dani: this is "bloomberg daybreak: europe".

i did a burger in london. manus cranny is in dubai with the stories that set your agenda. manus: debt ceiling negotiations will intensify in a search for a framework agreement. the president will scrap part of his asia trip to be in d.c. for talks. the risk of searching yields a bid spending standoffs sparks a flurry of corporate bond sales, with pfizer set to place a jumbo $31 billion deal. plus, fed officials diverge on whether a pause or another rate hikes is warranted at the june meeting. asian stocks are mixed. breaking news all from germany, good morning. dani: siemens earnings coming in, it is a hike to their outlook. revenue and orders surged. revenue will be a 9-11% gain, the estimate was 7-10%.

industrial profit is coming in stronger than expected. revenue at 19 billion euros, the estimate was 18. orders were strong, second-quarter earnings 26 point 3 billion euros, the estimate was under 22. margins are disappointing, so still a cost issue but higher revenue and higher profit for all key units with higher demand. we will hear from the siemens ceo at 645 than u.k. -- 6:45 a.m. u.k. time. and i think we hmor breaking earnings. manus: we have indeed, from commerzbank, 580 million net income for first quarter, a beat against 571 penciled in. we want to know the net interest income and the momentum. a very comfortable beat in what we estimated. the ecb not done with their rate hiking cycle, 1.8 3 billion was

the outlook. they confirmed the 2023 outlook and safe for the full year, they will earn 7 billion euros in net interest income. that is above the original estimate of around 6.5 billion. my last guest said core cpi is 130 basis points ahead of the target, and they had another 100 basis points of mike's to get done. -- of hikes to get done. the cfo will join the team at 7:30 a.m. so that is the corporate news. for me, it's about the rising level of divergence at the fed. there is a wonderful phrase at home in the u.k., just to have an err and a spur. have another 25 basis points in your knapsack, it will not break the system because you have already done 500 basis points.

the recent to have an heir and a spare, just to cover yourself. dani: i've never heard that phrase. manus: heir and a spare, you've never heard that? dani: i haven't, and i am embarrassed. it is nice that we can talk about the fed debate. we have seen the debt ceiling trauma. that monster deal from pfizer, the fourth largest ever, companies are rushing to market to get in before a potential debt ceiling debacle. but that didn't rock the divan -- rock the bond market along with that debate. manus: williams is talking about inflation coming back to 3%. dani, how are your markets? dani: it's all about japan again this morning. it is the one market shining as everything it remains

range-bound, we are up 0.3%. solid gdp numbers contributing to things. goldman saying this is a promising market. the bank of japan is still using, foreign investment is coming in and a whole lot of buybacks, japan is on the cusp of that rare bull market hong kong tech, the rest of asia is not doing well. we will get tencent earnings today and see whether that shakes things up. that in europe is reflective of a u.s. market that finished in the red yesterday. it was that fear over the debt ceiling drama. biden cutting his trip short. and s&p 500 futures are higher this morning, up 0.2%. manus: i think my favorite phrase was suggested by tony, who said we are fine, we are frustrated, insecure, neurotic and emotional. that is your average equity trader. with that in mind, it translates across assets, it is a bit like

a day on daybreak. which takes you to the short end of the curve. one-month steve ells going back to the highest level since data began in 2001. we come off that kind of high zenith the point. when it comes to the longer end, that was driven more by the $31 billion, the fourth artist ever bond sale you mentioned from -- largest ever bond sale you mentioned from pfizer. ubs says the debt ceiling will give a short-term boost, but after that, it is their least preferred currency. hedge against u.s. slowdown. and nymex is flat to off this morning at 70.8. is the iea right, demand will rise from china, or are the cracks in the china store -- growth story rising? let's get your reporters. dani: derek wallbank brings us

