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>> good morning. this is bloomberg daybreak: europe. i am in london. these are the stories that that your agenda. a weak picture on asian markets as fed officials to further rate hikes -- debate further rate hikes. you can russia's commodity export. oil is steady. benjamin netanyahu tells bloomberg exclusively he will not pursue the entire overhaul originally planned by his government. >> i will still give it several months to try to get another consensus. it will probably be about the composition of the community that elects judges. not to get into a point where the legislature just knocks out any decision that the court needs.

there has to be a balance. request good morning. happy monday. welcome to a new week. treasury radios are edging higher. all of that after that mixed u.s. jobs report. just as there was in the latest fed speak. him talking about a pivot to a hold and her talking about potentially more hikes. traders pricing about a 40% chance of another quarter-point hike by the end of the year with more than 125 basis points of rate caused by the end of 2024. jp morgan scrapped its for session call and thursday cpr plan could be the next test for the market on whether the fed has further to go. >> u.s. futures pointing to a higher opening this morning. this as the s&p ended half a

percent lower on friday. let's get over to bloomberg's tonya chen in hong kong for how asian markets are faring. >> good morning. caution seems to be the operative word in the markets today. asian stocks are actually broadly mixed. we are seeing some hong kong shares earlier losses. in japan, the topics are getting today. we are also seeing declines on the mainland onshore stocks. the thing investors will be watching were out of china this week is the inflation data. a lot of economists are thinking this could become a tipping point for policymakers to spring into action to actually roll out some of the stimulus measures that have been talked about. it could be a tipping point for these chinese equities shares. interesting to put all of this into perspective.

for buying of japanese shares exceeded those. that is most since 2017. obviously both of these countries are facing headwinds with the growth challenges. it will be interesting to see how shares play out in the next couple of months. if you flip the board over the currencies, the yen is around 142 today. something to keep an eye u.s. inflation data that might introduce a little bit more volatility in the bond markets. we will have to see if that spills over into the jg -- jgb markets. they intervened twice in the market. >> thank you for that update. to the latest in terms of breaking earnings now. earnings season cooling down. we have just typically reports. a full-year loss of 4.5 billion euros because of higher turbine

costs. they are bringing in a loss before of 2.0 5 billion euros. the estimate was for a loss of 1.1 2 billion euros. third quarter revenue 7.5 one billion euros. lower than the estimates. there is a results always did miss being overshadowed by the uncertainty of the winter issues. the shares dropped 36% after they had to withdraw their outlook. shares down 2.7% in the past year. underperforming the dax which is up 16.5%. we will speak to the ceo at 6:20 a.m. london time. i am sure we will be delving deeper into the issues over those wind turbines. let's get to our morning roundtable with bloomberg's

valerie tytel. i want to start with the fed. we had this diverging fed speak over the weekend. on the one hand, the need for further hikes. on the other hand, they need to hold at some stage. this off the back of that mixed jobs report. sharon slower than expected payrolls. wage topping forecast. unemployment down. >> what you make of all of this? where does it leave the markets ahead of this cpi print on thursday? >> it was not the weak overall paper in the market has been looking for. that headlines job figure retrieved substantially. that is the lowest we have seen since december of 2020. but on the flipside, there wasn't a pickup and wage gains. average hourly earnings which the market was really hoping for. that they would get a low print. that is not necessarily good news for the fed.

wage growth is accelerating in that manner. the labor market is clearly weakening. that is a good trend the fed wants to see. the market reaction was fairly clear. a big rally when they came to the treasury market. in the equity market, a lot of weakness there. the interesting thing going forward for this week is whether we see this continuing the steeping trend in the treasury market. we do get a wave of issuance from the treasury. does that continue to add pressure on the treasury markets? >> we are michelle bowman saying the fed may need to raise rates further.

>> i think that will put enough restraint on the economy that it will continue to slow. my outlook is we will still be in a restrictive territory in 2024. >> that was the latest fed speak her. we'll get more from both of them later today. let's turn to geopolitics. a hike on a russian naval vessel and oil tanker signaling a rapidly expanding war. one market intelligence firm seeing frame rates ballooning. the cost of shipping food may rise by as much as 50%. this is a crucial moment.

we just had another harvest and it is a crucial avenue. talk us through these moves. it is very crucial avenue. nearly 20% of its oil exports, that is 2.5 million barrels of crude per day going through this transport avenue. the issue was with the backdrop. we have oil already at your highs. they could cause some inflationary pressure. we are not seeing crude bounce very high. brent is down nearly two -- .2%.

