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>> good morning. i am tom mackenzie in london and these other stories to set your agenda. stocks pressured after a sharp selloff on wall street as markets braced for a hawkish pivot from powell. most european markets are shut for may 1 labor day holiday spirit amazon's ai boosts shares jump after reporting strong cloud unit sales. tesla's cost-cutting continues. elon musk axes most of the team, dealing a blow to other automakers tapping into the network of fast chargers. it is fed day and expectations from bloomberg economics and others that you will get this hawkish pivot from jay powell. to what extent does he revise the view around three cuts. the most recent forecasts from

the fomc in light of the inflation pressures that are persisting in the united states. the language from jay powell will be very consequential indeed. does he use the word less and it comes to the expectation around cuts? does he even put the view that a hike is possible on the table? all of those scenarios are being weighed up by the markets but a hawkish pivot seems to be what is expected. u.s. futures currently flat after the losses of 1.6% on the s&p yesterday, the worst drop since january. the dollar strengthening. again, concerned leading up to the meeting on the stickiness of inflation. u.s. futures as i mentioned currently flat. u.s. futures flat. the u.k., one of the few markets in the region that is open today. nasdaq futures pointing lower by .3% despite the decent numbers that came through from amazon with a focus on aws, the cloud

part of the business with the ai component. let's flip the board. the two-year yield back above 5%. the dollar strengthening again. and the wrecking ball of the u.s. dollar and in concern and pressure many global fx and currencies. two-year back above 5%. in the oil space you saw a drop in brent prices of 1% yesterday. of course the focus on the talks around a potential cease-fire in gaza. that is all factoring into the oil space. brent down. bitcoin had a terrible month, falling 16%, the biggest drop monthly since the collapse of ftx on the higher for longer expectation around the fed. reflecting the strength in the dollar rather than anything within the euro, at least for now.

let's check in with avril hong singing --standing by in singapore. avril: we're seeing risk aversion trickling into the asian session where many markets are shut. we saw the likes of the japanese , australian and new zealand benchmarks 1% down. they have mostly clung onto losses from earlier in the session and the decliners today include oil andcoal producing-related stocks. this is as the geopolitical risk premium fades, helping to cap declines on the nikkei. special mention for the stock of laser tech. this is the maker of chipmaking equipment and they reported strong growth. we also saw an earnings beat. let's flip the board because i wanted to talk you through the performance of the nikkei in the past month where momentum pulled away from the peak we saw in march. march of the run-up in the

nikkei was thanks to the weakness of the japanese currency. but in april we saw it losing momentum because of this fed pivot. also because of excessive pessimism towards chinese stocks waning a little. we are seeing the nikkei today starting the month of may on the back foot. let's look at dollar-yen as well, because after monday where japanese officials are believed to have intervened, it has been stabilizing but now nudging back towards the 158 level. the moves seem to reinforce the idea we will see potentially multiple rounds of intervention continually to keep dollar-yen in check. and of course as we turn our attention to the fomc that is really keeping traders on their toes. tom: 157.86 on dollar-yen. thank you for the check on the asian markets with a focus on the nikkei in the currency

around the. the fed is poised to keep interest rates on hold for a sixth consecutive meeting. officials are expected to signal delays in future cuts could come amid sticky inflation. let's get more with ven ram. set us up for we can expect from the fed. a statement in any potential changes to the language and then what we will hear from jay powell. ven: yes, we're not going to get any summary of economic projections this time around, nor a dot plot. it will all be left to the statement and pilot signaling. he is likely to be hawkish. he has to be hawkish because he has no choice. the fed penciled in inflation rate of 2.6% for the year and that was already upward. now this year corsi -- core pce

has averaged 3% which means the inflation script has not gone according to their tastes. which means the fed has no choice but to be hawkish. much of that is already in the treasuries. we have done 14 basis points the past month. that is a humongous surge. there is some upside potential for a yields probably 25 22 but i do not expect that to happen immediately. tom: as you say, a lot priced in already. talk to us about the reaction function within the treasuries. there is a relative ability for the treasury markets to look through the hawkishness given what has been priced in. and you do see that yield move higher. talk to us about the treasuries and the likely reaction to what we hear from the fed? ven: as we mentioned, they have done 40 basis points in the past month. short positions might be

