a high of 470 intraday on that number, but retrace this

dramatically. you mentioned at the top, two year yields have moved 50 basis points higher since we got that payroll data, but we are now pricing in almost close to the top of the range with the hike in march, may, and june, going to 5.5. it begs the question, a renowned set up for some sort of yield rally if we don't any hawkish fed speak. we will hear more later today. manus: we do have that angst of the debt ceiling coming into play. here is the yield differential, are you at or near peak u.s. rates? we are splitting hairs as to whether it's 5.25 or 5.5. christine lagarde is emphatic, 50 basis points, and the woman would not be moved. enda: another very clear message that even though inflation is slowing across the euro zone,

she is clear, they are going to go again by 50 basis points. she then said they will review and see how the economy is going after that. he goes to the whole argument we were having at the start of the year which is that they were in danger of driving economies into the ground by raising rates too much. two things are happening, inflation has proven to be more persistent than expected, and recession risk has dimmed somewhat, the european energy crisis is not like what it was last year. it's not hard to imagine how it some point, whether central banks are getting it right, raising rates to protect the economy. manus: the european bonds, was or any angst in the spreads, where did it manifest on the 50 basis points promise?

valerie: the market is still pricing in hikes from the ecb. we hear from two of the two most prominent doves today, and let see if they say anything different than what lagarde told us yesterday. manus: there's one him sheet, she usually hands it out and everyone sings from it. thanks for the latest on the rates picture from the u.s. to europe. airbus is delaying their plans to ramp up production of their jetliner. sid philip is at the airbus factory in france, good to have you with me on the live. this is a bit of a shock, isn't it, in terms of the delay. is it all supply chain or is there a broader reason? good morning. >> it is all mainly supply chain. the man for travel has been a

stumbling block, especially for the supply chain. it has really been a stumbling point, we talk about how energy costs arising and inflation and everything else. that is having a -- an impact on supply chain and consequently plans to ramp up production. manus: short and sweet, let's see what more information they give you and whether that is really the worst case scenario. they're pushing back by almost a year on some of those targets. think very much, sid philip there on the airbus story. a couple of things we're watching today, another big day for american data. 1:30 u.k. time, and in the

europeans only got the ecb leader speaking in london at 3:00. number fed officials will speak throughout the afternoon. loretta mester is appearing at 1:45. later in the day, james bullard will be talking in tennessee. coming up, american consumers, retail sales jumped 3% in january, the most in almost two years. recent arguments from fed officials that rates may have to go higher for longer. how will we position for that? on bloomberg. ♪

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manus:manus: what's the swirling around jp morgan, saying explosive rise in short dated option is creating risk on a scale that the markets have not seen since 2018. the senior portfolio manager,

issue word about that fact? good morning, good to see you, stephanie mark -- the equity market is like this, it's refusing to listen to the bond market. do you think there is an awkward moment between the bond market and the equity market? good morning. >> good morning. i think the equity market is exhausted and is not sustainable. i think people forget about seasonality's. we have the january effect and a lot of tech stocks selling last year. also in terms of performance leadership, it was clearly about the strong's performance, and also investors are missing out. so for me the technical backdrop is not healthy and it is not a

sustainable rally from here. manus: we've had a look at this chart, this huge buildup in options. you got that massive buildup, traders have to run to hedge. when you see this kind of formation that we saw five years ago, do you worry about liquidity in any way, pools of liquidity being withdrawn quite quickly? >> yes, definitely liquidity is a topic. what is more of a topic is inflation and how central banks are reacting. and i think inflation is cooling down, but only slowly. the main reason being what we just saw at the beginning of this week. is causing another problem for

monetary policy and cooling-off off the economy and inflation is slowing in order for central banks to pivot and change monetary policy from here. the equity markets and credit markets, extremely tight monetary policy. this goes hand-in-hand with the situation in the market. manus: like all good earnings season, going to interrupt our conversation with breaking news from nestle, one of the biggest food makers in the world. just think of the plethora of things that they do. this is what we've got for them there. gaining revenue comes in that -- at 8.3%, ever so slightly below what the estimate was which was for 8.70 four. on the pricing side, 8.2%, that is where the strength is. it just gives you a sense of the inflation narrative.

