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Speaker 1: Good morning. It's Thursday, the twenty sixth of October in London.

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Speaker 1: This is the Bloomberg Daybreak Europe podcast. I'm Stephen Carroll.

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Speaker 1: Coming up today. Israel insists it's still preparing for a

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Speaker 1: ground invasion as fury grows over it strikes on Gaza.

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Speaker 1: Morgan Stanley reveals a three decade veteran as its new CEO,

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Speaker 1: and Republicans elect a little known trump ally as the

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Speaker 1: next Speaker of the House of Representatives. Let's start with

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Speaker 1: a roundup of our top stories. Israel's Prime Minister says

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Speaker 1: his country is getting ready for a ground invasion of

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Speaker 1: Gaza in an address to the nation. Benjaminettannia, who wouldn't

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Speaker 1: say when troops would start their offensive. Here's what he said,

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Speaker 1: spoken by a translator.

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Speaker 2: Oh Hamas militants are doomed above the earth, underground, within

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Speaker 2: Gaza and outside of Gaza.

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Speaker 1: Nettan Now, whose comments came after the US President Joe

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Speaker 1: Biden said he'd asked Israel to delay an invasion of Gaza.

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Speaker 1: Some more hostages held by Hamas could be freed. In

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Speaker 1: a phone call on Wednesday, the two leaders discussed the

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Speaker 1: ongoing war on efforts to secure the release of those

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Speaker 1: held in the Palestinian territory. Israel's military said it continued

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Speaker 1: to target Hamas's leadership in Gaza, where the United Nations

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Speaker 1: said its shelters were overwhelmed by almost six hundred thousand

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Speaker 1: Palestinians who fled their homes to other news. Ted Pick

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Speaker 1: will become Morgan Stanley's new CEO. He succeeds James Gorman

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Speaker 1: after a fourteen year run that reshaped the US bank

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Speaker 1: in the wake of the financial crisis, more now from

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Speaker 1: Bloomberg's Charlie Palace.

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Speaker 3: Pick is a three decade veteran of the firm and

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Speaker 3: co president. In a statement, the bank said he will

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Speaker 3: be elevated to the top role in January and join

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Speaker 3: the board. The sixty five year old Gorman will stay

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Speaker 3: on as executive chairman. In tapping Pick, the firm is

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Speaker 3: turning to the man credited with spurring a revival in

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Speaker 3: its trading business after a perilous stretch during the two

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Speaker 3: thousand and eight financial crisis, a period when clients ditched

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Speaker 3: Morgan Stanley and doubts about its ability to survive reverberated

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Speaker 3: around Wall Street In New York. Charlie Pellet Bloomberg Radio.

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Speaker 1: In top corporate New Standard chartereds profits came in lower

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Speaker 1: than expected in the third quarter as the lender took

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Speaker 1: charges related to investments in China. The bank's pre tax

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Speaker 1: profit fell by two percent to one point three two

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Speaker 1: billion dollars for the period. That's compared to analyst estimates

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Speaker 1: of one and a half billion. Operating income rows by

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Speaker 1: six percent, driven by an increase in lending income and

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Speaker 1: wealth management, but provisions for loan losses increased to reflecting

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Speaker 1: the uncertain trajectory of China's economy. To the US, and

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Speaker 1: after twenty two days, fourteen candidates and four nominees, the

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Speaker 1: US House of Representatives has a new speaker. In the end,

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Speaker 1: Republicans voted unanimously to install a little known Trump ally

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Speaker 1: in the post. Louisiana Congressman Mike Johnson was a prominent

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Speaker 1: supporter of efforts to overturn Joe Biden's twenty twenty election victory.

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Speaker 1: During a speech members of the House, the newly elected

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Speaker 1: space speaker had this message.

