trillion increase in the debt ceiling. plus tesla slumps 6% post market as elon musk signals deeper price cuts despite the squeeze an margins tsmc second quarter sales fading. futures front about .2% lower on the dax. not bia coming through with a miss. renault coming in with a beat the demand softening a little bit as margins in first quarter came in as expected. the ftse 100 down .2%. we had a call from jeremy to get

to 8126 on the pound. the ibex gaining. cross asset then after a bit of a mixed picture essentially for u.s. close yet. you're looking at futures now. nasdaq down .4% despite the fact that yields are coming off around three basis points. 4.21 is what you're seeing. futures pointing lower by .4%. 1.09 on euro/dollar. could be getting to 1. 14, 1.15. when its comes to brent, $82, down 1%. tighter credit conditions. the fed's jon williams citing

the tightening and says work needs to be done to get inflation back down to the 2% target. hiring and inflation slowing and access to credit starting to narrow according to the fed's beige book survey. we can talk about beijing. but the beige book pointing to a stall economy in the u.s. what are the details that came through? what is the weakness? are we starting to see cracks in the jobs market? >> yeah, the tightening credit conditions, part of that is a result of more than a year of fed rate hikes that have been coming through continually. and the banking turn normally march. that combined, looks like that

is starting to flow through to the availability of credit for companies. this is fine. the softest landing that the fed wants to engineer. where this becomes more of a problem as again, the jobs live, if there is more widespread credit unavailability and that becomes more painful an acute, then that could easily spiral into job losses and we're seeing layouts in the tech sector. if this credit crunch becomes more painful, at least wider layoffs, that is where it becomes more of a recessionary spiral which is something that is not necessarily in the cards for now with regards to the fed's expectations. pricing in cuts by the fed by the end of the year, does it make sense if that comes to the fore? >> that is exactly what the traders are looking at. worst case scenario coming to

fruition. it is not the base case for most people in the market at this point. i think it is the expectation that the fed will pause after may rather than start to consider rate cuts. again, this could easily spiral from a soft landing where it is kind of a mild recession which is what the fed expects at this point but that spiral to the credit crunch leading to mass layoffs could validate rate cuts if it spirals into a recession. >> let's get more analysis now and bring in maria. thanks for joining us in the studio. christine pennanting a picture of a u.s. economy balancing on the head of a pin. is that where we are? the balance between the soft landing and the ease that this could fall into a hard landing?

>> i think the data we have seen in the past few weeks pennants a balanced picture. we have seen inflation continuing to come down. there are many sticky elements there that support higher interest rates for longer in the u.s. the wage situation is also kind of moderating within the labor market. the beige book pennants a very,- paints a very, very interesting picture. manufacturing pointing to quite significant softening. the key question will be what'll be the impact of the banking crisis we have experienced in the past few weeks. investors are quick to brush it off. markets quite resilient. >> brushing off the crisis? >> we are seeing lending

attitudes from those banks. is it going to be in favor of the policy in terms of slowing down the economy or is it going to go a little bit too far? >> the estimate is it has done some of the work of the fed for it. 1% or if they hike again in may and then pause, talking about 5.45 for the seminole rate. >> the data is still conducive to elevated rates. a slight increase from where we are now. it remains to be seen how many will the economy remain resilient? obviously one element is regional banks in particular what were the center of the banking crisis are impactful for the economy in the u.s.

we see banks remaining resilient and in some cases gaining from the dynamics that followed this banking crisis. smaller banks may be more impacted going forward. >> you flagged what you described as resilience within the larger banks. >> i think larger banks have posted some very good results as a whole with differences in there. >> do you buy those banks? >> i think evaluations are still supportive. in the u.s., more than in european markets and those banks are starting to benefit from the high interest rate environment. how economic rate growth will develop in the next few month bs will be crucial. if you have a strong downturn

you won't expect the banks to perform well. >> the nasdaq up 19% year-to-date. under pressure today. is tech a safe haven? >> it is very interesting, last year it was the worst performing. discounts and evaluations coming down a lot this year. the hope that interest rates are starting to peak. evaluations are more attractive as a whole. there is more resilience in some of those stocks. companies still waiting to spend on tech. the behavior of the sector is quite an interesting one and a useful one. >> and you're calling for a regional bias towards european equities. how does that hold off among

some traders, coming from the e.c.b. that is a live debate. hikes are coming. how does your thesis hold up? >> on an equity position, we maintain relatively neutral portfolios. there are some prempses. european equities is part of this preference in particular due to the current evaluations, the markets, the u.s. being clear at some point, that is also in the context being less aggressive in europe than other other parts of the world. at the same time, i think, you know, the policy in europe will be -- by data, what type of data we're going to see in the coming months and what banks are going to do in the coming months. >> what is your preferred hedge?

