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 large size, so i do agree with the concept. The question is, is a really specific to this situation or more pervasive . You can kind of pick and choose your stories with that. Generally, credit lending standards have been pretty strong, so i dont think it is holistically a problem. Alix earnings from boeing on deck. Lots of readthrough for this quarter. And we will look ahead to microsoft. This is bloomberg. Alix this is bloomberg daybreak. We are evolving into an ugly session today. Part caterpillar come apart Texas Instruments. Gettinggy in europe hit. S p futures down 0. 3 . 1500,zbank may cut directjobs 1500 comm jobs. Can we handle the risk off and the steeper curve . That winds up being the question. The yen trying to be the outperform her, along with the dollar in the g10 space. Boeing numbers are out right now. Lets dig into them here. At onernings coming in dollar 40 have since a share. I am trying to see what the comparable estimate 1. 45 a share. I am trying to see what the comparable estimate is. On a year on year basis, that would be significantly lower. Their monthly production rate. Revenue is down 20 year on year, coming in at 20 billion. All of the forecast is also under the assumption that the max will return to service in the Fourth Quarter. They are cutting production on the 787, assuming the max is going to return to service in the Fourth Quarter, and you have a steep decline in earnings and revenue on a year on year basis. Not sure about the comp in the market. That stockstill up 0. 1 . We will talk about the industrial space. Joining the onset is Brooke Sutherland of bloomberg opinion, bloombergs senior machinery analyst, and nate thooft from manulife. Youve had about three seconds to look at the boeing numbers come about it looks on a year on year basis not great, so i am wondering where the wondering why the stock is up. Brooke it is interesting that they are cutting the 787 production rate. Taking that down, that has been a really strong product for them. That signals that they dont necessarily expect all of those china orders to come through, which is a longerterm issue for boeing. I do think it is very interesting, at least for my quick scan of the results, i dont see another charge here for customer compensation. They may still be working that out, but the fact that there is not another massive, multibillion dollar charge related to the grounding of the 737 max may be some thing of a really for investors. Point. H, fair they are saying no significant change to the maxs estimated potential. Is that going to be good enough, though . You see airliners not assuming a Fourth Quarter delivery, pushing it back to the First Quarter of 2020. Brooke i am very surprised they are sticking with this timeline. It may just be that they dont have information at this point to lead them to come up with a new timeline, but based on everything we seen, all of the airlines at this point are not untiled to have this january 2020 at the earliest. You also have the emergence of those messages between boeing potentially having concerns with that Software System at the heart of those two crashes. That is at the heart of whether boeing can allow this to go back into the sky. They will testify before the house and the senate next week, and i think we will see a very hostile exchange there. A lot of doubts over that timeline, and i think it is very interesting that boeing is sticking with it. Perhaps a vote of confidence here, if you want to be optimistic, but i feel like that has to be rolled back eventually. Alix or could have been worse. Could that be the theme here . It actually was worse when you look at caterpillar. What seems so awful in caterpillars numbers is analysts had already guided down. They were prepped for something bad, and this was a lot worse. What changed for them . Reporter going through the release, what really surprised me incrementally was resources, basic tin mining equipment. Growing in the first and second quarter. It fell 12 in the third quarter. Total surprise. That was going to help cushion the blow on construction, so that was a big surprise. Construction was also down a lot. Alix is that a oneoff, then . Reporter mining is driven by macroeconomics ultimately. Metals, for example. With the Global Economy slowing, eventually they were going to cut capex in mining, and it looks like the customers are doing it sooner than expected. They did site cautiousness. Nate one of the interesting things, there is some story along the line of the intraand tory the inventory change. This is speaking to the macro dynamic. Itn at the most basic level, is not particularly good right now given all of the uncertainties out there. Caterpillar is just a classic example because no one wants these large machinery sitting on a lot if they are afraid they are not going to be able to sell it. Alix at what point do you need to buy . When caterpillar actually has a good number, the stock is going to go through the roof. Nate it is interesting, caterpillar has a long line of poor Stock Performance after announcing. Even when theyve had good ones earlier last year, the stock has underperformed. Youre right, at some point the bottom is in. We are starting to see some early signs with certain types of indicators, particularly out of asia. We saw japan new orders pick up last month. We saw china pmis not to tear rate more. Maybe you have some not deteriorate more. Maybe you have some really early signs. Alix to that point cut up to caterpillar is only down 3 . Is that something we can read through . Karen that has been the story of the quarter. Then outs shortfalls, they break, and then they come back. Im a little surprised by that but the by that because the stocks are holding up. Bellwether. We will see what they say on the quarter. They used to give color on 2020 in the third quarter. They no longer do that. I dont think they will get much from the ceo. Alix boeing now down by over 1 in premarket. They seem on a year on year basis much weaker on earnings, as well as revenue. The key is that boeing is cutting their 787 production rate. They are still confident on the max. Anything else stand up for you . Brooke i think the other big question is any big update on the widebody production. That has been pushed out because they were having issue with the ge jet engine. Is there any update on that timing . That is key to boeings future cash flow prospects. Cash flow this quarter was very disappointing, as you would expect when you have all those grounded maxes piling up in not being able to be delivered. Late yesterday, boeing announced that the head of its commercial airplanes division, Kevin Mccalla custer evan mcallister, was stepping down kevin mcallister, stepping down. Whenis a big decision Dennis Muilenburg himself is under pressure, and some have called for him to step down. Will there be more changes at boeing . Do they need to do more to respond to this crisis . Alix down by 0. 