tv Bloomberg Daybreak Americas Bloomberg July 30, 2019 7:00am-9:00am EDT
bombshell. they have and have-nots of earnings season. we speak to eli lilly cfo josh smiley. and central banks race to the bottom. mexican president amlo says his country's interest rates are too high. will all of the banks look to the fed? and citi will cut hundreds of jobs in its trading division. david: welcome to "bloomberg daybreak" on this tuesday, july 30. i'm david westin, right here with alix steel. a big earnings day. alix: first of all, welcome back. good news actually for the drugmaker so far. merck beat on earnings revenue and took their estimates up as well. eli lilly also beat, not quite as much. pfizer i think we are still waiting for. alix: all pressure being put on it. david: a lot of attention. assets, we are
taking a look at under armour, procter & gamble. under armour pretty good. they see full-year revenue coming up by 3% and 4%. the market still down by about seven points for the s&p. procter & gamble pretty solid, up by 3%. 2020 organic revenue growth coming in pretty strong, beating estimates. core earnings growth also beating estimates. david: they see more organic growth coming up, so a good forecast as well. we will definitely get a good read on the consumer through the next couple of hours. you're seeing the s&p down by seven points. it is a mix. the cable rate completely falling out of bed. where will you actually see the bottom? finally it seems like markets are understanding a boris johnson prime ministership and the potential for crashing out of the european union. yields pretty much go nowhere.
crude up by about 1%. it is really the cable rate. it has been unbelievable. the gauntlet thrown down. david: as you say, boris johnson is playing a very high-stakes game of chicken. we are getting out october 31, and you've got to change the deal. the eu has consistently said we are not changing the deal. i think he's headed toward the cliff. alix: i think he will take the cliff. david: it certainly seems that way. were really concerned about ireland, and he's basically saying we can't live without escape hatch. alix: we will get a really good read on what actually is priced into the market by how the markets respond to boris johnson. david: and the cable will test his courage. alix: time now for bloomberg first take. we are joined by sarah ponczek and michael mckee. i want to start with earnings.
sarah, i thought earnings were not supposed to be good. they were supposed to be diving down for the back half because expectations were too high, but we are not seeing that from some companies? -- but we are not seeing that from some companies. sarah: every time a earnings season comes around, we see companies guide estimates lower, we hear they might not be as great, and we see them come in and beat. that has absolutely been the case. about 3/4 of companies have been beating earnings. the picture looks good. we are no longer supposed to see an earnings recession. however, when it comes to guidance for the back half, we are seeing estimates for the third quarter come down pretty significantly, and estimates for the fourth quarter come down a little bit, too. when you look at full-year numbers, they are still pretty steady. you have third quarter and fourth-quarter estimates coming down, balancing each other out. there is still very much a risk
because we are expecting growth above 5%, and that could be a little bit testy. david: how good are the earnings really? one of the most important things is low expectations. is that basically what they have done, set expectations low? michael: that's a traditional game they play. one of the things she just pointed out is when you are talking about full-year earnings expectations, you're putting a stop at the end of the year on earnings, but the companies keep going into 2020. as we decelerate into the end of the year, that's not necessarily good news. right now where we are seeing the bad earnings is in industrial companies affected by the trade wars. the question is, does that start to spill over into others'? there's some discrete areas like pharmaceuticals that aren't influenced by that, but due to headline risk other areas in washington that may affect us as the year goes on. some seeing 3100 now for
the s&p, the lowering their margins. how does that make sense? sarah: because we are supposed to get easier monetary policy. largely, many people look at 2020 estimates. lowl we are expected to see double-digit earnings growth, but still above 10%. the majority is saying that seems a little bit unrealistic just because we are seeing a slowdown in economic growth. you're not going to see revenues accelerate -- if you are not going to see revenues accelerate, how do you get double-digit earnings growth? most strategists don't think we are going to see extremely wide margins. numbers will still look healthy, but to get growth above 10%, that doesn't seem realistic. david: the overall question, will be central banks save us all? around the world, central banks talking about going lower and lower, including most recently in mexico. we had the president do his
first interview with media from outside of mexico, our own john micklethwait. this is what he had to say. i'm more cautious about inflation. this is not a bad thing. this is not the wrong thing to do. i'm not saying that. but it is important to lower the rate to encourage growth. did you have it. totally unfair to cite lopez obrador as someone in this group. a president would always want to lower interest rates. in mexico they have been doing something nobody else has been doing, fighting inflation. there's a reason why their interest rates are high. you can argue about how fast they need to come down.
