Watching closely with moves on tiffany over the weekend, but also what weve had brexit developments, investors still watching whether there will be an extension to void a hard brexit last minute and what that deadline day will be were also closely watching developments around trade and suggestions there has been some progress in phase one of a trade conversation between the u. S. And china. All this as we count down to the fed this week and markets, were talking to our guest host, andrew this morning, maybe there will be disappointment for the rate cuts and might disapaint from market views. An event risk week is now a market tilting into the red at the start of the session lets dive into someof this green and red as we begin the trading day. Towards the bottom of these charts this morning in terms of underperformers that were watching by a sector level versus some of the outperformers at the start, autos at the top, banks at the very bottom of the boards trading down by. 6 asia won the reporters, very disappointing numbers from the bank that stock is down 3 at the open media stocks down. 4 . So some fairly decent percentage at the start of the day. Industrials around the glimmer of hope progressing. Industrials on the back foot sliding a third of a percent food and drink also grinding lower with utilities from there, we have Household Goods trading a little bit firmer this basket of stocks is what were watching closely this morning. Initial print seems to be firmer but. 8 in the green burrberry moving positive. Financials about a tenth higher. Oil and gas two tenths north lets see what the indexes look like at the start of the day the ftse trades weaker, Still Holding 7,300 points looks like baxtoback losses for that market down by a third of a percentage. We are firmer for the dax opening up a trade same sort of gains that youre witnessing across on the spanish market now we have just slightly flat market for italian stocks. Not a huge run away direction at the start. Lets get into the deals lvmh has a possible transaction with tiffany they have not confirmed the amount of bid. For up 14. 5 billion sources told reuters the French Luxury Group put in a preliminary offer this month valuing tiffany 123 per share tiffany is expected to reject the deal, believing it undervalues the company, leaving very much until the last minute to update investors before the stock opened up today. So far we are seeing it race ahead by 1 . Very strong performance. In fact, were having bit of a debate around the set why the stock would be bouncing, typically big accusations you can see the stocks reversing it is 5 00 a. M. Here in new this is a company thats proved york and here is your top 5 at its ability to execute in the five todays show is brought to you luxury space despite lots of by the letter a. Disruption for retail, luxury alphabet, at t, alibaba and has not been hit youll see all the efforts to those are some of the companies reorganize business new channels unveiling their results this and that Online Division selling week the force, strong with this one. Details behind microsofts into the chinese platforms of the internet and domestically some of the big second and third massive new government contract win and who is going home empty tier cities as youve seen a drop in the local sales tax. Handed. All that sparkles may be so, very strong trade were worth some 14. 5 billion seeing in this company and another record high for lvmh, tiffanys responding to an unsolicited takeover bid. 387. 65 in california, state of lets look at some of the emergency, wild fires continue other luxury names in response, to rage. Millions remain without power. One of the other Big Companies we wil that could be in the running if there happened to be a bidding war purely on market cap, numbers closer to lvmh, still enormous distance between the two firms in terms of size the other one suggested that might be interested in bidding for tiffany is richmont the jewelry and watch maker in switzerland. That stock up. 6 . But the one you have to ask about today is burberry, a company in play for a lot of investors, perhaps next luxury name to be acquired, it has missed out at this point one to watch as well lets move on to hsbc, stock down 2. 8 , reported 18 plunge in Third Quarter pretax market amid Challenging Market conditions the asian unit held up well in the Hong Kong Market was resilient. Cfo told cnbc the key challenge was Central Banks. The biggest single driver of the change in outlook for us is the shift in the Interest Rate cycle. If we had gone back a year, we would have expected rates continuing to rise as we look at 2020 now, particularly for the dollar block expecting continued decline in Interest Rates from here markets continue to be a bit choppy and the giopolitics around the uk and hong kong are certainly more complex than what we thought a few months ago. Lucy mcdonald has joined us, cio Global Equities. Were watching this activity with lvmh confirming it has been talking to tiffany, this would constitute another megatransaction if it progresses whats your instant take on this type of activity well, lvmh has been performing quite well, so better than expectations with some decent top line growth, but they are underrepresented in branded jewelry. Its the Fastest Growing area, going back to the 5 as a market so, from that perspective this would fill that gap. Theyre also underrepresented in the u. S. , so again that would fill a gap when youre looking at the valuation of tiffany relative to other branded goods, it is relatively affordable luxury even at this premium 20 premium, its on that of 14. R5 times which