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Speaker 4: They have been watching this drama play out for a

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Speaker 4: few weeks. We've learned a lot of lessons, but you

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Speaker 4: know what, through adversity it makes you stronger and yeah,

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Speaker 4: and we want our allies around the world to note

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Speaker 4: that this body of lawmakers is reporting again to our

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Speaker 4: duty stations. Let the enemies of freedom around the world

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Speaker 4: hear us loud and clear. The People's House is back

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Speaker 4: in business.

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Speaker 1: Johnson is an outspoken opponent of gay marriage and a

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Speaker 1: fervent advocate for cutting government spending. Shares in Meta tumbledon

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Speaker 1: after ours trading after the social media giant CFO Susan

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Speaker 1: Lee said the revenue outlook is uncertain for next year.

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Speaker 1: The comments put a damper and an other otherwise upbeat

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Speaker 1: earnings report with revenues higher than expected. Meta shares initially

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Speaker 1: climbed but then slid more than three percent in extended trading.

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Speaker 1: The European Center Bank president Christina gaud says the battle

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Speaker 1: inflation isn't over, but she's confident it can be won.

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Speaker 1: Speaking to Greek television ahead of today's ECB policy meeting

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Speaker 1: in Athens, Leguard said quote, we are not done yet,

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Speaker 1: adding that officials must be very attentive to the risks. However,

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Speaker 1: despite the hawk's rhetoric, the Center Bank is expects to

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Speaker 1: hold rates steady at four percent. The pause would be

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Speaker 1: the first in over a year. We'll bring you that

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Speaker 1: decision live here on Bloomberg at one fifteen pm London time.

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Speaker 1: And America's United Auto Workers' Union has reached a tentative

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Speaker 1: deal with Ford to end more than a month of strikes.

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Speaker 1: More now from Bloomberg's Doug Krisner.

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Speaker 5: We're told Ford agreed to hike hourly wages by a

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Speaker 5: record twenty five percent over the life of the contract.

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Speaker 5: It exceeds four years, and top pay will be around

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Speaker 5: forty two dollars an hour.

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Speaker 3: Now.

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Speaker 5: This deal happened the day before Ford was scheduled to

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Speaker 5: report earnings. Here's UAW president Sean Fain.

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Speaker 3: Ford knew what was coming for them on Wednesday.

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Speaker 1: If we didn't get a deal, that was checkmate.

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Speaker 5: On day forty of the stay and up strike, we

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Speaker 5: reached a historic agreement. This breakthrough will put pressure on

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Speaker 5: Ford's two chief rivals, General Motors End Stilantis to reach

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Speaker 5: deals of their own. We are told GM and Stallantis

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Speaker 5: are set to meet with the UAW later today in

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Speaker 5: New York. I'm Doug Prisner, Bloomberg Radio.

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Speaker 1: Those are your top stories on the markets. The Mscish

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Speaker 1: Pacific indexes one and a half percent lower. The Japanese

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Speaker 1: yen one hundred and fifty forty five against the dollar,

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Speaker 1: down two tenths of one percent at the moment as

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Speaker 1: we look at European stock futures eight tenths of one

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Speaker 1: percent lower for eurostocks fifty this hour. If you're looking

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Speaker 1: for more reading ahead of today's European Central Bank meeting,

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Speaker 1: our colleague Marcus Ashworth always worth reading when it comes

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Speaker 1: to central Bank decisions, but has been writing about how

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Speaker 1: Italian bonds are at the mercy of the ECB, so

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Speaker 1: definitely a worthwhile read from Bloomberg Opinion this morning. Well,

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Speaker 1: let's get more now in the latest developments in the

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Speaker 1: Middle East, the US President Joe Biden asking Israel to

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Speaker 1: delay a ground invasion of Gaza to allow for talks

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Speaker 1: over the release of hostages from the territory. This after

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Speaker 1: Benjamin Esnia, who reiterated his country was preparing a ground offensive.

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Speaker 1: Let's get more and from Head of Middle East and

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Speaker 1: North Africa, Stuart Livingstone, Wallist, you are good morning to you.

