Live on Bloomberg TV

00:00An iPhone has never been more popular during the December quarter. We set an all time revenue record for iPhone thanks to the strength of our incredible iPhone 13 lineup. Here we are a quarter of growth in the United States this kind of growth over the fourth quarter that we haven't seen since the nineteen eighties. This really does point to the fact that the business sector is starting to get more back to normal. And that's what we want to see. You look at the fourth quarter results. We had a very solid profit better than what people thought we were going to have. It was sort of in between the Delta surge and all micron surge at least for us. We've seen a lot of bookings canceled for January and February but March bookings look good. We're we're predicting that we'll be profitable in March. This is Bloomberg Surveillance early edition with Francine Lacqua. Welcome everyone welcome to Bloomberg Surveillance Rosalind Chin in addition to my block here in Rome. Here's what's coming up on tonight's program. Hide IBEX ripple. Well treasuries resume their declines. Apple surges in after hours trading as it goes through estimates and supply chain concerns posting record sales. And we look at luxury. LVMH posted record annual sales as customers snap up couture and cognac cementing the group rebound from the pandemic. So we have a lot going on today. Let's get straight to the markets to our markets expert our editor Christine Su Keenan. Christine I know there's a repricing certainly on how many hikes we'll get from the Fed. How many heist get from Bank of England. And that's moving at the fixed income space. Absolutely Francine. We're definitely still seeing an extension of those bond yields particularly in the treasury sector seeing those gains and yields across the curve about two to three basis points across the curve at the moment. And of course we're also seeing a similar move in the dollar because we're seeing that relationship really between Treasury yields and the dollar reestablishing itself at the start of the week. The dollar was all about risk aversion. But now as we're ending the week it's going to be all about that rate differential story. The dollar of course extending its gains but stopping just short of a 16 month high that we saw in November. Yeah and we're just getting us some GDP figures that Christine out of Germany. That economy contracting zero point seven percent in the fourth quarter. Christine overall is dollar and dollar dynamics probably the most interesting bit in assets right now. I would say it is definitely one of the most interesting bits Francine because of course it has repercussions for assets across the board particularly that emerging market complex. I mean you know we are seeing we're seeing emerging markets definitely feeling the brunt of the sell off in markets this week as risk aversion takes hold everywhere with that fed hawkish surprise. And really the story is going to be. Will those emerging market currencies be able to overcome the dollar strength that is about to descend upon us especially because we've seen emerging markets also seeing similar struggles as the Fed you know central banks there have really tried to get ahead of the curve in terms of inflation with massive rate hikes last year. Now the Fed is about to embark on the same tightening cycle. And the question really is will they be able to maintain that strength or will the dollar really just sweep across everything and push everything lower. Especially we see that renewed strength on the back of Fed tightening. Yeah and I wonder whether Christine a lot of the repricing is also because day in day out we talked about supply chain concerns day in day out. We heard about some of the chips not being available even from Apple that probably overpaid or pays more than other competitors for some of these components. Now with the fact that actually we don't have the supply chain constraint will it. Right. We could have repriced earnings for example or some of the equity stocks over NC and I think is definitely one to watch. Certainly the question of higher costs whether it's resulting from the supply chain issues as you alluded to or other things you know I mean we're seeing similarly LVMH for instance reporting higher costs as well in their results but then they were able to overcome that by really exercising this tremendous pricing power that they have over the markets at the moment. But really you know whether it's though even if the supply chain issue is easing somewhat as we gleaned from Apple's results there are still issues related to overall costs that could be a big factor for margins. So that's going to be one to watch for sure when we see more earnings from different companies coming for. Wonderful. Thanks so much. Markets editor there Christine Aquino looking at some of the big market moves. Now let's get more on Apple. The world's most valuable company reported earnings after the bell and Apple's strong results really defied fears with supply chain disruption. Let's get straight to Laura Wright in London who has all the details. Laura this is encouraging news. So maybe some of the fears were overblown. That's exactly right. Francine the fears were overblown. And on the earnings call the CEO Tim Cook he was reticent to change Apple supply chain because it has allowed them to be so resilient. We can see in premarket trading that Apple is surging this record for the fiscal first quarter. APM smashed to dollars 10 a share surpassing a one dollar ninety that the analysts had predicted. GROSS margins were at a 10 year high which shows the pricing power that Apple has had in the market. Phenomenal growth from Macs phenomenal growth from services. We know that Apple is pivoting toward more services based ecosystem. Hybrid working seems here to stay. Interestingly disappointing sales for the iPod although on the earnings call we learned that iPhones had been prioritized compared to those tablets. The regional breakdown China was the outperform 21 percent revenue growth year over year. Japan a notable laggard double digit negative territory suggesting that particular market is saturated the largest. The United States was stable along with the European Union. So what do the analysts think. I was talking to one in the early hours of this morning from Evercore ISI. And he told me looking ahead the March quarter is a potential headwind. It's seen as being pivotal. That said a multitude of new products are coming out. The iPhone 14 Francine I'm still using the eight and also the metaverse Apple. It's going to enter the metaverse with virtual reality. The eight. Laura at least has to get on to the 10 or 12 because it has a beautiful portrait mode. We can get pictures. That is your assignment for the weekend. Art Laura Right. Going through some of the wonderful things that we've heard from Apple of course still concerns about some of the shipping and delivery coming up. But we cover the fifth day of voting for your time president. We still don't have a consensus candidate. We look at how the country's economy can recover from the pandemic. This is Gilbert. Economics finance politics. This is Bloomberg Surveillance Early Edition and Francine Lacqua. Here in Rome. So let's get straight to the Bloomberg first reviews. Here's the guarantee. Hi Leon. Hi Francine. Let's start here in the UK. A report into alleged rule breaking parties in Downing Street could be stripped of key details following a request by London's Metropolitan Police. Civil servants. Gray was commissioned by Prime Minister Boris Johnson to look at allegations that lockdown rules were broken repeatedly by his office. Gray's findings were originally expected to be published this week. Now President Joe Biden has spoken with Ukrainian President Vladimir Selenski over growing tensions with Russia. Following the calls Lenski tweeted that the conversation Covid diplomatic efforts to de-escalate the situation and potential financial support. Biden is planning to raise the issue with German Chancellor Olaf Schultz when he visits Washington next month. Pfizer has got the nod from the EU drug directly later for its Cape 19 pill CAC. It is the first oral treatment for the virus recommended in the block with trials showing it can reduce hospitalizations and deaths among high risk patients by nearly 90 percent. Pfizer says recent research shows the drug is effective against the on the chronic variants global needs 24 hours a day on air and on Bloomberg Quicktake powered by more than 20 700 journalists and analysts and more than one hundred and twenty countries. I'm beyond Karen's. This is plain bug. Francine Leon thank you so much. Now Italy entering day five of voting for a new president to the prime minister Mario Draghi still seen as a potential favorite after four rounds of voting. He still hasn't got the backing of lawmakers. So let's get the very latest to discuss this. And we'll also talk about supply chains inflation and the Fed. We're joined by Brunello Rasa chief executive and head of research at Prosser and Roubini. So Bernardo as always thank you so much for joining us. I mean there are a number of ways this could go either. We have an unknown president of the republic that is actually quite stately. Usually it's someone that's a little bit older cross-party without a real agenda or Mario Draghi still becomes president of the republic. Are his chances increasing or decreasing with every day that goes on. Increasing for the very simple reason that if parties don't find alternative solutions then there's only one institutional in inverted Marx solution available and that strategy becoming president. They don't hide this of course such as promoting the Covid and president of the Senate. It is a metric has a lot to do with their highest job in Italy but this is perceived by the left as a partisan choice by the centre right. So it's not going to get the backing on the part of parliament. So eventually parties will have to agree on somebody. If nobody Gonzales is matter driving most likely. So what's the best case scenario for the markets. I mean does the market really care if Mario Draghi becomes president or prime minister as long as he stays in some calendar kind of you know powering Italy. I think this APF matter drag is in the picture best solution would be lot for longer and value lots of key G for a little bit longer. But then you would have a problem in 2023. So to some extent you've solved the problem now. The