some embers of the mexican central bank's -- some members of the mexican central bank's governing council do believe it is time for them to come down. alix: is president trump going to care? [laughter] michael: he just going to want to cut rates. fed actuallys the wind up getting that to appease president trump? michael: that is the big question in the markets. how does the fed actually do this? do they do it? does the ecb do it? can they have an effect with monetary policy anymore? i would venture to say most economists don't think this is going to work, which is going to be a question put to jay powell tomorrow. how are you going to make this happen? david: what is the market point of view? do the markets believe the fed is going to help them? sarah: absolutely. you look at markets near record highs, and you have to think
they are assuming that monetary policy will help ease the situation. markets are expecting a 25 basis point cut tomorrow. multiple people i've spoken to said there's a very large chance that the market is setting themselves up for disappointment. at this point in time, the market is baking in three full rate cuts through the year. what do they guide for for the remainder of 2019? that could be a testy issue. alix: great article in the terminal today about where the global czar. definitely check that out -- where the globals are. definitely check that out. the third thing we want to talk about our job cuts for citigroup. how does this set us up to talk about the dynamics of the job market on friday? michael: it doesn't really in larger macro sense, but it does in a minor sense of this appears to be another instance of technology pushing people out of
more as we see more and trading move online. there are fewer people needed. that sort of thing. we see the trading staffs of the big banks wax and wane with the economy and with market of elements. you'd think they would be going up -- with market developments. you'd think they would be going up right now with the markets going up. waxquestion is, would they again because of the growth of technology? citi would not be doing this just because of technology. they are not making as much money off of trading, and they are not alone and that. sarah: you look at how banks have done on their trading, whether fixed or equities, for the first half of the year, and it is one of the worst first half's in almost a decade. when he thing about banks trying to optimize going forward, it really is no debate, no surprise that if they are looking to cut,
the places they are looking to cut are the areas they are losing money or not making that much money from. we have spoken about it before. you look at the likes of deutsche bank cutting 18,000 jobs. the majority of that is in trading, but then they are focusing on investment managing, so it is really all about where can you get the most bang for your buck. alix: and where are all those workers going to go? when you look at deutsche bank or sent and there -- or sometime there -- or santander. david: make no mistake, it is going to affect the economy. when you take that many jobs, even deutsche bank is giving up some of the floors at its new headquarters. you'll see reverberations right through new york city, for sure. michael: you have spreads coming down because of the fed and other central banks keeping interest rates so low. i looked this morning at citi's net interest margin, and it is a straight line down. mckee andmberg's mike
offsetting the effects of lower energy prices. ceo bob dudley says the company is right on target at the midpoint of its five-year plan. a german today from company that says reaching its full-year forecasts -- from bayer, the german company says reaching its full-year forecast is in jeopardy. wei withstanding u.s. efforts business.s the chinese telecom giant posting a 23% increase in revenue for the first half of the year. the chairman telling bloomberg he's got a backup plan if the u.s. doesn't lift restrictions on the sale of certain technology. the u.s.'t know when will make a decision on android and when that decision will come , so we have to make preparations for our products. we will evaluate our strategy for the overseas market. if we are not able to use android for our new smartphones,
we have the ability to develop our own operating system and ecosystem to become the basis for our services to the customers. viviana: executives have told employees to brace for tougher times over the rest of 2019. that is your bloomberg business flash. alix: thanks so much, viviana. it raises the question, which businesses are worse off, the chinese or the u.s.? david: in the meantime, president trump tweeting this morning about the negotiations going on in shanghai. he goes on to say, "they must be waiting the out. if i win, it is going to be really tough for them. the only chance they have is a sleepy joe is elected." alix: so we are not going to get anything now? david: the interesting thing to
-- to me, "ifn i and when i win." he's never said "if" before. he's only said "when i win." alix: at the end of today, more than half of the s&p will be out with quarterly results. david costa at goldman cutting his earnings estimates today, boosting the overall full-year forecast for the s&p next year to 3400. joining us is david lebovitz, global market strategist. what have you learned so far for earnings season? david l: the current earnings season has been better than expected, and normally analysts are underestimating what things are going to look like. for us, this has been very much in line with what we were expecting.
