kriti: the magnificent seven driving a rebound in u.s. stocks. apple unveiling plans for a new in-house ai powered chip. monetary policy, traders reprice the ecb putting it on track to cut before the federal reserve. christine lagarde insisting the ecb does not take cues from across the atlantic. wall street bank earnings are in focus. jp morgan, citi, wells fargo all set to report today. it is friday. we're ready for the we can but there's plenty to digest the next 24 hours. we look at the futures picture, broadly positive this side of the atlantic. euro stoxx 50 futures higher 0.6%. the ftse 100 seeing green on the screen this morning, higher 0.4%. is that pricing in the full story of the ecb cutting? is that a positive rates story? at the end of the day, the s&p story not seeing as much green on the screen, despite that massive rebound in the u.s. tech space on particular.

usually you would see the asian or european traders hop on that trade. they are not this morning trade let's talk about cross assets though because the bond market matters more and more now. now that we have interest rate differentials coming to the forefront, you're looking at 4.57 on the 10-year yield, the fact that we are sustainably above that 4.50 level. is 5% on the horizon? we will dive into that throughout the show. fx gets interesting. you see volatility in the bond market not necessarily in effects. 1.07 on euro-dollar, 1.25 on cable. you are starting to see european currencies cracked but still a dollar story driving it. the dollar is driving the commodity space, brent crude trading at a $90 handle, only higher 0.6%. let me get a quick check on how asian markets are faring. tonya joins us from hong kong. walk us through it. >> hey, good morning and happy

friday. asian stocks are trading mixed today. i will take you into japan first. japan equities are on the firmer side, helped by this real estate sector surging. we have seen companies announcing buybacks and we have seen companies talking about cutting strategic holdings. that is boosting investor sentiment there. also the construction names in japan are giving this a [government has been handing out a lot of support to projects around chipmakers and semiconductor factories. another company to flag in japan, fast retailing, the operator behind uniqlo reported an operating missive due to weakening sales in china. we might see a slump continuing as they shift their key market to the eu. quick mention on the yen, we're studying around 153, it had weakened over the past week. interesting to note because jgb is hosting their worst session

this time last week. we had seen officials doing a lot of intervention when we saw the yield nearing 1%. we're not getting much of a squeak in japan this time around. i'm going to take you into china equities. we're still on watch for data out of china, trade data come along growth data could be due sometime today. next week we will have gdp numbers. the hang seng index is getting close to the 17,000 threshold which were to send a negative signal to local equities. going to mention some currencies. the korean won was weaker earlier today, the bank of korea earlier deciding to keep policy settings steady. they will keep an but the won weakening on that strong dollar. the singaporean dollar steady eight now, earlier they had a central bank decision as well. kriti: tania bringing us that

report this morning. from asia to right back to your. the ecb confirmed it will be cutting rates at its next meeting in june. seeing an 84% chance of it priced into the markets, after the central bank held rates yesterday, but in a contested decision. >> the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase our confidence that inflation is converging to our target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction. kriti: joining us is bloomberg's jana randow. covering the ecb closely. when we talk about the ecb perhaps front running the federal reserve, what does that mean in terms of strategy after that first rate cut? if we get that happen in june, is that setting up the stage for rate cuts every meeting on words, how is the ecb thinking about it? >> it's an excellent question

and i'm afraid i'm not having an answer for you just yet. the president left all her options open. we heard it in the clip. she said, if confidence in the inflation path towards 2% increases, then the ecb can remove some of that restriction. she also said policymakers are not pretty committed. they will continue to look at the data and see how it comes in. of course, we get the next projections in june that will tell us a lot. that everybody expects to form the basis for that first cut. what happens after is unclear. the projections, so far the march ones, are built on assumptions the ecb would be cutting interest rates by 100 basis points this year. strictly speaking if you want projections to materialize, that is the kind of easing you have to deliver. but, of course, things change.

