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rotation from big tech to small caps covered u.s. upside. the tsmc litmus test, will the maker of chips serve up an ai fueled relief rally? we break down the earnings and a half hour. the ecb looks to set cuts to rates -- to cut rates for a third time this cycle as inflation falls below the euro area's target for the first time in three years. we are live on the ground in slovenia where the ecb will be making that decision. ♪ tom: it's a big day for earnings. we have numbers costing right now from a swiss company that is nestle with a focus on pet foods

and coffee. full-year organic revenue increasing 2%, that's below its previous forecast of an increase of 3%. so it is cutting its outlook in terms of the forecast around revenue. the estimates have been just shy of 3%. an increase of 2.8% had been the estimate. it looks now like they expect softer revenue growth. nestle sees margins at 17%. on an operational level, that's below the estimates of 17.3%. nestle now sees full year 2024 underlying earnings pressure broadly flattened. a new ceo at the helm since august. keep an eye on that start at the open. net sales coming in softer than expected. it's a mix for nokia in the

third quarter in terms of sales, the estimates have been for just over 4.7 billion in terms of the adjusted operating margin, that was higher than the estimate. so the operating margin is a beat. the estimates had been for 9.45%. there will be details in terms of the telecom equipment maker and demand from some of their telecom operator clients as well. you saw the beat coming through again for the banking sector with morgan stanley and focus yesterday. the gains and rallies that stock , a gain of more than 6% for morgan stanley and expectation that bonuses will be juicy this year. european futures currently warning lower by .2%. heard the story for in terms of the official statements out of china. the ftse 100 looking to eke out gains of 12% as we look into the

market. nasdaq futures off by 53 points. the russell 2000 down more than 1%. let's flip the board, annual jobs claims, look at the u.s. 10 year. two basis point year -- yields up. we watched a single currency, the ecb almost fully expected by this market to cut for the third time. iron ore down 3% on the back of that disappointment around officials and lack of more concrete support for that property market of china. china has announced further support to ensure unfinished homes are completed and delivered to buyers. less crossover to our china correspondent in hong kong who is passing the details.

what is the expected impact? >> about 2.2 trillion yuan in financing has already been extended to these property developers projects so they are going to increase this, pre-much double it to 4 trillion by the end of the year. it's below what market analyst had been calling for. numeral had been calling for 3 trillion in additional funding through the intelligence analyst saying 11 trillion in funding is needed for this massive amount, 48 million homes in the housing maket that is not yet completed that has been the source of small-scale protests in china over the last couple of years. this is to shore up homebuyers confidence because if they're not sure the homes will be completed they will continue shying away from the property market.

i may not fully translate into fresh funding because of banks reluctance to lend. look at developers loans from domestic loans, it's down 4%, despite the establishment of this white list, and the credit risk these banks may be asked to take up, the possibility of mort nonperforming goals that could diminish the impact of this additional funding. tom: and as you say, banks and china are already under pressure. we will see how they react to these new initiatives. what other major initiatives have been announced during this reaping. >> the government is promising to renovate one million homes in these urban villages. these are usually very cramped quarters and urban cities that are usually occupied by migrant workers, for example. it's quite reminiscent of the shantytown redevelopment program am 2015-2018. the key difference is that then

it was 6 million homes a year on average that was renovated. the government is promising only one million homes to be renovated so the scale is much's smaller. bloomberg intelligence is saying it could lead to a 15% increase in new home sales if all of those one million new homes are sold next year. but she says it is achievable but it is disappointingly modest. some of the other measures include subsidies for families with two kids. overall it's disappointing there weren't enough measures boot -- aimed at roosting consumption. tom: that remains a key question any source of frustration still. some disappointment from some within these markets. the csi 300 now down in the session. to europe now and the decision from the european central bank, expected to cut interest rate by 25 basis points despite policymakers ruling out such a

move just one month ago. with inflation now below 2% for the first time in three years, it appears the decision just needs a formal signoff. our correspondent covering all of this for us near where the ecb will be meeting. the messaging changed and it's been pretty dramatic since the last meeting. >> an absolute about-face since we were last in frankfurt. it's an usually short period between meetings and we haven't had a whole lot of economic data in the meantime. to tell you what they are focusing on, you mentioned inflation story, below 2% for the first time since 2021. on the flipside you also have these business surveys sharing concerns about the growth outlook, particularly in the prime sector.