is compared to the overall sector is a couple of points higher. So, it looks sane, rational, strategically sensible and not that expensive now, theyre not going to get it at this price probably but they could afford to pay up a little more. So you think it could be little bit of not so much a bidding war but pushed back from tiffany shareholders requesting more cash on the table yes. I just want to get to some of the other reactions throughout look at whats been happening in the space, theres been other luxury names but also affordable luxury names is that the right read, you get one megadeal, you should be raking across the sector theres always a readacross when you get a situation like this potentially reevaluating their assets in this space but i think tiffany is a oneoff because of its brand. Whats interesting is the point you make about the gio graphical spread here. I suppose thats what makes this deal such an interesting deal. I was just doing a little bit of work here on the tiffany numbers from 2018. When you look at the geographic breakdown, 504 million for europe but in the states were talking 2 billion and in asia 1. 2 billion. So the opportunity perhaps to sell more strongly the little blue box idea into the european markets looks quite attractive. Exactly that. And in terms of the asian opportunity, perhaps thats not the driver here because they already seem to be relatively well represented in the asia pacific markets especially greater china. Do you suspect thats part of the reason why we have a more positive reaction in the markets this hour because if you look at asia and the china story, that actually feels like its going a little bit soft. In the shortterm i think in hong kong for sure its softer, but theres still medium term plenty of penetration opportunity there. So i think a tariff like this would make in a good geographical sense because tiffany clearly has more opportunity outside the u. S. And thats where lvmh has shown great success. Well leave the conversation there for now. Lets get to one of the other top corporate stories of the day on the earnings front. They posted a 70 drop in Third Quarter net income just hissing expectations. The German Chemicals maker already flagged a slowdown in the auto sector amid softening demand and trade tensions. Cfo of covestro joins us down the line thank you for joining us this morning. It looks like a lot of weakness today is again down to the auto sector i know you flagged this last quarter, but feels like things have deteriorated more significantly than you expected. How would you categorize the demand trends youre seeing in autos now . Yes well, good morning from my side. Thanks very much for having us you said it, automotive certainly is a topic, but lets look at the quarter as a whole and i would say we have delivered a solid performance in what you correctly characterized as a challenging environment so i think what is remarkable is we were able to grow our core volumes by 5. 3 and shows we have a very Broad Foundation across many industries, across many regions and as you rightly said, automotive certainly had a negative growth rate in your Customer Base and reflect this early on and were able to compensate that through sales into other industries, mainly the construction industry, the furniture industry, Electronics Industry and that overcompensated the weakness in automotive so we were able to grow 5. 3 our core volumes i think even more importantly our came in at 425 million, this is exactly in line with the guidance that we have given maybe even slightly better than that therefore i would say we were able to overcompensate some weakness here and deliver a quarter which is solid in a challenging environment as you correctly said. Now, on the core volumes front, i see that your specialties business has reported a 4 drop in core volumes. That was due to weaker demand across all Key Industries again particular weakness in autos this is supposed to be your more resilient less Cyclical Division what do you have to say about that is this division really holding up as it should be i would say, yes, it is holding up it cannot totally detach itself from auto motive were delivering coding substances into the auto motive industry that was impacted. Overall if you look at the Margin Development i would still characterize it as solid and therefore if you take the group as a whole, i would say were holding up very well against the weakness in this particular Automotive Industry through sales into some other industries because as i said we have a very broad base and automotive is only 20 of our total sales. But whats clear as you look across the earnings report, thomas, is that there is a real struggle here to get Pricing Power back on a lot of these products you give us a sense of when you think perhaps the market may bottom in terms of pricing declines because without being able to reinstitute that pricing pressure, this is a business that will continue to erode margins surely first of all what is very important, is if you compare prices to 2018 and 2019, 2018 was an absolutely exceptional year we have numerous times said that because it was characterized by the fact that some of our competitors were not able to get their plants up and running and therefore there was a severe shortage of supply in 2018 and we characterize this as flyup margins. We always said this would go away eventually. This is what happened in 2019. This was expected coupled with a weakness in the general economy and therefore, yes, just back to more normal levels this year relative to last year. However, and this is also why we totally confirmed our fullyear