7 , so off the lows. How do you look at some been let boeing . Theres two stories. One is what brooke is talking about. The other is that the world needs them, they are going to be fine. Nate boeing is such a Company Specific issue, it is really hard to piece apart what is going on specific to their 737 issues and other dynamics versus what is going on from a macro perspective. I really have a hard time using boeing as a flagship indicator for what is going on in the world right now. There are certainly other ones, caterpillar, for example, that little clearer how they tie into what is going on. Im not really digging too much into the boeing specifics as it pertains to broader macro issues. Alix we have tech after the bell, microsoft. What are you expecting from tech . Where are we going to see the strength . Where are going to see the weakness in the fundamentals . Nate i think you continue to have the big themes that play. Cloud is going to be key for microsoft. It is a question of how quickly it is still growing, and if we start to see signs it is going to decelerate. I think generally speaking protect, expectations are reasonably low speaking for tech, expeditions are reasonably low for this quarter. Alix Brooke Sutherland, karen will heart, and nate thooft of manulife investment, good to get your perspective. Viviana hurtado this year was viviananews hurtado is here with first word news. Ministeru. K. Prime Boris Johnson holding talks with labour leader jeremy corbyn. Lawmakers rejecting johnsons plan to rush the brexit deal for the house of commons in just three days. President Donald Trumps acting ambassador to the ukraine has now become one of his biggest impeachment threats. William taylor testified in secret before a house committee, telling of alarming circumstances. Taylor said he was told the president wanted ukraine aid to be contingent on the investigation of the bidens and the 2016 election. That appears to contradict he president s assertion there was no quid pro quo offered to ukraine. China considering a plan to replace hong kong chief executive carrie lam. That coming from a probeijing lawmaker in hong kong. Earlier, the Financial Times reported an interim leader could be installed by march. Lam sparking months of protests by introducing legislation to allow extradition to china. Today that measure was formerly withdrawn was formerly withdrawn. Withdrawn. Ally global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im to the on our tonto. This is im a viviana hurtado. This is bloomberg. Alix coming up, we look into the world of Financial Advisors, with the largest private Brokerage Firm in the industry. We will speak to penny pennington, Edwards Jones ceo. If you have a terminal, check out tv. Miss anything . Go back and check it out. This is bloomberg. Loomberg. Viviana this is bloomberg daybreak. Coming up in the next hour, robin hayes, jetblue ceo. Now to your Bloomberg Business flash. Chinas staterun cctv is sticking to its blackout of the nba. Its a sport channel didnt air the nbas opening game, the first time thats happened in at least a decade. Earlier this month, cctv launched its boycott when the general manager of the Houston Rockets tweeted his support for prodemocracy demonstrators in hong kong. Malaysia looking to settle its case with Goldman Sachs in the 1mdb scandal. Publicly, the government demands butman pay 7. 5 billion, negotiators may settle for 2 billion. Malaysia is trying to recoup money plundered from the scandal ridden develop and fund. U. S. Prosecutors also seeking to punish goldman. It is the end of one of the more dramatic business debacles in recent memory. Tbank rescuing rework rescuing wework with a 9. 5 billion package. The fund will get 80 of the startup. Founder adam neumann will walk founder adam neumann will walk away with over 1 billion. The bailout values the company at less than 8 billion. Im of jan or todd of im viviana hurtado. That is your Bloomberg Business flash. Alix we turn now to wall street beat, and we focus on the world of initial advisors. Edwards jones currently serves over 7 million clients in north america. Joining us is pending pennington is penny pennington, Edwards Jones ceo. Sonali basak is here with me as well. 1 trillion, no joke. What you tell clients in this environment, with these risks, about returns, about the environment . Penny the current environment says we are in a lower return environment. Weve gotten used to may be 4 gdp growth a few years ago. That is not occurring today. Our clients are going to need to plan for those kinds of lower return environments. We say the same thing weve been saying for decades, plan carefully, think longterm, marshal your resources, look at your own tolerance for risk, and allocate your assets appropriately. What doessonali that mean in terms of longerterm assets . Are you seeing that real demand . Penny we are not seeing that demand yet in our marketplace, the what we know is what is attractive to ultrahigh net worth individuals becomes more attractive, and manufacturers look at getting it into retail investment. So i am hearing a little bit about that, but i think it will take a bit. Sonali what is keeping people from investing in a bigger way . Im sure the likes of tony james would really like to know. [laughter] penny private equity as liquid, and when you are talking about the need for liquidity, when youre talking about folks getting into a comfortable retirement and needing to produce income, private equity is not set up right now to do that. Dox to pivot off of that, your clients have to take on more risk . When you mention risk profile, how do they think of that . Assets appropriately allocated are the name of the game. Alix has that changed, though . Hasnt diversification changed in the last 10 years . Penny i wouldnt say its changed. Clients need to be in the right percentage of risk assets for sure. Theyi ubs has said that are seeing more clients move to cash. Are you seeing the same thing . Penny anytime there is volatility or uncertainty, people wonder if the mattress is the best place to put it, but we know that is never the best place. The returns were getting on cash right now are essentially zero or negative. That is not going to prepare you well for the longterm. Alix in terms of your business, you grow or do you cut costs and retrench . And then the wildcard of fisher investments, you pick them up . Penny weve been in business for 97 years. Weve grown through every downturn. Time tothat a perfect continue to make the investments weve always had in training and of element of our gross advisors, that is how we impact our clients. ,e have 7 million clients today 40 million clients who think and act like edward jones clients. We need to grow to serve them. Sonali how is the zero fee phenomenon impacting you . Is it something you are seeing change behavior other clients . Penny we are not in that business. Trading has become commoditized. We are not traders. Dont trade with our clients. Help them understand what is most important to then, set up tailored strategies to help them achieve that, and then partner with them. Zero traits dont factor in. Alix something we are starting on daybreak his woman on wall street, where we are talking to the women helping create the rules in finance. Youre the only woman ceo who holds this job. How do you hire . What is different that you do today then the industry did 15 years ago when you werent in this role . Penny my predecessors, who were men, focused on this. This is not a brandnew thing at Edwards Jones. 