we were thinking low single digits made sense given what happened in the economy in 2q. what has been most striking is if you look at a decomposition of where earnings growth is coming from, it is essentially all buybacks. you have a two percentage point tailwind from buybacks propping up the broader earnings machine. one of the concerns we have as we look into 2020 is you've got consensus looking for 11%, margins that will likely continue to come under pressure from the increase in wages over the last couple of years, and if we are returning to a trend growth environment of around 2%, that is going to make the revenue outlook that much more challenging. david w: one of the reasons we are interested in earnings is because of what it tells us about the economy broadly. are there any green shoots from genuine earnings growth as opposed to buybacks? david l: financials are being aided by buybacks. generally speaking, the current
earnings season doesn't look all that good. the world is on health care's shoulders to an extent, due to a to an extent, due to a lot of m&a over the last few years. alix: bloomberg intelligence just did a deep dive on this. over the last year, it's been consumer staples and financials that have the biggest benefit from consumer repurchases. the difference between what they are making and what they pay out. stack it up for me globally. this chart shows earnings revisions for china, emerging markets, europe and the u.s. emerging markets, the yellow line, totally getting hammered. where do we need to see the most re-rating? david l: generally when we look at global growth, it is pretty mediocre. pmi's are below 50 outside the u.s.. manufacturing is clearly being hit hard by what is going on with trade and lack of resolution on these various
geopolitical issues. when we think about economies outside the u.s., which tend to be far more weighted towards manufacturing and services, until we see some clarity on the outlook for things like trade and brexit, these parts of the world are going to continue to struggle. not only is it late cycle and you want to go up in quality, which leads you to the u.s., but when we look at where actual growth is coming through, that pushes to the u.s. as well. david w: do you factor in the presidential election year? i think the big question around earnings next year is what does the fed do. is the fed able to stop at just a couple of hikes between now and the end of the year, or does this turn into a full-fledged cutting campaign? maybe that gives us a short-term boost, but that is not my base case. david w: it all comes back to the fed. david lebovitz will be staying with us. one ofup, beyond meat
david w: beyond meat dropping more than 11% in premarket after the company beat in the second quarter, but then announced a secondary share sale. joining us on the telephone from princeton is bloomberg intelligence's senior packaged food and retail staples analyst. welcome. they did at first but all right in the revenue and things, but then said we are going to issue a bunch more shares. reporter: good morning. all things considered, the actual earnings release were good news for beyond meat. it really is the secondary offering pushing shares down. it hurts the value for investors, and it seems to be a way that some of these early investors are just able to get around the lockup of around six months from the ipo.
david w: that seems to be a critical point. they are just cashing out. is that right? jennifer: a good chunk of it is cashing out. the revenue from those will get put back into the company for expansion and things like that, but it is a very small portion of the overall offering. david w: given the fact that it , it is so hard to leave that money on the table. we will take a look at the actual share price compared to what analysts thought it should be. it is just a huge headwind. jennifer: it is. the stock has had an incredible run. it is up about 800% where it ipo 'd. you can't fault investors for wanting to cash out. i think it was a surprise to everyone else, and it came on the heels of such a promising earnings period. alix: have you ever had it, the beyond meat? david w: i haven't. i want to. alix: that needs to be our lunch
date. still with us, david lebovitz of jp morgan. did you learn anything from this? david l: what is most interesting about the ipo environment this year, you have seen less transactions, but bigger transactions. that speaks to investor preferences, continuing to look for higher growth names. when we look at private markets, we still see folks looking for secondary buyouts or corporate acquisitions as a preferred mode of exit, but you are seeing a lot of these big names come to the markets, and that is trying to get previous investors in optionality to get out while bringing more people into the fold. david w: volatility has been relatively low. david l: in general, part of the reason you have seen a couple big ipos come through this year is because we had pockets of relatively calm seas within the market. back to the earnings conversation we were having, i
don't want to say the writing is on the wall, but we are in an environment where it looks like we are set to return to trend growth, at least in the short term. it doesn't look like we will see any sort of fiscal stimulus between now and next fall. the fed is going to cut rates. i would argue that lower rates is not really going to boost inflation or growth unless we are cutting all the way. when you look at the outlook for the economy, it is not bad, but it is not great, either. coming off of the back of a year of fiscal stimulus and growth very robust, people will take advantage of the fact that the market is pricing in a scenario we don't see coming for. david w: did you see how much the treasury is going to borrow? and that is for spending. alix: more than double. david l: but i would push back a little bit. it is only going to add about 25 basis points of growth as a whole, which relative to what we saw last year, is kind of small potatoes versus the full percentage you saw in quarters like q2.
the market is looking for an easy fed, moderate growth, and a deal on trade. that is what a supporting forward earnings multiples. i don't think all three of those things are going to come through. somebody is going to be disappointed. but if you are a private company looking to go public when investors are perhaps pricing in the wrong scenario, you don't care what they are pricing in. you just hope they are pricing in a positive one. alix: david lebovitz will be sticking with us. coming, markets await tomorrow's fed decision -- coming up, markets await tomorrow's fed decision. this is bloomberg. ♪
session. european stocks also moving lower, the dax getting hit the hardest. terrible outlook for the companies and that. questioning how bayer is going to go forward, weighing on the dax. the story in the currency market to me is what is happening with the cable rate, tumbling down 5%, as boris johnson continues to threaten a hard brexit if the eu does not come back to the negotiating table with what theresa may already to go sheeted. the curve in the u.s. -- already negotiated. the curve in the u.s. a little bit steeper. that helps the financials. crude up 7/10 of 1%. can't quite find the why. it could be bp related, with solid earnings bucking the trend. david w: in the meantime, boris johnson is not the only world leader trying to force a deal. president donald trump is out was tweets about china, saying, "china is doing very badly.