>> we are still treasuries, especially given the level of yields they are trading at now. it is a narrative that has seen a lot of volatility in the last few months. extreme risk off. we believe some of those assets will be able to deliver diversification in a multiasset portfolio. >> fantastic. thank you very much. multiasset fund manager. neutral on equities. a bit of a bias on european stocks. banks looking interesting particularly in europe. maybe diversify in terms of risk off. coming up, not looking chipper. thank you, producers. the outlook disappoints for tsmc. we'll get the latest. this is bloomberg.

♪

>> welcome back. 30 minutes into the european trading day. futures in the u.s. also pointing lower between .3 and.5%. banks gaining a full 1%. autos taking a big hit down 2%.

you look at iron ore, copper and brent, also feeling the squeeze. across the bond market, bonds are a bit down across the u.s. treasury curve. let's get to the stocks to watch. what are you looking at? >> renault is leading those auto stocks down. that stock dropping almost 7% over in paris as the company warns they will need to cut pricing of electric vehicles and that is dampening sentiment around better than expected costly sales of its s.u.v. model. not bia not bia saying the same thing. cutting back on infrastructure spending. that one dropping in helsinki. meanwhile l'oreal giving us some green on the screen. skin care and skin creeps, that kind of thing.

doing really well there. 3% up in sales. in london one of the worst performing we have had in london over the past three years. seeing a continuing slide in sales. customers are cutting back due to the cost of living crisis. hitting that one in london today. tom: thank you very much with stocks on the move. looking at autoos. the healthcare space or the skin care place. tsmc's property beating after margins held up better than expected. they grapple with persistently week consumer demands. joining us is bloomberg economist in tie pie.

what for you were the key takeaways from tsmc's results? >> it has been a whiplashing 90 minutes putting out those numbers and then giving us guidance. the bottom line was -- the top line was in line. then they gave the outlook. this year their revenue and the industry revenue will be worse than expected. in fact, tsmc sees the first half dropping 10 and then rebounding in the second half. what is interesting, the big surprise is they did not cut their capex. there is a lot of rumor and debate over the last week they may cut their massive capex budget. they didn't.

they are sticking with it. they are not flinching. the reason is they believe they will need that kind of capacity. more more importantly, all of this excitement about a.i. is driving a lot of demand. the chips they make at the leading edge are very, very important in the a.i. space crunching all of those numbers so they are plowing ahead to make sure there is enough capacity to make sure enough chips will be coming out of the factories so they can go to invideoand all the companies going -- invideoia and all the companies. tom: how do these numbers and how does the commentary feed into the health of the broader chip market? >> clearly the broader chip market is looking weak. weaker than three months ago. one thing tsmc pointed out is they are cutting their outlook for the year because what they

had expected in the last three months is not happening at the pace they expected. slower than they expected. they pointed specifically to china. it is not bringing up the demand they expected. that opening up is much slower than they anticipated. it is rising which is a surprise to everybody including tsmc. the chip market and the electronics market this year looks weak, weaker than expected. there is that shiny spot which is a.i. tom: we'll see if that has an impact on stockpiles going forward. thank you from bloomberg opinion on those results of tsmc. he pointed out that capex, they are going to stick to their

guidens at capex tsmc. that is good news for asml that makes that high-tech kit that tsmc relice onto produce and churn out all of those chips. that company gaining 1.34% after the losses yesterday. it took a loss yesterday on stocks on disappointing guidance. ster sticking the that giving upside to that stock. >> tesla is not done cutting prices after missing first quarter pricing estimates. shares in theev car maker dropped in after hour trading as the c.e.o. argued there are good reason more price reductions. the base price below $40,000 for the first time in years. l'oreal sales have jumped more than expected.

the french koz met ecks giants expecting strong demand. north asia, which includes china, what is a weak spot however with the country reporting supply con ventilators. one of the largest hedge funds has sold its property bonds. purchases of the assets helped stur a 523% increase in shanghai's asset management strategy last year. they said they are concerned about the debt burden from the property sector. this is bloomberg. tom? tom: thank you. coming up, hsbc pushes back firmly against a proposal to

spin off its asia business. we'll have more on the continuing battle to step up again. that is next. this is bloomberg. ♪

tom: welcome back to the open. we are 23 minutes into the european trading day. losses across the bench mark of .2%.