encouraged to take some money off the table. i think powell is not going to comment on whether or not they will be able to get three date cuts this year because they can still technically do it. if they start in september they have three meetings since september and they can get that done. it is unlikely the plot will evolve that way but there is nothing we should do today to paint themselves into a corner. he will leave that for the next dot plot. means short positions might be encouraged to take money off the table. but if it comes that the fed will not be able to cut rates at all, that is when we would see the two-year treasury marching up to 522. tom: ok. as long as that optionality is still there to cut, maybe there is a cap at the front end. if not, you can see further jumps higher. just above 5% on the two-year.

ven ram has been consistent around expectations of six cuts. ven ram, very clear on that at the front of the year that that was very unlikely. thank you for the analysis as we lead up to the fed presser. the focus was yesterday on amazon and the cloud unit coming through, seeing the strongest sales growth in a year signaling a turnaround for the retailer's most profitable division. on an earnings call, the ceo said amazon's ai capabilities are behind the acceleration in growth. >> considerable momentum on the ai front where we have accumulated a multibillion dollar revenue run rate already. you heard me talk about our approach and we continue to add capability to all three layers of the genai stack. tom: for the deep dive on the amazon story let's bring in

charlie wells. the cloud unit was always going to be scrutinized. give us the detail around the success amazon has had with this and whether it is to be sustained. charlie: this was the first time amazon executives publicly put revenue run rate on that ai franchise. so the cfo said yesterday this was a multibillion dollar revenue run rate and that is what wall street wanted. aws had a great first quarter, revenue was up 17%. what investors were really focused on were what are sales going to be going forward. 2024 is the year a lot of these cloud companies needed to show they can make money off of generative ai. so that estimate was really important and part of that success story. tom: they had the story around meta in the back of their mind when they stressed we are monetizing this. investors seemed to cling onto

that. what about the rest of the business? charlie: amazon is huge and revenue overall was solid, up 13% from the same time last year. this was the first earnings report where you saw amazon prime having ads. so ad revenue is up 24%. what was striking from this report was some softness in e-commerce. sales missed some analyst estimates. the cfo yesterday said consumers seem to be trading down. that could be a sign of inflation. and they seem to be ordering more consumables. these need to be delivered faster and that cut into profit margins. tom: it is interesting what it tells us about the state of the u.s. consumer. starbucks's missed as well, and the e-commerce part of amazon. in terms of the ai story, i mentioned meta and the impact they have, the stock selling off on the back of their selling plans.

what is your assessment of where things stand right now in terms of the ai impulse with these companies? charlie: with the megacap companies it was so about what the future holds. the street seemed to reward companies that would compel future oriented stories. i am thinking more about google, microsoft. they were rewarded and they could project a positive story about generative ai. meta was more modeled and they were punished because of that. so it is looking like amazon falls into that first category where they were able to tell the positive run rate story. the shares were up about 2% but let's see when stocks are trading pretty -- are trading. tom: questions asked whether or not this company should be in the mag-7 tesla, eliminating almost their entire supercharger organization. the group is responsible for building a vast network of public charging stations that

virtually every major automaker is in the process of tapping into in the u.s. bloomberg learning the decision to cut the nearly 500% teams comes in addition to the more than 10% staff cut ordered in mid april. let's get the details with peter vercoe. what does this mean for the rollout of tesla's supercharger network? peter: clearly it is going to slow the rollout of the network. after news of the whole division being wiped out broke, elon musk posted on x that while tesla will continue to expand the network, it will be at a much slower pace. tesla's supercharger network, they have more than 6000 of these superchargers in the u.s. it is seen as the most reliable, the most extensive, and the fastest charging network in the

u.s. and that has always been a big competitive advantage for tesla. it helps overcome range anxiety, it helps overcome concerns about how long it takes to charge an ev. so to put some question marks over that puts another bit of a cloud over tesla and how fast it is growing. charging is also a money spending unit for tesla. analysts have estimated it should be a $3 billion business by 2030. so again, it's all being pulled back a little bit. tom: and this is not just a tesla story. there are broader ramifications to the wider auto industry. talk to us about the ramifications of this move. peter: tesla's charging infrastructure has become the industry standard. whereas gm and ford and most