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Speaker 1: How much influence does Joe Biden have over the timing

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Speaker 1: of a ground invasion?

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Speaker 6: Yeah, good morning. Well, I would say the US probably

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Speaker 6: has an outsized influence over Israel. And what Israel does,

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Speaker 6: I mean for several reasons, but I mean just working

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Speaker 6: through them logically. Number One, they've been the biggest recipient

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Speaker 6: of usaid for as long as anyone can remember. Number Two,

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Speaker 6: they collaborate on a great deal of military equipment. So

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Speaker 6: for instance, the famous iron dome that they have to

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Speaker 6: sort of protect themselves from rockets was originally developed in Israel,

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Speaker 6: but is now a sort of a joint venture with

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Speaker 6: some US companies and so on and so forth. And so, really,

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Speaker 6: the request here, and it is a request, it's not

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Speaker 6: a demand, and Biden was very careful to sort of

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Speaker 6: phrase it that way. Was fold Really one, we need

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Speaker 6: a little bit more time to get the hostages out.

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Speaker 6: And remember we've only I think that's four so far,

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Speaker 6: and there are more than two hundreds still there. Number Two,

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Speaker 6: there's been this ramp up in attacks on US military

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Speaker 6: bases across region, primarily Syrian Iraq, but obviously they're worried

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Speaker 6: about the bases they have elsewhere in the Persian Gulf.

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Speaker 6: And then number three, to try and ramp up the

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Speaker 6: human humanitarian aide that you've seen trickle into into South Gaza,

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Speaker 6: and it really is a trickle at this stage, so

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Speaker 6: it's several trucks, but in the context of a population

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Speaker 6: of two million people, you know, is really a drop

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Speaker 6: in the ocean.

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Speaker 1: At the same time, we've had these comments from Queen

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Speaker 1: Rannie of Jordan criticizing Israel's response to the Hamas attacks,

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Speaker 1: garnering a lot of attention. How is significant are they

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Speaker 1: when it comes to regional perceptions of this conflict.

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Speaker 6: Well, I think they're reflective probably of you know, where

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Speaker 6: we've seen arise in tensions about the view, particularly in

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Speaker 6: the Middle East, where I think, you know, everyone would

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Speaker 6: expect there to be some sympathy or quite a lot

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Speaker 6: of some for the Palestinians within the general population, and

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Speaker 6: therefore the Middle East leadership I think has felt the

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Speaker 6: need to be probably more vociferous than most about what's

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Speaker 6: happening in Gaza. But I think as a very good

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Speaker 6: article by Israel Be a Chief You from Brouna pointed

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Speaker 6: out overnight, there does appear to be spreading slightly more

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Speaker 6: widely in the international community. And really what it comes

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Speaker 6: down to is what context people are putting around the events.

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Speaker 6: Since the atrosities we saw in October seventh, So certainly

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Speaker 6: within the Arab world, I would say that the context

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Speaker 6: that the people have been trying to push is one of,

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Speaker 6: you know, several decades of what's been happening within Israel

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Speaker 6: and the Palestinian territories, within Israel itself, and I would argue,

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Speaker 6: probably to some extent in the US and other strong allies,

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Speaker 6: the context is a much wider one. It's it's centuries

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Speaker 6: and centuries of oppression and mass death. And really I

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Speaker 6: think that's that's the tension we're saying, and we saw it,

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Speaker 6: I think most clearly at the UN both yesterday where

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Speaker 6: we had sort of a double veto on these bills

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Speaker 6: going forward, but also with the comments from the Secretary

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Speaker 6: General that really sparked a lot of anger within Israel

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Speaker 6: and obviously in demand for him to resign.

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Speaker 1: Yes, and of course those diplomatic wranglings continuing at the

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Speaker 1: UN as well. No progress though it seems on either

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Speaker 1: a pause or a ceasefire in the resolution and discussions

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Speaker 1: that continues until late last night.