what the fed beige book tells us about a stalled u.s. economy. real pressure coming through for like of iron ore and brent and w.t.i. a third day where you have seen oil down. back to $81 a barrel on brent. the session tieing into those concerns about the recession that could be emerging in the united states. let's get back to the earnings story. the particularly the banks. that is the sector that is gaining today, a little over 1% in europe. morgan stanley's beat first first quarter expectation as profits fell from a year ago. let's bring in bloomberg's charlie wells with details. what went right and what was a miss? >> wealth went right for morgan stanley. you look at the wealth unit, it was up 7% from the year before. after all the turmoil we saw from the banking sector in

march, $20 billion went into that which is good news for them. think about all the fees. that is going to cause a lot of jealousy across wall street. on the downside, equity trading was a miss. that was a big part of the strategy. that is going to be disaopponenting. also you saw loan-loss provisions quadruple. tom: a switch between goldman sacks and morgan stanley. when it comes to the regional lenders, though, where is the focus? what are we expecting? >> we're focusing on deposits. which of those banks have been able to bring back deposit? that was a part of crisis in march. there were concerns they could lose out on some of those deposits but banks that say they have been able to stabilize have been saying they need to pay more in order to keep their customers with them. we have this week, apple and

goldman releasing that savings of 1.45% which is going to put pressure on the regional small banks and bigger ones as well. tom: let's switch focus to what's happening in asia. particularly hsbc. this has been an argument rumbling for at least a year. it has stepped up a bit. >> they have been moving from a rum to believe a growl. the largest shareholder has been calling for hsbc to -- to help with markets and competitiveness. hsbc says that could destroy shareholder value and it could take a hit on dividends. this has been out in the open for the past year or so, i would say. it seems to be heating up ahead of first quarter earnings reports. it is getting fairly heated. one executive kept saying hsbc was being closed-heapedded.

some harsh words there. we'll see how it pans out. tom: seems like the gloves are coming off. thank you very much indeed. coming up, we'll be joined by the c.e.o. of one of ukraine's biggest grain producers and exporters. stay with us. this is bulb.

♪ tom: welcome back to the open. we are 30 minute spos the european trading day. the fed's beige book suggests the u.s. economy stalled in recent weeks with hiring and inflation slowing and access to credit narrowing. u.s. speaker kevin mccarthy has proposed a bill to raise the u.s. debt limit and cut federal

spending. tesla slumps most market as elon musk proposes deeper price cuts despite the squeeze on margins. let's check in on these markets as the earnings picture fails to reassure. you are risk off across these markets today as investors waking up the picture from the beige book. the commentsry from those credit conditions market down .3%. the earnings picture, everything you see reflected in autos. a disappointment in renault. the dax is down .6%. the ftse trading lower. let's switch over and see how things are shaping up across the sectors. banks are holding up despite the fact that yields are coming off

the treasury curve. there is a bid for bonds at the moment. close to 4.2% at the front end that remains for the banking system at least for now. margins currently up .8%. morgan stanley was a beat. fixed income was part of the mix for morgan stanley. real estate down .2%. at the bottom of the list, real estate gaining .renault was part of the mix. iron ore, copper an brent all under pressure. you can link that to those mounting concerns about a recession in the u.s last i checked brent was trading at about $81 a barrel. let's switch to commodities and switch to soft commodities and the impact of russia's war in the ukraine fresh uncertainty

about the agreement. a deal that is been crucial for bringing down global food commodity costs from records after russia's invasion. moscow has been accused of stealing ukrainian grain en masse since the outbreak of the war. joining us is the c.e.o. from one of ukraine's biggest grain producers crucial for the economy of ukraine and when you think about commodity price globally, it really sits at the heart. how have you and how has your company adjusted to russia's conflict on the ground in ukraine? >> thank you very much for your interest. actually the problem what we have is to explain there is a

business in ukraine. we are still working. people are receiving their salaries. we are still surviving because basically serve concentrating on the military help but there is no financial help. our company is located on the south of ukraine where basically we have invested enough money, more than $2 billion actually for the last 20 years to develop the infrastructure. irrigation simply to make ukrainian grain. very competitive. as a result ukraine has exported. when the port was closed and still brought vessels, sea-going

vessels and nobody is explaining -- and secondly, we are very grateful to united nations initiative because this initiative, ukraine could export 20 million tons of grain so far from the 22nd of july. we are grateful for european communities who are trying to set up solidarity lines. investing into -- logistical chains. simply finding the way for you cranian farmers to receive the income to start seeding again. the world needs more food. actually these higher logistical costs, the profitability for the farmers are lower. today everybody is concentrating