president for the next seven years. And then you find put up said caretaker of technocratic government for another year until the elections and then after the elections a new political government emerges. As long as this clarity after the election and the market would be relatively happy I think. Brad give me a sense of actually how Italy fits into this wider concern about access to the EU recovery funds how it fits in with these higher energy prices and some of the supply chain constraints. Does it to have to play a game of more friendliness to Russia. Because it's so dependent on it for trade other than gas or oil resources to speak of and therefore it relies on supplies from other countries. He has had his own bilateral relationships with Russia in China. But as these of course of course a bit of concern in Washington and therefore effectively Italy has delegated all these relationship with these foreign countries such as Russia and China to bear you. And that's how he fits in the more general global supply chain issue knowing that Italy of course also as a producer is of course is being affected by these supply chains and modern DAX. BURNETT Well we've also had a repricing after a more hawkish Fed and that's impacting a lot of assets. Will it impact what the European Central Bank can do and what does that mean for an economy like it to. The ECB is already front page from Paris to the Fed. The inflation rate in the US is 7 per cent in Europe is still 5 percent in both cases since in peaking. Short term and therefore the ECB can afford to be slightly less hawkish than the Fed. And yet they said it would be just continued doing that in March and it was gonna be a piece by much smaller TPP the implications for the dollar. You know I think we are since we've seen that so far and monetary policy differential is coming back in vogue. Higher inflation higher rates clearly is not good either for bonds or equities at this stage. What's your prediction for the for the Italian presidential race. I can bet you actually know press or even a macchiato no expense is spared in front of you know cafe until stack in front of the Senate. If you get it right. OK. That's a good bet. I still think Randy has their high yet chances but not over 50 percent and this change defined as all the others together and don't reach 10 percent each. So eventually drive me. He's the one with the greatest challenge in stage I think. All right. Wonderful. The espresso that is on granola Rosa there. Rosin would be the chief executive officer CEO and head of research joining us today. Now coming up we talk a lot more about some of the earnings season. Electrolux net sales beat estimates in the fourth quarter. We talked to the chief executive Jonas Samuelsson. He's up next. And this is Bloomberg. Economics finance politics this is Bloomberg Surveillance early edition on Francine Lacqua here in Rome. Now let's look at earnings and Electrolux reported net sales for the fourth quarter that beat the average analyst estimate. The Swedish domestic appliance maker says it expects demand this year to be above pre pandemic levels. Now we're joined now by the chief executive to discuss the results and the outlook for the year. The chief executive Eunice Samuelson joins us. So Mr. Samuelson thank you so much for taking the time to speaking to us today. Well how do you see demand going. Will there be stronger demand supply more products going forward or do you see that waiting off. No I think I think we will see continued fairly strong demand as people are continuing to invest in their homes working more from home and and using their appliances more frequently. You know that all points to continued sort of demand going forward in most markets. Are you expecting to gain market share. So what regions do you think you can grow bigger. And how much of a difference does it make. Yeah we're in that you know in 2022. It's gonna be our biggest launch year ever in terms of new products that we're introducing. So we expect to gain market share in the premium end of the of the range both in North America and in Europe and also in Asia Asia-Pacific. So a very solid year ahead of us in terms of market market share opportunity to through innovation. Mr ourselves and I was asking you whether that would make a difference because some of your competitors are struggling to keep up with demand. I guess there are some components are actually very difficult to find. Do you see the same concerns going forward. Yes I think we're you know we're obviously at the peak of the Micron surge and and knowing a situation that was already quite constrained both in terms of ocean logistics and electronic components we're expecting that to continue at least into the second quarter and with with quite high risk of disruption. So do you see the situation improving at any point because of these supply chains or will it be much more protracted than we think it will be right now. Well I think as the pandemic hopefully starts to wane and into the second quarter and some of these backlogs or interruptions get get washed out I think there's a good opportunity that we'll see sequential improvements. I think there are some areas like you know semiconductors. There probably will be constraints also into the second half but a lot of the other ones will gradually work themselves out. I think. Yes so what are the some of the other ones actually where we could see supply chain you know hiccups. I don't know whether is it still electronic components or is it something else. Electronics. This is by far the most challenged. But you know throughout last year we saw certain plastic grades or steal grades and other components you know on and off being constrained because of disruptions really driven by the pandemic. And hopefully there we will see a gradual improvement in the stability of supply as soon as the pandemic wanes. But but again the part that that seems to be a little bit more protracted is the electronics. Semiconductors well we'll steel prices stabilize. I think steel prices have started to stabilize at high levels right now. You know to be frank I think those prices are above long term equilibrium. You know as demand stabilizes I think supply will come on stream and and hopefully there will be a downward trend in steel prices. You know sometime in the not too distant future hard to call it second one. What happens to energy prices from now. No we're expecting them to rise certainly in Europe for at least a couple of months. Did they stabilize after that. And can you hedge against them. Well I can't say that I'm an expert on energy prices but but certainly as we get into the warmer months I assume that supply will be you know it will be stronger and prices will come down as a consequence. And that's certainly for it for electricity. It's not a major component for us. So it's not something we track. Close. Yes. For example steel plastics. Mr. Simpson what can you tell us about your share buyback program. How how will that progress in the next couple of quarters. While the board announced in the fall of last year that they're intending to to introduce an annual sort of recurring buyback from something we haven't done for it for quite a number of years. But we expect to continue to buyback sheriffs consistently over the coming several years. They announced the intention to buyback about two and a half billion Swedish krona worth of shares. It's an amount that's similar to the annual dividend. So. And then that's the level that I think can be sustained for quite some time. All right so Mr. Samuelson thanks so much. You know Samuelson though the chief executive of Electrolux. Now coming up we'll have plenty more of course on some of these earnings. We also have more from the fifth day of voting for you Italian president. We'll be speaking to the minister for Ecological Transition the energy minister about torching gluttony. Stocks mixed U.S. futures actually fluctuating a little bit. Again investors trying to figure out what the message from the Fed this week means for their portfolios. We had strong earnings from Apple but of course there is always these prospects of tightening policy in the U.S.. This is Bloomberg. Rate hike but ripple through the markets treasuries resume their declines. Plenty more from Italy throughout the day its voting day five. And we look at what that means for the future. And finally apple surges in after hours trade. Those concerns about supply chains didn't really come to the forefront. Well good morning everyone and welcome to Bloomberg Surveillance Early Edition. I'm Francine Lacqua here in London. Let's get straight to the markets and let's get straight to our editor Christine Aquino. Christine we look at the markets on the back of what the Fed did and it does seem that markets are fluctuating a little bit. Yes they know that the Fed was maybe a little bit more hawkish and they were expecting in certain parts of the markets that's being repriced. But otherwise they're also focusing on the strong Apple earnings. Absolutely. Frenzy. And I think that really just speaks to how noisy this week was when it comes to several catalysts because at the start of this week we were of course very much focused on that selloff in equity markets driven primarily by the tech sector. But then of course we shifted the catalyst over to the Fed and that hawkish surprise from Jay Powell and finishing the week on good Apple earnings. So there's a lot going on in markets at the moment. And so there are a lot of conflicting signals. Of course the equity sector very much reacting a little bit to what we saw from Apple less so in Europe of course because as we know Europe is a value play. It's not a tech play. So we're seeing equity indexes in the region primarily down here. But yeah I think overall there is this battle a little bit between the good rather good earnings from Apple in a number of other companies that we've seen this week. LVMH of course included in that versus the future trajectory of what the Fed's going to do when it comes to policy. All right Dani Burger said there. Christine Aquino with the very latest thank you so much for joining us now. It is day five. Italy entering the fifth voting day for a new president. Lawmakers still have not managed to agree on a new president after a fourth round of voting. A sign that it will be harder than initially thought for Prime Minister Mario Draghi to get the job. We are delighted now to be joined by the Italian