worst year in 27. was supposed to start buying agricultural product now. they may be trying to wake me out -- to wait me out, but if and when i get elected, it will be a lot tougher deal than now." i think he's trying to add some urgency to the chinese side. the price is going to go up if i get reelected. alix: so if you don't buy the sale now, it will get tougher in 2020. onehave earnings coming in dollars 20 share on a net basis on a net basise for mastercard. that is a beat. their margins also were better at 58.3%. david w: what is interesting is 60% of their revenue comes from outside the united states. they've been growing much faster
. it is not just a u.s. phenomenon. they've been seeing it in the u.s. and asia. don't they all have to offer higher incentives and stuff so they expand margins? david w: buying was up. you saw it with citi reports on consumer credit cards. that is good news perhaps for the consumer. alix: which we will discuss over the next hour or so. david w: now to mexico. mexico's president andres manuel obradorer door -- lopez spoke to blumberg's john micklethwait on monday. obrador: i would like the central bank to work not only on controlling inflation, but for it to be thinking about growth as well.
we are talking about what the .entral bank is doing if they are more cautious about inflation, this is not a bad thing. this is not the wrong thing to do. i'm not saying that. but it is important to lower the rate to encourage growth. this is an issue i'm leaving for the central bank to decide because we trust we are not just going to be able to grow, but also to develop. , but development -- only gross, but development. growth, that is what we want to change, and to create new paradigms. growth is creating wealth, but not necessarily distributing wealth. development is growing and distributing wealth.
so our administration, our government, what it is now doing better than before is .istributing income ,lthough growth is scarce little growth, there's better distribution as well. that is, there's more well-being. that was mexican president undress manuel low price -- president andre manuel lopez over door -- president lopez obrador of mexico. alix: with us still is david lebovitz of jp morgan.
david l: i think what's interesting when we look at monetary policy outside the u.s., and this is much more of a developed market issue than a emerging-market issue, they are really pushing astray. could continuean coming up with new ways to stimulate the economy, but frankly, i'm not sure it is going to work. what is striking to me is i almost wonder if the fed is cutting rates because of the effectiveness this -- because the effectiveness of rate cuts from other central banks is not there. the fed is very concerned about what is happening around the world, reminiscent of what we saw in 2015 when they paused the rate hike campaign given the instability in china. i think what we are seeing is a fed getting pressured into cutting rates because of what's happening outside the u.s., and
frankly, given my own view that the ecb and back of japan will say they have arrows in their quiver because they don't want to undermine the credibility, but i wonder if that is the case. david w: does that's adjust that if and when the fed cuts rates, it won't be because they think it will stimulate inflation in the united states, but they are more worried about rates around the world? david l: that's right, i think it is about easing financial conditions abroad. inflation expectations have been sliding since september. the fed usually hikes until something breaks. if you want to put your thing it is in place next petitions. this howdy -- what broke time, it is inflation expectations. what do you think? david l: i'll be the first to
admit i have a very different view from my group over the past couple of months, but they have gotten me warmed up to the idea that there is likely a fed cut coming tomorrow. i think the fed will cut tomorrow, and i don't think they will do anything in september if the data holds. that is when balance runoff is expected to end. i think they are going to be very methodical at the start, assuming the economic data holds up. to me that is a cut tomorrow, maybe nothing in september, and then which cross the bridge in december when we get there. once they start cutting, historically it has been very difficult to stop. alix: if that happens -- david w: if that happens, what are the odds of a temper tantrum from equity markets? david l: the markets have been pricing in an impossible trinity . easier fed policy has been priced in in general. those three cuts they are
pricing in this year, valuations need to come down and you will see areas like utilities and consumer staples come under pressure. david w: really interesting. thank you so much to david lebovitz of giga morgan asset-management. now let's get an update on what is happening outside the business world. --on a hurtado is here with viviana hurtado is here with bloomberg first word news. viviana: boris johnson spend the next few weeks pressuring the eu to renegotiate a brexit deal. top-level u.s. trade delegation arriving in china to resume negotiations. mnuchin secretary steve and u.s. trade representative lighthizer will meet with their chinese counterparts at dinner, but the two sides are farther apart than they were three weeks ago. expectations for a breakthrough remain low. it is round two of the democratic president for debates
over the next two nights in detroit. 20 presidential hopefuls will square off on cnn. tomorrow night will feature a rematch between former vice president joe biden and senator, harris. harassment -- and senator kamala harris. harris moving up in the polls after the last debate. 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. hurtado.na this is bloomberg. david: another debate tonight, and that match up will be the one everyone is watching at the moment because kamala harris early got the better of joe biden last time. alix: what was the great line she had when everyone was arguing on stage? it was such a clincher, and you knew they had been working on that. david: that little -- "that little girl was me." alix: something about we don't fight here? david: like the adult in the room. you know that joe biden is going to be ready this time. it will be very interesting. i'm sure there will be some