other big automakers in the u.s. had their own system, they have all decided to transition to the tesla system, for the tesla network. at the moment, that is being done by selling adapters or providing adapters to ev drivers from ford and gm and these companies. but from next year they will be installing tesla's unique charging ports in their cars. this could have ramifications for the entire ev industry. geared -- it comes back to access to charging and range anxiety. and we know that some -- that those are some of the major hurdles in stopping people making the transition from a nice car to an ev. reporting we had from the u.s. last night when news of this broke was executives at rivian, one of the companies moving to the tesla system, confused and concerned by this development. we are heading into summer in

the u.s. which is the peak driving period. it looks like the major contact points for the other automakers, they have lost those at tesla. so there is going to be some uncertainty about how this all plays out now. tom: ok. peter vercoe on what seems to be another very consequential decision by the ceo of tesla, elon musk. coming up, questions linger over the resumption over cease fire talks as israel awaits a hamas response. that conversation is next. this is bloomberg. ♪

tom: welcome back to bloomberg daybreak: europe. israel will not join cease fire

talks unless hamas response to the latest proposal for a temporary truce and hostage release, according to the country's state run news. for more, our news director rosa manson joins us. israel has presented a proposal as being extremely generous. when do we expect the hamas response? >> it may come as soon later today. israel says the talks are being mediated by countries including the u.s., qatar and others. until they get the response and time to look over it. the u.s. and others describe the latest israeli proposal as extremely generous. they say it provides for the safe passage potential he of people to move back to the north of gaza without being inspected by israeli troops. it is possible some conversation

around the withdrawal of israeli troops in certain parts of gaza. there is a lot we don't know about how long you cease fire might last, particularly in terms of the numbers of israeli hostages that might be released, the numbers of palestinian prisoners who might be exchanged in turn. and we just a not know how hamas is going to respond. either side has accused the other of not acting in good faith. at this point the are passing notes between mediators to communicate with each other. that said there is an enormous amount of pressure coming from the u.s. and europe also from hamas, qatar, egypt and others to get to the table and find a way to get a cease fire. the imperative really is to avoid israel invading rafah in the south of gaza. tom: and that is something that netanyahu has insisted he will and want to do and they need to do that in order to

bring this to a close as israel would see it. given what we have been hearing from netanyahu, reiterating that, when a cease fire last? how tangible would it be? rosalind: that is always the risk, that a cease fire only lasts a week or two. benjamin netanyahu has been adamant that israel will need to do more in gaza to eradicate hamas and he said that is the ultimate goal. so any cease fire will be extremely satisfied -- extremely fragile even if it happens. the hope of the others is once you get a cease fire you try and roll it over. try to get it extended. the longer that goes on you -- it is clear netanyahu is under extreme pressure at home politically from the right and

so on to continue against hamas. he has to factor that in. for all his comments right now there is no indication he is going to back down on his plans for rafah. tom: thank you very much, bringing us the latest on those cease fire talks and what we have been hearing from the israeli prime minister, who will be meeting with antony blinken in israel later today. antony blinken is on the ground and will be meeting with the israeli prime minister later today is what we expect. we will keep across that story for you. police officers entered columbia university's campus a few hours ago, arresting pro-palestinian demonstrators who had barricaded themselves in a building. the columbia president said she asked police to clear all protest encampments and maintain a campus presence for at least may 17. switching focus on coming up,

europe's most valuable company. its home country of denmark is feeling the effects. a fascinating deep dive. we are going to bring you the details next. this is bloomberg. ♪

tom: welcome back. there is no escaping the global phenomenon that the diabetes and obesity is drugs have caused. the producer has become europe's most valuable company. in its home country of denmark is feeling the effects. for more, our copenhagen reporter joins us with the details. sanne has been reporting a sweeping story about the ramifications of this. how then is novo's growth