minister for ecological transition. Is the energy minister and his a better. And Mr. Toogood. Thank you so much for joining us. We've been talking extensively of course about the price of energy. You've been talking extensively about the price of gas. Is the Italian government mulling a new intervention to try and appease some of the pressure is not only on families but on businesses. You know so far we we've invested about 10 billions in mitigating the impact of the gas prices on the other energy bill of the families. Of course as more immediate the process. So we met a number of new laws over the last few trimesters. And of course we we are watching we're monitoring the projection of the market because we feel that this gas crisis will be long lasting. So we will need structural structural measures in the future to mitigate the cost of energy. So Minister give me a sense of how much more we could actually afford to spend when it comes to trying to pay some of the higher energy prices. Is there. Can the budget afford this kind of support. Well so far so far we're trying to mitigate in real time the increase of pricing. But of course as we see there the crisis is really complex and will be long lasting. I think we should do more. And I believe that that European level we should discuss about the common storage of gas joint procurement to mitigate the global cost of the other gas. And of course I think we need to reanalyze the way energy electricity pricing is made so far. I mean I don't think electricity can be linked anymore for the cost of gas. It's a nonsense right now. Maybe in the past this was useful to accelerate the accelerate the renewable energies but no longer now. And finally we should take into account the geopolitical situation that's very very complex at the moment. Don't forget that about 800 billions cubic meter of gas over the next decade will go would be forwarded towards the east the orbit of the planet because of decarbonisation to the face of the coal. And this of course would will make the situation even more complex for the gas. Administer at the same time we're seeing situation extremely complicated because of Ukraine and all the geopolitics Italy is effectively one of the countries in Europe most reliant on Russian gas. So do you worry that extra sanctions on Russia means higher prices for Italy. That's a very complex problem. Our energy mix is basically monochromatic. We have a gas 95 percent of which is imported and then we have renewable energy with such an energy mix and such an extent of the import. We might be in danger in case of a global crisis of the gas providers. So we are monitoring the geopolitical situation. But as you understand this is something in progress. So fast and minute by minute is difficult to say what happens tomorrow. So we are just monitoring watching. We have some contingency plans of course but we hope it will not be necessary. Is it to be ready to reintroduce nuclear power. Look we have a low after two referendum that states that we cannot make new nuclear powered installations so that is under the discussion and policy as I'm a technical minister. I will need support right now in 2020 to the construction of new nuclear plant the second and third generation. On the other hand I'm very interested I'm sure in the future. This could be a viable solution. The development of fourth generation small modular reactors could be a solution. We need to invest a lot in research and development and this has to be a war effort. It cannot be a single country effort and I'm sure something good will come out of that. But so should gas and nuclear actually be part of the taxonomy plan and is it really ready to fight Germany on this. Look at the taxonomy. We have to understand there are 27 countries with completely different energy mix so the taxonomy must be inclusive. That cannot be a single solution valid for the entire European landscape. So there are those countries having nuclear power others having massive use of coal and others like Italy having renewable and gas. So of course the taxonomy has to be rather flexible and inclusive in that they think it's a reasonable document. And don't forget this is a financial delegated act. So it gives an idea of where we should invest. We should not say for Canada you can do this or you cannot do this. So it's reasonable for the time being at the central government. Minister give me a sense of how much the increase in energy prices will impact GDP. How much are you expecting GDP to be affected by this. Oh of course. We hope this will grow steadily as it was so far. Being passed can be really bad. You know we expect the something like 30 billion increase in the energy costs for the country in one year or so that this is this is actually a big number and we are actually accelerating with our economy. So we are very happy with this. But of course the cost of energy is going to back that is going to be counteracting. I'm not able to make a forecast right now. And we hope will not be that bad. Minister finally I mean the impossible question when do you think we'll have a president by. We're here covering the elections were on stand by. It's the fifth day. Quickly will a name emerge. Okay. I'm a realist and I'm not a boater. So as any other citizen I'm looking forward to having a high level profile as a president. And I hope this will be found in the next couple of sessions. I'm not a voter so you know I'm just following this story like like you are. But do you think you'll still be a minister in a couple of months. Do you think Mario Draghi will become president of the republic. It's hard to say but I think my NASDAQ is such a fantastic guy that we should really have him on board in this country. I mean he's really easily a solution to any problems and wherever he will be it will be hard to think very well. So I just hope it will be around as long as possible. Minister thanks so much for joining us sir. It'll be good I know there is the Italian minister for ecological transition now. We'll have plenty more of course from Rome. Day five of voting but we also have a lot of earnings to get through. So coming up HLN reports pre-tax profit for the fourth quarter that beat estimates. And we talked to the chief financial officer Adam Carlson. He's up next. And this is Bloomberg. There are multiple special interests who knew that the global logistics was this fragile. We have to be careful because we will live in a very very chaotic world. And uncertainty is the rule of the day. Supply chains around the world are very constrained. The uncertainties are going to be here for I foresee it into 2023. We have seen shipping and container shipping prices increased by a factor of three. We'll see price hikes from businesses to consumers. And so it's inevitable that some of that will have to be priced through towards the end markets. The labor market says it's very tight. So it appears that the economy has less capacity than we thought. And so that's why we're in a situation where inflation has not faded away quickly. It's coming through out the business coming in. Supplies is coming in. Wage inflation etc. So of course the key here is to maintain a pricing power and to to be able to share that pain with customers. There will always be part of the discussion from now on. Inflation of course part of the discussion and those were some of the discussions that we've been having about it on Bloomberg TV. Now let's get straight to the Bloomberg business flash. Here's the endurance highly on high crime scene. UniCredit has posted fourth quarter revenue ahead of estimates on higher income from fees and lending. The Italian company joins rival Deutsche Bank in driving gains to the top line while seeking to keep a lid on wage costs amid the boom in making. The revenue gains are a boost for management plans to return almost three point eight billion euros to UniCredit shareholders in the coming months. Now Robin Hood shares have tumbled in post market trade after revenue and outlook at the US brokerage missed estimates. The platform slashed its forecasts for the current quarter to three hundred fourteen million dollars down from four hundred and forty seven million. Robin Hood shares were already 70 percent below its July IPO price. Softbank has confirmed its CEO Mark Child Claw is leaving the company. The departure comes after clashes with the founder Masayoshi Son over compensation and responsibilities. Greenberg understands claw pressures of for more as much as 1 billion in compensation in recent months because of his contributions including the turnaround of Sprint and the listing of troubled the business. We work and LVMH has posted record annual sales with revenue of more than 64 billion euros topping the previous record set in 2019. The gains by the French company which owns brands including Tiffany's have four and crushed in jail highlight the V shaped recovery experienced by much of the luxury industry underpinned by recovering economies and a soaring asset prices. And that's your Bloomberg business flash frenzy. There you go Leon. What do you do if you have the money and you've been stuck at home for two years. She's won a splash out. You buy yourself a couture gown. Why not. Under retail or sticking with retail. Each of them has set an ambitious goal of doubling its sales by 2030. Now that's after the fast fashion retailer reduced discounts and lowered its longstanding inventory buildup. And its quarterly earnings report to HLN this morning also said it aims to cut its carbon emissions in half by the end of the decade. Well we can find out more about this and the results. We're joined by the agency's CFO. He's Adam Carlson. Adam thank you so much for joining us. First of all we will talk about inflation. A lot of your raw material costs are going up. Have you been able to pass this on to your clients and consumers. Good morning and thank you for having me. Of course we are working closely to secure that we can at all times offer our customers the best combination of price quality and fashion in a sustainable way. And given the circumstances around us we see that we have great opportunities to continue to collaborate with our partners in our supply chain to ensure that we actually have a competitive advantage towards other retailers facing the same situation. So we are closely monitoring the situation and of course also looking into to how we are in a good way. And at all times secure our our value proposition. Do you feel like