>> they extended the unilateral supply. that could actually be prolonged further and even deeper. we are staying in the middle east but israel. benjamin netanyahu told bloomberg he will not pursue the entire traditional overhaul originally planned by his government. they will try to change the makeup of the judge's election. >> i am absolutely sure israel will come out stable and successful in democratic. at least as democratic. in my view, more democratic. i don't think you will have civil war. what you are seeing is the natural conflict between two opposing views that have not yet mastered but they will mesh.

>> do you support your central bank governor? >> sure. i appointed him. >> he has to decide by next month. >> i have guarded his independence rigorously and that will continue to be a policy. i will talk to him. but we just had not had the opportunity to discuss that. >> will you ask him to stay on? >> possibly. i think he has been an exceptional central banker. i think that is a possibility that i will have to talk to him. >> i think one of your listers called him a savage for raising interest rates. >> my ministers are a hectic parliamentary system. >> i think i passed some laws or

corrective additional laws that safeguarded the independence of the central bank. i do not want the government barging in on what the central bank wants to do. i had several central bank directors. in a few months there will probably be more time as prime minister than anyone in the western world for the last half-century. i have a lot of central bank directors to talk to. >> absolutely soundproof. i always give backing there. >> it would be pretty powerful to the markets given the divisions and turmoil if you would ask him to stay on.

>> i think the choices i have made in bringing in central bank directors -- stanley fischer, after him, i think the people see that we choose and choose well. >> will have more of that interview throughout the program. let's look at some of the other things we are watching later today. 7:00 a.m. london time. our economists reckon they are going to confirm the weakness in manufacturing is what is the blame for the german economy's second quarter stagnation. that is a topic we will be covering with siemens energy later on. 1:30 p.m., we will hear from raphael bostic and michelle bowman.

finally, at 5:00 p.m., we will hear from the bank of england chief economist again. on friday he said after the thursday rate decision, if there is another surge in natural gas prices, the bank would be forced to react. not saying the bank is on any sort of preset path. there is also a story about hsbc executive slamming the u.s. for strong-arming the u.k. into cutting back business with china. and accusing the u.k. of being weak for going along with it. talk me through how these new numbers will play into the ecb thinking. >> we had a lot of upsetting data surprises out of europe recently but maybe this hits the right spot. we had factory orders for germany coming better than expected. if this industrial production also comes in better than expected, maybe people will start rethinking the trajectory of europe's economy.

we had a soft spot already and are looking for more positivity going forward. >> thank you for joining me for our morning roundtable. you can get a round up of the stories to get your day going on today's edition of the daybreak newsletter. today they lead on the commodity fall out of ukraine attacking another russian vessel over the weekend. they also have that latest fed speak we have been talking about and finally they have the story of the bank of england coming out on capital rules. all of that and more on the daybreak newsletter. if you are a terminal subscriber, you can find by going to da why bigo. treasuries are selling off across the curb. especially at the short end. we will discuss that and all of the other market moves, next. this is bloomberg. ♪

>> welcome back to bloomberg

daybreak: europe. let's get into the markets now with bloomberg's mliv strategist. you have treasury selling off across the curve. mostly on the front end. what is driving it? >> it is still up from what we saw on the u.s. sovereign rate last week. more because of the fact that it highlights the problems with u.s. fiscal deficit. this is going to be pretty tricky anyway. and then they put all those things together and people of been pretty defensive going into those options. the first of the options is a three year. three year is not a particularly popular time. it does not fit neatly into many portfolios. that is always a tough one to sow.

it was the third year driving the most of our jobs numbers on friday. he put those things together and it will definitely be a chance for some pretty high volatility. if we get through this week, if there hasn't been too much damage done to the treasury curve, people will be very relieved. it will be a very busy and long way for bond traders. >> we have the meetings at the july meeting. what stood out for you? >> one of the interesting things was the demand is starting to show through in japan. that is something the boj has not really acknowledged for some time. also, the other thing is i don't really seem to have a plan of what to do if the 1% yield threshold is reached. bond yields don't need to go to 1% because it is not justified.

funny enough, markets don't agree. it will be a pretty good test for them. if inflation stays higher in japan. he could get pretty exciting. >> thanks to mark cranfield. 4.5 billion loss on higher turbine costs. the ceo joins us to talk -- joins us to discuss the results next. this is bloomberg. ♪