market expectations shifted toward a rate cut today, almost fully priced. what's interesting is that the governing council hasn't done much to bat that away. in fact most of them have endorsed it. the only member of the covenant counsel whose actively publicly arguing against a cut today is the slovakian central banker. there could be more hawks behind the scenes but that means that now the focus in the press conference will turn to the rate path ahead and at the moment the expectation is for faster cuts to a deeper, lower level. tom: talk to us about that projection going ahead beyond this meeting where markets are almost fully pricing in the 25 basis points. it is the path ahead for the ecb given the softness in growth. how much tension is there going to be within the fomc or at the head of the ecb, but that's part of the mix as well, where the

fed goes. the decisions for the ecb as we project into 2025. >> it's an interesting contrast, the dual mandate of the federal reserve and the ecb still having to balance the downside risk to growth and the continued inflationary pressures. in terms of the path ahead, our survey of analysts expects cuts at every meeting all the wayo march and then another couple of cuts in june and december. that would take the benchmark rate to 2%. the rate at which interest rates need to stimulate or restrict the economy, but all of this is based on the data. on the one hand, you look at the labor market is showing signs of easing. look at the corporate story, companies like basf offloading staff.

and yet we still have unemployment at a record low. wages growing at a healthy clip, keeping up that inflationary pressure, but then the ecb having to manage the downside risks to growth and even just last night, christine lagarde flagging the geopolitical tensions in the middle east, the political tensions around the u.s. election. so much uncertainty which means overall in this press conference today, i'm sure christine lagarde will continue to emphasize the need for caution, and again, the need for data dependency. tom: lizzy burden on the ground for us ahead of that ecb decision and will be given us all the details and analysis throughout the day and tuning in for that press conference with christine lagarde. do not miss ourerae of that ecb policy decision at 1:15 p.m. u.k. time.

the news conference will be a half-hour later. here is what else to be thinking about today. we are expecting earnings from tsmc to drop at 6:30 a.m. u.k. time or thereabouts. we will bring those to you live and bring you the analysis because of course after asml's fortunes and challenges particularly around the industrial demand and the auto demand for chips and equipment that asml provides to the chipmakers, the focus now firmly switching to the giant that produces those chips for nvidia and apple. to what extent will the team continue? the sales release recently were still strong in the stop is up about 26% year to date. we will bring you that data live and give you the context. the ecb rate decision, markets

almost fully expecting another cut. the press conference arguably will be the more important piece of the story today around the european central bank payment at 1:30 p.m., we will get data out of the u.s., retail sales expected to tick up, 0.3% increase from 0.1%. we know the cost of financing is becoming a challenge for many households. in u.s. jobless claims, fomc officials are increasingly scrutinizing the labor market putting the weight of the focus there versus inflation. all that coming up throughout the day. you can get around up by the stories you need to know in today's edition of daybreak. the top story right now is the detail coming through from chinese officials, additional measures to try to support the

real estate market of that country. investors so far are pretty unimpressed. coming up, u.s. retail sales do later today. is the american consumer holding out? we will bring those for you, and of course wall street bonuses. u.s. banks and traders within those divisions are hoping to cash in on the earnings windfall after blowout results. we will bring you the details, coming up. this is bloomberg. ♪

tom: welcome back to bloomberg "daybreak: europe." morgan stanley has joined their wall street rivals and posting better than expected revenue, a 32% profit surge for the third quarter. we asked the company ceo about the rebound of dealmaking and how investors are weighing election risks. >> i think you have a number of investors that are actually continuing to plow forward on the view that the economy is in pretty good shape and consumers and corporate's are in great shape so that when there is an election outcome, once there's a sense for whether new policy will actually get affected, then they can have a reaction

obviously that brings into question monetary policy and what it will look like. our job is just to stay close and make sure infrastructure is fit for purpose. we do run tabletops to make sure not just that we can help offer solutions to clients but also that we have our act together. >> after the election is there a sense and which party is better for the stock market? do you have a view? >> i really don't. i don't know that we can imagine what the mandate will be and what the policy will be coming off what's been said during the campaigns. what i do know is that the economy continues to be in pretty good shape and that gives any new administration some tailwinds. they need to continue to imagine where we are in the election cycle and they have to pay attention to deficits and actual debt and all the things you been talking about. >> there is the election itself and the moment until the boat is certified. you expect uncertainty to clear