the ecb said and lagarde distressed clearly they will look at the data. they will see how it pans out and then take their positions. what happens in the u.s., at the fed, will play a role. she found quite nuanced language yesterday on how the ecb is affected by those decisions and by economic trends across the atlantic. kriti: for the four hours ago, you were with us -- 24 hours ago, you were with us talking about markets getting ahead of themselves. maybe a cut did need to happen it yesterday's meeting. now some ecb members said there might be a need for it. walk us through divergences within the ecb itself. >> we knew going into the meeting there were a few governing council members, who hadn't excluded moving in a --

knowing they probably wouldn't have a majority. arriving at the ecb, there was a group of people that thought let's talk about it. if i had to say, i would favor going early. they are referring to an extremely weak eurozone economy. where manufacturing is still shrinking, where confidence is just inching up. where demand for corporate loan demand is disappointing, which means prospects for investments are very low. inflation for example is falling faster than expected for four months now. so, they saw a room to already start moving. but the large majority of governing council members said let's wait for the data. we said we would be

data-dependent, so let's look at it. there were a few that took a while longer to convince. but ultimately, the president said everybody rallied around of the consensus. setting up june. it would take a lot for that move not to happen. kriti: jana randow walking us through the dynamics over at the ecb. potentially marking the start of a historic couple of months on the continent. i'm excited about monetary policy all of a sudden on this continent. we have headlines crossing from the ecb governing council member speaking on tv3, reiterating what jana was talking about, saying they will cut in june if nothing surprising happens. still talking about strong wage growth and that the moment for a rate cut is near. you are seeing weakness in the euro, not necessarily off the back of that because that trend was already in place. as we see more readthrough into

the bond market. from the monetary policy to the micro. apple shares closed sharply higher, after a report that the tech giant is preparing to overhaul its entire mac lineup with ai-focused in-house chips. let's bring in peter elstrom. this a big deal for a variety of reasons. one simply being that when we talk about the ai momentum story , microsoft, alphabet, amazon have all dipped their towing into the ai story. microsoft perhaps leading the pack. apple has been noticeably left behind. does this changing the game? >> the news here is that we are getting a new lineup of mac computers. they are not just mac computers, they are ai macs from apple. everybody seems excited about that. it seems apple is taking this seriously at this point. they have been a step behind on

some new technologies, with openai charging ahead with chatgpt and microsoft making progress. what we see now is apple is planning to introduce a new m4 processor that will be able to handle a lot of ai capabilities more smoothly than the chips in the past. apple, for more than a decade, has been designing its own silicon to take full advantage of the software they have got and other capabilities. now artificial intelligence will be a priority. this is a fast refresh of the mac lineup or the introduced the last lineup in october with the m3 chip. by the end of this year, we will see new computers, the macbooks with the m4 chip that will handle ai capabilities. investors have been excited about this. apple shares are up 4.3 percent. shares have been sluggish. he saw much of their suppliers in asia make gains. partly because sales of these

computers have been slow. there has been a drop off. in the last fiscal year, we saw apple computer sales drop 27%. that has led to some problems with the stock over the recent months. now it seems there is hope they will be able to refresh the lineup of products they have and spark demand. kriti: speaking of sparking demand, it is perfect that you are based in asia because one of the weak spots of that demand story have been china. it has arguably been in the emerging market space. samsung has taken a big chunk of market share. could this help appeal to that customer? >> apple sells a big mineable product braid by far the most important for them as the iphone. the softness you are referring to is their struggles and making sure iphone sales continue to gain momentum. they are right at the top of the market, the premium-priced

product out there. in china they have had struggles over the past year, as bloomberg has reported, there is a government ban on using iphones in a number of markets. huawei has come back to the market in addition to samsung which has long been a formidable competitor. huawei is coming back to the smartphone market in china, the second-biggest market for apple after the united states. this new lineup of macs with the ai chips is likely to help on the computer side of the equation. but they still have some challenges on the smartphone side of the house. kriti: bloomberg's peter elstrom walking us through that screw. -- scoop. we will keep an eye on today's session and whether they lead the pack when it comes to the u.s. stock story. there is plenty of macroeconomic data we are keeping an eye on. 7:00 a.m. u.k. time, gdp numbers, we will break those live on markets today.