you have more competition now than you used to and some of your core markets including the U.S.. Think competition has changed slightly. We've seen that the last couple of years have been challenging for the for the whole industry. There are some smaller niche players popping up in many markets but we still get our focus on all seeing relevant for that for the customer in all parts of the world. We believe we have a strong set up to to create customer value all across the globe. So what are you expecting us to go back to pre pandemic levels in terms of shopping at H and M.. And does that mean that you're looking likely to open more stores or are you staying put for the moment. Right now obviously we are happy to see that that's at least a store closure levels are coming down to a minimum and hopefully this can can then result in that we resume to a more normalized situation. And looking at 20 22 we believe that there will be a slight decrease of the store portfolio. But we also see throughout the year that that's some of complement each other really really well. So we have a good plan before for 2020 to we we estimate a slight decrease of this offer from the. Are dividend payouts back on track. Dividend has been proposed from the board to the AGM AGM and we are happy to see that that did that part. Also the capital allocation strategy can be resumed to a more normal level. So yes dividends are are back as part of the capital allocation. I understand of course that and we've been talking about this in the past. But you know how to deal with China has been troubling for HLN. Do you feel like those troubles are getting better or worse. We the situation is still complex and we are working on on it but we would prefer not to comment more and more detail regarding data development in China at the moment. But in terms of consumer demand you expect to be able to regain some of the market share lost in that or is it just too soon to say. Now we're following the situation very very closely obviously and we're working to secure that. Are consumers in China can still create a long term relationship with a gentleman. And we're working on that plan. It's too early to say how that will play out when it comes to market share. OK thanks so much for joining us. Adam Carlson the chief financial officer of HLN joining us on the back of some pretty solid earnings figures now. Coming up Apple sales climbing 11 percent to a record one hundred and twenty four billion dollars in the first fiscal quarter. Have they conquered the supply chain. That story our main story is up next. This is Bloomberg. Economics finance politics. This is Bloomberg Surveillance early edition on Francine Lacqua here in Rome. Now we're just getting some breaking news. The Italian parliament will actually hold two votes on the new president today. Now this is quite a big deal because it means they want to speed up the process. It also means that Mario Draghi could have a better chance of getting it because they still haven't found consensus candidate and he's still emerging as one of the favorites. Very quickly onto the papers. I know it is a very murky process over international audience hanging there will have a name at some point. If it's not today could be tomorrow or next week. But some of the papers have been really funny. Tampa for example with a voodoo doll of Mario Draghi in political chaos there is always someone with a sense of humor trying to I guess kill off some of the other candidates to become president which would secure him a seven year term. Another one is Matt Miller said give me a half naked model sort of. He's going back to one of the scandals of him in a discotheque a couple of years ago. And some of the mainstream more mainstream papers such as Republic are just playing it quite straight. Also NASDAQ playing it quite straight to saying we'll have to see and hopefully we'll have a name pretty soon. Now onto corporate earnings and Apple the world's most valuable company beat sales estimates marking a victory against a supply chain crunch fueled by both a pandemic but also by ship chip shortages. Well joining us to discuss all of this is Bloomberg Quicktakes Alex Webb who's also a Bloomberg Businessweek communist on technology. So Alex good morning first of all. How did Apple beat the supply chain crunch. Did we overblow the dangers to it or did they find a way of securing more chips. Well it's a bit of both actually. But Apple said that iPod sales were perhaps a little less than might have been expected. But that was partly because they were taking components that were intended for iPods and directing them towards iPhones is obviously a lot of share technology between those two devices. We also know that Apple is generally very very good at managing market expectations. The the IBEX community had built in about 10 a 10 billion dollar hit from the supply chain constraints. In reality the company said it was about a six billion dollar hit. And needless to say they beat on its estimates by four billion dollars. So you can see that delta in that. But they do have you know a very well oiled supply chain machine built by Tim Cook. So does it mean that actually we could see some of these supply chain crunch also being used for a lot of other technology companies and what's it mean for stock prices. Well I mean there are other companies that clearly are more of already being hit more drastically by this not least Tesla Apple supply chain. You know it's been around for 10 15 years in its current form. And as I said he's very very loyal. The others it's a bit newer don't have quite the same aggressive chapel supply chain operatives at times. They don't have that same approach. They are already suffering. And of course there are companies that are purely dependent on their hardware. Apple has services businesses as well. So Alex valuations. Valuations valuations that valuations of these tech companies valued some took compared some of the broader market. Well Apple's valued at the moment about 27 times forward earnings. It is a premium to the S & P was sort of 24 times forward earnings but not a significant one. If you look at Amazon it trades at 40 times forward earnings. Tesla 80. You're not suggesting Apple is going to go anywhere near to Tesla anytime soon. But the thing that's interesting is as other companies start to recover from the pandemic in a forceful way we might see some revisions to the upside on their estimates. That means that they will look slightly cheaper. And there's a possibility that some of the stuff some investment cycles out of the likes of Apple and Microsoft and towards those other companies that increase look a bit cheap. All right Alex thanks so much. Alex Webb there with some of the tech stocks that we need to watch. I'll be here in Rome of course probably throughout the week and certainly will be here possibly live on Monday as we await the president of the republic. We just found out that there will be two votes in the parliaments a beautiful but overcast day today. So maybe we get on with business and find a consensus name in the next hour or Matt Miller NIKKEI lines. We'll be in New York or Anna Edwards in London. This is Bloomberg. Once again the hallmark of the Fed is they talk a lot tougher than their actions. What's clear is Powell is very data dependent on the right path. I think the one concern that I haven't as a big conservative is as the fallout in the financial markets were off line a bass line here. This is Bloomberg Surveillance early edition with Anna Edwards Matt Miller and Kailey Leinz. It's 10:00 a.m. in London 5:00 a.m. in New York and 6:00 p.m. in Hong Kong on this Friday January 28. Our top stories today. Apple survives the supply chain crunch. Cruelty revenue easily beat Wall Street estimates and the company projects that sales will rise by double digits in the March quarter. It may be a fragile end to a roller coaster week for U.S. equities. Investors still trying to figure out the impact of soon to be higher interest rates and bracing for an attack. President Biden tells Ukraine's leader that Russia could invade sometime next month. Welcome to Bloomberg Surveillance. This is the EARLY EDITION. It is Friday. I'm Anna Edwards in London. With Matt Miller and Kailey Leinz I've read New York and Kaylie. It seems every time I look away from the European equity markets in the last couple of hours we take a leg. Lower sentiment not the best this morning. Well Anna it's been like that kind of all week. Every time you look at the equity market it seems to be in a different place than it was just a few minutes beforehand. It's Friday. Thank the Lord. I am a little bit tired if I'm being honest after this week. I think also there was getting a little bit of relief in Asia overnight. Some positive news for most of the equity market benchmarks. There you have the MSCI Asia Pacific Index up for the first time in six days rising about half of 1 percent. The one exception to that story was China. CSI 300 of course had fallen into a bear market in the Thursday session. Those losses did continue on this Friday down one point two percent even though you have state media funds coming into by trying to support the equity market. But maybe there was just a little bit of selling pressure as people tried to close out their positions ahead of the New Year holiday next week. Now of course I did want to point to one individual stock in particular and that is Hopson development. Of course a developer in China really weighing on property stocks across the board. As P.W. see its auditor has now pulled out because they couldn't get sufficient information. And that followed a couple of other auditor exits this week creating some concern potentially about a wider exodus. That stock was down 17 percent in the session. Its worst dropped since 2000. And finally I did want to point to what's going on in the bond market as well. Broadly you actually sub sovereign bonds bid in the Asian session overnight. The one exception to that was Japan the 30 year yield. They're posting a two three standard deviation move up 2 basis points to 75 basis points. You're actually seeing a lot of movement in Japan which is something we don't necessarily see all that often. Yeah. And well you know what I was thinking maybe Kelly we're all a little tired out from this week. Maybe you won't see the kind of volatility in the volume that we have in the last four trading sessions. As I was thinking that I saw S & P futures move