Transcripts For BLOOMBERG Bloomberg Daybreak Americas 202407

Night, caterpillar warning this morning. Money moving into the bond market. Yields lower by about two basis points. Time now for global exchange. And london to you new york washington, our bloomberg voices are on the ground with this mornings top stories. U. K. Prime minister Boris Johnson will Face Parliament after lawmakers blocked his plan to rush the deal into law. We now face further uncertainty, and the e. U. Must now make up their minds over how to answer parliaments request for a delay. Alix European Council president donald tusk earlier signaled that the eu was likely to do. In order to avoid a theeal brexit, i recommend eu 27 except the u. K. Request for an extension. For this i will propose a written procedure. Anna edwards is in westminster. Anna the Prime Minister is concerned. There are two paths that could lie ahead. One of them is to change the type of the existing agreement billed to give it another chance in parliament, to see if it can get support after its got more time for discussion. Johnsonht, we saw boris facing one of the votes because mps were asking for more time to scrutinize the legislation. He has talked to the labour leadership to come up with a timetable. No progress has been made in that conversation, but they have been talking. The other path is the possibility of general election. If no new timetable can be found that would come and support and the house, perhaps department us to will call for a real election. He certainly threatened that yesterday. There might be various reasons why he might want to do it. He has quite a serious lead in the opinion polls at the moment. It might suit him to go with a deal in hand. To limit wont let him enact the people and say give me your blessing parliament wont let him enact to the people and say give me a blessing. Will we see a new timetable or a election . If we want to see either of those, we need a delay from the european union. You heard Boris Johnson talking about what the eu is going to decide. We heard from leo varadkar this morning that he is going to support a delay to the brexit process, and many people here in westminster assume, perhaps dangerously, that the eu will say ok to that delay. Alix investors here thinking the same thing. Thank you so much. We want to turn now to some earnings. We heard from caterpillar and blackstone this morning. Joining me for highlights is, chandra is emma chandra. Emma i wanted to highlight first caterpillar. The Company Really sending out some distress signals as the stock is reacting in the butarket, falling about 4 , falling close to 8 and we first saw those earnings. They missed estimates, and the company lowered its forecast for 2020. Caterpillar blaming demand, as we had seen them do in previous quarters. They do see dealers making inventory reductions as they are concerned about Global Economic uncertainty. We know that has been fueled in part by the trade war and trade tensions, and that is something we heard about from Texas Instruments. Of course, the bellwether when it comes to the chip sector, Texas Instruments falling 9 in the premarket today. It is really stoking a bit of negative sentiment for chips around the world, certainly here in europe. We have seen that sector perform worse on the stoxx 600. The ceo in the company there saying that trade tensions i can customers far more cautious. Alix great recap. We turn to new york, where softbank unveiled a 9. 5 billion rescue package for wework. Softbank will now own 80 stake in the company. Bloombergs sonali basak joins us with more. Its official. Walk us through what we know. Sonali it is official. Softbank owns 80 of the company now. Something important to note, we work will be an associate ash wework will be an associate of wework will be an associate of softbank, not a subsidiary. With that said, it is still a lot of money. We will see how investors react to this deal. Alix so far, the outcry against adam neumann has been quite severe, particularly within the company. Sonali adam neumann is walking away with more than 1 billion, as well as a 200 million consulting fee, while employees are being laid off. The disparity here is something making people uncomfortable. Alix to say the least. Thank you very much. Now we head to washington, where Facebook Ceo Mark Zuckerberg is set to testify before the House Financial Services Committee Later this morning. The hearing is expected to largely focus on the companys propose cryptocurrency libra. Joining us with more is kevin cirilli. Kevin Mark Zuckerberg prepares to go on offense. His testimony was released late last evening. He is set to say that facebook does not have the ability to move forward with its libra and Digital Currency and while it, that it will cede ground to china. He has said, while we debate these issues, the rest of the world is in waiting. China is moving quickly to launch similar ideas in the coming months. Meanwhile, progressives on the committee, including freshman alexandria because he accord as cortez, area ocasio. Reparing to go on the attack facebook hopes it will continue to work with regulators on future regulations. Alix thank you so much. Stay with Bloomberg Television later today. We are going to have live coverage of Mark Zuckerbergs testimony at 10 a click a. M. Eastern time at 10 00 a. M. Eastern time. We have General Dynamics coming in quite strong. Revenue beating on a year on year basis, up 7 . Earnings beating as well. There backlog came in a little light. It was down by about 3 year on year. Free cash flow really solid. They say this should come as no defense andat the airspace portfolios continue to remain strong. The question is, will anything else wind up being strong . Coming up on this