talking about the health of the u.k. economy. is there early signs of stagnation? at 12 p.m. u.k. time, we get highly anticipated report from ben bernanke, the former fed chair, who has been asked to talk about how the boe can work on their forecasting story. do we get scenarios pushed as opposed to the current charts? what to those recommendations look like? we will dive into that in just a couple of minutes with a great guest. we have the actual report at 12 p.m. u.k. time. then the focus goes into corporate america, specifically, it wall street banks. citigroup, wells fargo and jp morgan kicking up the earnings story. when we talk about the rate cycle potentially ending, does that mean peak margins for a lot of banks? but coming up on this program, we talked geopolitics. joe biden vows to back japan and the philippines among growing chinese influence in the south china sea. more on the joint summit next

and why you should care as an investor. ben bernanke set to unveil his review of the boe's forecasting models today. michael saunders weighs in, the former member of the boe monetary policy committee, coming up at 6:45 a.m. london time. an interview you do not want to miss. this is bloomberg. ♪

kriti: welcome back to "bloomberg daybreak: europe." i'm kriti gupta in london. the u.s., japan and philippines say they are committed to free and open indo-pacific. the statement after a summit between the three countries' leaders following chinese actions in disputed waters. isabel, this is a story we have been watching as the leaders of japan and of united states meet,

now bringing in the philippines. can you walk us through the need the philippines has when it comes to the south china sea? how does the summit change the game for that country? >> the overall message from the summit was very much that president biden came out with this ironclad so-called commitment to the two allies in asia. two of the most important allies the u.s. has in asia. the reason i think he is doing that now is partly because we have seen this huge escalation in tensions in the south china sea recently. we have seen the chinese coast guard fire water cannons on philippine ships. it is becoming a situation where people can be injured or possibly killed. that is something all three countries want to definitely calm down. not only does japan also have its own separate territorial dispute with china. it is also concerned about the south china sea as a waterway, as a massive trading nation, it

wants to be part of the effort to keep the peace there, so it's economy can keep taking over as normal. kriti: it comes at a time when the u.s. in particular has a naval presence in the philippines. but has a lack of funding when it comes to pacific command. the south china sea situation, if it ratchets up further, the u.s. is out of luck in a lot of ways. how has china reacted to this rhetoric out of the summit? >> we haven't seen a reaction yet to the three-way summit. the reaction certainly to the bilateral summit yesterday. there was this statement afterwards condemning china's actions in the south china sea as dangerous and escalatory. and the reaction from the ministry of foreign affairs in china was not happy at all. they made formal complaints both to the u.s. and japan and said

this relationship should not be something that is targeting another nation. and should not be harming another nation. they are clearly not happy. but on the other hand, we have reports that next month we will see a trilateral summit between japan, south korea and china in seoul. there is a possibility that things can be patched up. despite these military tensions, china remains a important trading partner for everybody in the region. everyone wants to see the tensions calm down as far as possible. kriti: it is a fascinating story and it comes as a cybersecurity and chip security come up ahead of a crucial election cycle in the united states. as bell rentals, our tokyo bureau chief. we go to the latest in the ukraine war. russia has destroyed the kyiv region's largest powerplant and attacked gas storage facility. it adds to concerns that the ukraine's military defenses are

near a breaking point. western officials say kyiv is at his most fragile moment in over two years of war due to a shortage of ammunition and manpower. it comes as u.s. lawmakers continue to argue over a 60 believing dollar aid package. the european union moving towards unlocking additional aid almost 2 billion euros to the war-torn nation. off of that news coming out of the powerplant, we saw a massive move in european gas, up 8% in yesterday's session. we haven't seen it open in today's session yet. it will be interesting if that continues, as we wait to see what the supply chain impacts our and whether they spread broadly into the market, or if this is a one-off. i want to check on oil because we are keeping a close eye on the middle eastern tensions. what does an iranian response to israeli hostilities in damascus actually? look like? ? we have seen biden and his allies pushback against an iranian response altogether.

nevertheless, supply dynamics are in play. brent crude not pricing in that risk but that may change as we get headline. 85 handle on nymex crude. both higher in line with risk sentiment in futures of the moment. electric vehicle sales are expected to slow down this year, but slow growth doesn't mean no growth. we look into what has knocked consumer confidence in the ev market next. this is bloomberg. ♪

>> in terms of the ev's, the process in the markets, perhaps the consumer moving into the ev's is at a slower pace. >> the automotive space is not like silicon valley. this is not a space where there is a winner take all technology.