they said the 2023 organic revenue growth is going to be, the point where organic revenue growth is going to blow away. the estimate was for 5.52%. so again, what you're seeing here is the strength of pricing. the underlying trading, operating margin for all of this year will be 17-17 .5%. i want to come back to you not specifically on nestle, but on this type of company. we have a cost-of-living crisis, we have an income squeeze, but yet we have pricing power within some of these massive, i would say defensive plays or more cyclical play. would you put nestle in the cyclical camp, and how would you describe exposure to this kind of company and pricing power? >> it's a very interesting

topic. they are substantially underpriced right now, you are right. higher demand was made by fiscal stimulus and this -- today companies are faced with decelerating at a much faster pace than cost, leaving companies with negative operating leverage. the impact of this negative operating leverage is still very much underestimated by the market. manus: so the idea is higher for longer. we have yet to really understand what that is, is it in the fours, in the threes in terms of rates in the united states of america? for now, we are in the higher for longer range. how do you prepare for that? where do take exposure for

higher for longer? socgen want cyclicals on their book and they say europe will outperform their american peers in this scenario. >> we are on the same page, because i think european stocks might be the bright spot going forward. european stocks based several headwinds china covid policy and supply chain issues. and there is heavyweight on european stocks. with the china reopening underway, major headwinds for europe stocks. the total backdrop for european stocks is much better now. manus: and the buybacks that we have seen have been pervasive, haven't they, in big oil and banks. banks are trying to hang on the shareholder behind them with buybacks. where are you drawn to on that by back them, how much will that

play in 2023, and where will it be most manifest? >> i think what we will also see in 23 is an increase in ma. companies are looking to redeploy excess cash into m&a transactions. we currently see high cash balances that companies, covered with cheap equity valuations, this could fuel m&a transactions going forward. tech companies and energy companies want to add on to their core businesses manus: stephanie, thank you very much. coming up, what it means for the

country's independence movement and the broader political agenda in the united kingdom, on bloomberg. ♪

manus: nicola sturgeon has resigned as scotland's first minister after eight years in the job. it was a shock move that left the future of the scottish independence movement prevention doubt. what is next for the country? >> i am announcing my intention to step down as first minister and leader of my party. >> as the nation's longest-serving and first female first minister, she has been a force to be reckoned with, but then in a complete surprise, she announced she is quitting. so what is next? under her tutorship, the

scottish national party has dominated every election north of the border since the 2014 independence referendum, turbocharged opposition to brexit, but her repeated campaigns for a second independence vote have fallen flat. now her party is deciding how to pressure the u.k. to hold another boat. recent post showing support for both the party and independence has waned. opinion is split. some said decision to use the next u.k. general election as a de facto vote on independence would be a mistake because it when we recognize. whatever direction the nationalists movement takes, she won't be at the driving force. she is handing over that hot potato to her successor, saying she won't stand in the way. manus: the succession race begins north of the border in scotland. let's get you up to speed with the first word news headlines.

simone foxman is in doha. simone: germany's -- a one-day walkout will hobble operations at seven airports including the countries largest, frankfurt and munich. there were widespread -- widespread disruptions yesterday after worker accidentally deal through dated cables, bringing down the company's i.t. systems. a former china-based employer is being accused of stealing confidential chip data. sources say this is are critical to producing some of the world's most advanced chips. u.s. stock trades will soon be settled crisis quickly after the regulator said it would shorten the time needed to just one day. the move by the sec aims to

address structural issues exposed by the meme stock mania in early 2021. sec chair gary gensler said the changes would make markets more resilient, orderly, and efficient. 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. i'm simone foxman, and this is bloomberg. manus: simone, thank you very much. mike norge says it can still make it to $25,000. he did say that it could make it to $500,000. andy halford is going to chat to a(jennifer)d is going to chat to mthe reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy.

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manus: a very good morning, welcome to "daybreak: europe." i manus cranny in dubai with the stories that set your agenda. malaysian stocks and futures rally, the prospect of higher fed rate dispels optimism. standard charter, profit misses and the bank looks to fend off a potential takeover. speak to the cfo, andy halford, shortly. plus nestle postage 2023 guidance, eroding the margins of the world's biggest food company last year. standard charter has announced a billion-dollar buyback as it seeks to fend off a potential takeover target. the london-based bank reported earnings for the first quarter

-- fourth quarter. joining me is andy halford, cfo of standard chartered. good to have you with me. the motto is in bill and andy we trust. the numbers have missed, but you said just trust me, we are on the right track. these numbers don't exactly prove that. why should investors keep the faith in the two of you? >> well, with respect, i do think the number -- the numbers prove it, actually. what we printed today is 15% growth in our top line, that is the highest topline we've had since 2014. a 15% growth in our bottom line, again the highest we've had since 2014. our primary metric is at 8% that we've had over that period of

time, we've had the strongest fourth-quarter that we have had for many, many years. so i do think the direction is really strong in the fact that that has enabled us, as you mention, to increase the buybacks that we have already done in the past few months, this time last year we said the intent was to return $5 billion to shareholders over the next three years. that's a last year and this year and we are now two point 8 billion into the 5 billion, so absolutely on track to delivering that. so i think the direction travel is a great one and we should have every competence now in the future for the bank. manus: is the buyback, the billion-dollar buyback today part of a defense against a potential fab bid? was the pressure from one of your biggest shareholders to up this dividend?