20 of our Financial Advisors are women. We have been focusing on this for quite some time. Weve got to tell the story of what the business of Financial Advising is. It is not all about stocks, bonds, mutual funds. It is about helping people, about serving the public, and helping improve their lives for the future and the lives of their families. Alix do you feel you want to grow that 20 . Penny absolutely. We ought to be closer to what the population is. Clients theive our widest choice for their Financial Advisors. That is the human being story about what we do. Alix penny, really appreciate your spending time with us today. Any pennington, Edwards Jones ceo, thank you. Cinelli vasek, thank you as well. Sonali basak, thank you as well. Coming up, we speak with eli lilly ceo dave ricks. This is bloomberg. Alix eli lilly is beating earnings expectations and boosting its forecast this morning. Challenges do remain in the industry on drug pricing. The full house is expected to vote on a drug pricing bill later this week. We welcome dave ricks, eli lilly ceo. Really appreciate it. The street a little underwhelmed, and part because they are saying your guidance is were fighting more a tax rate rather than fundamental earnings. What do you say to that . Dave i would say we had a Strong Quarter overall. Our products continue to grow the company. In this industry, you need to launch more things then you lose the patent on. Thats how you grow the business, and thats what we did in the quarter. We had a few price headwinds this quarter, as well as the headwind of generic cialis, which went off patent last year. Those things combined our doubledigit growth headwinds this quarter. They will reseed they will recede. We are excited about the Growth Prospects for the company. Alix the question ever run really wants to know the question everyone really wants to know, what reform for medicare do you think will actually happen . Many say there is one passed by the Senate Committee that would be manageable, and some saying this would actually be destructive for you guys. What is the most likely scenario you see . [laughter] dave well, that is a very difficult question for me to answer. Im not in congress, so i dont get to vote on these things. If i was, i would support some important reforms which are included in the senate package. There are some things we dont like in there as well, but these are primarily aimed at the part d drug benefit, which is focused on senior care. We had this program. Its been very successful and very popular, but we know theres improvements that could be made. Have serious conditions and expensive medication, part d doesnt have a price cap. One thing we would like to see is the benefit of the rebates shared with the plaisance with the patients. That is not included in either package. That is a huge missed opportunity. We make insolent, as you know, and that is one product where there is an enormous spread between the list price and the net price. Is the money in the middle going to supporting premiums and other purposes. We like to see some or all of that shared with patients who have serious illnesses. Why cant they benefit from the negotiated saving . Alix if we take into account some of the details in the senate, Drug Companies will have to pay a 20 discount and limit some subsidies. You cant raise prices beyond the cost of inflation. If that happens, what do you do in your business . How do you plan for that . Is it less r d . What do you do . Dave mostly, we support. The peace we dont agree with is capping the list price. Of course, today, list prices are basically at that level. That might be an upside if we got cpi these days. The part d benefit was meant to delegate the negotiating authority to third parties, to plan to provide the benefit. We already have cpibased price caps in every agreement in part d, so it is a redundant principal, and it introduces the specter of government price controls. We dont like that. If the rest of that package went through, there are some products that will pay more into the system, but also, they will probably need less discontinuation of therapy, which patients abandon their prescriptions, seniors in this case, at the pharmacy counter because they cant afford it. That is a bad outcome for the senior, a bad outcome for Americas Health care system, and we lose the sale and the prescription. It would address those fundamentals. Mostly, we like those elements in the senate package. The house version is a totally different story. Alix the house version, many totallyy, would be catastrophic. Not palatable at all. Basically, the prices for drugs would have to have an average cost of drugs through other countries. You will get fined if you didnt deliver. Do you look at this as this could happen, or is this just the first step, but weve got to get it together because drug pricing is coming down in some way . Dave we do need to get it. Ogether as an industry that is our response ability. That is why we are leaning forward and proposing reforms like we just discussed on the senate side. The house package is totally different piece. It attempts to import price controls already enacted in other countries and apply them here. It empowers the secretary of hhs to directly negotiate prices. Its not much of a negotiation, though, because if we dont agree, they can are revenue up to 95 . That is a pretty punitive negotiation, i would say. It is not a balance package. Trillion out of this industry over the course of seven years. Thats about 40 of the u. S. Business. There is no way we will have the industry we have today if that occurs. There wont be investments in r d as we see today. Im not sure what investor would want to put money into an industry with that onerous price control. It seeks not to regulate just government programs, but the entirety of the u. S. Marketplace for medicines. It is a huge overreach. I do expect it to pass the house on purely partisan lines. I hope it doesnt progress much farther beyond that. Alix just to round out the conversation, talking about mna, you are strong into, day into m a recently. Do you rethink your strategy . Dave we are pleased with our mna strategy our m a strategy, which is first to allocate resources to our r d. We are trying to innovate new medicines every day. That is core to our strategy. Competent that with assets developed within laboratories outside the company, and biotech, etc. We made the strongest acquisition ever in oncology that has been very successful so far, noted by the phase ii results we read out in september. Overall Response Rate in lung cancer for the lead asset was over 60 . That is an incredible number in lung cancer. Those kinds of the filaments really encourage us to continue to look for medicines that can change the lives of people, whether in our labs or outside. Alix great to speak with