matchup we don't anticipate. that is tonight and tomorrow night. you can watch that here on bloomberg tv. on "balance of power" at noon, -- we willake speak to former democrat senator joe lieberman. kevin cirilli will be covering that debate for us. coming up, jp morgan taking on the largest bank in the world, china's state run icbc. more on that next in today's wall street beat. this is bloomberg. ♪
coming up in the next hour, bain and company partner. ."is is "bloomberg daybreak regulators in dubai have proposed their largest fines ever. a private equity firm will have to pay $350 million, accused of serious wrongdoing that includes unauthorized activities and misusing investors' money. a former managing director pleaded guilty to conspiracy charges in the u.s. last month. nintendo reporting fiscal first quarter profits that missed the lowest estimate. consumers didn't care much for the japanese company's lineup of new games. nintendo says operating income fell about 10%. it left its full-year forecast unchanged. capital ones has a massive data breach exposed personal information of 160 million
people in north america. a former amazon employee has been charged. servers rented from amazon's cloud services unit stored the data. capital one says it is unlikely any of the data was used for fraud. i'm viviana hurtado. that is your blumberg business flash. alix: feeling better about -- your bloomberg business flash. alix: i'm feeling better about that. time now for wall street beat. first up, citi cutting hundreds of jobs this year. analysts say it won't be the first. then, a new ceo moving past a scandal that triggered an exit us of investor cash last year. and jp morgan is gearing up to take on the world's largest bank, china's biggest lender, icbc. david: joining us now is so and basak. -- is sonali think one of the
things that is disappointing about this is this bank is not coming from a position of weakness like a lot of the european banks. people didn't know there would be some changes on wall street. david: isn't that the time to make the cuts, before you are actually in trouble? a lot of it is from equity trading. alix: and when deutsche bank is cutting 18,000. annmarie: it's been a terrible year so far --sonali: it's been a terrible year so far at citi in particular. the big question is what happens of the top three, jp morgan, morgan stanley, goldman sachs? do they double down or join the pack? alix: does that speak to the broader strategy citi had? some said they were too big and they didn't streamline enough. sonali: banks like goldman sachs were trading in a lot of secular headwinds. pressure is on that business, and the hedge fund industry also. the fact that the industry is
just smaller and generating less money. those trading clients, where are they coming from? are they consolidating to the bigger banks? david: let's turn next to gam. they have a new ceo. stock is really good news for those who have coming a little later. our own opinion colonist says the new ceo's job is to sell the company by the end of the day, but who knows? we seen a lot of outflows, more than analysts expected. the stock is down more than 60% since haywood was suspended last year. the good news is they've reached a conclusion, which means maybe they can pass this phase of their life. david: what do we know of mr. peter sanderson? he seems like a pretty good fit. sonali: resumes matter in this space. he was an executive of blackrock's european enterprise, so that is good news. he comes from a reputable place.
i think everyone is excited to see there is a real ceo and not just an interim. story is for jp morgan. a really good feature story talking about jp morgan entering china, taking on icbc. talk is about what this is. sonali: i love this visual. you always think of jp morgan as the world's largest bank, but icbc actually is. it is a behemoth. what jp morgan has that icbc doesn't is it is a global bank. as they look for growth abroad, maybe they can do it. david: jamie dimon was complaining about u.s. regulation, saying the really big banks are over there, and pointed at icbc. those are the big guys. sonali: after the crisis, icbc really double down. it is more of a lending venture than an investment bank like jp morgan. alix: why would it be jp morgan
competing with icbc and not other banks? sonali: well, it is bigger. morgan stanley is another bank that was to double down. asia is one of their priorities this year. asian technology companies are just as important to them as the faangs. there's a lot of things about jp morgan's business model that fit quite well, plus the ability it to to bring global companies deal. david: thank you so much. coming up here, eli lilly gaining in premarket after the company beat in second quarter lifted full-year guidance. we will talk about that with joshua smiley, the eli lilly cfo. alix: if you are jumping in your car, you can tune in to bloomberg radio across the u.s. on sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪
david: eli lilly announced its second-quarter earnings earlier this morning, doing better than expected in earnings and revenue, and raising earnings guidance for the next quarter. shares are up in the premarket as a result. we welcome joshua smiley my eli lilly cfo, from indianapolis. welcome. it is good to have you with us. what is driving this for you? joshua: good morning. yes, it is a good quarter. in costnue grew at 3% currency, driven by 6% volume growth. this is despite the fact we are dealing with headwinds from our cialis patent loss in the u.s. are 6% volume growth is really driven by the nine products we've launched since 2014. they contributed 43% of our sales in the quarter, and really
what is helping propel our topline performance. we also had great pipeline progress in the quarter. we had three new approvals in the u.s., and this must morning -- and this morning, really exciting news for our drug for metastatic breast cancer. we announced it is the first to demonstrate overall survival, so helping women with metastatic breast cancer live longer. we are really excited about that progress. given the sales performance we saw, we had better eps performance for the quarter and we were able to take that and, given our outlook for the second half of the year, for new products primarily, we are able to raise our expectations for 2019 by seven cents. david: how much of it was truly city -- was trulicity? what else do you have on deck to come in? joshua: that is now our biggest product.