>> welcome back to bloomberg daybreak: europe. let's check in on these markets for you. u.s. futures pointing to eye-opening this morning. up for tenths of a percent. the s&p ended .5% lower on friday. dragged down by apples downbeat

other. 50 futures are currently down .3%. we can talk about one of the big companies in germany. they reported their earnings this morning. it is scrutinizing its wind business for a strategic reset after heavy cost related to ongoing problems with turbines. the company has said this morning, annual losses are expected to nearly quadruple to 4.5 billion euros. we can discuss those results with the ceo. thank you for being with me. what is the main thing you want investors to take away from these results this morning? >> it has been a very demanding quarter. it is a very diverse pictures that we have.

we have to take charge of 1.6 billion free quality related costs. these were issues that occurred after a certain runtime. we had an additional 600 million charges. because of the ramp up of the offshore business, there is a demand that is good. these are affected by shortage in construction workers. the other thing is -- it overshadows conventional energy businesses. obviously, this is fantastic. this is really painful. the other thing is we have already since the 22nd of june establish mitigation measures including establishing a task force fixing the quality

problems and addressing it now step to step. this is a situation where we are reviewing the different elements in terms of how can stabilize the wind business. it is an interesting growth business. but you have to be able to operate profitably. >> what you know about the causes of the floors and onshore turbines? what are you doing to fix those issues? >> these are related to a certain operational time and this is a relatively diverse picture. i think it is important to understand that these are issues which currently do not affect the operation of the turbines. they are producing powerful customers but we have relatively early on identified issues, the two main components which need ratification for some of the

turbines in the fleet, it is always a mixture between specific suppliers which have provided these parts and also conditions. this is not a black and white picture but i think what is important is these are for them to fix over the next couple of years. these quality issues and we are always trying to do this in line with our customers. so this will unfold over the next couple of days. >> how long will it delay profitability? >> it will allow us to do exact statement store that. at the same time, what we are doing is saying how do we phase it out over the next 10 years to come? so it is not just quality issues. it is to say what is the best path through that and that will

influence the exact timing of some of the profitability but one thing is clear. it delays our path to profitability in the wind business. there is more than just fixing the report. we will look at the overall package. >> how does this profit from the transition to renewable energy? >> could you repeat the question? i could not hear you. >> how did they profit from the transition to renewable energy more broadly? >> and i thank you very much. you have seen the fantastic record. obviously, this needs to transport electricity. we are benefiting from this. we are seeing an increasing margin. we see the ramp up now in hydrogen.

we will see a quarter for the book on the hydrogen side. there are good elements that would profit from. we also want to profit from the wind business but that is obviously somewhere that we have to be going. >> thank you. the ceo of siemens energy. we will bring you the latest on the new attacks on russia, ukraine and that is next, this is bloomberg. ♪ wow, you get to watch all your favorite stuff. it's to die for. and it's all right here. streaming was never this easy, you know. this is the way. you really went all out didn't you?

um, it's called commitment. could you turn down the volume? here, you can try. get way more into what your into when you stream on the xfinity 10g network.

>> good morning.

this is bloomberg daybreak: europe. these are the stories that you're waking up to. that officials debate further rate hikes and of this week's inflation report. hostility with ukraine threaten russia's commodity exports. plus, israeli prime minister benjamin netanyahu tells bloomberg he will not pursue the judicial overhaul original planned by his government. >> i will still give it several months to get it under consensus. and just knock out any decision that the court makes. it has to be a balance.

>> good morning and welcome to monday. it is a new week and we started with treasury yields edging higher. there was a little something in there for every bull and bear just as there was in the latest fed speak. him talking about a pivot to a hold. >> the plane is not yet on a trajectory to a soft landing within the runway. >> i philip we have been getting promising numbers on inflation. i am not expecting this to be a two or three months time. >> i still do think there are substantial inflation risks. >> it was a weird business cycle. it can be a weird recovery and i am hopeful we can pull it off.

so far we have been doing it. >> able to go a while for the inflationary pressures to fully dissipate and get us back to do present. >> this is an economy putting us up back together. it has been surprisingly resilient. >> u.s. policymakers past and present sharing their economic outlook in aspen there. traders pricing about a 40% chance by the end of the year. on the stock front you have u.s. futures pointing to a higher opening. let's get over to asia now. what is happening where you are? ? it's our digesting all the

rhetoric from those that officials. asian markets seem to be quiet cautious today. hong kong shares recouping some of their losses. the japanese topics was getting. there are still some losses onshore there. investors in china will be looking at china inflation data out this week. some economists are saying this could be a tipping point for these chinese equities. for these policymakers to put in place these stimulus measures they have been talking about rolling out. the current board also wanted to point out the yen 142. there was a lot of volatility in the bond markets. we will have to see how this plays out and how it will spill over into jgb yields. today, they are around 62 basis points.

