Transcripts For CNBC Squawk Box Europe 20240713 : comparemel

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. Try new febreze clothing quick dry mist. It eliminates odors and refreshes lightlyworn clothing. Breathe happy febreze. La la la la la. Rowithout the Commission Fees and account minimums. So, you can start investing today, wherever you are even on the bus. Ooh, like this guy. Yeah, i bet hes investing right now. Hes taking charge. Hes grabbing the bull by the horns and he just missed his stop, yeah. Its time to do money, so what are you waiting for. Download now and get your first stock on us. Robinhood. Doprevagen is the number oneild mempharmacistrecommendeding . Memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. We are witnessing a very mixed market open for the monday session so far little bit of red across on some of the core markets and also a little bit of green. Some of the stocks to watch, philips grinds high by. 4 it has posted quite mixed results for the Third Quarter. 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 Household Goods<\/a> 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<\/a> 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<\/a> 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<\/a> 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<\/a> 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<\/a> pretax market amid Challenging Market<\/a> conditions the asian unit held up well in the Hong Kong Market<\/a> was resilient. Cfo told cnbc the key challenge was Central Banks<\/a>. The biggest single driver of the change in outlook for us is the shift in the Interest Rate<\/a> 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 Rate<\/a>s 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<\/a>. 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<\/a> 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<\/a> net income just hissing expectations. The German Chemicals<\/a> 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<\/a> across many industries, across many regions and as you rightly said, automotive certainly had a negative growth rate in your Customer Base<\/a> 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<\/a> 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<\/a> again particular weakness in autos this is supposed to be your more resilient less Cyclical Division<\/a> 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<\/a> 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<\/a> 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<\/a> 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<\/a> 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<\/a>. 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<\/a> 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<\/a> 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<\/a> 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. Try new febreze clothing quick dry mist. It eliminates odors and refreshes lightlyworn clothing. Breathe happy febreze. La la la la la. Rowithout the Commission Fees<\/a> and account minimums. So, you can start investing today, wherever you are even on the bus. Ooh, like this guy. Yeah, i bet hes investing right now. Hes taking charge. Hes grabbing the bull by the horns and he just missed his stop, yeah. Its time to do money, so what are you waiting for. Download now and get your first stock on us. Robinhood. Doprevagen is the number oneild mempharmacistrecommendeding . Memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. We are witnessing a very mixed market open for the monday session so far little bit of red across on some of the core markets and also a little bit of green. Some of the stocks to watch, philips grinds high by. 4 it has posted quite mixed results for the Third Quarter<\/a>. The dutch Health Tech Company<\/a> reported a 3 rise in core profit despite flat order intack it cut its Profit Margins<\/a> 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<\/a> 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<\/a> decent 1 . But also the last three months 16 or higher. A lot of self help measures by the German Company<\/a> they will not sign off on a sale unless potential buyers agree to sweeping concessions for workers all this according to a reuters report they also told the news agency that the union would fight any potential job cuts jeff thanks very much, indeed. Lets go back to the conversation around the desk then Lucy Mcdonald<\/a> is with us managing director cio Global Equities<\/a> and andrew sheets is our guest host from Morgan Stanley<\/a> chief of cross asset strategy. Lucy, where would you have our audience put their money then . Were coming sort of to the end of october we havent had the big bust that many bears worried about, but we do seem to be topping as we were discussing earlier on the u. S. Indexes, and some of the data is weakening. What do you do from here well, look at where there is relative value around the world and across the sectors, from where we are looking at looks to be health care looks within the whole defensive space looks relatively undervalued theres quite a lot of concern which is priced in there for no u. S. Regulation that we dont think is going to materialize. And its also probably depressed the whole sector, so i think within there managed care looks quite interesting. Then on the more sort of cyclical or growth areas, i think within some of the industrials theres some good actually technological structural growth in there, which has probably been derated so that i think looks quite interesting as well. And then tech theres still quite good growth in software. We have seen microsoft came out last week, so Cloud Software<\/a> is still growing. Theres still pockets of growth and pockets of value, but overall were not expecting much from the opening markets moderate growth, more volatility but there are still opportunities there. Lucy, in terms of the timing of some of these trades you just outlined were now looking at three weeks in a row of positive gains for the stock 