down from up. So we were looking at gains. Now we're looking at a drop still basically launch but it's a little bit of movement there. The 10 year yield back at one eighty four. Remember yesterday we saw that drastic dropping and now we're back right where we were on Wednesday. So one eighty three fifty five to be exact which I probably should be with the 10 year yield. You know I get excited about the dollar index right now at eleven ninety one seventy six. We're seeing some real strength here. And we had come off our November highs of eleven ninety four but we're getting back up there right now. And I wonder if that's a safe haven bid or if that's just that the whole world expects more interest from the Fed. So they're getting into the greenback 9x crude up right now. Eighty six ninety five a barrel. And by the way Brent crude is trading just under ninety dollars a barrel. So we're watching those levels in a. Yeah. Slightly more rents in just a moment. Matt we are far more negative than punch here on European equity markets. We started out with some higher expectations I suppose but European stocks falling down by as much as one point six percent on the Xetra DAX this morning. We are nervous around the growth story nervous around the German growth story in particular that German data coming in showing a contraction in the last quarter. Also nervous around supply chains. More on that in just a moment. Back to the oil story. I've got the Brent price in order for you to see this morning. And we are seeing further concerns around geopolitical risk pushing oil prices up again. We actually went up as far as ninety one dollars on Brent earlier on in session. So that is why we got to on the oil conversation. And that keeps inflation very front and center doesn't it. I was looking at the GNN earlier on in that column dedicated to commodities all in the green Electrolux also dealing with its inflation pressures and dealing with supply chain issues. And what that means is unmet demand for a company that makes home appliances that stock down by just over 6 percent. LVMH the luxury goods company in France that stock performance fading as we go through the session. It was much stronger earlier on demonstrating pricing power now telling us that familiar story about how strong luxury goods are performing as people get out and travel just that little bit more. Talking of travelling a little bit more outdoor advertising businesses reflecting some of that return to normality and. Some parts of the world at least. To go over in Paris up by nine point nine percent Katie. All right Anna. Well of course we're all excited. Today is Friday but we still have to get through the full day ahead. And there is a lot to pay attention to. French President Emmanuel Macron and Russia's Vladimir Putin are due to hold a phone call this morning to discuss those Ukraine tensions. Then we'll still have earnings rolling out throughout the day. Chevron and Caterpillar will cross before the opening bell. And at eight thirty a.m. New York time we will get a lot of US economic data including U.S. personal income and spending as well as that P.C. deflator of course the Fed's preferred inflation gauge. And then finally rounding out the economic data at 10:00 a.m. Eastern Time. We'll get University of Michigan consumer sentiment data Matt Miller be really interesting to see how sentiment is holding up amid these inflationary pressures and also market turmoil that has had a great wealth effect for a lot of Americans. Yeah absolutely. Looking forward to that even though it comes from the University of Michigan. Let's get to the world's most valuable company right now reporting earnings after the bell. Apple strong results defied fears of a supply chain disruption. Bloomberg's lower right has the details. Laura what were the key takeaways on how Apple was able to achieve results that were so much better than the Street's estimates. There was so much better. What supply chain crunch on the call. Tim Cook defended Apple's supply chain. We're seeing Apple surging in the pre market revenue just shy of one hundred twenty four billion dollars. Smashed coming in at two dollars 10. The Street's expectation was one dollar ninety gross margins at a 10 year high. Apple successfully launching lots of new products. Services phenomenal growth. Macs phenomenal growth. We know that Apple is pivoting toward a more service based ecosystem and the hybrid shift to working seems to be here to stay. iPods tablets disappointing. They were down 14 percent for revenue year over year. That's because Apple has been prioritizing components in their iPhones. The regional picture is also interesting. Was taking note. China clear out performer 21 percent growth revenue year over year. Japan in double digit negative territory suggesting that particular market is saturated. Okay so that's the picture geographically then Laura. How would the results received by analysts without the tech titans set to report next week. Of course. I spoke with one analyst in the early hours of this morning from Evercore ISI. And for him look March is going to be crucial. We may see some potential headwinds there but some upside. Later this year the iPhone 14 is being launched. I was telling Ana earlier I'm still using the eight. I feel embarrassing. I might fall behind the curve on Apple is entering the of us in the autumn. Speaking of the massive US augmented virtual reality next week yes we have massive platforms along with Alphabet and Amazon. Another big week the walled garden of advertising and focus on the structural shift to online selling from a number of businesses. After the pandemic Laura if you still have an iPhone 8 I'm surprised it's still working. That's actually pretty impressive. Thank you so much to Bloomberg's Laura. Right. And of course Apple giving a boost to Nasdaq futures this morning after what has been an incredibly incredibly volatile week. Limber excreting. Gupta is joining us now for a tech technical look at the action created. How do we even make sense of the last five days. Yeah well it's fascinating because you're Shery Ahn to see in Texas widely under pressure but it's also dragging the entire market lower. This is going to be a big story especially when it comes to the Sox index because Laura was just talking about the idea that the metaverse is the next thing that's getting fuel. But how do you fuel that metaverse. How do you take that next step. While semiconductors are a really big part of it. In addition to their use case for things like electric vehicles. So I take one take a look at the technicals of the Sox index because you tend to see the moves in big tech that you see in the S & P 500 magnified in the Sox. And let's take a look at this for going back to a year. The RSI the 14 they are PSI which is this bottom panel right here tends to be a little bit of a roadmap for when you see this broader index bottoming out. You saw it over here in May. It dropped down to that oversold position. And now you see a little bit of a bounce back. Same story when it comes to October. And now once again we're hitting that same level after a 20 percent drop in the Sox index this time. The question is do you start to see the S & P 500 and the Nasdaq in particular follow. At the end of the day these chip makers really lead to a lot of big tech supply chains. And we know those companies make up the majority of the S & P 500 trading. We've felt you know the the Russia risks weighing on the markets since the beginning of the week. How does that show itself in the data. Oh well this is going to be fascinating because it's in the Bloomberg Commodities Edge DAX. Everyone is talking about oil right. A knee jerk reaction of as much as 10 dollars on a Russian invasion to Ukraine but no one's talking about wheat aluminum together. Russia and Ukraine make over a quarter of the world's grain supply. Aluminum a major exporter is Russia of. Force for say cars that of course. Need that to create more of their product. Take a look at this. The last time 2008 you had this major peak in the Bloomberg Commodities Edge spot and that was post recession 2011 a food crisis once again created by a crop crisis over in Russia. And here we are all the way over here in this kind of spot and hitting a record high. Once again the latest leg higher is coming from really pricing in the risk of that invasion Matt. Thanks very much. Bloomberg. Christie gets a much broader than just oil. I was looking at palm oil. I mean that's not a Russia story. But that also trading at a fresh record. Let's stick with the geopolitics though. President Biden has warned the presidents of Ukraine that there's a distinct possibility the Russians could invade next month. That is according to the National Security Council. President Biden spoke to me Zelinsky yesterday. Emily Wilkins Bloomberg government reporter joins us now from D.C.. What is the detail behind this warning that we're hearing once again from President Biden despite the Russians really emphasizing it seemed to the last day or so that they're still talking in Washington is very much gearing up for a potential attack. I mean you've seen it all this week in how the U.S. has moved in sending troops over to Eastern Europe. And you're hearing it more with President Biden's rhetoric over his phone call with the Ukrainian president. I mean this is something where you have heard the two of them on different pages on whether or not an invasion is likely. And so that was part of the discussion yesterday as well as some of the economics. And that's something that the U.S. is really trying to keep in mind here in terms of energy in terms of gas in terms of other items that need to get to Ukraine. How are they going to position themselves. So if Russia does attack and there are sanctions levied that Ukraine and other European allies aren't extremely hurt by those sanctions. Yes it's interesting. He sees he seems so sure it will happen. I'm surprised he didn't use the word imminent in the phone call. Emily in terms of what's going on with China we've already seen one bill go through to try and counter Chinese competition. Now there's another but it looks like there's some GOP opposition. Why is that. So it's important to note that a lot of this Republican opposition is coming in the House that this bill a different slightly different version of it did pass in a bipartisan manner in the Senate. And all that really needs to do for this bill to go forward because the