it achieved over $1 billion of revenue in the quarter for the first time. it is growing very well. class, leader in the gop so it helps patients with diabetes as they transition from oil therapies -- from oral therapies to injections. there's still a lot of growth left for the product itself, but as you mention, we are really excited about the next generation product. we released data on this potential product in the fall last year from the phase two study, where we see much more significant blood sugar control and more significant weight loss. we've got phase three trials up and running. we expect to generate data beginning in 2021 and have that drug on the market in the 2022-2023 timeframe. opportunityk at the right now, even with the kind of gross and he wouldn't billion
dollars of revenue for trulicit y, in the u.s. there are still more patients who would benefit from it, so there's lots of room for growth. david: there's a lot of talk about diabetes treatment right now in washington and concern about how much money from a suitable copies are making off how much money pharmaceutical companies are making off of it. joshua: we experienced a 4% net we chargeo the prices our customers are down across the portfolio by 4%. this certainly includes diabetes, which is our biggest category. the challenge we see in the u.s. right now is that price reduction doesn't make its way to patients on a uniform basis. there are patients who are struggling at the pharmacy counter to pay for their medications. i think as we look at the legislative solutions that are being discussed, but we are really focused on is how do you ensure patients are getting the benefit of the price reductions
we are putting in place. david: there was a big deal announced yesterday with pfizer and mylan. how does that change the territory for you? how does that change the way you approach your strategic position? joshua: it really doesn't. we think the best way we create value for society and patience and our shareholders is through innovation. it really means bringing first in class and best in class new patients into areas we are focused in. our analysis is on major acquisitions or mergers don't create value. they are probably counterproductive to bringing medications to market. we are really focused on the five therapeutic areas we are in. we do want to make investments and acquire companies, but really it is about acquiring best in class medications. we actually did the largest acquisition in our history earlier this year.
it was really around acquiring a platform of precision oncology medications. a red inhibitor that goes after a particular mutation prevalent in lung and thyroid cancers. if a patient has this mutation, the benefit that we see so far are pretty profound. we are looking forward to some bidding that drug later this year. david: josh, take you so much. that is joshua smiley, eli lilly cfo. e,ix: coming up, mark stoeckl ceo, and bonnie wongtrakool, western asset management. this is bloomberg. ♪
earnings estimates need to come s&p and see 3400 for the next year, while others crash and burn. trump says the u.s. has all the cards. the president says if and when he wins the white house in 2020, any trade deal with china will be a lot tougher than the ones officials are looking at now. central banks try and race to the bottom. says hispresident amlo country's interest rates are too high. policymakers looking at the fed as it kicks off its today fomc meeting. david: welcome to -- it's two-day fomc meeting. david: welcome to "bloomberg daybreak." president trump saying they haven't lived up to their bargain in buying a cultural product. alix: not only maybe they don't need it as much, because it is all about the pigs.
you don't have the pigs because of the swine, so you don't need the soybeans to feed the pigs. david: the other half of the deal as we are supposed to let sold. get more stuff the president did mention that part. just this morning we had the huawei president. >> i think the damage is bigger to suppliers then to huawei. we will have to manage continuity internally, but the damage to the u.s. supplier is direct as they lose a customer. if the u.s. removes huawei from the entity list, that would be a solution. david: well, that is the solution. alix: good. that doesn't seem like a possible redline at all. in the markets, a lot of things happening today. a ton of earnings coming out. terrible. some s&p futures around the low of the session. the cable rate one of the underperformers, though off the
lows of the session, as boris johnson throws down another gauntlet to the eu. the 10 year yield pretty much goes nowhere. also want to point out some inflation data. german inflation slowing to 1.1% in july. the estimate was for 1.2%. moving,ll not really but this is a continued story. david: this is one of a series of data points that seem to be pointing in the same direction. alix: and really, what is interesting, the push and pull between the euro and the dollar. who is able to jawbone that currency lower when the central banks are all racing to cut? the other part of it is earnings. 12% of the s&p reporting today. a couple of really big movers. apple due after the bell. joining us in new york is mark ckle, adams express fund
,anager, and bonnie wongtrakool western asset management portfolio manager. what is your broad take right now on earnings? what do you like? mark: for the most part, and you've identified some that haven't, earnings have been pretty good. unless you don't count mr. mcdermott, sure. but they have been pretty good. topline growth has been better than most people expected. it has flowed through to earnings. there have been some pockets. i think some of it is idiosyncratic. i haven't seen the mcdermott release. we don't own it for a variety of reasons. seseek many of the mis have been idiosyncratic. so far, earnings season has been pretty good. david: doesn't tell us anything about the rest of the year? mark: that's a very good
question. one of the things that is interesting is for the most part, companies have not really been good at taking this earnings beats and projecting through the rest of the year. let's put yourself in the seat of the ceo. a lot of it is the unknown. there's a lot still unknown. the economy is doing really well. a lot of these companies are doing well. but there's still a lot of unknown, whether it is china, what is happening with brexit. a tough brexit is a hard thing to think about swallowing. wait beforent to you put both feet in. alix: before we go global with bonnie, what is your strategy? you own apple, for example. do you buy? do you hold? do yourself? how do you -- do you sell? mark: we try to concentrate on stocks where we think there's a
high likelihood they will exceed earnings. with something like apple, we think it is a little too early to add to apple. we own it, as you've identified. i think there were a lot of bulls for 2020 with 5g. we think it is a little early to be there. with us, it is all about relative. where we are relative. we are overweight a lot of other stocks other than apple, although we think it is a good investment. it is not the best one we have. david: bonnie, i know you are a fixed income person, but how much of the earnings is being supported essentially by the incredible bond rates? bonnie: we have seen second quarter earnings come in stronger-than-expected, and much better than people feared. of theree-quarters companies have beat earnings expectations, and by a margin better-than-average, by about 5.4%. within that universe, we have seen a bifurcation between
companies that generate most of the revenues from the united states versus those that generate it from outside the united states. that is a margin of about 16% difference with companies focused on the united states seeing's earnings growth, and those with revenues outside the united states seeing earnings contraction. what we've done at western is we've tried to play that by looking at companies that are not just deleveraging and have better yield than the market, but that are also less vulnerable to trade risks. for example, within u.s. banks. that is one of our favorite sectors. banks in the united states have really strong balance sheets, and they are very high quality. they have really deleveraged since the financial crisis. in addition, they are less prone to trade risks. u.s. banks have about 16% of revenues from outside the united states. that makes them a really attractive place to invest.