600, do you think investors should be waiting for a pullback to take action and get into some of these plays or is it safe to get in now for fear of the stock rally just continuing and you having to chase the rally even higher . Well, overall, were not really expecting markets to be that strong. So i think you can be patient in some ways and let the valuations come your way. We think that you are going to get volatility, which is going to be driven by uncertainty about what Central Banks<\/a> are doing and also by the trade war. So, those bouts of volatility should give you opportunities to buy into those names you want to you do need to focus in quality in these times because there clearly is a deceleration in growth so you want to be looking at companies which have still got to grow the top line and also protect their margin as andrew was saying there is margin pressure out there, cost pressure, some is tariffs, some is wage costs. So you just got to make sure that your company is in a position to maintain its margin. Its funny you talk about wage cuts. Some suggest maybe we are seeing too much strength in wages, stopping some of the growth that could be throughout in jobs. Whats the risk event around the payrolls and the fed this week for you . Well, i think the fed assumption is they will make another cut. Thats probably right. But were also looking into what theyll do after that and leave it and watch and see theyre still working on their overall framework. Andrew mentioned a pause after a cut. Do you think there will be a pause . I think highly likely, but we want to see what theyre saying r they looking very short term and data dependent or moving towards a different structure Decision Making<\/a> which they are looking at and then also the communication of that Decision Making<\/a>. Lucy, we have to wrap it up thanks so much for coming in Lucy Mcdonald<\/a>s, managing director Everybody Loves<\/a> a bit of special situation, dont they . Look at the wall this is the luxury sector. This is the reaction youve got to that lvmh bid blood in the weather and pandora benefitting from this. Very similar to tiffanys. You know what, you scratch around in the european markets and you say, what looks a little bit like tiffanys in europe right now. I tell you what, well take that they work like a charm, david, those charm bracelets. Clearly working for pandora. I look forward to more of your luxury insights, jeff. When we come back, coming up on the show, the eu reportedly edged closer to agreeing a brexit extension as election talk builds in the uk. Were live from westminster next hsbcshares on track for th worst day in eight months after they misses the quarter profit expectations and warns of a challenging outlook. The cfo tells cnbc that business in asia held up well despite the trade war and unrest in hong kong. We obviously got the on going trade dispute between u. S. And china and the on going protests, both of which are impacting the business you can see that in the underlying macro data. Overall, were pretty pleased with the way hong kong is continuing to perform for us. Lvmh goes after the little blue box as the Louis Vuitton<\/a> owner makes a 14. 5 million bid for tiffany sparking a rally in luxury stocks. A draft text reveals brus l brussels is considering threemonth extension with possibility of earlier exit if uk ratifies. Ahead on squawk box rick perry tells cnbc he doesnt believe President Trump<\/a> will be impeached. People so dislike this president in a political way they will spend whatever it takes. You know, even to the point of giving up their own reputations to try to harm him well, were now about half an hour into the european trading session. Its really a mixed picture. The overall picture is slightly negative the stock 600 down about 0. 08 this, of course, comes after three weeks in a row of gains for the main benchmark here. Corporate earnings firmly in focus here in europe and also state side we have about 145 names reporting in the u. S. This week and already this morning we kicked off with a raft of corporate earnings in europe putting it all together, investors taking a fairly cautious tone this morning big news of course in the deal making space with lvmh well look at the luxury sector in a moment. We have the fed meeting concluding on wednesday and then some more macro data coming through toward the end of the week now looking at the different sectors, again, as i said, very mixed picture. At the top we have the cyclicals, autos, basic resources, technology and industrials. Bottom, we have banks, utilities and telecoms the gains and losses fairly evenly split across the different sectors. Lets take a look at the single stocks a lot of this has come through on the id owe sin cattic front we have pandora shares up 3 the whole luxury space is trading higher on the back of the confirmation from lvmh they are holding preliminary discussions with tiffany in the u. S. At the bottom of the board, hsbc trading down 3. 6 after a disappointing set of results its on pace for its worst trading day in six months. Overall a fairly mixed trade for european markets. Thank you for that. Karen and i musing on the excitement of Virgin Galactic<\/a> which seems nonexistent. Investing in space exploration. Take a quick look, float around in a spaceship and come back down to earth. Where are these going to list on the nycr you excited at all about Space Tourism<\/a> . Didnt expect that question. I did not prep for that question we at Morgan Stanley<\/a> have initiated on the space economy, which we think over the next 30, 40 years will be huge. Space tourism is not the main part of that but thats satellites, thats other kind of broadbased space infrastructure but look, were just talking about the luxury sector. I guess space travel is the ultimate luxury. You can compare tiffany to a pandora even how do you compare this company to anything else out there, problem for the Analyst Community<\/a> when uber came to the market because they didnt know what to do with it or lyft theres no real competitors in