House and the Senate are going to come together with their different versions talk it out and produce something new. So technically if House Republicans oppose this bill it means it can still get passed the House it can still go to that conference and they can potentially come out with a more widely supported bipartisan product. That said Republicans say that they're not fans of this bill because it's a little more partisan than what the Senate put forward. They feel that Democrats didn't work with them on it. We've heard concerns from Michael McCaul the head of the foreign affairs Republican head of the Foreign Affairs Committee and they put it out there that they really don't think they're going to be able to support this legislation when it comes to the floor. But it'll be I think more interesting to see whatever product comes out of those House and Senate discussions whatever bill they come to an agreement on. That's the one I think more people will be looking to Republicans to see whether there is more widespread support there. All right. Bloomberg's Emily Wilkins of Bloomberg Government in Washington for us this morning. Thank you so much. And now let's get back to the markets. Take a look at some stocks moving in. Premarket trading here in the U.S. absolutely plunging to the downside is Robinhood. It reported after the bell yesterday revenue missed expectations a greater loss than expected. Plus users were down 8 percent revenue per user. Also disappointing. And as a result that stock is down nearly 14 percent before the bell after already being down 69 percent from its IPO price earlier this year. Another mover to the downside is Western digital supply chain issues. A big challenge here is its guidance missed expectations. That stock is down about eight point four percent. But it's a little bit of a better story for Visa beat on the top and bottom line payments volume up 20 percent. Both Visa and MasterCard really underscoring some strong spending trends. And as a result that stock is up about four point six percent before the Ballina. Lots to talk about with Dan ISE this morning. We'll be talking tech. We've had a lot of earnings already. We'll get more next week. Dan ISE Wedbush senior equity analyst joins us shortly. This is Lee. Earnings season is here. It has been frozen a little bit. Disappointment in some of the early reporting. Bloomberg is fastest. With the numbers and analysis this is a crap. What's it buy and what's a run away from Bloomberg. The fastest numbers and analysis you trust. Welcome back to Bloomberg Surveillance. This is the early edition on Matt Miller in New York with Kailey Leinz Anna Edwards. With us out of London we are simulcast on Bloomberg Television and on Bloomberg Radio which is why I don't normally show you a chart. I just talk about the data and then we move on. Obviously radio listeners can't see what we're looking at but this is one of those times when I would recommend as sure as you get to work or as soon as you get near a Bloomberg terminal. Log on and type in hashtag BTB 51 49 because this chart really is worth looking at. This is the one historical example we have of quantitative tightening and how it affects risk assets. Bonds did well the curve flattened. The last time we saw quantitative tightening and stocks were so so 2018 was a down year. 2019 we came back. But still it looks like risk assets haven't kind of rough. And that's what the market is worried about right now. Joining us to talk about this is Christine Aquino. She helps lead our markets coverage out of London. Christine what is this the biggest concern when you say the quantitative tightening as far as what the Fed's going to do this year. Well it's definitely that and it's combination with the rate hikes that we are also meant to be seeing from the Fed. So this is quite unprecedented. The idea of the Fed entering a tightening cycle using two levers in its arsenal of course the quantity quantitative tightening that you mentioned the process of rolling off bonds from its balance sheet but also raising those rates and perhaps raising those rates faster than markets expect it. And so it is very much this a full blase tightening cycle that we're seeing here. Then it will be really interesting to see how that plays into markets because of course that will have repercussions for the short end of the curve. Those two year Treasury yields really ramping up much higher potentially. We'll have to do much more to reprice this. But then of course the long end of the curve very much reacting to that process of the Fed rolling off bonds from its balance sheet. What sort of maturities will they start looking at initially and how does that impact the shape of the curve moving. Yeah I've seen them in the last me meeting. Christine good morning by the way. We heard a lot about the interest rate hikes not so much about the quantitative tightening and how that plays out and what opportunity there is to steep in the curve with that particular process. So we'll leave that one. Let's get back to Europe where we are and think about the growth story here because the markets were negative already before we got the German data that showed that the economy was in contraction in the last quarter of last year. Quite a surprise to a market that's about DAX. It's fallen on a nervous market I suppose. Absolutely. And I think it really does speak to the fragility of the European economic story still. And with that context you you can understand why the ECB has been very emphatic about the fact that it's not going to raise rates in 2022 despite the fact that its counterparts in the US and the UK are very much heading into the tightening cycle is still very much a fragmented sort of economy. Germany of course still reeling from the effects of the virus over the holiday period as well as some of those supply chain issues. And then when you look at it in the context of France and Spain doing slightly better more on consumer spending you can really see it's a different paces. And this is the dilemma for the ECB next week. Do we have to get through the ECB and Veolia next week before the equity markets globally can actually focus on earnings. Well Kelly I think it will have to be a simultaneous factoring in of all of these catalysts. I mean this is exactly what we already saw this week when when you know earnings season is just starting to kick off. But you know we had the earnings catalyst but of course we had geopolitical risks to consider as well and then to cap it off. The Fed hawkish surprise is Apple earnings to top it all off. It makes for a really eventful week. And I think next week will be very similar. We'll be hearing from a lot more companies how they're in. We'll see you know the real time effect of inflation and how these companies are able to deal with that. And then from central banks and how they're dealing with that visa policy. OK. We'll all need a good rest over the weekend. Christine to prepare for more volatility perhaps next week. Thanks very much to Bloomberg's Christine Aquino from the markets like team of course. And you can get further analysis from the Markets Life blog. That's on your terminal. Emily Chang. He gave me the function this just lean back. This is Bloomberg Surveillance Early Edition. I'm Kailey Leinz with Matt Miller in New York and Anna Edwards in London. Now let's get the first world news. And President Biden says he will fulfill his campaign promise to nominate the first black woman to the Supreme Court. The president says he'll announce his choice by the end of February. Justice Stephen Breyer has formally told the president he will retire in June or July assuming a successor has been confirmed. North Korea has now confirmed that it's launched four missiles this week. The tests include the launch of two long range cruise missiles that could give Kim Jong un's regime the capability to hit almost all of Japan. Kim has ramped up weapons testing in an effort to signal unhappiest ness with the US over economic sanctions. The European Union and the UK reportedly are gearing up to sanction new Russian gas projects if there is an attack on Ukraine. That's according to the Financial Times. The sanctions would drastically cut financing and technology transfers for gas facilities and China and Russia will sign an agreement to build a research station on the moon. The two countries aim to complete basic infrastructure construction for the lunar station by 2035. It's the latest sign that the new race to go to the moon is heating up. Next month the US has scheduled a major test of its Artemus program an effort to return astronauts to the moon later this decade. And once again I say. And up to the moon. Yeah. This time we're not talking about means are we. We're not talking about investment strategy although obviously a big investment theme. Fill that coming up on this program. Karen chatted head of investment strategy for ISE shares in May. We will be talking with BlackRock about investment strategy when they sounds on Europe and European value in particular. This is Bloomberg. This is Bloomberg Surveillance Edition. I'm Anna Edwards in London with Matt Miller and CAC lines in New York. Here is what you need to know. Shares of Apple are higher today. Fiscal first quarter sales and profit easily beat expectations. That's seen as a victory over the supply chain crunch. Meanwhile Apple forecasts that sales would grow by a double digit percentage in the March quarter. Apple leaves higher in premarket. It may be a shaky end to a roller coaster week for U.S. equities. NASDAQ futures paving earlier gains. Investors are weighing the impact of upcoming Federal Reserve interest rate hikes. President Biden has warned the president of Ukraine that there's a distinct possibility the Russians could invade next month. That is according to the National Security Council. President Biden spoke to Vladimir Zelinsky on Thursday. That is a list of what you need to know this morning that there is a lot going on this Friday as we get ready for the last session of the trading week. It's been a volatile week. It's been an incredibly volatile week as I think Kelli was pointing out. We saw the kind of swings the last couple of days that we haven't seen since 2008. We had two days in a row of gains of more than one and a half percent and then finished down. Right now we don't see a lot of movement on the S & P futures. They're pretty much unchanged although the arrow is red. So if you're a glass half empty