the latest on the debt ceiling talks. mark greenfield on fed officials being at odds over june's rate decision. manus: as you lead with the white house, congressional leaders have taken steps towards avoiding potential u.s. default. both sides voicing optimism following high level meetings in washington. >> we finished a meeting with congressional leadership about a path forward to make sure america does not default on its debt. [applause] >> there is still work to do, but i made it clear to the speaker and others that we will speak regularly over the next several days and staff will continue meeting daily to make sure we do not default. >> for 97 days, the president ignored us and said we couldn't meet. it wasn't until republicans would no longer ignore the problem and raise the debt

ceiling and past the bill did we finally get a meeting. manus: this is the third meeting now between biden and mccarthy. derek wallbank is here to read the tea leaves. the president is cutting his foreign trip short. he doesn't want that political egg on his face if that goes wrong. there is new people involved in this discussion. does that shift the dial for you? >> it does, young in particular, but they are both known as dealmakers with bipartisan cloud. republicans put forward a representative who is also respected by democrats as a dealmaker who knows what he can offer. as much as anybody in leadership can do. remember, they have a razor tight majority in the house so the math gets complicated here.

as kevin mccarthy said, you can see how a deal as possible, as much by the end of the week. it is certainly there to be had. you would be talking about a whole range of things that could go into that. the trick is to actually get there. there is optimism. i said the other day, if joe biden gets onto the plane, that is an optimistic sign. he's about to go over to the g7 in japan. but he is cutting that trip short, so it is not necessarily, we have this all sewn up. he wouldn't be cutting that short interesting the diplomatic damage that he is factually risking if it was all buttoned up. so yes, it is closer than it was, is it all the way there? no, it is not. dani: it is a dramatic and public step to take. there is this dichotomy between

mccarthy's comments saying we are still far apart but a deal as possible by the end of the week. what happens in the meantime if they make that happen by friday? >> if i am reading the tea leaves, i am thinking what is probably baked? there is probably something to talk about future spending levels, republicans want to trim that. so probably something on that. you might see something on rescinding unspent money. that is a convenient washington game, pull back money that was not going to get spent anyway, it counts as a cut, great. covid money is one of those places. you might get something on regulatory permitting, that is something both sides want to get done. there is really a hitch right now in terms of adding work requirements to certain federal

safety net programs, welfare, food stamps, things of that nature. that will possibly split democrats. that is a thing where republicans might want to put for the sun, moon and stars but the more they get, the harder this might be to get across the line because you have to have democrats vote for it in both the house and senate. dani: derek, think you so much. derek wallbank. now to the fed, hawks are tilting towards at least one more rate hike to stop inflation, while doves worry about the risk of over tightening. >> i want to learn more about what is happening with all these lagged effects, but i also want to reduce inflation. if more increases are necessary, i'm comfortable doing that. >> the past evidence in the data has been when you have financial stresses like the bank stresses we're going through now. and when you have big rate increases that take a while to have their full impact, you at

least want to take those into account. when you are looking atlantic the plane. -- at landing the plane. dani: let's bring in mark cranfield from our mliv team. how are markets digesting this? for the first time in this rate hiking cycle you have a clear debate between fed officials. >> there certainly is a debate. we have heard a few speakers this week already. there are several more to come. but the underlying message appears to be, they seem to be assuming there will be a debt ceiling deal, as there has been in many years before. they seem to be on the working assumption that will be put behind them. they can go back to focusing on the key factors driving monetary policy, which is inflation and the job situation. the on climate situation --

unemployment situation in america remains very unfavorable. that is the bottom line. you can hear that from the fed speakers we have already heard this week. what appears to be happening is you can see they might not be agreeing on whether there will be a hike or a posit the next meeting, but even if they go to a pause, it will be a hawkish clause. -- hawkish pause. you have a lot of traders in the market already pricing rate cuts by the end of the year. the fed wants to make sure the message is clear that is not happening. as long as the economy stays in the shape it is, unemployment at multiyear lows, there is no reason for the fed to cut rates. they may be able to pause, but they warned there is a risk of them going back up again if inflation goes higher in the months ahead. that's the message, that's why bond yields are taking higher. -- ticking higher.