>> thank you, tanya for that update on asian markets. i want to come back to geopolitics. ukraine has taken russia's war into the black sea using crew strives to cripple a russian naval vessel. you have wheat extending games off the back this morning. we will talk about that with bruce einhorn. great to have you with me. what are the implications of the black sea escalation for russia as well as others? quick this will make shipping oil through the black sea much more expensive. this is something the russians have been trying to do to ukraine for white a while now. putin pulled russia out of the ukraine deal last month. since then, russia has been attacking odessa and ukrainian reports and infrastructure geared toward the export of rain.

the defense ministry said two can play that game. that is a message they posted on social media. ukraine attacked a major russian port. attacks will significantly add to the cost. there is also the implication for europe. this goes from the russian port on to europe. that could make russian imports of oil from kazakhstan more expensive as well. >> market implications are exactly what the bank of england

was talking about when he said they will have to react if more comes. really thanking you for bringing us the latest there. we will cross over to africa. niger has closed the countries and -- countries airspace. this as the deadline passed on. what is the latest where you are? >> as you mentioned, we passed that deadline which was supposed to be sunday evening and at this point in time, we did hear they have closed airspace to all international flights outside of those including countries like chad, algeria, molly and libya. now we are really waiting to see what happens next. over the weekend we saw a little bit of activity in niger. we saw thousands of people

rallying, appearing to be in support of the coup leaders. we know this deadline was set. what happens next? what will be here? we are in a holding pattern at this point in time. just to see what unfolds now on monday morning. >> what does need to happen for all this tension to ease? >> what we have heard from most regional leaders and most international leaders is this call and desire for a resolution to come in the form of diplomacy. they do not want this to get to military intervention even though that is something we did hear if we did not see a restoration back to democracy by sunday that there could be military intervention. that was supported by countries

including senegal, ivory coast and nigeria. the one main point to think about with nigeria, it is very important. nigeria shares a large report -- large border with niger. he needs to have the approval of his senate in order to pursue military intervention. at this point in time, based on what we heard over the weekend, the senate has not approved any sort of military intervention. it is unclear how they plan to move forward. especially because what we are hearing from the leaders at this point in time is they are preparing to defend any sort of military action if they do see that coming. but regional powers really do not want this to break out into the military intervention situation. >> thank you to jennifer for that update. they head of public affairs is

criticizing the u.s. for strong-arming -- strong-arming the u.k. into business with china. he accused the british government of being quiet week for going along with it. they told attendance at a closed-door event that the u.k. should not be blindly following the u.s.. instead, look after its own interests. this is also the chairman of the china business council lobby. he said his personal comments don't reflect the views of hsbc. now, operating profit grew to more than $10 billion for the second quarter. a strength its insurance businesses helped encounter. the results were driven by a 74% increase in insurance earnings. all of that at auto insurer geico. elsewhere, here is what we are looking out for today. on tuesday, the ecb releases its

consumer expectations, export survey and then on wednesday will get china pmi and ppi data. later in the day we will be watching the disney earnings. on thursday it is uscp i. the prior month's report showed a rise of 3% from a year ago. that is the smallest increase in more than two years. at the end of the week, we get u.k. gdp and u.s. ppi. all of that to come this week. coming up, the israeli prime minister tells bloomberg he is pulling back on his judicial revamp plans. we will have more of that exclusive interview for you next. this is bloomberg. ♪

>> welcome back. israel's prime minister says he

will not pursue entire judicial overhaul of -- originally planned by his government. he will only work to change the makeup of the georgia selection committee. the israeli leader says his nation and saudi arabia will deepen economic business relations even if they don't formally recognize each other. he spoke exclusively to francine lacqua in jerusalem. >> it tells you why i am very optimistic about israel. one of two reasons. one of two main reasons. one is that i will start with saudi arabia. i think that we are about to witness the pivot of history. i can't guarantee that will happen. first it starts in the economic order of energy, transport and communication. that naturally goes through our geography. from the arabian peninsula, the

arabian peninsula. we will realize that despite -- wherever we have formal peace or not. >> do you have to give concessions? what would you give? would you limit jewish settlements in the west bank? >> you have a good want to try to eke out for me. my negotiation stance. of course you will not succeed but you can keep on trying. i think it is feasible to have that? what do i think the political questions will be if there is political will? will there be a political way to achieve normalization? that has enormous economic consequences for your investors. if they have to bet on it, right now, i would. but i can't guarantee it. >> i am not trying to eke out