>> consumer gradually better educated. at the moment, infrastructure, the battery, hardware for the customer to purchase. it will be a slow adoption pace. kriti: auto executive speaking recently about the challenges in the global ev market. for our weekly deep dive into the energy transition, bloomberg expects 16.7 million electric vehicles to be sold worldwide this year. the forecast is 22% higher than 2023 but still marks a slowdown from the 30% jump last year. the numbers point to a bumpy road for the ev industry over 2024. i want to bring in alexander, head of bloomberg nef's electrical vehicle steam. talk to us about the slowdown. is this a one-off, for something

that will play out with more momentum or bigger deceleration this year? >> there has been a lot of overly dramatic headlines in the past few months. pointing to the slowdown, over the decline in ev sales. looking at january and february data, those don't seem to support that thesis yet. everyone is looking at the big ev market, china, europe, the u.s. and in those markets ev sales were for the two first months in the year still up. in china, 38% up, europe 14%, u.s. 16% up. there is an exciting story developing around emerging ev markets like india or thailand, where sales are growing really fast. right now ev sales are not falling off the cliff yet. kriti: talk to us about the sustainability story when it comes to things like input, for example, is the cleaner ev story accurate? i asked that because you hear so

much narratives about the technology, that it is cleaner now but longer-term lithium batteries, etc. may not be as sustainable as it seems. >> actually it is quite the reverse. ev's are already much cleaner than petrol and diesel cars. the debate around the lifecycles of sustainability of electric cars stems from the fact that in the manufacturing phase, ev's are emission intensive. that is down to the battery manufacturing process preyed once on the road, those cars are much cleaner. >> that is down to the use of emissions that cars are associated with. if you buy an electric car today, drive it, the lifecycle co2 emissions are up to 71% lower.

the good news is, it is said to get even better than that. as grids get greener and renewable energy generation increases, electric vehicles are becoming cleaner. kriti: something we will be watching closely. alexandra o'donovan bringing us that crucial story. if you want to hear more, download the switched on podcast on apple, spotify or wherever you get your podcasts. plenty ahead. we will go back to monetary policy. a conversation you do not want to miss. to miss. stick with life's daily battles are not meant to be fought alone. - we're not powerless. so long as we don't lose sight of what's important. don't be afraid to seize that moment to talk to your friends. - cloud, you okay? because checking in on a friend can create a safe space. - the first step on our new journey. you coming? reach out to a friend about their mental health.

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♪ kriti: good morning and welcome to daybreak europe. let's get to the stop stories --

top stories. magnificent seven driving a rebound with apple unveiling plans for a new chip. traders put the ecb on track to cut before the federal reserve. christine lead guard insisting europe central bank does not take cues from across the atlantic. j.p. morgan, city, wells fargo all set to report today. do not check out for the weekend. i want to get a quick check of markets. green on the screen, futures higher by 7/10 of 1%. the ftse higher by 4/10 of 1%. seeing complacency and caution in the u.s. market. futures are 52, unchanged despite the rally in yesterday's trade. not seeing investors hopping in or following through when it

comes to futures contract. we were talking about complacency. we are seeing a 10 year yield at 456. really not much action. 107 on eurodollar, brent crude trading at 90 handle. in a few minutes we will have the latest figures at the top of the hour. looking ahead to former fed chair's review of the bank of england forecasting models. how this changes the game for investors. we are joined from bloomberg economics. a pleasure to have you. let's start with the data. gdp figures, does it suggest stagnation if we throw recession off the table? anna: for today we are expecting

a flat reading of gdp and modest growth of .1%. ratings might not sound that positive but they confirm u.k. economy has turned a page after the recession we had. now the question is whether this is a rebound. or whether you will endanger inflation progress. we think we're looking at .2% growth rate for the first quarter and that is how it will stay. and a lot of drivers sustaining growth. and then on the second question, it is a good change from two years of stagnation into one year of .2 growth.