the fed still has a lot more work to do. even if we don't hike next month, don't think we wouldn't do it again later in the year. manus: that dropped it home in terms of the lack of a surety. the market is in there for 4.7% by the end of the year. that's a hopeful christmas present. mark reaffirming the messages that drove the bond market yesterday. we will unpack that debt deadlock. it spurred a late day slide in the equity market. our next guest sees the standoff continuing to add to volatility. we speak to ann-katrin petersen from blackrock. ♪

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>> what i think about the trajectory of inflation, we made

really good progress. >> inflation is down and continues to make progress. it is not as fast as we wanted it to. >> i also want to reduce inflation. if more increases are necessary, i am comfortable doing that. >> to think about where the economy and inflation was last summer compared to today, we have seen positive things happen. >> we should not be full by a few months of positive data, we are well in excess of our 2% inflation target and need to finish the job. manus: fed officials over the last 48 hours on the fight against inflation. my guest is ann-katrin petersen, senior investment strategist at blackrock investment institute. you are lucky you only have to produce one piece of research a week on this. we talk about it every day, all day. there is no consensus on pause, how dysfunctional is the market that it presumes that rates will

be at 4.7% by christmas? there is no consensus on pause yet, is there? ann-katrin: good morning, manus. we're discussing all of that very closely on an everyday basis. in relation to the fed, a pause is not a pivot, that remains our prediction although the market does not yet reflect that pause, and thinks rate cuts are underway. however looking at the inflationary backdrop, inflation is cooling but will settle at higher levels. we see inflation in the u.s. settle at around 3% to 4% by the end of the year. that is still above the fed's target, as mentioned by one of the speakers. this means the fed has more work to do to tame inflation, and will not yet cut rates this year.

dani: just to put a fine point on it, you think we don't return to a world of 2%. we don't return to the -- world. ann-katrin: it seems to be a long way from here. it is rather the case that there are outward pressures still. rates in the u.s. will stay higher for longer. in europe, the ecb has more ground to cover to approach -- monetary policy is restrictive but not sufficiently restrictive. there are underlying structural forces at work that investors have to keep in mind. three of them, namely aging populations, which will mean higher wage growth ahead, or at

least pressures of higher wage growth. the second one is the geopolitical fragmentation. third, that transition to a zero carbon world. all three factors mean some sort of production constraints will be ongoing, leading to higher inflationary pressures, and more volatile inflation. this is why we continue to like bonds on a technical investment horizon, but also on a strategic investment horizon. manus: that's building the portfolio for the slightly higher, longer. i am drawn to the phrase, everything is fine, they are frustrated, and emotional. where is the biggest vulnerability in asset classes. i look at your credit allocation, you are neutral on a tactical basis, but are turning some of your -- trimming some of your overweight on a strategic

basis. lots of people are worried about credit specifically. about mortgage credit, perhaps not on the residential side, but more on the commercial side, is that the key vulnerability in the new world you describe. ann-katrin: this new world of higher macro and margaret follett -- market volatility entails risk, but it also entails opportunities. in the near term, central banks have and had to manage stability risk, and price stability risk at the same time. we know that the banking stress of regional banks in march has led to some more credit tightening conditions and credit availability. against this backdrop in a memo manner we have cut back our tactical positions in credit.

however we still favor investment grade credit over high yield, which we think will be more vulnerable as recession hits to the latter part of this year. we believe recession is foretold, engineered by central banks trying to tame inflationary pressures. on a regional level, we prefer european credit over u.s. credit, again, a granular position given more attractive valuations here. dani: really great to get your thoughts this morning. ann-katrin petersen, senior investment strategist at blackrock investment institute. we will speak to lord mayor of london nicholas lyons on how the city can retain his crown as a startup admin -- and fintech hub. this is bloomberg. ♪

dani: it's get your first word news with adrian wong in hong kong. adrian: ubs says the emergency takeover of credit suisse could boost its bottom line by $35 billion this quarter, ubs is projecting billions of potential legal and regulatory costs. the boost to profits comes from negative goodwill. the pans economy grew at a faster pace than expected in the first three months of the year, as further easing up pandemic rules boosted consumption. gdp expanded at an annualized rate of 1.6%. data adds to speculation over the prospect of an early election. pfizer sold $31 billion of debt to fund its acquisition of seagen.