up quickly or do you think it will last for a while? >> i'm hoping for what we all hope for which is that the election is a certain outcome and we go about getting a sense of what policy is. if there is uncertainty, that can go on for a bit of time but markets tend to be reasonably sanguine about that kind of uncertainty for number of days. there could be some jittery behavior but assuming we know where we are going, the market should align in due course. >> the u.s. is mulling revised capital rules with lower capital requirements initially put forward. how do you feel about the direction of travel? >> i feel like the direction of travel has been constructive. we are carrying a capital buffer of 160 basis points. we carry that because it is an uncertainty that affects morgan stanley. i care about a strategy which is

to allocate capital for individuals and institutions that care about our culture which is one of rigor and partnership, and i care about financial strength, capital liquidity. whatever the vicissitudes of the discussion going into the election, i think it's probably the case that we will not have resolution on this until after the election but i think the industry has made its case on where some real modification should be made and i think that regulators are largely listening. we will have to see how that plays out coming out of the election. tom: the stock was up 6.5% by the end of the session yesterday. talking about the relative strength of the u.s. economy as well. traders that u.s. banks helping to cash in on the earnings

windfall after those blowout results. goldman sachs compensation meanwhile expects to rise by the same amount. morgan stanley with 4%. the biggest banks are on track to post their best trading year since the onset of the dodd-frank era. retail sales likely grew moderately in september as consumers in the u.s. contended with high finance cost and elevated uncertainty ahead of that presidential election. valerie, we were listening to him talking about the relative strength of the u.s. economy. is that expected to be reiterated today with the data with the retail sales? >> it's been light on the data

calendar but the big one is retail sales for that reason. he gives us a glimpse into the third-quarter gdp, mostly because of this control group segment of retail sales. that is a direct feeder into gdp so the markets will have their eyes on that today. it's expected to come in the same as prior months so have your eye on that. it will give us a better reflection of where third-quarter gdp for the u.s. is heading. the atlanta fed's gdp is a real-time indicator of four where gps tracking for the third quarter. it has crept higher in the last few weeks. now sitting at 3.2% for the u.s. for the third quarter. that is the u.s. growing above trend. or hints of that in the retail sales figure. we also get the jobless claims figures today. they are expected to be muddied

by the hurricane impact. in my next chart, i'll show you how much the initial claims were muddied by the last two hurricanes. you see hurricane irma and hurricane ian had a big effect on planes in florida. the print today will likely be muddied by that so will have to strip out the states a did have hurricane impact to get a good guide on where the labor market is going from here. tom: thank you for that preview of the date it expecting out of the u.s. and what will tell us about the broader economy. coming up, tsmc releasing earnings in a few minutes time. concerns rise about slowing demand in the chips sector, the concern red bells being rung by asml. click come through with some numbers that may give some relief? we will bring you the data when they cross.

stay with us. this is bloomberg. ♪

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he gets it. yeah. tom: welcome back to bloomberg "daybreak: europe." israel's military expanded strikes on lebanon saying it killed a senior hezbollah commander. lebanese authorities say a separate strike killed 60 people including a local man. israeli warplanes struck by root for the first time in almost a week, just hours after lebanon's prime minister said the u.s. had assured him attacks on the capital would ease. in the u.k., chancellor rachel reeves has been urged to ignore the downturns and press ahead with lance to raise 15 million pounds for britain's wealthiest. the institute for public policy research and the center for the

analysis of taxation feel that raising capital gains could raise public coffers. that to the earnings story and details around nestle, the top line coming through in terms of a cut to the forward guidance for this maker of pet foods and coffee as well. more changes being announced, the board structure is being adjusted but the top line is the cut to the full year guidance. this now is expected in terms of organic sales, nestle expect to see an increase of 2% in 2024. they had previously seen an increase in excess of 3%. that cutt expectation to 2%. there's a new ceo at the helm. the challenges clearly are there

for the maker of nutrition products. the stock year-to-date is down for nestle a little over 10%. we will watch that stock at the open at 8:00 a.m. u.k. time. coming up, concerns rise about slowing demand across the chips sector but you do have to distinguish between the demand for industrial chips and auto chips versus those that go into data centers that underpin these large language models. details coming through in the next few minutes.