you. Thanks a lot. Eli lilly ceo dave ricks on earnings. Caterpillar and Texas Instruments being highlighted on the downside. They will be weighing on the market overall. Caterpillar way above the lows of its session. This is bloomberg. Alix welcome to bloomberg daybreak on this wednesday, october 23. Happy hump day. Im alix steel. Lets take it right from the top. Pm johnson this is a great advance for the whole of the u. K. Alix british Prime Minister Boris Johnson considering his next move on brexit. Parliament should have the necessary time to improve on this worse than terrible treaty. Alix it could be calling a general election. Parliament blocked his plan to rush a brexit plan into law. Impeachment is a dirty, disgusting bird. Disgusting word. Alix William Taylors testimony could bolster the likelihood of an Impeachment Vote in the house. Facebook Ceo Mark Zuckerberg is on the hill today. Facebooks Mark Zuckerberg prepared to go on offense. He will talk about policy lapses, possible antitrust violations, and cryptocurrency. In the markets, it is going to be about the macro dominating. Cctv talking about china buying more stuff from the u. S. , but it is going to be caterpillar and Texas Instruments earnings weighing on the market. A little bit of safety creeping in. Treasuries bid ahead of an auction later today. Joining me for the hour is Mark Chandler of bannockburn. Good to see you. Apparently, youre not looking at caterpillar, necessarily. What are you looking at . Mark caterpillar is part of the story for the Agricultural Sector out of the United States. Weve got argentina, ecuador, chile problems. Im focusing on where caterpillar is doing their business. Alix i love that you brought that up. We havent spent enough time on chile. Developed markets having this kind of unrest so many years after the financial crisis really has to raise some questions for macro thinkers as to what is happening here in the world. Mark exactly. Alix earnings reports are rolling out fast and furious this morning. We were just talking about caterpillar. A pretty gloomy outlook. Also have Texas Instruments issuing an abysmal outlook. Joining us for half of the hour is Tony Despirito, black walk disparate have tony head ofo, blackrock u. S. Income. Coney when you look at tony when you look at the beats, the percentage is higher, although the size is a little bit lower. Mark what do you thing about what is happening . It seems to me as they report the earnings, they move the guidance downward for next year. Are you seeing a repeat of q4 from last year . Tony i see it is more Company Specific and less of a theme. Theres been the expedition of a recovery, and that recovery is getting pushed out. I think that is a common theme among industrial companies. On the consumer side of the economy, there we are seeing much more positive activity. Alix but we had hasbro yesterday, which wasnt the case. They warned about trade. Then you talk about the outlook, and caterpillar sounded pretty terrible. They were also guiding for not great earnings, and it was even worse than everyone expected. Texas instruments, they are like the first port of danger. What do you see thats good here . Instruments, i would put that on the industrial side, same as caterpillar. On the flipside, look at some of the healthcare care companys reporting. If you look on the hmo side, we have companies that are growing their earnings point percent plus this year, and yet are at low doubledigits. Mark how are they doing that . Tell us about how they are growing their earnings. Tony first of all, these Companies Grow because demographics, populations growing. Alix we are all getting old is basically what hes saying. [laughter] tony unfortunately, yes. So we consume more health care when we are older. That means a growing revenue base. These companies are also getting more efficient. They are getting larger. They are using technology to control costs. Their administrators costs are coming down. That is leading to better margins. Mark do you see this as being an inflationary thing . As a macro person, i am looking for early signs of inflation. Is this a problem we should be on the lookout for . Tony health care has been for my entire lifetime on the higher end of the cpi, so this is nothing new. In terms of inflation, that is not some im worried about. I actually think the Inflation Numbers have been pretty muted, and that is a good thing because that has allowed the fed to be more dovish, which has been very supportive to the market. We actually have real Interest Rates that are negative today. Alix on the broader sense, you Mission Health care, but are we seeing anything about value and growth . I feel like earnings have people over the expectation we have seen in the market. You seem the best today outperformance the best twoday outperformance in growth since 2012. Tony in september, we saw Growth Stocks coming down, value stocks doing well. That quickly reversed out. I think what that reflects is that valuation spreads on the market are very high sis is tickly very high statistically. That definitely creates opportunity for the value investor, but youve got to be careful because there are lots of value traps out there. There are a lot of industries being disrupted, more than ever in our lifetime. I think it is really important. It is important to emphasize quality and value. That is what we do around the blackrock Equity Dividend fund. Are you thinking about shifting more towards value, or still a growth driven market . Tony incrementally, there is always some tradeoff. We are moving a little more towards valuations, but that said, i think you can have a little but of your cake and eat it, too. With some of the disappointing ipos, i think people are becoming increasingly worried about some of the Growth Companies that dont mike money. I think thats where you have to be careful. Alix they might have gross because of cloud, but they are worried about profit ability. About profitability. Tony exactly. Alix theres conversation that maybe the dollar has peaked. What is the story in your world . Mark i think a lot of people have been looking for the peak. The country i thought was interesting was norway. Last week, the norwegian krone hit record lows against the dollar, record lows against the euro. , er widgeon stock market the norwegian stock market i think might be up 2 to 3 this year. In some ways, it is a value growth play being played out globally, europe being the value play. I still dont see much traction. Alix Everyone Wants to buy it, but they are scared of the trap. Thats a great point. What is going to be the spark . Tony watch industrial production. Industrial production numbers outside the u. S. Have been very weak. In the u. S. , they havent been great, but theyve been better. I think that is the key driver. On the growth side, the other thing that is important is to make sure you are buying quality growth, quality businesses. As young as you are buying highquality business models, your good. Alix both of you are sticking with me. Much more to get into. Norfolk southern reported at the top of the hour. They did miss estimates, earnings coming in at 2. 