program, more of your morning trade and analysis on the markets in todays first take. Happy wednesday, guys. This is bloomberg. Alix time never bloomberg first take. Time now for bloomberg first take. Joining me his former trader and voice of the bloomberg audio squawk vincent cignarella. How do you look at the earnings we get from Texas Instruments, from caterpillar, when they all worn about the broader ash all all warn about the broader environment . Vincent i thing it is a bad sign for the broader industrial economy. If you put the two on the chart, it makes perfect sense. Caterpillar,ss in not only would you expect the dollar to trade lower, but this is a big trade situation. The trade outlook is finally starting to bite into the industrial sector in a way that now we will see if it translates to the consumer sector. Alix what i thought was also interesting about Texas Instruments, they are the closest to the engine of demand. They are going to feel at first. Companies later down the supply chain are not going to file yet, but at some point it does get to the consumer. Weve known caterpillar was weak for a while. Vincent and i think Texas Instruments is the consumer, and you are seeing it as well. It takes lead time for manufacturers to order the chips from the chip manufacturers, to put in whatever products. We have chips in everything. Theres just about nothing that isnt being run by a computer right now. So you have Something Like Texas Instruments morning, basically telling you there is no demand for the next six months. This could way into the this could weigh into the First Quarter of 2020. Fxx so if you are an trader, what do you do . It is a weaker or stronger dollar story . Vincent probably a stronger dollar because we see people looking for havens. U. S. Treasuries will probably be back on the bid side. From 1. 6 in the 10 year to 1. 8 . Now i think we should pull back a little bit. 10year gilts will drift a little bit lower, and we see a bit more of a Slower Growth cycle going into 2020. We may pull some of that growth into the Fourth Quarter of 2019. Alix the other narrative is that the dollar steepened. That we might see a rotation and other assets. Vincent if we see the trade situation level off. We are not seeing that just yet. People have been talking about peaking the dollar. I dont know why they are still working. [laughter] vincent but they somehow managed to carry that day. Its really hard to pick tops and bottoms in the market. While you still could see a top and the dollar going forward, you need all of these other things to fall into place first. Alix reports from cctv, the china broadcast network, saying china will increase imports of ag products and boost imports of consumer goods and equipment. Weve known about the ag products, but consumer goods and equipment is a little bit new. Also joining us on set is nate thooft, menu life Investment Management head of global asset lifecation manu Investment Management head of double asset allocation. Good to see you. Ate weve been watching the dollar closely, but on the whole, it does appear it might be rolling over, but you will have to see more Economic Data that really reinforces that. We might just be range bound until we actually see a better breadth of global macro drivers, and may be pmis tomorrow in europe, to actually lift the other currencies to keep that dollar trend intact. Alix we were also talking about earnings, and how it is not painting the best picture. What was your take . Yesterday you had United Technologies beating and raising, and today you get caterpillar and Texas Instruments. Tis earnings season. Youve got to decide, is it a company or macro issue . Caterpillar has always held out that they are a global indicator of the many factoring space. By the end of the day, we will see what micro soft has to say around the tech sector. Vincent microsoft is looking to do well today. Alix although its not done as well in the equity market. That has really belong to apple. Lets get to another story, which is kind of on the sidelines, kind of related, and that is brexit. What are you doing today . What do you do . Lawmakers extending yet again. Vincent way too much optimism yesterday. I think the whole week. Alix to be fair, the first part was approved. Vincent yes, thats a very good sign. Mps and some labour agreed, so it could actually pass. Vincent if they werent probably in such a rush to get this through because the plan took so long to get into place with eu leaders, because it was kind of a last minute thing. To the mps credit, this time they really didnt have a chance to look at it. So they want to get a look at it before they pass it, and thats not necessarily a bad thing. The question is, will Boris Johnson call the election . The eu will give him at extension. It is going to go after the 31st. They wont trigger a hard brexit. But if he feels confident and calls an election, it could become a referendum on brexit once again. While he may be well in command of the polls at the moment, if the population truly wants to remain, they will go in to vote labour and vote in corbyn, and we will be right back where we started. Alix dont say things like that. [laughter] alix we are seeing Prime Minister questions over in u. K. Parliament. Prime minister johnson saying the brexit deal is a great advance for the whole u. K. Here nate, weigh in here. I think the next thing is seeing how long this will go on. What else can they insert into this and what else can get doubled up into this whole mess where you have disagreements . Are they going to push the extension out far enough that boris is just going to be like, let me do an election at this point in time . It is really in the hands of the eu and how they want to deal with this extension, and