they are throwing off huge profits as well. earnings are up 10% this quarter, and we expect them to have a record $250 billion of profit for 2019. alix: what do you think about that, mark? lowered earnings estimates because they think we will keep going. the expansion is going to keep going. what do you think? mark: this is incredibly trite, but it is hard to fight the fed. if you look at what is right in front of us, easing is coming. if you look at the performance of the s&p from the time easing hike, thethe first iods,ge over those 14 per the s&p is up 20%. they are making it easy to embrace risk assets. for that reason, it is incumbent not to fight it and go with it until you see some cracks. the cracks are likely in
inflation or a recession of some sort, and we don't think that is anytime soon. alix: again, the similar question is what then offers the value? bonnie was talking about financials and stocks that have levered, less exposed to trade. is that how you do your analysis? mark: that is a good way to do it. the other thing we do is we are sector neutral. we look at what are the best relative opportunities within each sector? i think bonnie is right when it comes to banks. we are overweight banks. but it is trying to go in each sector and find those we think and do what a lot of other people don't think they can do. microsoft is something we are overweight. adobe. salesforce.com. although they do have earnings outside the united states, they
particular consumers snapped up &g's beauty product. plunging beyond meat in premarket trading on sales to sell more than 3 million shares. a warning today from bayer. the german company says reaching its full-year forecast looks increasingly ambitious. bad weather is threatening the performance of bayer's agricultural division. in the round up weedkiller lawsuits, there's been an increase in the number of plaintiffs. that is your bloomberg business flash. david: central banks around the world are looking at further rate cuts, often at the urging of elected officials. the latest is president lopez obrador of mexico, who made his view clear when he spoke exclusively with our editor-in-chief john micklethwait. obrador: they are
more cautious about inflation. this is not a bad thing. know, this is not the wrong thing to do. i'm not saying that. but it is important to lower the rates to encourage growth: david: still with us -- to encourage growth. david: still with us our mark stoeckle of adams fund and body one for cool of western asset management. and do you invest -- bonnie wongtrakool of western asset management. how do you invest in this environment? see the trend going on in other emerging economies. the inflation average in emerging markets is about 3%, and that is below in years past, when it would run more like 4% or 5%.
we see emerging market economies poised to cut rates, and that makes their sovereign bonds attractive to us. david: sovereign bonds are attractive. is mr. lopez obrador going to get the growth he wants out of it? same sort of story at the fed. bonnie: that's right. i think all of the central banks are facing this situation where, in the absence of fiscal stimulus, all they can do is add monetary stimulus, so they do what they can do. really we see this focus on inflation and the fear of inflation being too low for very long, and having a japan a n oftion -- a japanificatio other countries. in particular, the bank of then, the ecb, an federal reserve are all committed to letting inflation run above 2%. that is something we hadn't seen in the past, and now all of them are aligned in that goal. alix: where is the
outperformance of my bond proxies in the stock market? mark: some of the consumer staples companies which are bond proxies have done pretty well. you saw the procter & gamble numbers today were just spectacular. they were really good. some of the other staples, phillip morris was pretty good. coca-cola was great. the coke mix of pricing and volume was about as good and balanced as you can get. some of them haven't done very well, but in general, on the equity side the staples have performed pretty well. alix: is that the strategy? do you want to buy the bond proxies or take on more risk? mark: we believe you should be balanced. as i mentioned earlier, we are sector neutral. we have to have staples exposure. i think that's a great way for too risky ornot go
defensive. i think that is important for most investors. we think we are really good at identifying the stocks within each of those sectors that can outperform. we've done very well in staples this year. cosco is another u.s. dominated company that has done well. coca-cola has done well. we think that being diversified with exposure to both risk and non-risk assets is an intelligent way for investors to go. david: how do uss the risk that may be overbought on the prospect of cuts -- how do you assess the risks that the market may be overbought on the prospect of cuts? it doesn't mean an interest rate decrease this week would be a mistake, but there's a good chance that after this meeting the central bank will be one and done. our bond investors prepared for that?