guidance with narrow margins we said we would come within the range we previously communicated now, to your question, i think definitely our expectation is that in the shortterm there will be no recoveries. Were seeing 2020 probably also another challenging year and preparing the company for this environment. Thomas, i want to ask about capx. This is a topic for investors. Now in light of the weakness that you have seen come through, albeit we have seen some of that weakness offset by other parts of your business that have been performing well, how committed are you to your current capx plans and could we see an adjustment moving forward . Well, i think what is very important to understand we cannot steer our capx at a quarterly level. It takes about seven years from the decision to build a new site to the time when the first product is coming on stream and therefore of course were monitoring very closely what is happening in the environment we really scrutinizing all the investments, but what i can tell you is were absolutely convinced that our capx is creating value because its the foundation for the future nl profitable growth for the company and, yes, were always checking whether its in line with our internal thresholds in terms of performance but were not adjusting it on a shortterm basis and therefore in general we keep capx as one of the key strategic pillars for the future growth of the company. We got to wrap it up. Thomas, nice to have you on the program. Thanks so much for joining us. Thomas is the cfo of covestro. Question for our analysts around the desk this morning, both andrew and lucy, the fact that we see volume prices weak in the Third Quarter and flat running into the fourth quarter, something julianna gets very excited about, surely tells us we have a problem here with growth and with cyclical stocks Going Forward. Is this a big kind of waving of a red flag just to be very weary about going back into value or apparent value propositions with this backdrop of weakening trends in such a critical area as volume . Yeah. We have seen a lot of concern about cyclicality in the stock markets this year. So you have seen big divergence between growth and value and cyclicals lagging more bond proxies and growth all year. Until very, very recently where youve seen a little bit of bottoming out in that, and youve seen quite a disappointment on earnings of the more cyclical sectors. Andrew wants us to buy value in europe, dont you i do. Theres a risk that there are lots of traps out there waiting for us. I think there are so one thing we do have to realize is the price that were paying for that value and, again, i think the way that our European Equity team has thought about it is some of the cyclical value is not as cheap as some of the other parts of it. We recently upgraded banks to overweight they have their own challenges but are not impacted by some of the industrial cycles as much. We like tell come. You hear the margin. Growing sales but profits down i think that is a trend that were starting to see more and more across more companies we have to be mindful of. Its notwere seeing this slow down but its actually coming through in margins as much as its coming through on the top line. Thats true and the way we have been dealing with this value and growth and the concerns about earnings is by having a barbell. Avoiding the most expensive of the defensives so that would be the consumer staples. And then looking at the more cyclical value end but looking where theres less earnings downside risk, the less, real exposure to trade wars or tariffs. And thats been the way of getting that balance right in the portfolio. Okay. We have to take a break. Lets pay for the programming. Well be right back. Phillips put in a mixed set of results in the Third Quarter karen will take you through the story and the charts when we come back. Most people think of verizon as a reliable phone company. woman but to businesses, were a reliable partner. We Keep Companies ready for whats next. man we weave security into their business. Virtualize their operations. woman and build ai customer experiences. We also keep them ready for the next big opportunity. Like 5g. Almost all the fortune 500 partner with us. woman when it comes to digital transformation. Verizon keeps business ready. Sfx upbeat music a lot of clothes you normally take to the cleaners arent dirty dirty. They just need a quick refresh. 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The dutch Health Tech Company reported a 3 rise in core profit despite flat order intack it cut its Profit Margins target friends, the ceo, told cnbc earlier this morning that the company was still weathering the impact of the global tensions. We called the quarter a mixed result its a bit of a paradox on the one hand, we had very Strong Revenue growth, 8 across all businesses and across all geographies. In fact, that is very good news. At the same time, we see in particular connected care was affected by some head winds and that includes the trade wars the other businesses were able to mitigate those trade wars a bit faster, connected care has a complex supply chain with many products we were unable to move fast enough to off set some of these tariff impacts and to be honest, we also had a few other head winds in connected care in the quarter such as somewhat weaker product mix. Overall, i remain confident about our ability to improve in the future lets move on to this i want to show you this Stock Performance decent 1 . But also the last three months 16 or higher. A lot of self help measures by the German Company they will not sign off on a sale unless po