my view. Do they want to do a more traditional shortterm to see if they can figure it out, or put at a longer date to keep using that as long as they can come at which leads to a better outcome or an election. Vincent they are between a rock and a hard place. If they call it to late call it too late and trigger a hard brexit, that falls on the eu, and that is excepted with they dont want. It most likely will result in election. Boris will probably pull the trigger, and everybody will pull back. Nate and the eu doesnt want to know deal exit because they have such a number of fragile economies in specific countries that just cant deal with that. It is a tough spot right up. Vincent diverse result for the eu is that the u. K. Leaves, their economy goes on, nothing happens, and ill of the other embers of the eu are like, what are we doing here . Alix what it does point to, and this is what i wanted to also bring up, is the broader rotation into value. That has been really stark. We side in september for a minute, but we are seeing it again, having the best two day upswing since 2012. Are we learning anything about market rotation here that is getting missed in the earnings . Nate i think it is still down to positioning right now. You had such a long run for Growth Stocks that you seen some rightsizing and positioning. Im of the view that this is a positive. What you seen as a broadening of the participation in the market. Im not seeing this outright growth to value trade at this point. I still think theres a number of reasons why people want to own Growth Stocks. We are still in a low growth world, and people should be Rewarding Companies that still get growth. To me, this is an early sign of perhaps seeing broadening in deeper his patient and the market is outright big rotation, and tech stocks are going to willfully underperform and tell you is going to be the leader. Vincent i agree. I think it is positioning. Youre basically spreading your assets across the table, not in one place or another. Theres a lot of uncertainty. With that uncertainty, i think the greater spread of your assets and your bets give you the better chance of surviving when the next shoe could fall. Alix i dont know how it applies to the fx market, but we are learning the safety isnt safe. Love volatility stocks, some of the Consumer Discretionary stocks, maybe some of the staples. Treasuries, i feel like weve known that now. Are we learning this . Is this a thing . Nate i think it is more of a valuation story. The position is just, people have such large positions now, the kind of have to write size those to some extent. Yes, there could be a temporary period where some perceived safe havens underperform for a bit, but it is really more about perception and the size of the positions then something has changed fundamentally with those companies. Keep in mind, not all defensives have been working. Health care is a classic example of one that has underperformed a lot. We know why, but that is one sector that if youre looking for defensives, that might be one place to think about. Vincent defensive fx and treasury havent worked. The twoyear was well bid, but i think that is because of where weve come from. Youre just looking at some capitulation, and the hedging situation. Just coming back into the market, maybe taking some back off the table. Alix my take away, it is all positioning. Take a break. Vincent cignarella, thank you very much. You can hear his trades coming up later in the hour. Nate thooft of manulife Investment Management will be sticking with me. If you want to browse the charts and check out the features, go to gtv under terminal. Caterpillar getting a little bit of color here. The cfo blames greater Economic Uncertainty for weaker sales. That stock still down by 4 in premarket, off the lows of the session. Also some broader china heads here. Cctv says china will increase imports of ag products and imports of consumer goods and equipment, and also allow some Foreign Companies Equity Investment for capital. We will see if that is part of phase one trade deal. This is bloomberg. Viviana youre watching bloomberg daybreak. Shares of caterpillar are falling. The largest maker of mining and Construction Equipment cutting its earnings forecast. In the third quarter, kat reported a drop in sales. It expects demands to be flat. Caterpillar warned things were deteriorating in asia. The profit outlook suggests matters have gotten worse. Texas instruments rocking the chipmaking sector. The Company Getting a weaker than expected forecast. It warned trade tensions are making customers far more cautious. The report led to a selloff in semiconductor stocks. Texas instruments predictions are seen as a indicator for the market. Softbank will get 80 stake in wework. Founder adam neumann will leave the company board. He will walk away with as much as 1. 2 billion in stock, a 500 Million Dollar credit line, and a 185 million credit fee million consulting fee. At lessout values it than 8 billion. Alix thanks so much. Things could actually get worse. The company is on the hook for the 47 billion in lease payments over the coming year. Theres plenty of blame to go around, but that is really not the whole story. What happened to wework is not just a failure of this particular set of individuals. It is a consequence of the last decade of easing money that has made investors throw money at assets promising to grow fast, and they wont last forever. Nate thooft of manulife investment in its mint Investment Management. Nate certainly defective we people willing to lend to them, you have this situation where it has exacerbated the fact that a company like this was allowed to get as far into debt and to do some of the activities it had done so quickly in such larg