49. That stock not really moving yet. Coal revenue was down by about 13 , so that is weighing on the company. Coming up, it is brexit limbo. You are looking at a live shot of parliament. More on that next. What do we do . Where do we go . How do you trade . This is bloomberg. Pm johnson our policy remains unchanged that we should leave the eu at the end of this month. We will leave on october 31 if we can make that, if honorable members opposite will comply, and i will report back to the house and due course. Alix u. K. Prime minister boris speaking earlier in parliament. For the latest on brexit, anna edwards joins us from westminster. Im not very clear as to whether or not Boris Johnson is saying hes going to get an extension or if he is going to call for an election. What are you hearing . Kevin speaking in anna speaking in parliament and brexit clarity dont always go together, do they . He pointed out the policy is still to leave on october 31. That does not mean that the u. K. Will leave on october 31. He went on to say that it depends on whether the opposition will comply. Obviously, the opposition will comply on the timetable. We found that out last night. Hes waiting for eu reaction. He also said that. Last night, he said we should not delay. To thel sent a letter eu, parliaments letter, he calls it. What he says isnt always fully represented of of the story, i would say. He says in terms of the common, it does look incredible difficult for parliament to meet that october 31 deadline. Now we went to find out whether we have a revised timetable and maybe break it still happens under Boris Johnson steel, but just a little bit later, or whether we have a longer extension, and then we see a general election taking place. Alix thank you for helping us keep all of that straight. With me on straight, Mark Chandler of bennett burn and Tony Despirito of blackrock. 1. 28 . U do with cable at tony it is clear to me how well sterling is holding up despite greater uncertainty. I think the issue isnt the timetable, but what needs to be done. There still hasnt been Economic Assessment of the deal that was worked out. Alix it is like we are not even there yet. Economic assessment . We are just trying to get a timetable. That so during the treaty formed the monetary union, it was a 20 day debating period for parliament. Now the government wants to do it in three days, for the future of the u. K. So it seems next to impossible to be able to do it in that timeframe. I think there will be a delay, and as youve pointed out, whether they have an election, that would be my leaning. That they have an election next month because they still cant be sure that the deal will pass. Even when it passes, this brexit story is going to be the gift that keeps on giving to you in the media because after they get to this agreement, whatever it is, there is going to be a one your standstill where they negotiate a new postdivorce relationship, and that could still end up falling apart and leading them back to the w standards dashed to the dub etf standards rather than undo agreement to the wto standards rather than a new agreement. Alix tony, how do you think about it in your world . Tony first of all, we are in the later innings of an economic cycle. That means rising volatility. We are in a president ial election cycle in the u. S. That means rising volatility. Then we have brexit and the china issues. Mark rising volatility is not just a subjective thing, but also implies direction. Stock market volatility, the vix goes up in the stock market goes down. Arent we also talking about direction . Higher Interest Rates, lower stocks . More movement, but directionally biased . Tony i am not seeing that because we are not in a recession. I think we are more trading within a range, and that is what we seen over the last 12 to 18 months. The s p 500 has been very much range bound. Alix can i tie this back to . Hile the idea of a lot of unrest in whating markets, look at is happening. At the same time, you are seeing factions in different politics in the developed market world. How do you see this as a trend . This is a Global Inequality problem that governments of all ages are going to have to confront. How do you think of it . Tony you are right. Theres been rising income inequality in the u. S. For 30 or 40 years now, so it is a big issue. You see it results in political divides. It also results in simple to flipflop in the electorate. I think that is one of the values of having a 60 vote requirement to get most things done in the senate. This has to be a really clear issue. Take a look at brexit. It is pretty close to 5050. Of 20we had this period years or so, reaganthatcher, were the driving factor. Now we see stakeholders over shareholders, environmental issues, national security, income disparity, wealth disparity. Noneconomic efficiency issues arising to the fore. For investors, that has real invocations. How is a company paying its workers . If i Companies Paying low wages, that is a risk factor that you need to look at an take into account. I think that becomes increasingly important for investors. Mark at the world bank imf meetings, there is talk that the world banks might want to impactr environmental are you beginning to do that when you have all your weight equities impact. Are you beginning to do that when you evaluate equities . Tony it is something we look at when we evaluate a company. It as weo thing about integrate esg, but we dont have a deliverable, per se. Alix we are going to continue this conversation in just a bit. Mark chandler and Tony Despirito will be sticking with me. Coming up, helen qiao, bank of America Merrill lynch chief china economist. This is bloomberg. We want to encourage not just a trade truce, but actually trade piece because trade peace because that is the only thing that is going to get rid of underlying uncertainty and stimulate trade and growth. Alix the organization cut asia growth forecasts in its latest report, with projected growth of 5 this year and 5. 1 next year. That would make it the slowest pace of expansion since the Global Financial crisis. For more, helen qiao, bank of America Merrill lynch chief Greater China economist, joins us. Mark chandler of bennett burn is still with me as well. If thats still to of bannockburn is still with me as well. Is that still too optimistic . Helen i took a quick glance at the numbers. I would say that as of 2019, we are mostly in line, but for 2020, there is some discrepancy in where we see things could go. For example, in china, or number is 5. 7 . I think the imf just lowered it to 5. 