growth will not be strong, it will run below u.k. supply growth. kriti: feels like the u.k. is not on the same path. forget the u.s., but the ecb is doing its thing. you have three central banks diverging. talk about this review. perhaps the dismissal of fan charts catching investors, but scenarios, where you looking for and strategy? anna: scenarios have been floated around. they're open to change. the way they communicate with the use of charts, there are arguments about scenarios being improved and their easy to understand in the sense that

instead of impossible outcomes, you tell the public how you could end up in those scenarios. they could improve the narrative, but what is the long-standing challenge of the boe is communication around the ray path and we are left in the dark about where rates will head in the future. the question is whether the boe will shift its forecast. a bath for interest rates backed by a model on judgment that will improve communications, i think this is the area we are focused on. kriti:. plots come with criticism as it is. anna, thank you for the review at 12 u.k. time. i want to bring in someone who has been in the room, michael

sanders joins me, bank of england monetary policy committee member. thank you for waking up early for us. i would like to pick up where anna left off, the idea of communicating better, could this recommendation scenario, do you think it will make that big of a difference? michael: if the question is how to deal with uncertainty around the central forecast, the bank of england has a central forecast which is a thick line and gradually diminishing intensity around that. getting wider as the horizon goes forward to bill estate uncertainty around the central path. these charts are so wide that they sort of say two or three

years out anything could happen. scenarios illustrate what might happen to the economy, inflation and interest rates if risks where to come into play. that scenario might be sticky growth and higher than longer. it might lead to a faster decline. it is a useful way of converting uncertainty into something more coherent about major risks. kriti: how risks may pan out, it's interesting because this was initiated off of miscommunication around black swan events no one saw coming.

a pandemic, supply chain shocks and the guilt market. i'm curious about what happens when you forecast scenarios but you cannot accommodate them. does that set up the boe for a lack of credibility or criticism around the events that they cannot see coming. michael: you always have scenarios based on risks and as the situation changes you might change scenarios. you can imagine it in early 2022 russia's invasion of ukraine, you might have introduced a scenario with a bigger extended rise in energy prices. i think that would have been useful. to make it clear when you get a

shock like that, the scale can have significant effect on policy and at the moment there is not really any way of doing that in the chart mechanism. i should come back to one other thing though. during a review it is not just a response to criticism. expert led external reviews of central banks, that should be a regular thing that we should do. central bank of new zealand does this external review roughly every five years and reduce -- the reviews lead the central bank to adjust. you try to learn lessons from your experience and other central banks. people do not view this as something you do when something has gone wrong.

it should be a regular way to ensure what they are doing is best practice. kriti: it makes sense. i'm curious about where this goes wrong, what are the limitations, could fiscal policy be one at a time when a labor victory may not be included in the boe forecast? where do scenarios stop short? >> you have to recognize the limitations of any forecast based on certain assumptions and they may not holds if the situation changes. that is an unavoidable limitation of any forecast. so as external use, forecasts

are either a promise or implying the only possible outcomes are shown in the central forecast scenarios. forecasts are useful for policymakers and useful to communicate monetary policy. there are limitations. kriti: talk about how markets get involved. there have been so many criticisms for inventing the dot plot because of the way markets use it. the main pricing around bod this week has been fed driven as opposed to driven by u.k. fundamentals at a time when the boe a uses market expectations as part of their policy. where should markets play a

role? >> sad to say, low consistency between interest-rate and asset prices. it leaves the mpc based on a market path they may not feel is plausible. economic forecast is often in -- most do not think it is a reasonable central case for economic outlook. and third, i'm not sure what message does forecasts meant to convey. they will need to shift and they will shift to a system in which mpc make judgment on what they think is reasonable path for interest rates over three years and using that as an ingredient in the macro forecast. then you would have a forecast

for the economy, inflation, interest rates. they think it is reasonable, that would be better than the current system based on a market path they may not view as likely. forecast based on mpc interest rates, the forecast path would change over time. it's never a promise, just a best judgment and that forecast path itself might change. you can see markets adapting to economic news in the u.s., producing a path which is different to the fed dots. fed dogs were done we could go and the patch should differ from the central bank assumption in light of economic data, you would want that to be the case.