tom: good morning, these are the

stories that set your agenda. chinese stocks pair gains after the government slays support for the housing market fails to impress. bart a gauge of asian stocks follows wall street higher after rotation from big tech to small caps powered u.s. upside. the ecb look set to cut rates for a third time this cycle as inflation falls below euro area target for the first time in three years. we are on the ground in slovenia where that decision is taken place. the tsmc litmus test, with the maker of chips add to fears about slumping semiconductor demand or serve up ai fueled relief? tsmc earnings do in just the next few seconds. in fact, they're crossing right now. it's a miss in terms of first-quarter organic sales, estimates had been for a contraction of 5%.

the pressure coming through for the asian part of the market when it comes to this maker of brandy and were thinking about the impact of chinese tariffs on french brandy. the estimates had been for 2.8. the tsmc more important earnings story when it comes to the broader story rentech and semiconductors. tsmc third quarter net income coming in as a solid beat for the third quarter. $325 billion taiwanese. the estimate had been for below 300 billion. they came in above that by about $25 billion taiwanese. in terms of net income for the third quarter. the gross margin also beating for tsmc. the gross margin at 57.8%.

estimates had been for just below 55%. net income is a beat for this key foundry making chips for the likes of nvidia and apple. we will watch for the details on that. i tech reporter is standing by, what stands out to you from these numbers? anabel: is set margin, it's incredibly high. you think about where analysts had seen this going into the numbers and you're looking at a range of between 53.5 to 55.5. you beaten the highest estimates by quite a wide margin. where tsmc sees the longer-term target is at 53%. it's another signal that tsmc is robust and the higher in for advanced technology space, ai

chips. that's where it is dominating the market and that's what is standing out so far. you could've expected strong net income figures. we had that outperformance coming through over those monthly sales figures but to reiterate that gross margin, it is impressively high. tom: it is indeed. there will be may be further upside today on the back of these results. we have to think about the chips sector and distinguish between that demand for those ai accelerators produced by nvidia and the slumping demand for the chips that go into electric vehicles. there are some view that maybe the misfortunes of asml is not necessarily a bad thing for tsmc. maybe at the rate they would've spent, they are able to use what they already have to produce chips.

talk about what you'll be listening for on the earnings call and how to think about some of these factors? >> there's a couple of different things we want to listen for. it's kicking off in about 25 minutes from now. first is what they signal around two nanometer reduction, the next generation of chips and we expect those to start being made toward the end of next year. we will watch for any sort of guidance around that. adjacent is packaging technology . suffice it to say advanced packaging technology is taken on an even greater prominence in semiconductor production because it integrates multiple components into compact designs, and that is really critical. tsmc has a proprietary technology and what they signal around the expansion of these facilities will be another critical thing to watch out for. guidance really important, with a lifted in 2024 and what will it say about 2025?

price hikes are another critical area. it could eat into margins into next year. and anything they signal around geopolitical concerns because were just a few weeks out from the u.s. election. taiwan or tsmc is pushing through with making production facilities in the u.s., germany and japan. they need to start to move some of their technology outside of the island and that will be another thing to watch out for. tom: i love that you got that in . annabelle, thank you for breaking down the earnings coming through with tsmc. let's get to the markets because earnings is part of the story and a key driver. maybe tsmc is part of the mix on the asian session right now, the

msci asia pacific is up .2%. the ftse 100 looking to add 24 points. s&p futures pointing lower by .10%. nasdaq's futures down. the russell 2000 had a decent, solid session indeed yesterday, ending up around 1.6%. let's flip the board and look cross asset. the focus on the euro leading up to that decision from the ecb. the markets expected another cut in this cycle from the european central bank. brent trading up4% and iron or pssure after more disappointment from chinese offls in terms of their support measures for that economy, particularly the real estate market. a bit of pressure in the session

today. it's a big day for the european central bank, expected to cut interest rates when they meet later. lizzy burden joins us once again from where the ecb will be meeting today. a rate cut is being priced in, how much anticipation is therefore this decision? >> five weeks is a long time in central banking. you mentioned inflation, it's back below the ecb's 2% target but more importantly, even though we haven't had a lot of data since last meeting, these private surveys pointing to weakness when it comes to growth , particularly in the private sector. that's why markets have come t expect a rate cut today. the governing council mostly either directly or indirectly have endorsed that and it means a focus turns to the path ahead. the expectation and makets is for a cut again in december and