negotiations. i am trying to understand what you're willing to give because this is such an important partnership. >> i will tell you what i am not willing to give. i'm not willing to give anything that will endanger security. that i will not do. i think there is enough room to discuss possibilities. i think the palestinian thing is brought in all the time. it was always brought in. it is sort of a checkbox. you have to check it to say that you are doing it. is that it what is being said in corridors? is that what is being said in discrete negotiations? the answer is a lot less than you think. >> if you look at given the palestinians the real estate, is that something -- is that a redline? >> it will be an iranian controlled state in an area that is about the with of washington. if you take israel and the

palestinian areas together, it is a little more than the width of washington. you will have a palestinian state, you will have an iranian terrorist state. >> what i said often is i have a solution. two things about that. one, the palestinians should have none of the power to threaten israel. this means in whatever final settlement we have with the palestinians, israel remains -- israel has the overriding security power. otherwise we collapse. they collapse. >> that was benjamin netanyahu

speaking exclusively to bloomberg. i want to think a little bit about the market implications here. for years, israel has boosted a currency that was likely to react to u.s. stocks. this time it seems the market turmoil is playing out differently. marcus don't seem to be immune to politics anymore. political assets are exposed to volatility. you see the check will be one of the five worst performers. a key question is whether the central bank governor is going to stay on after the end of his five-year term. another key question there. also, we want to bring some breaking news from kkr.

it is to offer 44 euros per share. cash for a stake in its space tech firm. this after the bloomberg's group that came through that they plan to take over the tech company. oh has built satellites products for the galileo navigation system also, weather forecasting and the international space station and its applied tech to help search for life on mars to track comments and support rocket launchers. more on that, i am sure in the coming hours on kkr. 80% of european companies have reported for the second quarter so far. we will break down the winners in the laggards, next. this is bloomberg. ♪

>> likes it is the job report that has some viewing the softer landing bed. -- badly. if it is the harder lending, we will worry about the 4.4% which increases drive. the market-based -- marketplace faces -- favors the softer landing. that was the july jobs data there.

we are nearing the end of the earnings season here in europe. let's check how companies have fair this past quarter. join me for a breakdown is the senior european equity strategist, tim. give us the big numbers from the second quarter. >> avenue -- as you have said, roughly 80%, a little bit more have reported. we are well on our way through the earnings season. overall i would say it has been a pretty good result. >> we have about 30% that have missed so that ratios pretty good. importantly, if you look at the overall number, you might think a 10% earnings decline is not so hot. clearly that is a retreat from the profit growth we have seen over the past several quarters. but it is better than the 12% decline that was expected. if you back out energy and

materials which are down a lot because of your on your commodity prices, earnings are of 7%. i think it is a pretty healthy assessment, surprising to us that it has been so good. >> two things jump out. one is margins. often margins. if we take away energy materials, profit margins from every other sector are robust, solid, higher than they were year on year and we are at near or at record levels for low sectors. that is the biggest surprised us. it still is the biggest risk as we go into the second half as the economy slows. the other thing i would say is while earnings beats and misses have had an impact on stocks, real impact on results have been guidance.

we have seen management at times be conservative, not a big surprise but where we have had negative guidance. most of those who miss. >> they are feeding into the european central bank's as well. we lament the end of earnings season. what else is the set up for european equities this summer? >> it is an interesting time. we are coming into this summer doldrums vacuum for earnings. if you look seasonally, there are some pretty good functionality on the bloomberg. august and september tend to be the worst months. all else being equal across many markets. that is number one. number two, if you look specifically at the smi, as two of the bigger countries, we see

as you see in this chart a wedge forming. and it is interesting. you have things like the downgrade in the u.s.. you have the lack of earnings coming ahead. you have court in ukraine taking various tunes here and there. and you have this wedge shape coming together that either means a breakup or breakdown. seasonally and this sort of thing, it feels a little precarious. very near term before we get on the second half of the year. and then i look into next year. >> thank you for that look back and to look ahead. for more analysis and insights from our team at bloomberg intelligence this earnings season, don't forget to check out bi on your bloomberg terminal. let's check in on the markets as we and the are u.s. futures pointing to a higher rate. the nasdaq futures up half a

percent. the s&p ended half a percent lower on friday. dragged down partly by the downbeat demand outlook. in europe you have stocks facing futures currently down 3/10 of a percent. at the top of the hour we get the latest numbers for june as tim was saying, relatively quiet for earnings today. just to companies reporting on the stocks, 600. one copy we're looking out for is saudi aramco. the rose biggest fossil fuel producer. and those earnings are due out today. this is bloomberg. ♪