kriti: you went where i wanted to go, the stickiness in the united states, we are no longer seeing three major central banks, the fed, boe and ecb even watching the same risks. stickiness is persistent in american inflation. given that the u.s. is the uk's trade partner is there a readthrough into the u.k.? >> that e.u. is a more important trading partner than the u.s. but you are right to highlight that there are divergences between central banks. they had the same slow down but there are differences right now falling quickly in the u.s., falling quickly in the u.k., and sticky in the u.s..

the u.k. will be back to 2% inflation. figures for this month will get published in may and deflation is below 2% target and probably also in the second half of this year, so sticky inflation in the u.s. will not stop the bank of england in the next few months. i would say june is more likely. interest rates will not come down quickly but i suspect they will come down. kriti: we have to leave it there, but thank you for joining the program. former member of the boe monetary policy committee, thank you for your insights. ahead of the bernanke review. the biggest u.s. bank stocks have soared but can they maintain momentum? we will preview next. this is bloomberg. ♪

♪ >> berkshire hathaway is apt in the sense that we look at business models. super successful over time and a lot of messages. it is the power of long-term ownership of assets and compounding in your business. kriti: co-ceo of kkr on why he is taking a cue. i think of the way warren buffett approached banks,

securing earnings. bank of america and citigroup reporting today. i'm joined by jenny. let's start with the big one. j.p. morgan have been the king of wall street. it does that continue? jenny: we will not see diminishing of that so are looking at net interest income. they laid out what they think is going to happen. if you go back to january, you remember banks expected rates to come down, so they were saying as a result income was going to come down three months on. that is more of a debate than it was in january. it seems like we are higher for longer so i think you will see that in the way they talk about income from the first quarter and their outlook for the rest of the year.

kriti: is this peak profit for the cycle? i'm curious if that shows up more in j.p. morgan or wells fargo? jenny: they are equally exposed. i imagine we would hear the same things from jamie dimon. if rates stay higher for longer, we will continue to be in the peak profit mode, but they will try to get investors ready for when the rates come down. if you will see pressure on revenue side. the tone will not be up needs even if the results look strong. kriti: we're watching citigroup but i want to get to morgan stanley. there was a probe announced. can you walk us through why this

is important? jenny: wall street journal reported they are under investigation for money laundering and this is something you see lurking all the time big banks under investigation. aml is key because this is terrorism financing. regulators take it seriously, penalties can be big, remediation is long, so that's why you're seeing this stock reaction. such a thorny issue, not wrapped up superfast or something that the new ceo wants in his first few months on the job. kriti: they're trying to really grow and taking lot of momentum. she will be back in the next couple of hours. thank you for the crucial context. we go back to the macro. this is bloomberg.

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♪ >> it is arrogant to say the market is wrong because the market is the total iq of all people in the world. i do think inflation will be tough to get down. more near shoring, we have seen some pressure on raw materials, wage increases are high so i suspect that we will not see the rate cuts many expect. >> that re-prices everything. >> markets have been resilient on the back of changed expectations, a little surprising. >> is that because they believe

it is a cut? >> probably not. >> u.s. exceptionalism is what we are seeing. one of we gotten wrong? >> u.s. economy is pretty good relative to europe and we see it as well when i see u.s. ceos they are just seeing the backdrop in america as better than euro so a lot of things are going right in america. kriti: the ceo of nord's bank. he says the economy is good, things look resilient and he sees that across-the-board so what does that mean? for me it is the bond market story. we continue to see is 5% on the

horizon? when was the last time we were at 5%? that brings me to the fall where you see the 5% level. picture the stock market overlay , closer and closer to the 5% level we see a drop, that is scary. repricing in equity is given bond market momentum increasing. where do we go from here? seeing steepness in yields, that's where the chart matters. 5%, 4.7, in terms of moving where the bond market is going to go, the crucial equation in central bank is driven by

reserve and that is where the chart is handy. it is all one line despite the central banks. major topic of conversation on markets today. plenty of big guests will weigh in on markets. exclusive interview with the former president of the ecb at 7:15 u.k. time. up next, markets today to make it through the european open, this is bloomberg. ♪

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♪ >> this is bloomberg markets today. cash trade one hour away, here is what you need to know. ecb on track to cut. we speak to the former president.