if you look at our bloomberg survey, most analysts reckon you will get back to back cuts all the way to march. followed by cuts in june and december 2025, taking the key rate to 2%. there is a debate on the governing council where the radius that needs to neither stime o reach- restrict the euro zone economy. what we will be listing for from christine lagarde at the press conference is whether meeting by meeting cuts are on the table and what is holding them back. it looks like the answer will be they want certainty on the labor market and certainty that inflation is indeed defeated. since last meeting arguably this is an even more uncertain geopolitical climate. tom: lizzy burden, thank you very much indeed for the update and the preview of that ecb decision. do not miss our coverage

continuing througu the day tecbpolicy decision. that decision will be made at 1:15 p.m. u.k. time. the news conference will follo a half-hour later. the leaders of the european union and six golf nations have been meeting against the backdrop of turmoil in the middle east. the summit in brussels which lasted just a few hours covered visas and trade as well as the escalating regional conflict. let's bring in oliver crook who joins us from brussels. what was the outcome of the meeting? were they talking shop or were there real concrete details on this? oliver: i think it was a little more of talking shop. we should put it in the context of the fact it's the first time the gcc and the e.u. level have at in their history of cooperation agreement. there have been discussions of potential free-trade agreements but they've never been able to

come together. what is interesting is, first of all you have a single joint statement where they did both call for a cease-fire in both gaza and lebanon, a little bit of common ground that they have. other issues they have common ground on, there's a new reality in europe when it comes to energy security and the gcc is crucial there. at the same time, it shows maybe the e.u. is not in the same position it always has been historically without the same strong ties with the u.s. and the gcc being such a key player dealing with everything from instability within the middle east, but the key energy security. so it is striking when you see mohammad bin salman walking through the rooms explaining the new world we live in, one that's a little more fragmented and one in which the middle east and gcc leaders of trying to play a central role, navigating the geopolitics. tom: and that energy component

is really interesting. from one conflict to another, because e.u. leaders, many of the newly appointed to their roles come meeting today with president zelenskyy. what are we expecting on ukraine? >> this is the first time we've had an e.u. leader summit since we had commissioners appointed for the new commission in the first time since the draghi report that lays out priorities for the next five years for the you. is the fast -- last one before the u.s. election which will be decisive on a number of different issues. perhaps no issue more than ukraine. what zones key is doing in brussels is presenting his victory plan. we got the early contours and that in front of the ukrainian parliament yesterday and it includes not relinquishing any territory to russia and what

he's looking for, an invitation into nato that is not membership but showing willingness to go there, and to lift all restrictions on weapons to be able to strike within russia, and also calling for more weapons to be delivered as deterrence for the future for ukraine. these will all be the key topics and it will be interesting to see and what level e.u. leaders are willing to get on board on the question of them joining nato and the key question striking within russia. there is a fear that nothing can really be decided until november 5 when the u.s. election takes place. tom: when it comes to migration, the contention, the splits within the e.u., attention has been long running around this issue. where all the fault lines right now? >> this will be key in the discussion, getting to where the

thought lines are. this is an issue that you can basically no longer ignore. immigration is huge, whether in france, the netherlands or germany. this is something you cannot ignore anymore and is seen as softening with a lot of the times from -- that are historically on the left. we spoke to the prime minister of denmark who is a social democrat. she says there is a real turning of the tide when it comes to immigration. this is what she told us in an exclusive interview. >> it is changing a lot, finally, thank you. we should have changed the rules and the legislation in europe a long time ago. i am a social democrat and i'm quite tough on immigration and especially migration. if too many people from outside europe into europe, the problems

with lack of integration will simply be too big and too massive. >> she is seeing a changing in the conversation, putting at the top of the agenda of the question of immigration. the prime minister of italy will be chairing a meeting on the sidelines. italy for the first time this week has deported migrants to albania. could this be one of the models that europe starts to look at? it's causing conflict and contention within the e.u. where you have eight countries that have been effectively suspended and are doing border checks at the borders. so it's important for the european leaders to resolve. tom: oliver crook on the ground for us in russell's, thank indeed. coming up, a feisty kamala harris gives her first interview to fox news. a poll by the network shows donald pulling ahead. we have the details next, coming