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Speaker 6: No, and really it's hard to see a way out

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Speaker 6: of this. I mean, Nestgnil came out very strongly yesterday

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Speaker 6: and said we will be doing the ground war, but

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Speaker 6: it will be at a time of our own choosing.

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Speaker 6: So it's clear that at least as off today, that

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Speaker 6: it's still going ahead. It's not entirely clear when it

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Speaker 6: will happen. And as you know, having followed this very closely,

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Speaker 6: our expectation was that it was going to kick off

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Speaker 6: a couple of weeks ago. You know, we had the

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Speaker 6: forward military base being built on the border, we had

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Speaker 6: all hundreds of thousands of reserves called up, and then

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Speaker 6: I think to some extent you've had a succession of

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Speaker 6: global leaders come to Israel, and I suppose urge caution

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Speaker 6: and caution in terms of what the scope of that

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Speaker 6: ground war will look like, what the targets are, what

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Speaker 6: you know, ultimately, what ideas are on the table for

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Speaker 6: what comes next, because I think this is part of

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Speaker 6: the thing that Biden was talking about in his visit

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Speaker 6: was yes, you know, absolutely ground war, but think carefully

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Speaker 6: about what's going to come after that, and make sure

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Speaker 6: that it's not worse than what was there before.

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Speaker 1: Okay, Stewart Livingston Wallace, our head of Middle Eastern North Africa,

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Speaker 1: thank you very much for joining us with the latest

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Speaker 1: on events in the Middle East. This morning, let's turn

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Speaker 1: out to the latest journings reports from the technology sector.

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Speaker 1: Shares in Facebook's parent company Meta Slidon after I was

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Speaker 1: training after its CEO said the revenue outlook for next

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Speaker 1: year was uncertain better needs as though from IBM there

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Speaker 1: better than expected sales. We've got Matt Blux and from

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Speaker 1: Bloomberg Intelligence with us this morning to talk us through

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Speaker 1: the details. Morning to you.

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Speaker 3: Matt.

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Speaker 1: Let's start then with matter. I suppose the revenues for

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Speaker 1: the latest quarter are actually better than expected, but it

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Speaker 1: was this idea of what they said about the future

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Speaker 1: that seems to have caught Marcus attention.

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Speaker 7: Yeah, that's right, quite kind of topsy turvy aftermarket performances

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Speaker 7: share so to revenue growth accelerated really rapidly this quarter.

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Speaker 7: They just reported up to twenty three and a half

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Speaker 7: percent growth. I mean, they make all their money from advertising,

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Speaker 7: so it was quite a similar story to what we

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Speaker 7: saw from Google the day before that brands are spending

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Speaker 7: probably to kind of help keep customers happy with the

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Speaker 7: price increases they've been suffering. But they and they kind

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Speaker 7: of pushed a lot of their spending into twenty twenty four,

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Speaker 7: so it actually looked made the kind of four year

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Speaker 7: twenty three the outlook look a lot better, and I

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Speaker 7: think initially people were kind of quite happy with that,

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Speaker 7: and then we had this kind of comment on the

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Speaker 7: call from the CFO that you know, next year's revenue

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Speaker 7: outlook is uncertain, and that really spooked in best. I mean,

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Speaker 7: it seems pretty obvious to me, given everything that we

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Speaker 7: have going on in the world right now. The company

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Speaker 7: has been talking about doubts about corporate spending into Q four,

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Speaker 7: So to kind of make a comment that next year's

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Speaker 7: outlook looks on certain it wasn't a big surprise, but

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Speaker 7: it's enough to speak the market, and I think it

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Speaker 7: suddenly brings into focus all the money they're spending on

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Speaker 7: virtual reality. I think I saw somebody wrote yesterday that

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Speaker 7: cumulatively they've spent something like fifty billion dollars on virtual

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Speaker 7: reality the metaverse, and you know they make a few

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Speaker 7: hundred million dollars of revenue quarter from it. Et said

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Speaker 7: drop in the ocean, and I think, you know, if

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Speaker 7: you do see significant headwinds to sales growth next year,

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Speaker 7: then that investment program is going to come under an

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Speaker 7: awful look more scrutiny. So I think that's the kind

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Speaker 7: of challenge that they have.