is it a defensive move? >> no, it exactly is not. we would've done this whatever the speculation was out there, as i say, a ago we said five billion over a three-year period. we have consistently looked where we've got access capital and said we need to keep the business, if not, let's return it. last year -- now it will be seven pounds or thereabouts and hopefully over time we will look back and see that the money we're spending now is being spent at very wise prices. i think this will have happen irrespective, this is very affordable on that basis alone. manus: so you brought up the speculation, and of course it is about fab looking at standard charter, do you see any merit,

you and the board, of a commendation of fab and standard charter? would it work, would it be a good fit, and do you see merit? >> we are not going to comment on speculation. there has been no contact whatsoever, that is 100% the focus. the journey, the direction of travel, it is a positive one and that is where focus will continue to be as we move forward. manus: so absolutely no communication whatsoever from fab with you are the management team? >> correct. manus: speculation is 30-30 $5 billion. is that a fair value for standard charter? we understand

30-35,000,000,000-dollar cash offer. do you see that as a fair value, or what is a fair value for standard charter? >> we are focused on hitting the underlying performance of the business up. over the past few years we have been substantially improving the fabric of the business. we've had quite a number of our businesses this year that have held all-time record income growth, while singapore business , the more we can drive the profitability of the business up, the more we will bring the business back fairly value. that is what we are completely focused on, what is fair value? time will tell, but the share price has been responding quite nicely over the last year we think there is still a lot of room to go. manus: your credit impairment charges $344 million. on the credit impermanence, as

you look at the u.k. and china, do you expect this to be a steady-state number, or should i assume that means credit environments will rise and rise materially? >> what we have said is the last couple of years, we have probably been by long-term averages in relatively benign times. i think the context of this $800 billion sounds like a lot in its own right, but the context is a $300 billion loan but. so actually it is a proportion of that is still at relatively moderate levels. it may rises are further to normalize with long-term cyclical averages over that period of time. as you say, last year was really about two things, real estate and sovereigns. other than that, the rest of the

book behaved really well. manus: obviously i know the business very well in my region, i'm very familiar with a lot of the exposure that you have to some of the indian community here. do you have any exposure to adani, either directly or through collateral that you need to inform the market about? >> absolutely nothing to inform the market about whatsoever. we don't comment on specific client situations, but overall i would say over the last period of time, or exposures, particularly in india, which many years ago were more challenging for us, have been very dispersed with spanning across many different sectors and businesses. we are very comfortable with our position generally, if the war is anything we are concerned about, i think you can take the

absence of saying anything today as saying you are ok with -- comfortable with our positions. manus: are you pausing or stopping lending to adani? >> we don't comment about individual situations. we continue to apply the same approach as we would do normally. our credit impairment history of the last five years has been extremely good. but the variety of corporate siu service there, the fact that we are more focused upon corporate stan consumer, it's a very good spread, a very good mix of business. manus: you mentioned geopolitical tensions remain of vulnerability. i'm given to understand in your slides today. you talk about the impairments in china real estate, you talk about geopolitical tensions, we've obviously had rising tensions with the balloon incident. is there any reassessment of

exposure, the investment case for exposure to china and to rebalance that with haste, away from china, in any way? >> no, we operate in 60 markets around the world. they are very diverse. it will be rare that we don't have geopolitical issues going on at any point in time. from time to time we will press harder in some parts of the world and less hard in others. i think we have shown that with countries like sri lanka, we can be responsive to what is happening locally there, we continue to play our part locally but we can manage our exposures, we are still very strong leaders in the long-term growth. many of the sectors have been struck. also worthy of note, last year our business grew in china

double digit and the income we generated grew at twice that level. no change in our commitment, very central to our future. manus: we didn't quite get to the easy stuff, which was rates, let's take a moment and breathe. where do you see u.s. rates going? how brutal is it going to be? >> i would hope that we are sort of nearing the top of the cycle now. i think the most important thing is that we get economies moving forward and take the word recession off the table. so yes, rates peaked a lot in a very small period of time.

long-term averages are not massively high but i hope we see a little more cooperation, maybe more next year, then we can focus on economic growth and prosperity rather than be focused on the fear of recession. manus: the market seems to like a billion-dollar buyback in hong kong at the moment. andy halford. coming, nestle's earnings, we will break down the numbers with the world's largest food maker. bloomberg intelligence in the house, they can take us through some of the sweet moments in nestle. ♪

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manus: let's get your business flash with simone, she is in doha.