it took in over $80 billion in orders for the eight-part investment deal. it is the largest deal for m&a this year and the fourth biggest in u.s. history. global news powered by more than 2700 journalists and analysts in more than 120 countries. manus: dani, these german results. just a quick reflection. on the banks side, it is a reflection of the sword of damocles didn't happen. provisions are down 85%. guidance that they are going to be better in profitability than 20. net interest income is far from done. they are saying 7 billion for the year, above the estimate of 6.5 billion. net interest income will be 7 billion, they saw above 6.5, the estimate was 7.26.

there are clear messages coming through from commerzbank. first quarter is a beat, 580, the market had penciled in 571. dani: it is remarkable how much european banks are benefiting from net interest income, whereas in the u.s. it is a question of profitability pressure trying to retain some of those deposits. while we are talking about german companies, siemens had earnings, too. we will speak to them shortly. it is all about that order surge. this is some of the best evidence i have seen that manufacturing in germany is still okay. services tends to be out of manufacturing. siemens raised its outlook for the second time in fiscal year 2023. its main business industrial products with digital solutions is all driving revenue. they expect orders to normalize during the rest of the year, but overall it is good news getting

these contracts and getting that order book filled up. these german companies showing up in the results. manus: this all plays into the view, the outperformance of european equities let's say relative to other parts of the world. the question is whether the trajectory of the euro can continue higher. various people on the show calling for 1.14, 1.19. it is all about the differential between the ecb to the fed. dani: we will continue the conversation about the u.k. specifically. how you can revive london's as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network, with no line activation fees or term contracts... saving you up to 75% a year. and it's only available

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manus: this is "bloomberg daybreak: europe" i am manus cranny and divide. dani burger in london. dani: pfizer is said to have placed a jumbo 31 billion dollar deal. but officials diverge on whether a pause or another rate hike is warranted at the june meeting. u.s. futures rise with asia stocks mixed. as the bond market is getting hit from all sides whether it be from the deal, the fed, or more debt drama. manus: the one thing i would say take away from all the fed speak is there so far from an actual cause the any possibility is delusional.

that is sentences from our guest unless something dramatic happens. dani: let's not hope for that. i hope that it is just the pricing of a tail risk. perhaps we're listening to the fed but there are some folks who think that the recession could be bad in the want that for protection. manus: let's have a look at the shore and peered our data goes back to 2001. cautious optimism. biden talking about default is not an option. the fed is done on the survey, they save the fed is done. risk assets would be resilient as long as we have a soft landing. discombobulated and by pfizer as they shook up the larger end of the curve.

hedge your dollar exposure, it is the least preferred currency on the board. they prefer yen, aussie, and a little bit of gold. short-term boost if there is a debacle over the debt ceiling. iea imagines it will be 200,000 barrels higher than anticipated. the probability of consumption is said to be low. room for such action is limited. it is still like a candle in the wind at the moment. dani: this perhaps what we see equities. hong kong tech, also down. the bright spot is japan.

continues to see gains at the highest level. will we see the rail bull market come back. in the meantime, the debt ceiling drama to end the day, fear of no deal being reached. s&p 500 futures on high. the cycle of the situation in the u.k. london still rules as a financial hub but the fact is that equity trading has shrunk in recent years. it is a queue in britain. homegrown companies like certain tech giants are looking across the atlantic. meanwhile, the ceo of fintech saying it is "hard to do business in the u.k."

joining us now is nicholas lyons . it feels like things are piling up day by day. is this a wake-up call for london? nicholas: it is. there is a lot coming to fruition at one time. i think there are some substantial issues we need to tackle. one is the fact that the pension system which is a great asset has been very conservatively invested for many years. part of that is that we close down final salary schemes in pension. the second big area is the fact that we have great growth companies in this country that are not providing the type of financing that they need.