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Speaker 1: Yeah, it's really interesting actually to think about the first

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Speaker 1: of all, the markets having this oh no weight moment

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Speaker 1: when they heard the comments from Susan Lee, but also

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Speaker 1: this idea of balancing investment in matter, which still remains.

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Speaker 1: I was actually fascinated by their user number is still

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Speaker 1: growing seven percent three point one four billion. I mean,

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Speaker 1: they're still astonishing when you think about the presence that

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Speaker 1: Meta has in this space too, which makes what they

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Speaker 1: do with their business and how they're performing all the

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Speaker 1: more interesting.

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Speaker 7: Yeah, exactly. And I say, you know, if we look

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Speaker 7: back a year or so when growth was stalling, you know,

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Speaker 7: it felt like, you know, Facebook had how to stay.

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Speaker 7: Instagram was facing a lot of challenges from TikTok. To

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Speaker 7: be fair to them, they've done a lot of things

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Speaker 7: to kind of turn that around and get back into

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Speaker 7: the to the market and that actually comes through in

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Speaker 7: the active user growth and the ads impression growth, so

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Speaker 7: you know, up thirty percent year on year. So things

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Speaker 7: like wheels have really helped Instagram. The Threads platform still

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Speaker 7: kind of you know, let's wait and see, it doesn't

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Speaker 7: make a time. Yeah, you know, yeah, they're doing a

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Speaker 7: lot of good things, but yeah, that that big bet

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Speaker 7: on the metaverse. Yeah, it still looks like it's years

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Speaker 7: and years away before it delivers a return. And an interim,

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Speaker 7: they've got AI, which has kind of come to their rescue,

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Speaker 7: spending a lot of money there. I'd still imagine it

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Speaker 7: generates a very small amount of revenue for them, but yeah,

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Speaker 7: at least it's a kind of near term gap to

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Speaker 7: kind of kind of plug that hole.

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Speaker 1: Yeah, let's think about IBM then focus on software appears

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Speaker 1: to be paying off there, Yeah, it does.

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Speaker 7: I mean, obviously IBM has been through a huge transformation

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Speaker 7: over the years. You know, they kind of shifted to

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Speaker 7: this kind of hybrid cloud concept and red Hat was

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Speaker 7: a really important part of that, and red Hat continues

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Speaker 7: to deliver really good results for them. But yeah, they

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Speaker 7: are benefiting also from this transition to AI. I think

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Speaker 7: there are only generating hundreds of millions of dollars of

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Speaker 7: revenue from it in a company that generates billions of

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Speaker 7: dollars of revenue. Again, not very much, but the momentum

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Speaker 7: is there, and they're now talking about this concept of

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Speaker 7: the hybrid cloud shifting to hybrid AI and that they're

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Speaker 7: in a really good place to help corporates of all

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Speaker 7: varieties on their journey towards AI. But clearly to the

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Speaker 7: extent that corporates are still spending on technology. The budgets

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Speaker 7: have shifted massively in the short term to AI, and

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Speaker 7: they seem pretty well positioned to kind of help corporates

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Speaker 7: on that journey. I guess the kind of one soft

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Speaker 7: point in the print was slightly weaker consulting revenue. We've

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Speaker 7: seen something similar from most of the big eety service comes,

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Speaker 7: like Excenture, for example, So I don't think that was

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Speaker 7: a big surprise, but you know, it does show you

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Speaker 7: that that's I guess, the kind of signal that there

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Speaker 7: is some softness in the economy coming through, because that's

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Speaker 7: typically an area that corporates pull back on.

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