changing your home country of denmark? sanne: for one thing, novo is the reason denmark's economy even grew in 2023. gdp was up almost 3%, but without it the economy would have stagnated. and we are seeing a massive impact locally. recently i went to a manufacturing hub for novo and it is investing a lot of money to expand and produce more. you are seeing the local economy flourishing. educational institutions are merging around novo. novo is creating a lot of jobs because they are hiring a lot of people but also we are seeing jobs from suppliers and construction workers. even danes who have nothing to do with novo will have felt its gains. gains would have seen that their

pensions are rising. novo is also paying a lot of corporate taxes, which is benefiting the average dane. tom: really fascinating. ultimately the growth picture of denmark being reshaped by this to the upside. that is the positive. but there are challenges of course and frictions as well. what are those? sanne: yes there is, especially for a very small country, a very small economy like denmark. we are a nation of 6 million people. and we are hearing that businesses are complaining that they are struggling to come -- to recruit because novo is taking all the workforce. we are seeing other concerns as well, like over potential political favoritism of novo, which has a lot of close ties to the government. there is a lot of political attentiveness to novo at the moment. finally, the size of novo has

triggered this question of, is it healthy for a small economy like denmark to be so dependent on one single company for all of its growth? tom: ok. sanne wass with the reporting on the impacts of novo, its sheer size and scale on the country of denmark. it's today's big take and also on bloomberg.com. coming up, u.k. prime minister rishi sunak faces another major test, as england prepare for local elections. we are going to have a preview, next. this is bloomberg. ♪

>> good morning.

this is bloomberg daybreak: europe. i am tom mackenzie in london. these are the story doesn't your agenda. stocks pressured after a sharp selloff on wall street as markets braced for huck's pivot from power. big markets are set for may 1 they holidays. shares in the e-commerce giant jump after strong cloud unit sales on rising add demand. plus, cost cutting continues. elon musk reacts as automakers are tapping into the network of fast charges. let's check in on these markets where there is context. the u.k. will be open as usual. the markets and the moves, they were pretty pronounced.

ftse 100 futures flat. s&p futures pointing to the losses of a 10th of a percent. they dropped 1.6% yesterday. the same since january. 70,512 despite the good news that came from amazon. and the fact that add demand and drive is there. u.s. treasury yields continue to run higher. about 30% on the two-year. back about 5% from the two-year. it is expected to be that hawkish pivot from jay powell. that is the view of bloomberg economics. that is up attentive a present.

62 after a drop of 1% yesterday. and the focus on the cease-fire talks around gaza and israel. brent down .8%. the fed place to keep interest rates on hold for a sixth consecutive meeting for a preview of what to expect, what to focus in on, what you be interested in and what to prioritize, let's bring in color for the details. what will you and the team be scrutinizing when it comes to this decision? >> let's start with you. you basically nailed it. it is the higher for longer narrative. the last time we heard from power, he was very clear in indicating to the market that the whole idea that we were going to see a cut from the fed anytime soon is probably not on the cards anymore. basically if you look at the data we've had lately out onto the market, there is not a lot

for the fed to hang a cut in. there are clearly some wage pressures. the question is how much is powell exactly and even though the fed decision is the big thing, the one we always look for are one of the comments after that. and will powell indicate there are less cuts on the cards for this year? let's remember we started off with three cuts for 2024 and right now, people are thinking are there any cuts for 2024? looking at that will be very important.

markets were also looking at the three interest rate cuts for this year -- we are now looking at one. there are a few more hawkish people out there that even think we won't get a cut from the fed this year. >> that is where that needle lands. when it comes to the market reaction, how much is priced in at this point in terms of those hawkish scenarios? >> a lot of it has been priced in. what we have seen from the markets is whatever data comes out, the expectation is the fed will in fact come back on the rate cuts scenario. all of it has been a reaction to that. if you look at the positioning in markets right now, it is the world of the short bond. the world of the short bond is back. there is futures market, cash market. there are a lot of shorts riding on this.