they are getting that financing from some of the most successful investors in the world. very flattering that we are attracting all of that money. woe on us for not providing -- putting together that pension source making that the focus. dani: a lot to pick through. i do want to flow in terms of voices. i was struck by the former chair of british american tobacco now saying it is a problem in the city still has a narrow british way of life. referring to pay, big reforms, is he right, is it a cultural problem? nicholas: there is a cultural problem.

it is the risk of aversion. this country is more dependent on financial services and any other country in the world. london i think is peerless around the world for the debpth -- depth and breath. we cannot pay national service bills, care bills, education bills or do what we need to do internationally if we are not having a productive economy. we cannot have a productive economy without a thriving city. we have to change the narrative. part of that is looking after future retirement plans. we have to make sure it democratize is the returns. there are problems with there are solutions.

we have a very good dialogue with government and with regulators about this direction of travel. manus: very good morning. if i look at it, i am internationally displaced, i lived there for 20 years. there was an open dialogue when i started. what is macron doing in france that needs to be done? what is he doing right that is not being done in london? nicholas: i do not want to draw to me perils between london and paris. one of the risks that i would establish and we have macron

with a very singular vision about what he wants to do in france but is not really being embraced by the people of france. one thing you can say about the city of london, it has been around for a thousand years. the city has always been there. hopefully it always will. macron has turned the dial on the creation of wealth and recognizing the value. he was the first to go to china, he took a delegation -- delegation of 100 businesses. he puts business as a priority. need to do that in the u.k. much more. dani: you say you see progress on both months. are you confident they will do

that, either party? nicholas: yes. we are consulting with all the financial businesses. dealing with some of the largest players, not just u.k. but international. london is the most international financial center in the world. we have more foreign financial funds than any other city in the world. we are trying to see what the direction of travel is, what will it need to look like? we have all of these exciting things like ai, digitization of assets, currencies, quantum computing, what is that mean markets as a global financial center? will new york, singapore look like in 2030? let's be more strategic with this great jewel in the crown that we have in the u.k. manus: what is the answer to

that? formerly it was the center of foreign-exchange, it is the center on a number of these fronts. you have technology snapping at your heels and taking business every single day. when are you going to stand up and say we are the center of excellence? what are the top three things you will be in 2030? nicholas: u.k. has a third largest fintech business in the world. we have more fintech unicorns than japan, france, germany, singapore put together. technology is disruptive but is also our friend. that is where the future will come. tech, fintech, green, renewable tech, life sciences, biotech. we have four of the 10 best universities in the world.

we have great entrepreneurial talent. we need to address the issue is how we do the accelerated funding for that. that is why i advocated for the future 50 building ground fund. -- $50 billion fund. we want to make sure we have the best tech research in the u.k.. this is an ecosystem we have to create. it is not done overnight but is something that is vitally important. manus: thank you so much. that is nicholas lyons from the city of london. coming up, we will speak to roland busch. this is bloomberg. ♪

dani: siemens has raised its outlook. they now see revenue growth of up to 11%. ceo roland busch spoke to bloomberg. roland: supply chain is easing. with the exception of some semi conductors, we see prices going down. this gives us confidence going forward. at the same time, we still feel like we have a very strong demand for the portfolio. this all about digitization, optimization, and sustainability. it is a very strong demand. we believe we have some normalization but it is a super

cycle which we are serving as our portfolio. there is labor in the market, high cost, meaning that we see a lot of diversification, new green plans which will stimulate programs. this is a power portfolio. on the fiscal year we are confident because we have a strong backlog. in the long term we are confident we will have all customers same relevant with their portfolio and offerings. >> a no on that, when we dig into the numbers, go a little under the surface, it seems to be diminishing while revenue is going up.