person that's fine. The U.S. 10 year yield is rising. This should be green for the glass. Half full people out there because the yield is on its way up and the arrow is pointing up as well. In any case it's red because people are selling bonds and that makes the yield go up to one eighty three fifty five eleven ninety one almost eleven ninety two on the dollar index of the greenback has some real sway. A lot of people out there saying cash rules everything around me right now unless they want digital money. In that case bitcoin is on its way up. But still you know I've been telling you the last couple of days we see this range and we seem to be range bound here. Thirty six thousand six hundred forty is pretty much the same place we've seen Bitcoin every other day this week. Kelly what do you see in terms of free market movers. Well there's a lot of them out there at the moment. Of course Apple is really the big company story we are following today. Anna mentioned it. Supply chain crunch no problem. Record quarter on many metrics for Apple. Even if the iPod did face a little bit of a challenge in the quarter that stock is up 4 percent in premarket trading. Not so lucky though for Robinhood. AD revenue missing expectations a bigger loss than expected. Users down 8 percent. All of that resulting in a 14 percent decline for the stock adding to an almost 70 percent loss it's seen since its IPO. And then of course Tesla got hit extremely hard after earnings yesterday. It was down eleven and a half percent in the Thursday session. But starting to see some buying of the debt coming through those shares are up about eight tenths of one percent. As we see Apple really leading tech higher on this Friday morning into. Yeah Kelly a big focus on tech Ben and we are seeing selling in nearly all sectors here in European equity markets. Matt showed us the S & P futures just edging down a touch. Well we're doing more than that here in Europe. We're down by one and a half percent and more in some of the bigger markets here. And most sectors in negative territory. One of the things we continue to be nervous about of course is inflation. And for that reason I'm showing Brent crude here 80 968 ever ever higher it almost seems like when it comes to the oil price although that's obviously not the case. But we are moving higher today 89 68. We've been above ninety one dollars in the last 24 hours. So that is something we are certainly watching geopolitical risk in the mix that we nervous around the growth story nervous around confidence in the growth story here in Europe. We're also nervous around supply constraints. And that's something that's weighing on Electrolux. They supply household goods of course. And if they can't get all the chips they need they can't sell the product they want to. And that means unmet demand. The stock moves lower. LVMH a positive story coming through from the luxury handbag and other jewelry manufacturer. A story of really strong pricing power coming through although the stock performance fading that one stock performance has faded a little but still really strong. The outdoor advertising business J.C. Tyco underlining that appetizing outdoor seems to be back. Certainly when you think about the increased mobility that we've seen from certain parts of the globe as we recover from that pandemic let's think about where we go for the equity markets from here. Then it's been a really volatile January. One of the themes has been selling. Tech has been getting back into value perhaps. And I've got a chart that shows exactly that theme and what we can expect to see on value for those listening on radio. This is showing European value stocks set for their biggest monthly outperformance on record. Is this outperformance by value or underperformance by tech. Either way you look at it this could be good for Europe if it continues. Karen Charity's head of investment strategy for ISE shares EMEA at BlackRock and joins us now. Karen good morning to you. How much are you getting involved in the value trade the European value trade at this point. I think it's very interesting that tried that you're showing the European value outperformance. It's something that we're seeing come through strongly in ETP flows. So where I sit. You know we're laser focused on analyzing some of the trends from the best third party flows because it gives us a sense of what's happening in this market volatility of the past few weeks. And the answer is. We're not really seeing a rush for the exit but we're also not really seeing a significant buy on that. But what we are seeing is a significant to the sector region and CAC level. And the beneficiary is really value. So the value factor in flows that we are picking up significantly especially in Europe especially in sectors that are you know cheap on a valuation basis that feature heavily and value such as European banks. And we're also seeing this come through on a regional basis with a bit of a preference for European equities coming through and flows at the expense of areas like U.S. equities. Does this have legs. I think it could. It could have legs in the context of the view. That's why we're really here in an economic restart not a recovery. So many extra job growth that gets delayed will come through later. And that's really supporting some of those cyclical plays. Yeah. Karim ISE I pull up ETF go on the Bloomberg to follow these flows and I see outflows in the spies in your Ivy V in the Qs where you see the most pressure here. The most pressure really is coming through on a slow down not so much significant outflows. Again it's not really a rush for the exits but not by a faucet. This is the headline that I will take away from what investors are doing at the moment. So it's a slow down in buying relative to December in U.S. equity and in some of the large cap area. But having said that you know you were talking about the Apple number this morning. We do still like DAX. We do still like those quality names which is why we keep talking about this barbell approach track with with the look on value and on quality at a time. And you know tech. We did a big analysis this past week on which are those companies that have the best pricing power that have the ability to withstand tougher margin environment in the context of more spooky higher inputs. Growth and tech really comes out on top in Boston obviously. So there's room for both. What are you expecting in terms of the economy. I mean we've heard forecasts for single digit to 15 percent earnings growth this year. We've heard forecasts for inflation to start coming back off of 7 handle on the second half. But their concern is that the Fed moves too far too fast and pushes us into an inverted yield curve and the recession following that. Yeah. So let's you know stepping back and framing this conversation on the macro environment for 2022 we're seeing some trends here already in some supply chain pressure easing like we did an apple except for the iPod figure. So those supply chains that you're using are really a main driver of why we see the surge in inflation that has been coming through in the first half of the year likely to start moderating as we progress in the year. So like moderating back down in Q2 Q3 to Q4 which which should help with some of that inflationary pressure on the growth side. Again this is really a restart at play. And what the restart dynamic for chess is that you know we're seeing a significant catch up in growth that's coming through despite some of the tightening that's getting priced in and the tighter liquidity conditions especially from the from the Fed. So all in all what does this mean for the earning growth question that you were asking earlier. I think in the high single digit earnings growth. It means an environment where we can't rely as much on multiple expansion but we can rely on it on a decent but not stellar earnings growth environment. On the subjects of inflation which you were just thinking about Kerem where are people looking to hedge against it. Yeah inflation hedging is a huge area of focus for us. We're seeing this come through in equities on a sector level. Some of the inflation hatches that are coming through are in areas like value again are in areas like financials. Financials alone have seen 9 billion dollars of inflows and ETP and sector ETP which have become a growing share of the over all equity flows. To show that you know sector these are increasingly becoming a go to for selectivity for investors. But we're also seeing with inflation hedging theme come through enlisted private markets like infrastructure infrastructure equities have become a much bigger theme for us. And then lastly in commodities and commodities as a whole come up as as an inflation has gold's device opinion. It's more of a hedge that investors are looking at in a high inflation regime less so in a moderate one. But it's definitely it's often. Karen thank you very much. Thanks for your time. Kareem Jet is a black rock head of investment strategy for ISE shares EMEA. Thanks for spending time with us here on Bloomberg TV. Next up on Bloomberg TV we're going to talk Apple. Dan Ives joins us Wedbush senior equity analyst. We'll talk Apple to all the other tech news flow as well. This is Bloomberg. This is Bloomberg Surveillance Early Edition. You're looking live at the principal room coming up later today. Chevron CEO Mike Worth. That's at 10:00 a.m. in New York 3:00 p.m. in London. This is Bloomberg. We set all time records for both developed and emerging markets and saw revenue growth across all of our product categories except for iPod which we said would be supply constrained. As expected in the aggregate we experienced supply constraints that were higher than the September quarter. Apple CEO Tim Cook speaking yesterday after the company's first quarter sales and profit easily beat expectations. That is seen as a victory over the supply chain crunch. Shares of Apple are higher in premarket trading. And joining us now to discuss is Dan ISE analyst at Wedbush Securities. Up early for us this morning he has an outperform rating and two hundred dollar price target on Apple. Dan was this a case of us overestimating supply side challenges or underestimating demand. Look I think Apple really flex their muscles not just when it came to the supply chain but just overall demand. I think demand for iPhone 13 is outstripping supply by about 15 percent. And when it comes to supply chain apples at the head