i think the initial reaction will probably be the same that we have seen but in the longer run, once that is digested, we might see some short covering for a taking. the market has been pretty hot. there might be some unwinding. >> interesting. we'll see how it adjusts. the press conference coming out 30 minutes after the statement. there was a really important day for the federal reserve. now to u.k. politics where the prime minister will face another major test. if the post translate to major losses for the conservatives, mp's could push for rate leadership change. alex morgan has more. >> rishi sunak is facing another major test just months before an inspector general election. right-wing critics arguing up to

use thursday's local village. voting will take place for more than 2600 seats. that is in addition to 10 mayoral races and the parliamentary election. >> conservatives will be fixed onto results in particular. those areas are emblematic of the parties ability to perform in labor facing regions. >> and i think the conservatives can hope for is damage limitation. certainly in recent polls we have seen. access and shows there is white little appetite for another leadership change at this point. >> they are showing they can match sky high expectations with

results at the ballot box. the prime minister want to emphasize local elections are a very different beast to a general election. whether or not there will be enough to convince rebels within his own party will be found out once the votes are counted. what does alex morgan on how the uk's local election are. when it comes those constituencies, whether the battleground areas were conservatives, what will you be looking for? can they hold onto half of them? secondly, can they hold on to two key once? those to really represent the

conservatives ability to fight in labor facing areas at the general election. the latest: suggests that they will hold on the next local election but he could still be a bloodbath on .1, the local cuts we see. >> 500 over thousand seems pretty good. when it comes to the impact and the ramifications of the opposition labour party, how are we thinking about that? wesley failed to dent their coleaders at 20 points. even the advisors say that since he has been in number 10, the problem is he has not been able to sustain a positive new cycle at this time. meanwhile, they've had this failure to launch. they actually had another boost. the opposition labor leader

because the first minister of scotland just resigned. that means that where is neighbors are difficult north of the border in 2015 and 2019 -- >> if tomorrow is a bad day, what does it mean for those within the party? they are gunning for new leadership. >> they have been plotting for months to use this as the opportunity. this is the blood -- if this is the bloodbath i said they could be, this is the evidence that only a change of leader can save them at the general election. there is a chance that rishi sunak gets hammered. they are going to need about 50 letters on the front tory mps to trigger a no-confidence vote. sunak can't take his position for granted and yet it could be a better result if he manages to

stay in. thank you for this u.k. elections. let's start tomorrow. the elections in england. after the u.s. as sanctions to russia and iran, we take a look at the impact on why they are so tricky to enforce and how they are adjusting to this ticket of additional sanctions. for more on that, this is bloomberg.

what's welcome back to bloomberg daybreak: europe. energy giants are increasingly making noise -- speaking at a climate change.

it adds to chatter around european giants potentially being lord great enthusiasm for oil and gas. that is a story we are continuing to watch for you. there is pressure coming through. a drop of 1% yesterday. stockpiles in the u.s.. there is also the focus on the cease-fire talks. potential cease-fire in gaza. those talks continue. there are some modest and cap guarded optimism. the building of a downside that we saw yesterday. just about anyone dollars per barrel. we stay on the energy space with a particular focus on sanctions and then zero in on what is happening with tech because moscow is testing the limits of u.s. sanctions on its tanker fleet.

the journey comes days after the u.s. is some sanctions on russian banks to facilitate energy deals. we will also get your views on the russia story. we will start with iran. some changes there from the sun house and then signed up by the u.s. president. there is a lot in that bill. taiwan, others, israel as well but on the question of iran, they are building on sanctions that already exist to target this. talk to us about the consequences of the sanctions. quick does sanctions have significantly impacted the ability for corporate to facilitate iranian petroleum or

any other contact with what we call for an adversary. it includes russia, china and north korea. what the bill has done is left the u.s. want to harmonize it sanctions with those of the u.k. and the eu. so for those of us on the side of the pond, if we have stricter sanctions, the u.s. will harmonize with those sanctions. the u.s. has also focused on china and russia in making sure the u.s. is authorized to put those assets into ukraine support fund for example. to support damages that ukraine may be. >> we are seeing the ability of these countries to adjust to these sanctions regimes. it is at a six month high in

terms of production in iran. high levels of production coming in from iran despite this. >> it is true the sanctions may make the behavior slightly slower or slightly more cumbersome. it doesn't change the behavior. the russian tankers will change names and change names back to see how that works. they will go through other adversaries that are based in the middle east but i think what is important to look at is how charlie is reacting in a different way to the same behavior. what china has done with this is talk about peaceful coexistence and how we can have a win-win cooperation with the u.s.. obesity is the u.s. and china are both interested in stability but the u.s. is focusing more on a narrative around national