8 . We think that is an encouraging moves that they are coming in line to where the market is, but achieving five point 8 is not necessarily an easy job either. For example, we are expected in that policy easing has to step up in the near future, and that is why we have our baseline there. Otherwise, they could still slip further through the crack. You were disappointed this week when he pboc did not set the new prime loan rate. Is he pboc signaling to us that we might have to wait a while longer . Helen the pboc were probably thinking they have already done enough, to be honest. They would say, we have done so much. Look at the previous months, and look at what we have done. That is an acceleration. In our view, we dont think they have done enough. We think the risk is that they probably have fallen behind the curve, and they definitely need to do more. In addition to the lpr cut which they should have done, they also should have cut the benchmark Interest Rate, which covers not just new lending, but also existing lending stock. The loan stock is the massive quantity we are talking about. But they refused to do that. But we think we would require them to do is to wait for the to nextmost likely week, when the politburo meeting is held. And then the president will step out and say we need to do some adjustment. Alix go ahead, mark. Mark of course, with the trade conflict with the u. S. , we see that as a headwind on china, but how much of this is China Economy just slowing down as it matures . It is now slowing past 6 . How much of an impact is the trade, and how much of it is really just china and its own evolution . Helen this is a terrific question. There are many things that are combined at the moment that really slow down such a giant economy. You have trade, but i would have to say that its more a 2018, but we have been slowing down since march 2017. Partly it was china itself, but it wasnt all structural. Consumption than investment is part of it, but there was also deleveraging. They have been driving very hard throughout 2017 and early 2018. That was really slowing down the economy. Secondly, you have a with aturing sector slowing change. There is a large part of the economy exposed to that. That is overall affecting the china overall economy, but we think it can be denied it cant be denied that the output gap is already pretty negative, and playing that our actual growth fell below our longterm potential, and policy easing needs to step up. Alix we also got some headlines today from cctv that said things like china is going to mps going to increase import of ag products, going to buy consumer goods, equipment, etc. When we see those headlines, we think may progress is being made on trade talks. What do you think . Helen i would tend to say the same thing, but i would be more skeptical than saying we are all good. [laughter] i would never say1 that we are neverod alix i would say that we are all good, for sure. Helen a lot of the nature of the changes in this trade deal, or phase one and phase two of such deals, as that they are probably just checking and proposing, and then rechecking, reassessing. The problem is right now, it looks like 40 billion to 50 billion import on an annualized basis. That is a huge number. We were talking about china in the past buying, at most, 20 billion at the peak level can 2012. If they really push it all the way up, that is a big number, and i would say that would mckay huge difference to the bilateral trade imbalance. But in the meantime, there are some anymore critical things that havent been resolved. For example, huawei. The technology stuff. Not askingng adrs, companys to invest in chinese assets. We have some any other things that have been completely unaddressed, so where are we in that particular trade negotiation . Im not sure that phase i is already the answer. Mark how much do you think china, which has a horrible food inflation because of a shortage of protein, soy and meat, so importing more is out of china anne necessity rather th doing u. S. Farmers a favor . Helen it is both, and i think trade benefits both sides. It is not just doing u. S. A favor. It is helping china, too. Has done such a job to the hog supply that theres almost a surplus in soy, because soybeans are the main feed. We dont have too many hogs alive. Alix we have to leave it there. Thank you for joining us today. This is bloomberg. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. This is bloomberg daybreak, im alix steel. Equity markets were low. Under that 3,000 level, you still have some Technology Stocks getting hit hard. Thats with Texas Instruments and their warning story after the bell. But in other asset classes, you got money going the bond market, but change happening in the fx market. So what that might say about Risk Appetite improving a little bit, well see as the session goes on. Bond auction coming later on today and earnings and how investors digest the numbers over the next few hours. Its been eight years and its now time to say goodbye to mario draghi he will oversee the monetary meeting of his term tomorrow and for a look the economics of the euros on under his tenure, we turn into mike mckee. Whats the report card . Its hard to sell up eight years in three charts but we can get a picture of the presidency by looking these. Take a look first at this chart. This is the one that will really be his legacy. Remember whatever it takes, it was just a few months into his presidency when he came out and said the eurozone, we will do whatever it takes to hold it together and that should be enough and it was. You can see where bond yields were at the time. Greece, 33 on its 10year note and look whats happened since. Greece is at 1. 3 . Its been a massive change and to that, you can credit mario draghi. In terms of his mandate, what is he supposed to do . That report card, not so good the metric for the e. C. B. Is to keep inflation stable just below 2 . And you can see the blue line there. Hes not making it. And on a consistent basis, he one able to do that. They lowered the deposit rate down to negative 50 basis points. Still not helping. I threw in growth there because it shows a weakness in the eurozone that the e. C. B. Has not been able to address. So now he leaves. Can his successor do any better . What did he leave Christine Lagarde . Not a whole lot of tools that are working. At the i. M. F. Meetings, people talked about what the e. C. B. Can do next and when you look the Balance Sheet just starting to go up, you look at the deposit rates, negative. And most people dont t one possibility ithe targeted longterm refinance operations. The e. C. B. Lends the banks if they lend that money on. And they lend it at a very low rate so that could work but the first auction of the third round did not go well. So they may have to adjust that. But thats for Christine Lagarde to decide. Mario draghi just one more meeting to go. Alix great setup. Ith me, Mark Chandler and Tony Dispirito of black rock. I know you like value quality. Anything in europe for that . Yeah. So we were discussing u. S. Versus europe as a market and i think the data that we just saw, you know demographics are better in the u. S. , g. D. P. Is better and inflation is more stable and at a better rate around 2 thats why u. S. Stocks are doing better. So we like the u. S. Market. I think thats where you want to stay. That being said, you could find pockets of opportunity in europe but its pockets. Its not broad based. It seems that the what strikes me is europe has these negative Interest Rate as might have was pointing out and germany looks like theyre having a