simone: u.s. retail sales rose by the most in nearly two years in january, signaling robust consumer demand that could bolster the feds rate hike plans. the value of overall retail purchases increased 3% in a broad advance with all 13 retail categories gaining, led by motor vehicles, furniture, and restaurants. fidelity investments is looking to fill about 4000 new roles by midyear, even as rival asset managers reduce headcount. they will focus on customer service as well as technology and follow a year of record hiring that took staff numbers to 68,000. deutsche bank is said to be cutting bonuses for staff who inappropriately used messaging services for business munication. sources say cuts affecting page still to be awarded last year. deutsche bank is among several banks find over $2 billion by u.s. regulators over the use of

unauthorized communication channels. and that your bloomberg business flash. manus: simone, thank you very much. the results are in for nestle, forecasting probability will probably improve in 2023. higher material cost and shipping costs eroded the margins last year. duncan joins me, good to see you. over the surprises, read headline was the guidance for this year. take me through your first surprise. morning. duncan: it looked like the numbers were good on growth but margins were -- gross margins probably 200 and 300 basis points. so they've had to push prices up in the second half of the year. the question for 23 is going to become the reverse of that,

going back up in the second half as those costs start to ebb away. it's going to be a tricky year, 2023, tough for their staff, hopefully the second half when the inflation is a bit more sensible. manus: we've probably gone through a bit of shrink inflation with product size changes, we've had the price increases. a mars bar and a twix have gotten smaller, i'm convinced. what about the volumes, are they holding up amidst these price increases? duncan: volume is still positive in the first half, it's in the second half it obviously drifted back. considering the pricing they have for their brands, think it is come through strongly with

these results. but obviously they need to cut pricing, you're right about the costs ebbing away. if you look at raw material come they have gone up a heck of a lot since then. between 30% and 100%. they do need further pricing, and it's how they manage that in the first half for 2023. however, the longer term forecast, i have no issue with at all. i'm not worried about the longer term, is just how they manage 2023. this will be interesting. manus: everyone is still in time out in terms of how 23 pans out. we had this disinflation narrative. do you think the input side of the cost cycle has?

? peaked for nestle, on the soft, side, do you think it's going to roll over? duncan: it looks like it should. we had the ukraine situation, it was already hurting. that's going to drift off, which is good news. what happens with the ukraine grain deal is possibly the thing that could change, every company did a great job last year finding alternative supplies, but at a cost. i have no idea what will happen there. but on the whole, think we have definitely piqued. how far it will come down, i could not tell you. manus: another breaking news

story this morning, is pernod ricard. they've got absolute bod,, chivas regal in their stable, they talk about the american consumer and they talk about china, and they say they expect a dynamic year of growth ahead in 2023. duncan: yes, they look to have been pretty much on every single level. clearly we need to enjoy ourselves after going through pretty depressing second half of the year. it looks like we have chosen drink as a way to do that. they've been very good at marketing their brands on the internet, making sure we get them.

it's coming back strongly, and obviously at some point we will get the benefit from china reopening as well. you are going to see that come through in the second half as well. i haven't seen any economic data particularly on china, but i would anticipate what we are hearing elsewhere that that will be a strong balance in the second half. manus: duncan, we appreciate you coming in. thank you for joining me. you can pick up all the research on the bloomberg. we will have details on asml as the u.s. seems to help in preventing china's chipmakers abilities from advancing. ♪

manus: let's get your trading day set up for you. american economic data is the focus. we have a up fed speak to deal with. 1:45 p.m., the cleveland fed president speaks, u.s. fed president james bullard will hit the tape, he is in jackson, tennessee. across the pond to europe, 3:00 p.m. this afternoon. the other major story we've got is from asml. sources tell bloomberg data stolen was from systems that were used to store technical information about its chipmaking

machinery. the dutch company is blaming a former china based employee. let's get to our asian and politics reporter, rebecca, thank you for joining me. what has been stolen, and how concerning is it? rebecca: as you say, this is information on software systems essentially stored information about the technology that as cml uses, specifically it is linked to a repository for technology linked to lithography, which is essentially crucial to making these very advanced chips. as far as we know, sources saying to us it was taken by a male employee over the past two months, and while as they allege there was the theft of technological information, it hasn't been a theft with hardware information. but there is of course heightened awareness and

heightened sensitivity around this because it is the second instance where we have seen some kind of theft by china based employee in less than a year at this company. manus: in terms of the geopolitics and the export controls, why is this so important? rebecca: as you say, the netherlands and japan have both joined the u.s. to support some of those curbs and export controls on chips. in some ways we have already seen companies like asml that are prescribing to these broader measures, but it is important, because it's just another high-profile, global example that underscores some of the risks and affirm some of the concerns that the u.s., among others, have leveled when it comes to working with businesses in china.

and of course it's happening against a backdrop where the u.s. and china are continuing to spar over the inset -- incident where the u.s. names there was a surveillance balloon. we may see a meeting between blinken and china's diplomatic leader. manus: that's what you call trying to get on the exit ramp quickly. rebecca, thank you very much from hong kong. equity markets are immune to higher rates, that is the thesis that the market is working on at the moment. this is bloomberg. ♪

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