up. stay with us. this is bloomberg. ♪

>> i remember how right the market was on ronald reagan in 1980, despite what the pundits were saying. in the last 12 days the market and the inside of the market is very convinced trump is going to win. you can see it in the bank stocks, you can see it in crypto. tom: the inside of the market very convinced that trump will win, that's the view from that billionaire speaking exclusively to bloomberg. kamala harris sat down for her first interview with fox news as she seeks to broaden her appeal to conservative voters. >> let me be very clear. my presidency will not be a

continuation of joe biden's presidency. like every new president that comes into office, i will bring my life experiences, my professional experiences, and fresh and new ideas. tom: let's bring in kriti gupta. this was a line that stood out, because this was the clearest i've heard, hairs articulating at least what she hopes to frame as a break from biden, if that's a way we put it. how different will lay, harris presidency be if she wins, versus what we have with biden? >> it's a little bit of a catch 22. the idea that she is breaking away is crucial, but she has already kind of said that. for example, her position on gaza and the middle east is far more vocal than that of her predecessor at the moment. it's also key to point out that she's going even further with

economic policies and ways to address things like inflation and housing. one the key pillars of the biden administration is things like drug pricing and creating controls on that. to make affordability in the united states a key issue. then she steps back on things like corporate taxes. she sang about 26 percent. you do see this push and pull, some divergence from the top lines compared to donald trump. mixed reactions on how it's being interpreted. tom: thanks for that analysis on that interview. as we build up to that election in november in the u.s. lizzie, thanks for standing by. you effectively broke down in your notes to us different potential outcomes in terms of whether we get trump or harris

and how the congressional mix breaks down with the senate and the house. talk about where the odds are some of these combinations and how we think about the policy that can come through that. that start with some of the different options you have outlined. >> we see the odds in the race is being extensively -- essentially 50-50. for harris, we see overall of 40% probability that we see harris victory but with a constrained harris in that she does not have democratic control of congress. that will hamper her ability to push forward the agenda she's campaigning on at the moment. so that puts it only 10%.

trump, the best case scenario where trump wins but he does not have control of congress and therefore we see a situation in which she's focused on policies that he can implement through executive order and that leads him to focus on tariffs and immigration policy. we sit 15% probability that we see a market friendly trump that is focused on tax cuts and deregulation. that requires him to have full control of congress. then we put a 10% probability on a trump with the unified control of congress that does implement these tax cuts but is also focused on tariffs as well. so you get basically all the different policy flavors of trump at once. he implements essentially everything he's currently campaigning on rather than just elements of it. the take away we are trying to present here is that congress really matters when we're

talking about the actual impact of the election, particularly for harris, it does constrain policy platforms that she's putting forward at the moment. the other factor were trying to demonstrate here is that you can get very different outcomes even if it talking about a single candidate winning. tom: do not lose sight of those senate races this time around. on the trade front in particular, you talk about the policy response to potential additional tariffs, risk of a trade war under certain scenario with trump. give us a little more detail on how that could come to pass why you're putting that at a 25% probability, which sounds unnervingly high to some. >> the thing to note in that scenario is that we are not saying trump will implement all of the tariffs he is currently campaigning on.

we think he will be slightly more constrained than that because he's working through executive orders. by because it is a scenario in which he did implement tariffs, it could be a focus for him should he not benefit from a large tax cutting agenda. we think we would seat measurable increases in chinese tariffs, but we don't think that 10% baseline tariff on the rest of global trade is something we will be able to implement without congressional approval. tom: some smart potential outcomes as result of the u.s. election. there is much more coming up. stay with us. this is bloomberg. ♪

tom: welcome back.

it's an earnings day and in the u.s. you have industrial production, jobless claims out later. u.s. retail sales for the month of september, the expectation is to take up 0.3%. suggesting may be consumers are holding up if the number comes through. bloomberg economic says there are seasonal effects at play in the cooling neighbor market means consumers are constrained. that data will drop later and we will give you analysis. there is lots more coming up. stay with us. this is bloomberg. ♪

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>> anna edwards, we're an hour away from open trade. strong third-quarter with net income ahead of estimates. global chip stocks take a