of the line they have a great view price better than anyone else. The fact that it's moderating going into the March quarter. Those are words that are going to be heard around the world in terms of from a street perspective bullish for tech. And this was just a golden quarter for Apple in face of all these headwinds. Dan good morning. What have we learned then from the Apple numbers about the right way that the good things to do to manage supply chain constraints at this point. Have we learned lessons about the value in being big and having big contracts in place. Have we learned about trading one products off against another. Some people have talked about them doing in the last quarter between the iPhone and the iPad. Yeah I mean look I think Apple obviously because of where they said not on their hardware ecosystem. I mean they are always going to have more access to chips than anyone else. And of course that foothold they have in China continues to be so crucial. But there you even though it's more Teflon like they still had about 10 million iPhone units they've shifted from December into March but it comes down to cook. He's a tactician him in the team terms and navigating the supply chain and making sure that demand is ultimately met. And it just happens. They came out with iPhone 13 that continues to juice globally be a massive seller best holiday season ever in China. Despite the fears that's the linchpin of growth takeaways here. In my opinion given the headwinds this is probably one of the best Apple quarters we've seen in the last decade. I wonder what you think about this factoid from the story Dan that just shocked me. There are now one point eight billion Apple devices currently in use up 300 million from two years ago. So they've made a huge jump. Is that kind of growth to be continued. Can we can we expect that to keep up at this pace. And where is it coming from. Is that coming from China. Yeah. A match. Great point because if you look at China I mean our estimate is they've gained about 250 before some market share in the last 18 months. In China now it's best selling smartphone in China. Haven't seen that in six years. I mean look I think it just shows iPhone 12 iPhone 13 that tag team in terms of the introductions on 5G. It's really been a rock chip in terms of demand. Also two hundred fifty million of nine hundred seventy five million iPhones worldwide. Based on our estimates have not upgrade their phone three and a half years to this huge pent up demand right product right time. Despite supply chain I call it a more homes light performance from Cook. Got it. And it hasn't gotten a new phone since the great financial crisis. How many phones out there using 5. And how important is 5G to apples growth strategy. I mean 5 G it's the hearts and lungs of the growth strategy. It's not just for my iPhone 13. Look what's happened across the board in terms of them now producing their own chips and you can 5G today that's still only about 8 to 10 percent of overall base is really now upgrade the 5 G as this goes forward. It continues to be our thesis. It's a renaissance of growth in Cupertino. You know we could argue valuation all day but I believe this is a sum of the parts valuation services which is Rock of Gibraltar we think worth one point five trillion and invest in a market that's just been nervous. White knuckle backdrop. This is the news the street needed to see along with Microsoft early in the week that I believe reverses the tech trend. Haters will continue to hate but I think six months now Apple is north three trillion sustainable as a mark cap. OK Matt was exaggerating but he does have a point. And so do you down about the number of people who haven't recently upgraded me included. Let me ask you about the unanswered questions though. You think that we've learned a lot this week from Apple and from Microsoft answered a lot of those questions around SAC. And you think we're we're kind of back to the races that what is the big unanswered question for next week then as we go into the the earnings story that. By the it's the supply chain. And I think that's the missing piece. We could test a tested called out supply chain. I think there was more conservatism. Apple C is moderating now. Next week we will get other chip players as they come out. Other software names it comes down to is our view. Software and chips lead CAC car work from home. Names will fade. You can't put them all in the same bucket. And I think CAC is way oversold here. And in our opinion you look at Apple. This is going to be that life raft in a market sort of turmoil that I think turns around tech. And again it goes back to when Cook talks everyone listens. He and Apple have the best view the supply chain is anyone globally. OK. So we'll listen to him. I'm also listening this morning to the CEO of FTSE Mike Rowe talking about no easing of the shortage of chips until 2023 but that's them talking about that less specific type of chips they make down. We thank you very much for your time Dan ISE senior equity research analyst at Wedbush Securities. We appreciate the early mornings with us. Now Italian parliament the Italian parliament is set to hold two votes for a new president today. We're live from Rome next. This is live. This is Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Matt Miller in New York. Now Italy is entering day five. Five are voting for a new president. Lawmakers still haven't managed to agree on a new president after a fourth round of voting. A sign that it will be harder than initially thought perhaps for Prime Minister Mario Draghi to get that job. What does that mean for the international audience. Greenberg's Francine Lacqua is still with us from Rome. The longer this takes the more time you get to spend in Rome though Francine. But tell us all we nearly there yet. Win win. I know everyone's distracted I feel like the parliamentarians may be distracted by the good coffee and the beautiful views. The longer this takes I think probably on balance the chance of Mario Draghi become prime minister becoming president increase. So he would leave the prime minister on the road just because it means and that it's more difficult to find a consensus candidate. However we also found out moments ago that there will be two votes today. So it does seem that lawmakers want to get on with it. So every time they vote it means that they have a better chance of actually finding a name. If it's not President Draghi then we'll have someone else. A number of names have been floated. Would they change. Very very often. Remember the the espressos we had in Bari for what was at the G7 the G 20 Norway licious. Ever everything's delicious and of course there's an inflation dimension to every espresso here in Italy. In what sense. Like they're more expensive or you just need more of them. Yeah. I mean both bozo but actually they are more expensive which is why a lot of people are saying look this is a disaster. They used to be one euro twenty one euro ten and certain parts of the country and they're now up to 150. This is actually a political hot potato. Because it turns you know cannot live without their espressos. And this is also front page news of all of the papers. In fact if you look at the papers man and I know a lot of the focus is on. I mean look at this. This is fun. My your drug with a voodoo doll hoping to get it. This is the front page of a simple. And then page 2 and 3 they talk about inflation and they talk about the espressos. We also have another fun one with Matt Miller Self-feeding who could be the big winner if we go to early elections. I mean there's there's a picture of him half naked going back to a scandal at a discotheque that happened a couple of years ago. But again it's all of these major political parties that are trying to find dealing with inflation and also finding the next president of the Republic of Italy. All right. So a little bit of continued volatility there for the Italian political situation but we all wish we were there with you in Rome. Francine Lacqua coming to us live from the heart of Italy. We are also watching a number of other things this weekend. I'm watching the snow. Apparently we're going to get a foot of snow here. I'm not sure if that's meant for actually you know in Manhattan in New York City because that thing's just grind to a halt when you get that much snow here. But it seems like it could happen tonight into tomorrow. And hopefully it's all cleared up by Monday so we can get back to work. And I hope you have some good indoor weekend plans then. Matt I'm watching geopolitics global geopolitics of course tensions with Russia. We've heard from the Russian foreign minister Sergei Lavrov sounding a little more conciliatory talking about the being receptive to the US proposal that involves some rational elements. He says this coming just as President Biden of course has been warning the Ukrainian presidents about invasion next month. That's what the US line is at the moments as they say. At the same time they talk financial support. So we'll watch that of course. We're also watching the markets though watching NASDAQ features fading just a little. The closer we get to the U.S. session the further we get through the European session which is now down by one and a half percent while the stock 600 the movie fade on NASDAQ which is the Apple effect. We'll see how long that lasts. More Bloomberg Surveillance is ahead. We'll hear from Dean Kennedy of Macro Risk Advisors and Honohan of Wells Fargo amongst other voices. They will keep you in touch with all those market names in many sound three tenths of one percent. This is Glenn Beck.

No schedule data available.

'Bloomberg Surveillance: Early Edition' Full (01/28/22)

Bloomberg Surveillance: Early Edition, live from London and New York. Francine Lacqua, Anna Edwards, Matt Miller, and Kailey Leinz deliver the latest news and analysis on the markets with leaders in global finance and economics. Electrolux CEO Jonas Samuelson expects continued solid demand in most markets going forward. Karim Chedid, Head of Investment Strategy for iShares EMEA at BlackRock, weighs the impact of tightening monetary policy and a flurry of corporate earnings. Wedbush Analyst Dan Ives says Apple delivered a golden quarter. (Source: Bloomberg)

Bloomberg Markets
"Bloomberg Markets" is focused on bringing you the most important global business and breaking markets news and information as it happens.
More episodes and clips