security where is china is focusing more on a narrative around economics and how we can both work together. quick secretary blinken when he was in china also threatening china with additional sanctions on its companies that are supported the industrial base of russia and the defense industry. if there is additional sanctions and checks coming into place, is there an impact beyond companies within china? is there a broader global impact of those dental sanctions? >> i think there are some impacts of the sanctions but i think those sanctions will always have workarounds. this will have them make sure they are not caught up in the web of this particular sanctions. what this bill has also done is extend the statute of limitations from five years to 10 years.

they can facilitate transactions, facilitate finance. with any of these contact points with the right record-keeping in place, that look at the warranties. they should think about their own due diligence when they enter into these kinds of transactions because the long arm of the u.s. extra territoriality sanctions will come and impact those corpus but for the others i think it remains to be seen where it simply slows them down. quick this is just in the last few days around the way the u.s. is thinking about the sanctions regime. they are concerned about a broader impact on the energy market. we know joe biden is very acutely focused on gas prices. particularly in the election year. that just to the complexity of this issue.

is this the most challenging environment corpus and navigate? >> you are right. it is very complex and nuanced. 15 usc years go to beijing to meet with president xi at the same time they are also well aware that in the u.s. they have to pay attention to how they have their compliance regimes in place and how they are making sure they meet the estimates for this particular earnings season so we see with microsoft in the tech companies how they are trying to dance between been available for the chinese market. we have also seen elon musk with tesla and trying to make sure he is approved and has the right systems that are allowed within the chinese market. they are all trying to dance between what is necessary to do business in china and what is necessary to stay strong and respect for u.s. sanctions. >> elon musk himself is --

thank you for the analysis on this changing and evolving the sanctions regime. in other news, starbucks shares sank in late trading after reporting its first drop in sales since 2020. the coffeehouse saw transactions to client in every region. starbucks cut it's for your revenue forecast to single digits and signaled adjusted earnings-per-share may be flat. biden's founder on a u.s. prison for failures that allow terrorist groups to freely trade on the world's largest crypto currency exchange. his sentence was far below the three years requested by prosecutors. it is the first time asea has been jailed for a bank secrecy

act violation. we can check in on the crypto markets right now. it is about the higher for longer narrative coming through. and whether that gets submitted by jay powell. we are checking in on bitcoin. a little bit of again. very modest. it drops around 16% in april, bitcoin. it was a challenging month. the worst monthly drop since the collapse of ftx. that is the price over 30 days. down 14%. we will do another preview with a set up of what to expect. we will also listen in for the u.s. treasury section janet yellen on her concerns about this.

stay with us, this is bloomberg. ♪

>> i do have concern about where we are going unless we undertake some significant steps to reduce budget deficit. >> that was the u.s. treasury secretary janet yellen testified at a house committee. what a move that has been. this shows you exactly where we are in terms of the debt pile of the united states. 34.6 trillion. almost 35 trillion u.s. dollars. you are well below 10 trillion. 10 trillion in 20 years to almost 35 trillion u.s. dollars. let's flip the chart and see where this leads us in the here and now.

they came out with their needs. their most up-to-date estimates in terms of all this. that was above the estimates of some. they got their quarterly refunding. they plan to issue and the -- trajectory has been line in terms of the sizes of these auctions. the questions bent to what extent the market can absorb the appetite for that. to what extent does that continue? as you can see, the trajectory has been higher. we are from the treasury later. part of this will be linked to the qt decision from the fed. the expectation is they start to slow the pace of quantitive planning. let's have a look into when and to what extent the s&p performs

in the context of higher base. we are talking about duty but let's see if the fed is likely to hold where rates are expected to be held around that 5.25% level. maybe not fear too much. the s&p has actually outperformed in a scenario where rates are hold. they underperform when rates are cut. as much as 17%. just thinking about that as we lead up to the controversial for decision. the language for jay powell and focus. how caucus will they be? marcus today is next. this is bloomberg. ♪

>> here is what you need to know.