-- to get the ukrainian -- tom: andre, andre. >> nobody is thinking what we do next year. >> sure. tom: the importance of developing a sector for the people of ukraine and the globe as well. commodity prices absolutely of course in focus for us. can you give us a sense in terms of that black sea initiative, that corridor that has been reopened, what is the status of that now and what is your confidence that is going to be held up and sustained in the months ahead? >> it depends what you call the open because basically today is open, tomorrow is closed there. it is actually the tool -- too little too late to control the export and g.d.p. and the economy. the war is not only on the military side, it is in the newspapers. it is propaganda. as well as on the economic

ground. actually blocking the ports. you fight with the economy and fight against the business in ukraine. that is why, you know, if russia is breaking the borders, of course they are not going to respect what is called the grain initiative. that is why they are simply using every day visiting inspections for the vessels to come into the black sea and get out. you know, simply to manipulate the prices on their feed, on the corn and actually on the food because basically what they are trying to do, they are trying to create the problem for the farmers so they are going into bankruptcy. tom: andre -- we will have less export. tom: you talked about that investment around $2 billion in

ports and infrastructure. i know that of course has consequences in terms of the debt you and the company have had to take on. about 5.7 billion is what we heard. you talked about the need for financial aid. what is the status of your conversations with those lenders in terms of financing? >> actually already more than the one year, we are trying to achieve what is called the -- because basically the problem is how to predict the future during war. that is why what we are asking is simply to cover the agreement so that nobody is taking the action against the company because you know, it is not our fault that all of our -- some part of our facilities were destroyed. grain was -- from our field.

some grains were stolen. the company is not operating fully. everything is clear, it is on the table and what we are asking is to -- for assistance from the ukrainian state banks and private banks and the international financial institutions and actually we need this help today. and we are not -- tom: you need the help. is it a loan or are other banks calling in their loans? >> they were forced in my belief to take those actionses. personally i understand them. our business has lost and now their business is losing. that's why we need some kind of regulation, funds available to solve those issues. to avoid actually the fight

between the different economic institutions, the company, thebanks fighting with the companies. that's why we need to have this kind of thing, a solution. not to fight inside of ukraine. tom: we have seen a number of eastern european countries, poland, hungary, slovakia as well. banning the import of ukrainian grain. what does that do for the outlook of grain in the months ahead as we head towards the end of the year? >> it is my belief it is a highly political issue and somebody is playing on this ground you feel. trying to get the benefits, the

compensation from the bill russellles, i don't know the actual reaction. but again, you know, so the highest prices ever at the beginning of the war so a year ago, the farmers in the eastern part of europe had plenty of opportunities simply to cash in the money and to put extra profit into the bank accounts but they have not done this. and that is why they are trying to put the blame on ukrainian grain. think about that. if, for example, the ports were unblocked and ukraine could export as much as possible the prices that you are showing right now, they would not be so high. and that is why they would not see this opportunity. so it is basically where i think a lost opportunity that creates this kind of political mess on

the neighboring countries but the european union will be able to solve this issue. tom: ok. really appreciate your time. greatly appreciate it. a company that sits at the heart of global commodities and is essential to the economy of ukraine and how they navigate that war and the necessity for further financing and aid. pumping the brakes. discounts eat into tesla's margins. c.e.o. elon musk says he is not worried. we'll break down the numbers for you. ♪

tom: welcome back to the open. we are 45 minutes into the european trading day. risk off across these markets. spown .4%. markedly lower in the u.s. bonds are big. commodities under pressure. banks, insurance, real estate holding up but everything else is underwater. auto leading the way. tesla has pledged to cut car prices to boost demand at the expense of profit margins. price drops are eating into

tesla's income. it was 11.4% in the first quarter. down from 19% a year ago. let's bring in our global car editor. what stood out to you then from these earnings? it is the stomach of elon musk to take further pressure on margins. for me that was a standout. what else is in the mix? >> has is absolutely right. i inteept these earnings expecting that d.c. went into these earnings. they were cutting prices again. clearly musk would come out and we are done for now. he did not say that. an and has given signalers this not done here. the german plants that they opened last year was at the very end of march so effectively they didn't have any production out of that factory. they then opened the plant in texas. we're talking about two additional car plant than they had a year ago and yet

automotive revenue only up 18% that to me is a big cause for concern. musk and the c.f.o. talking about this idea they have plenty of room to work with in terms of margin and they are comfortable with what they are doing but i think it is hard to stomach that if you're an investor to look at the challenges that they are having on the top line. tom: the margin difference vs. ford at 6%. he is known, of course, musk for making bold predictions. did he come out with anything more in the call in terms of his tone that stood out to you? >> one of the things was this idea on the front end they are willing to accept limited profitability or limited margins and this sort of idea that on the back end maybe they will be able to make sort of recurring revenue or revenue related to