he talked to me about what is going on in the dynamic? roland: this includes pricing, a 6% level roughly. we can do that mindfully, taking care of our customers. you have a positive equation. we have cost increase as well. it is along the same level. prices are going down. we have a very solid handle on our numbers. this is the reason we could switch our portfolio off-line. this will be reflected in our bottom line guidance. >> you think you can do more on margins, you still have pricing power going further into 2023? roland: we will see what we can do. we lifted it accordingly with

our topline performance. very strong uplift. it lifted from 70%-20%. -- 17%-20%. therefore we are quite confident that we cannot montaigne -- we can maintain that level. >> want to talk regionally. we have a lot of data out of the chinese economy. what is siemens experience of the reopening and chinese demand? roland: this economy was running very quickly. we were recovering from covid, that was amazing. then the demand did not pick up that fast. the expectation is that during the second half of the calendar

year there will be a pickup in the chinese market. this is a projection so far which will impact only the last quarter of our fiscal year. we have been watching the market closely. this is also what others are saying. it is picking up. manus: siemens ceo roland busch speaking to our reporter. pfizer has issued $31 billion in debt yesterday. the pharmaceutical giant raked in over $85 billion for an eight month investment-grade deal. appetite is rich if you have people with the right credit to sell. very, size the deal. this is the blackrock narrative, it will go up in quality.

>> this ranks as the fourth largest u.s. corporate bond deal ever. most of it was for the debt financing for the acquisition of seagen. this marks a bigger turnaround in terms of the corporate market. the middle of may is a very weird time to see these types of deals go through. we are seeing a lot rush to tap the market ahead of the debt ceiling deadline, the first of june. in the market volatility can see capital markets freeze up. the same thing that has happened through mid-march and mid april when we had all of that banking turmoil. a lot of these issuers were cut out of capital markets because of instability in the markets prevented them from coming. this week we might see $50

billion worth of issuing. it would be one of the biggest weeks since february. dani: thank you. coming up, elon musk says the ev maker tesla will dabble in advertising period more on the latest marketing shift from the company. this is bloomberg. ♪ how can you sleep on such a firm setting? gab, mine is almost the same as yours. almost... just another word for not as good as mine. save 50% on the sleep number limited edition smart bed. plus, special financing. only at sleep number.

dani: tesla boss elon musk says the electric car maker will pull advertising. they have largely avoided big-name marketing. tesla egm, an appearance, but has elon musk done enough to assure shareholders? >> the most significant thing he

did was a few days for -- before which was bring in a new ceo for twitter. a lot of the criticism for elon musk was twitter, that is being put aside as he refocuses on the big company for him, tesla. that will play well as there has been criticism from shareholders of muska being distracted. he made a lot of comments about the economy saying it will be tough times ahead for the next 12 months. also that there will be a lot of companies that would struggle. while that could be a case for global economy and u.s. companies, tesla itself, he says, will be able to farewell out of those 12 months. the big thing is the advertising

that he says the company is likely to dabble in advertising. this is in response to one of the shareholders when he had a q&a at the end. manus: good to see you. how significant is this advertising? he has had to cut prices of his cars. in the interview he was talking about loss of advertising and twitter cost him about $40 million. is it such a big moment considering the cuts that the auto industry is in at the moment? >> this was in response to a question from one of the shareholders. we really do not know much about what that would look like, what the advertising would look like twitter going forward. especially as seeing that afterwards in the interview with cnbc he said this is something that he agreed on stage right then when he announced it for

the shareholders. what he did say is it needs to be advertising that approaches content, informative, that someone does not feel like they wasted time watching it. what that looks like, we do not know. going forward, tesla needs to find a broader audience. they need to find were a discussion is at a lower price point, trying to appeal to other people. there is a lot of criticism that elon musk has now acknowledged, that the current way of doing advertising through social media, he is preaching to the converted. manus: thank you so much. aggi on the latest from elon musk. now he is up to the possibility of testing the market with advertising. do you ever dream of working

from home again? dani: no. i refuse to ever work from home again. it is clunky in our job. but that is just us. there are plenty of people working from home and are happy about that. manus: the one thing is that americans are not willing to relocate or a new job. cannot move, will not move. that because rates are so expensive tove? i don't know. dani: that is it for us. this is bloomberg. ♪

we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? e what, we have a ton of mulch.

to "bloomberg markets: europe." i'm anna edwards live