this space how do you value the company at this point you have spacex, i suppose and youve got blue origin or whatever its called challenging. I guess youre looking at sort of the Satellite Companies<\/a> maybe that are out there but any way, brexit, should we talk about brexit . I think we must whether we want to or not, i think we have to. Setting Virgin Galactic<\/a>. Setting aside one hopeful moon shot with another the eu is preparing to offer the uk a brexit extension until january, 31st, according to a draft document seen by cnbc. The uk would also have the option of leaving the eu earlier if british lawmakers can get around to ratifying a withdrawal treaty eu ambassadors are due to meet today to discuss the delay willem joins us now from westminster. Willem, oh, you have a guest lets throw it straight out to you and you can pick up. Thanks so much. Before we talk about ratification of any deal, of course, lawmakers will be focussed on another topic before then and thats the possibility of an election im joined by tom bray, one of the two opposition parties at this weekend suggested an alternative to the Prime Minister<\/a>s proposal for finding a path to a national election. Can you explain whats different about your possibility compared to number 10 downing streets. Okay. The big difference between what were preposing and downing street is proposing first of all our election would take place on the 9th of december. In our proposal, secondly, we would not allow the government to ram through the withdrawal adreemt bill thats what Prime Minister<\/a> wanted to do he wanted to ram through by the 6th of november the Withdrawal Agreement<\/a> and then have a general election by the 12th of december we think that consideration or probably the most significant bill the country will have had to consider in the last 50 years in literally a matter of days is completely unacceptable. With our proposal all the Prime Minister<\/a> would be securing at a time of parliaments choosing is a general election on the 9th of december. The other concern that members of your party have publicly expressed is that the Prime Minister<\/a> is left with control over the election date, and yet clearly trust is an issue going both ways because the Prime Minister<\/a> and members of his own party seem to feel that theyre not willing to give you guys this proposal on your terms because it could be amended, which means that lawmakers could add to the type of language youre using at the moment what duds thoes that mean . We think our bill the way its being constructed is not open to a large range of amendments because its a very tightly drawn bill and therefore amendments about other issues, which we might support in other circumstances, such as votes at 16 and 17 would not be within the scope of this bill im not sure the governments are correct in their assessments of the possibility of this bill being amended. But i think whats significant about the discussion were having is the only reason were having this discussion is that the Prime Minister<\/a> is very keen to avoid focus on the 31st of october because he had made a pledge that he was going to do or die if we had not left the European Union<\/a> by the 31st of october and clearly we wont have done. Isnt it fair to say that your party doesnt want brexit to happen and therefore any of these alternative proposals Going Forward<\/a> are just a route to getting to that point well, its certainly not the case as ta party we have been hiding the fact that we want to stop brexit. We think brexit is a catastrophe for the United Kingdom<\/a> there are democratic ways which that can be done one of the ways is through a peoples vote. I have tabled 17 amendments. We voted on 7 of those the other way of doing that is in a general election where as a party we would fight with a very clear position of vote for us and we will stop brexit. And if we commanded a majority in the commons that is what we would do thats quite a big ask. Its never happened before in the last century at least. I justwonder, how likely do yo think it is that by pushing for an election you would end up with some kind of situation in parliament where peoples vote would be more likely than it is today . Well that is one of the things that might be a possible outcome of that. If the general election becomes very much are you in favor of us remaining in the european junior or are you in favor of us leaving . And the polls at the moment suggest that people on the whole would prefer to remain rather than leave, its possible that might lead to an outcome of that nature where peoples vote might then be the thing that that parliament could bring forward. Final question, is the split inside the largest opposition party, labor, the biggest challenge to both yourself and to Boris Johnson<\/a> well, certainly the split within labor has been the biggest challenge to us from the outset in terms of trying to stop brexit and secure a peoples vote. Until Jeremy Corbin<\/a> gets on board, gets with the program so to speak, im afraid it is very challenging to secure that peoples vote or indeed to stop brexit, which is what they want to do. Well leave it there. Tom. Thanks for joining us, tom brake, a member of the democrats and their spokesperson, point person on brexit, guys all right, willem, thank you very much for bringing us that interview from westminster. For the details of the draft document showing the eu is set to grant a third brexit delay, head online to cnbc. Com. This brexit story is going to run us by the looks of it run us through the end of the year here. The budget has been sort of sidelined. The torys are promising all sorts of fiscal expansion if they remain in power at this point. I know what you were saying about value earlier on for the uk market, but almost feels like its uninvestment if you want certainty in your Decision Making<\/a>, youre not going to get it, are you . I think thats whats very interesting about the uk and really europe overall. I think kind of from the outside it could seem like well this is just