recession. Look like they contracted q2, q3 with negative Interest Rates. You would think that the lower price would increase the demand for it and even though loaning to households and nonfinancial businesses are increasing, still low inflation. This is the mark of our era is low inflation. It used to be politicians, central bankers would sneeze and would cause inflation and now they cant do anything with inflation. Alix the meetings, we heard from germany were doing it with the 54 billion euros of green investing. We dont need to do a huge bazooka of fiscal stimulus. Do you think we need it . Do you have to think about that . Its an easy call for germany to do fiscal stimulus. They have one of the best budget deficits in the world among developed countries. Theyre clearly in recession territory. Its a easy and positive ecision. Its always easy for countries like United States to tell germany you got to get more into debt. Its like the grasshopper and the ant. Its the debtor country that want the creditor country to spend more money. You spend more money. Alix but in this case, i mean, as mike pointed out, like youve seen negative Interest Rates and youve seen tell trose and push the money out but the hasnt been a demand for it. Isnt that a logical conclusion to go to fiscal . Logical conclusion from our world view but germany and other countries in europe and its not just germany that is on a tight fiscal ship, the netherlands and sweden that dont think fiscal stimulus is a way to get ggregate demand. And i think this is a debate between with a they call liberalism and neoliberalism. Alix wow, its a whole different level of conversation there. What do you think . I think the challenge is i dont think the negative rates are working. Think hasbeen how hard it is. And thats why i look at the fiscal stimulus. What does it moon for investors . Were looking at an odd world where you can get more yield from equities than from bonds the 10 year treasuries. 1. 75 . The subpoenaed subpoenaed is more than that. And s p 500 is more than that. And think about fixed income. Its fixed for the next 10 years whereas equities, if the markets doing its jobs, the income should double over a 10year period. Its a weird world. Its very unique about that. People are trading bonds for capital gains. And theyre trading equities for the yield. And you see the volatility, actually. Bond volatility is rising. These countries with anything Interest Rates, the yield from the stock market with the daxon or the neck kay. Nikkei. Alix do you like the dividend proxies . You have to be careful. Some of the bond proxies have been bid up. Stocks trading about 25 times earnings is a different risk. When we look for yield, were looking much more at the Growth Income over time, looking at stocks that can grow their dividends because they have good quality compounders and Free Cash Flow trends. That what were looking for. Alix so the curve that weve seen, were about 18 basis points, its ban steep for the. What scenario in the bond market starts to make you rethink your hesis . I think we dot the stimulus of fed. That should help the economy pick up thats good for earnings. Its good for the stock market. And then later, then you start to worry about inflation. But thats later. I worry that the low Interest Rate in europe, negative Interest Rate in the working. That going to stimulate the economy . I mean is it going to help Corporate America and consumers in im not so sure. The Housing Market has pin picked up. Were seeing some of the best housing data for about a year and a half. Thats one of the areas that the fed can really help. Alix fair point. It was great to do have you on well sticking with me. We do want get an update on whats making headlines outside of our business world. Viva . Hes waiting for the e. U. To respond to his letter requesting a delay. Johnson would recommend the delay for the other 27 e. U. Members. And the British Police found 39 bodies in a truck driven from bulgaria. A man from northernyearold has been arrested on ireland has been arrested on murder. Ambassador trump of ukraine is one of the biggest impeachment threat. Taylor said he was told the president wanted ukraine aid to be contingent on the investigations on the bisons and the 2016 election. That there theres was no prid kuo pro offered to ukraine. This is bloomberg. Alix . Alix thank you. A quarter of the countries already out with earnings so far. Lets start with the earnings report. We saw the shares slide in early trading. The call with analysts got underway and were starting to see those shares. They did tick into the green but back into nelling territory. The concern here is really all about demand. The c. E. O. Calling out again Global Economic uncertainty staying on the course coming from trade and other factors. And when it comes to demand, caterpillar is seeing the end users are putting off Investment Decisions and all of this contributing to the first decline in Quarterly Earnings in some three years. E lowdown in the shell patch impacting caterpillar. Another big story from boeing. We saw shares decline in early trading. They have reversed to trade more positively now, up 1. 3 in the premarket and this seems to be investors really likeing what seems to be an optimistic plan or map for the company to bring the 737 max jet back to service. The c. E. O. Saying its safe return the top priority. Also saying that they expect the 737 max jet to return before the end of this year. Remember, u. S. Ally dont expect it until next year. They also plan to ramp up production next year. Finally a conduct look at the health insurers. The drug makers with beat and raises good for officials. Not so much for eli lilly despite the c. E. O. Touting the fact that new drug sells were sales were doing well. St the sell of key drugs that were not doing so well and analysts didnt like. Alix thank you, emma. Bloomberg users interact with the charts were using this is bloomberg. Come alix we have breaking news. President trump reportedly will make a statement at 11 00 a. M. At the white house on turkey and syria he tweeted theres a big success on the border and there is a state zone that create the ceasefire has helped combat missions have ended. He will be making a statement at 11 00 a. M. The question what is that means for u. S. Sanctions on turkey and will they be lifted if everything is settled down between syria, turkey and the u. S. Involvement there. Time now for bottom line. Were going to look at three ompanies worth watching. We work, the official handoff here. Its finally here. Softbank stake will be 80 of the company. Wework will be an associate of softbank, not an subsidiary. That will mean 20 billion liabilities of bank that softbank is expose today, not to mention the future leases of 47 billion. Adam newman will not the chairman the company but the soft softbank executive will be chairman. Alix next, boeing. What are some more standouts for you . You know, i think theres still a lot of uncertainty for me. Youre seeing the stock rise a little bit over 1 this morning and thats largely a reflection of the fact that you do not have a