software services. i think this idea this they are going to be able to deliver autonomy is something they have talked about year after year as being hope and a possibility. i think there is a lot of skepticism in part by the fact that year after year, we don't see that. and i think, you know, while there was yet another sort of, you know, halfhearted attempt to say we'll get to full autonomy this year, i think it was really marked just how many times we heard musk talk about i don't have a crystal ball and talk about economic uncertainty and stormy weather referring to the economy. it was unusual for him to be sort of down beat. he is often kind of abcentury waiting the positive. tom: conservative but cautious. elon musk on the call. thank you. our global car czar breaking down the earnings picture. let's switch to u.s. politics. speaker kevin mccarth write

proposed a bill to raise the american debt limit for about a year and cut federal spend what do we know about this proposal and its likelihood of get there you go the legislative process in d.c.? >> well, to answer your second question first there is almost zero chance of this getting through because the democrats control the senate so even if mccarthy were able to get this approved by the house where republicans have a majority, it would not go anywhere in the senate. that said, it could potentially be the base is of some sort of negotiation, if at some point the two sides really sit down to start talking. so what speaker mccarthy has proposed includes $130 billion of cuts, returning to fiscal year 2022 spending. then increasing spending of about 1% for 10 years.

other limbs on things -- limits on things like programs for the poor and medicaid. there would be an agreement to raise the debt ceiling and that is something that some republicans just don't want to do. for his part, president biden has already said this is a non-starter. the president says that the republicans need to come forward with an actual budget proposal because mccarthy has said let's do $130 billion in cuts, they ty have not said where the cuts would come. president biden says once you do that, then we'll have something to talk about. tom: it is really understating it. isn't it? how much time do we have left? the clock is ticking? >> it is indeed. so technically the u.s. has already reached the debt ceiling. that happened earlier this year. of course, as we have seen in previous instances where we have had these standoffs, treasury

department has ways to extend the deadline so they can take special measures. that is a process that we're now in. it is unclear how much longer that can go on. most people expects at some opponent whether it is in the summer or into the fall, then the clock will hit the magic hour and will have to have some sort of resolution here. at the moment it does seem like both sides are still positioning that seems to be what people in the markets feel that this is something that will get resolved but at the moment this is no sign of how that will happen. tom: yeah. don't discounts the extremists in the republican party to push this to the brink. thank you very much indeed on that evolving debate around the debt ceiling. coming up, turkey will start natural gas production from the black sea today as president

erdogan vows to cut imports.

tom: welcome back to the open. we are 54 minutes into the european trading day. risk off across the equity markets. futures in the u.s. lower by .7%. bonds are big. let's get to a story in turkey. in terms of energy space. turkey to start natural gas

production from the biggest field in the black sea. that happens today. president erdogan has promised to cut turkey's import dependence ahead of key elections next month. let's get the details from patrick who is in istanbul for us. what are the details around the gas field and what are the potential political implications for erdogan as we heads up to those elections? >> yes, big day here in turkey for energy and for erdogan. one of the pro government newspapers this morning was flagging it as the start of burning of the flame of independence which gives you a sense of how they are trying to fraiment. it is a big field. 710 billion cubic meters. production in qume of years, around 2027, it should be able to provide currently about a quarter of what turkey is

currently consuming. we are relying on russia and iran. there is messaging everywhere around this story the storage tanks written we promised all over them. this is a project that started with erdogan's son-in-law a few years ago and now we have taken it to realization despite the odds. a very challenging project. here we are just weeks before an election. tom: patrick, is there any opportunity this gas will end up on the shores of europe? >> there is. though notimmediately. they would like to export and specifically said they would like to export to europe. there is no deals to make that happen for the moment. and i think it will be interesting how they balance that with the political imperative at home. obviously they love to export to

those distant markets. but they also need to keep people happy and pay bills at home. tom: ok. patrick in istanbul for us with that interesting turkish gas story. coming up, we'll be joined by germany's finance minister. we'll discuss the banking fallout and the economic outlook. this is bloomberg. ♪

♪ >> this is "bloomberg surveillance: early edition" with francine lacqua. >> good morning and welcome to "bloomberg surveillance: early edition." i am tom mackenzie in london. here's what's coming up. the fed -- book suggests the u.s. economy stalled in recent weeks as access to credit tightens. the move is risk off with europe and the red. u.s. spa