one more step in a long uncertain process in the region thats been beset with nothing but uncertainty. But yet i think below the surface, kind of below that seeming chaos, i think is kind of what we think is an important step where the most damaging outcome, the no deal outcome, the odds of that have fallen precipitously. And i think if one agrees with that, then you can get this election, you can get a variety of different outcomes and coalitions, really either major party or in coalition winning. I think you can construct scenarios where that reduces some uncertainty, reduces risk to the market, leaves the uk and the broader europe and more investable place i do think oftentimes the most interesting moments for markets is when theyre inexpensive. Theres been a reason why the market thinks thats very justified. Its uninvestable, its inherently uncertain and something changes for that i think one interesting analogy is if we think back to mario draghi, right, its great to kind of celebrate his good time to celebrate his tenure. The bumblebee speech where he said he would do whatever it takes, you know, he didnt fix the european economy the european economy is not very strong as a result of what the ecb has done, but they removed that uncertainty they removed that tail risk. They removed that risk that it would break up or at least they did a lot to reduce that and that was clearly you know a big enough thing that it changed a lot of the other Investment Decisions<\/a> in the region. We had here dead in the ditch. Is that the comparison than ask for an extension doesnt quite have the same ring as the bumblebee. It is fascinating, the point youre make around expectations management is the meaningful one, that ultimately in the same way that mario draghi was able to follow through to support what he said if Boris Johnson<\/a> stays in power we could expect to see some fiscal stimulus coming into early 2020 i imagine. Thats a lot of ifs, isnt it that is a lot of ifs. Also the way the market would look at it, even if they lost the election the market would assume more fiscal stimulus from a coalition or laborled government again, you could get that scenario in either way thank you very much lets push on to another story, outgoing u. S. Energy secretary rick perry has dismissed suggestions the United States<\/a> will pull out of the middle east however, in the interview with cnbc perry backed President Trump<\/a>s plan to reduce the number of troops in the region lets go to hadley in dubai. Its been a fascinating narrative in recent weeks where we have seen the removal of u. S. Forces in syria and that sparked stability concern through events over the weekend with the capture and killing of the i. S. Leader, the isis leader. Absolutely, karen what we saw was President Trump<\/a> essentially thanking the governments of russia and syria and turkey as well as kurdish fighters there leading to a bit of confusion, im sure, not the least amongst the kurds themselves i have to tell you catching up with the outgoing u. S. Energy secretary here in dubai ahead of a very long week for him of travel not just here in the uae but also to saudi arabia for the Investment Conference<\/a> the future investment initiative, i had the chance to ask him what is going on with u. S. Policy in the region where are the americans can we expect to see them back any time soon . Hey, we never really left. Listen in. Without a doubt weve too many allies, too many friends this part of the world will always be, as it has been since im pretty sure time moral, pretty important will it always be just about the oil . Not necessarily not necessarily. I think this part of the world has always been the center of the civilized world if you go back historically, thats not going to change, i dont think so the United States<\/a> and our engagement here, our involvement here, our historic personal relationship, our allies that live in this region wooer, wern to be engaged. Do i agree that the president is correct in saying that, you know, the fewer u. S. Troops that we have in jeopardy and harms way, the better. Absolutely i agree with that but i also understand and history tells us that youre most likely going to have some amount of presence here. My hope is that we can do substantially more of it with technology, with innovation. Its one of the reasons we spend as much time and effort on Artificial Intelligence<\/a> as we do and Machine Learning<\/a> so that there are ways to rotect, for instance, the Oil Facilities<\/a> that are substantially populated here in this region with technologies rather than actually having to have young mar or young woman with a gun on the ground to do that type of defensive work so finding ways to protect the oil instillations without putting u. S. Troops on the ground and thats exactly what President Trump<\/a> authorized more troops to saudi arabia to protect those aramco facilities. Its been so fascinating to watch this story develop over the last ten years particularly that initial pivot to asia that we saw coming from the Trump Administration<\/a> sorry from the Obama Administration<\/a> several years ago and how that has made its way down the pipe to the American Foreign<\/a> policy in this region today its been a fascinating thing to watch. I want to bring up one quick thing before i let you guys go, of course the situation on the ground in lebanon. We have seen protests for as much as ten days and we have also seen the banks being closed now potentially closed through the rest of the month. Lots of concern there and anger against the Central Bank Governor<\/a> in particular i had the chance to catch up with the regional head of the imf who has been a member of the lebanese government in the past and i asked him, wast going to happen next . Whats it going to take in terms of economic reform, Structural Reforms<\/a> and moves by the central bank to give investors and citizens the comfort they need to say, hey, lets pack up lets get off the street and lets get back to business listen in. What is needed today is a very