significant increase in expectations for compensating customers. Boeing still expects the 737 max to be put back into service in the Fourth Quarter and it thinks that it can ramp up production relatively quickly after that and get to 57 planes a month by the end of 2020. That is sticking with its Prior Guidance on the 737 max even after youve had a flooded negative headlines and that time line may be pushed back. I expect management will get a lot of questions on that on the Earnings Call and you may see some crack emerge as analysts answer their questions. And the wide body production with boeing cutting production of its 787, a reflection of weaker demand from china and it expects the triple 7 xjet to be delivered if 2021. That is a change from july. That plan is being held up because of the jet engine. Still a lot of questions for boeing as we get into that Earnings Call. Alix well have the update. And a Third Company is jetblue. So shares soared the most in three years. Yesterday, thats on a favorable outlook for airfares and were very grateful that we had the c. E. O. Joining us now to take us through the plan of action, robin hayes. Thank you so much for being with us. Thanks for having me. Alix part of it is poaching you forcing you come on tv. I want to relay sustainability to earnings. How do you become sustainable and invest in that when it may not be profitable yet and deal with profitability and growth. Its a great question. In simply cost and revenue, in terms of one of our largest costs in the airline is our fuel cost. And so we have every financial incentive to reduce the amount of fuel that were using through to use of more modern engine technology, better a. T. C. Patents and also investment in things like Sustainable Aviation fuel and revenues. More and more scattered showers customers are aware on the Environmental Impact that the city has and if we dont, we will see impact in demand longer term. Mark i see that the green party is on the rise and many europea Americans Still more or less in denial about how serious the is appeal to American Consumers . I think its changing and its changing quickly. I talked to my colleagues that are already starting to see the impact of this and some of the research that we see see here shows that consumers are not changing behavior yet but theyre very conscious of it and they might. The challenge for us as industry to provide the answers to their questions so that aviation doesnt just become seen as an essential form of travel. Alix which brings up how do you agree . Grow and thats one of the bigger questions for jetblue. Youre not low cost enough to complete compete with a frontier but youre trying to appeal with business consumers in dealing with Cross Atlantic travel. How do you do that . How can you do both . Well, i mean, it is simplest and weve been doing it for 20 years. We want to offer customers a great product with low fare. And when we think about the opportunities to fly to europe, we see the tun because the competitors are gouging with the high fare. If you want to fly to london from new york, youre probably going to pay 8,000, 10,000, thats an obscene fare. The opportunity for jetblue is to change that. Weve done it already. We started flights from the northeast to california back in 014 with our mint experience which is a premium offering. And fares are less than half as they were five years ago and and heres are getting a better experience. Weve been doing it for 20 years. Mark there there any little tricks we should be doing . Alix by a ticket. Lets start with that. Youre going to get a great fare. And youre going to get great service. Coming to bloomberg reminds me of flying to jetblue of all the free snacks. You guys have it great. We offer free wifi, the most leg room, free drinks and snacksing and the best crew members in the industry. Alix can you do it alone or do you have to buy . Did you have to merge with somebody in europe that has a ig distribution . We work with 50 Different Airline partners. And thats the way that the industry has involved. You dont have to buy anybody. You are seeing International Airlines joint ventures. Its hard for them to form borders because of ownership restrictions we work with 50 partners and we offer connectivity. Alix the other question is boeing. So the story, that is taken a lot of cassidy off market. When it comes back on market, thats going to depress fares and hurt you guys. How do you position . If we think about the capacitys really affected this year. If the capacity comes back to 2020, that capacity is always going to be there anyway. The airplanes were already going to be flying. We really think the setup is going to be similar to what we expected. Alix no decline . In fare . Whenever capacity comes off, there is the risk of global fares. Thats the supply and demand issue from a jetblue perspective, theres a lot of things that were doing with the loilt side and new fares rolling later this year and that should allow us to post increases in 2020. Alix thank you for joining us, robin. Mark, thank you for joining us on the hour. Nd we got an earnings slump. Eli lilly had trade and if youre heading out jumping into your car, tune into bloomberg radio. This is bloomberg. Alix bielema loany joins me now. Listen to bill on the bloomberg on gtv go. Texas instruments could be very early open here. It is definitely going to be an ugly open. The stock has been in an uptrend ince december but it will gap. Alix so what about caterpillar really interesting price action early. It was down 6 after earnings and now its down. 3 of 1 . The initial trade they hammered it in the premarket. Now were back to little change. First report is going to be around the 130 but resistance because it is little change. Look for 134 which was yesterdays high and then second resistance is around 140. But really the key in the chart and you go back five years, clearly a longterm down trend below 140. Alix yeah, exactly. Eli lilly is our last stock. So interesting the number solid raised their forecast but that wasnt enough for the street. Because of a tax bill and they were worriedatheir drugs not selling as they start. Whats the chart . Clear down trend since march. Its clear resistance. Levels today, first report around the bottom of the july range around 105. That fails. Look at 103. Alix good stuff, thanks, bielema loan ye. Coming up, j. P. Morgan management and Global Market strategist. This is bloomberg. This is bloomberg. Jonathan the johndown to the open starts right now. Jonathan a macrobellwether is taken center stage. And the never ending bridgewater story. Parliament boxing johnsons plan to rush up its deal and Mark Zuckerberg heading to the hill. Good morning, good morning. Here is your wednesday morning price action. Futures negative. No drama here. Euro drama unchanged. And a bit into the treasury market. 1. 74. Big issues. The outlook for 2020. Maybe we are looking at better earnings for even 2020. Expectations were very, very low here. Now theyre normalizing and thinking wait a minute. There might be upside here. Theres always a hockey stick in the Fourth Quarter when the