Big Tech Beats: The Bloomberg Open, Europe Edition

Good morning. Alphabet and Microsoft earnings paint an optimistic picture for Big Tech. Two regional US banks suffer diverging fates. And we take a look at Elon Musk’s bet on price cuts and razor-thin margins at Tesla.

What’s Happening Now

Alphabet and Microsoft rose postmarket after their earnings beat. Alphabet’s cloud unit made money for the first time and the company announced a share buyback of up to $70 billion. Microsoft saw resilient demand for its Azure cloud services. Both companies emphasized the importance of AI on their post-earnings calls.

A tale of two US regionals. First Republic plunged 49% after a announcing a surprise drop in deposits. The bank tapped consulting firm Messina Group for advice on dealings with the government. But PacWest’s shares jumped postmarket after it said deposits stabilized in March and rebounded in April. Meanwhile:

• Stan Chart’s pretax profit beat expectations, with net interest income rising 13% thanks to higher rates.

Quants investors are “out of ammo” for buying stocks, Goldman’s Scott Rubner warned. His data show systematic money managers have loaded up on more than $170 billion worth of global shares in the past month, driving their exposure to the highest since early 2022. As a result the group is more inclined to be sellers in coming weeks.

Spotlight

British patients are turning to private health care as the NHS struggles with mass strikes, long waiting lists and budget constraints.

• Insurance firms Vitality Health, Circle Health and Aviva have all registered a surge in the number of patients they serve. Concerns about the NHS are “a significant driver” of growth, Aviva said. Hip and knee replacements are the fastest-growing procedures to be done privately.
• The state-run NHS struggled with pent-up demand following the Covid pandemic, adding to demographic pressures from an aging population. Health insurance as a work benefit is also becoming more common.

What to Watch

In central banks, the Riksbank is expected to raise its key rate today by 50 bps to 3.5%. Bloomberg Economics expects a further 25 bps of tightening in June, bringing the hiking cycle to an end at 3.75%. And the ECB has no choice but to continue tightening due to core inflation, Boris Vujcic told Delo newspaper.

Stanley Druckenmiller is betting against the dollar and called it his only high-conviction trade, the FT reported. That’s in large part due to his dim view of US policymaking. Druckenmiller described the broader investing environment as the most uncertain for markets and the global economy in his 45-year career.

Recep Tayyip Erdogan suffered an unexpected health issue during a live TV appearance. An interview abruptly stopped broadcasting before he returned to the program, saying he was experiencing an upset stomach. He’s campaigning to extend his 20-year rule in elections set for May 14.

Crypto bros may have rolled their eyes at Societe Generale’s recent launch of CoinVertible, but it summarizes the direction of travel for crypto regulation in Europe, Lionel Laurent writes. The coin’s pitch is to offer legal certainty, collateral transparency and interoperability with TradFi. As regulators close in, the co-opting of what was loudly promising to be disruptive is gathering pace.

By the Way

Elon Musk is betting the House of Tesla on low prices and razor-thin margins. His latest strategic pivot will determine what happens next in an industry that Tesla has already turned on its head over the past decade. Competitors may have little choice but to respond to his price cuts. Read more in our Big Take