strong and convincing reform package that restores confidence both of the citizen, investors and international community. It needs a strong package, to address some of the weaknesses of certain number of institutions that, in fact, are contributed to the increase in debt like the reform of electricity, make some of the public asset be more effective and more productive and increase the level of revenues that generate like telecom and some other assets and address what the people are asking in the streets and fighting corruption. So several days of protests on going in lebanon, as you know a lot of anger at the Central Bank Governor<\/a>. A lot of anger at the banks themselves no signs of the protests ending any time soon. Guys back to you. Coming up, alphabet prepares to release Third Quarter<\/a> results. More when we return. When you look at the world, what do you see . Where others see chaos, we see patterns. Connections. Relationships. When you use location technology, you can see where things happen, before they happen. With esri location technology, you can see what others cant. Doprevagen is the number oneild mempharmacistrecommendeding . Memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Its how we care for our patients like job. His team at ctca treated his cancer and side effects. So job can stay strong for his family. Cancer Treatment Centers<\/a> of america. Appointments available now. Cancer Treatment Centers<\/a> of america. Want your skin to glow . Like woah. Try new b3 powered serum sticks and new overnight gel masks with b3. Cleanse with 5 in 1 daily facials. Get glowing, with olay welcome back, everybody. South africa is into the final of the Rugby World Cup<\/a> after edging out wales the Southern Hemisphere<\/a> side emerged victorious on a score of 19 points to 16 boosted by a try by damian de allen they will play england in the final after the eddy jonescoached side beat new zealand on saturday. Alphabet is posed to set revenues at 40 billion. Elizabeth joins us with more i was just reading report from barons describing this to charles dick bs quote around the tale of two cities best of times and worst of times this is First Quarter<\/a> numbers versus Second Quarter<\/a> numbers. Investors have had a little bit of everything. They have we have seen a real bounceback since the strong Second Quarter<\/a> report partially spurred by the 25 billion buyback that the Company Announced<\/a> in july. Now this quarter were looking for revenues of 40. 32 billion that advertising revenue is a crucial thing to watch in this report given there was a bit of a slow down earlier in the year and picked back up that is where google still gets the majority of its revenues were looking closely at this cloud growth this is a huge competition playing out between amazon, google and microsoft and seeing in the past weeks reports from amazon and microsoft, how much cloud is driving the bottom line, so were going to be closely looking at googles cloud revenues arent specifically broken up by revenue. You have to sift through its other revenues to get a sense of that well be looking very closely there. Also that will be weighing on operating margin we know cloud is so high margin looks like its making Big Investments<\/a> in things like data centers that could mean its margins are lower. We cant talk about alphabet without talking about the regulatory concerns weighing on the outlook here we know that google is subject to an antitrust review by the department of justice in addition to a big antitrust investigation by several states attorney general. On the back of amazons results you noted during the Conference Call<\/a> regulation wasnt really a central feature. What are we expecting in terms of the regulatory front for a a alphabet tonight they disclosed there are more on going investigations that states attorney investigation is new you expect analysts will at least ask how are these investigations weighing on its outlook, setting money aside for possible fines, we know they had to do that on three separate occasions on the eu. Ultimately the company has maintained a fairly optimistic look on all of these regulatory hurdles but its probably going to come up tonight. Andrew, weigh in on this because obviously were focussed on the ability of tech sector to continue to be a driver of upside momentum. Yeah. So were underweight tech as a sector in the u. S. Where im most concerned more expensive secular growth names but i do think its interesting. I think in some ways our concern is that this is a cyclical sector masquerading as a defensive sector and that if growth is slowing down, that these companies will not be immune from that and even if we look at the year of year Earnings Growth<\/a> in the u. S. Tech sector, its showing one of the weakest levels of any of the major sectors it kind of gets this halo effect of whatever is going on, tech will always be fine in terms of actual underlying earnings power already started to slow and we worry that will continue there is an argument its undervalued versus sum of its parts. Look at the different parts of business, self driving so far into the future and revenue models from autonomous is hard to put into a model at this point. Wonder if its trapped by some of these big futuristic investments. I think it has and will still make up a small slice of revenues investors dont know how to value them. But if they do continue to invest so many funds and not just in that self driving unit but also in ventures like its health venture, something we have seen as an increasingly big focus of these Big Tech Companies<\/a> a push into health, those end up being major earnings drivers, that could totally change the way people look at these companies and not so much about ads inill be very","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia903100.us.archive.org\/12\/items\/CNBC_20191028_080000_Squawk_Box_Europe\/CNBC_20191028_080000_Squawk_Box_Europe.thumbs\/CNBC_20191028_080000_Squawk_Box_Europe_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240716T12:35:10+00:00"}