bonnie: i think the market is pricing in more than that many cuts, clearly. our expectation is that probably tomorrow, the fed does not announce more than 25 basis points. as we discussed, the u.s. economy is doing quite well. the fed views this really as preventative medicine come more of a vaccination than some sort of -- preventative medicine, more of a vaccination then some sort of emergency procedure. depending on how the data comes in, we could see further cuts. the key is with the messaging the fed has done so far and other central banks, rates are going to remain low for quite a long time from now. alix: but if we get something like no clarity on the balance sheet runoff, no sort of extension of rate cuts, but kind of one in done or wait and see, what do we see in the bond market? bonnie: we think that scenario is fairly unlikely, but if they were to take more of a hawkish slant, clearly the market
would react. that is not priced in, and that is not the consensus expectation. mark: and much the same thing in equities. i think the equity market would, if what chairman powell says tomorrow is the wrong words, which would lead people to believe that september is not likely for another 25, i think the equity market would react negatively to that as well. david: y, 10 years after the fact, is the equity market so dependent on just one person and what they have to say at the fed? we would hope at this point that the economy would be beyond that. mark: it is a great question, and on many levels it is silly. it is silly that one person can do that. on top of that, you've got an administration that continues to pummel him on what they want. it doesn't make a lot of sense. there's nothing we can do about it. there really isn't. i think you do your best. the one thing that investors should really think about doing is not reacting too quickly to
it. just have a little bit longer horizon. there's going to be a lot of if the verbiage changes or if it looks like we are not going to get -- or if this 25 his last. just have a little patience. alix: both of you are sticking with us. coming up, beyond meat getting seared in premarket. more on that next in today's bottom line. ♪
it is finally starting to really their forecast. their stock is down about 5.6% in the premarket. they got a huge problem with these, and getting bigger. alix: huge. you did have one court case with dropine reduced, clearly a in the bucket, but now they have 5000 more. david: 87 million times 18,000, what is that number? alix: you do that math while i talk about bp. bucking the trend of weaker earnings from big oil, bob dudley, the ceo, talking about his strategy for oil prices. bob: i think there's a lot of uncertainty in the market. we are planning around the $55 a barrel range, but you've got big downside issues potentially in venezuela, iran, permian crude coming on and supply, chinese demand. right now in the first half of the year, a little bit of softness in demand, but it is coming back up. alix: really worried about
strait of hormuz. lots of risk there. david: we are also looking at beyond meat. joining us now is brooke sutherland. this is stunning because they were beating on earnings and revenue, and they decided to announce they are going to have a secondary offering and offer more shares. brooke: i think it is stunning to see beyond meat shares down for a change. they are going to let some of the early investors in the company itself and the ceo sell some shares before that lockup period expires in october. i think that is completely overshadowing anything that was happening with the numbers. it does sort of factor into a trend here. you have early investors getting out early, and the company is selling more because they need more money to fund expansion. you also have another net loss in the quarter. david: but most of this money is going to the pockets of the founders, including the ceo. he's got like 40,000 shares he's going to sell.
on top of that, he says i can't answer any questions about it because there are regulatory restrictions. that was a copout if i've ever heard one. but you're right, this is still a startup company that has that sort of element of some of the tech companies where you give rich payouts to the founders, and they ultimately get to run the show, but they are also having to spend a lot of money. they did flip their full-year guidance. they now expect profit, but now that is adjusted. when they actually turn the quarter will be interesting to see. stoeckle of adams fund is still with us. even before this, do you like the stock? mark: no, we don't do ipo's. much like other ipo's, you are going to get another chance at this. corporatee
governance is terrible. they didn't have to sell right now. they just did. to have the ceo sell at a time like this when they have done so well, it is pretty disingenuous and just bad. i don't know what the directors were thinking. david: is there any sense of whether or not they did the stock a favor because it was too high and they deeded to take some of the out you doubt? -- some of the altitude out? brooke: but do you really want to do that as the ceo? i think if you believe in the direction of this company, there's still a ways to go here. beyond meat is still in the early stages. it needs to lock up restaurant deals. impossibles rival foods with burger king. we have a long way to go. to call the top in the shares at this point is a little risky as ceo. alix: if you don't want to play with the trend, would you play
this emerging trend like a tyson or kellogg's? do you like those stocks for this shift into plant-based protein? mark: it is really not enough. the staple stocks have had some trouble with growth, kellogg's and some others. this isn't going to move the needle enough in the short-term. alix: maybe he just wanted to buy a boat and go on vacation. i don't know. [laughter] alix: brooke sutherland, things a lot. mark stoeckle of atoms fund is sticking with us. coming up, reporting mostly positive earnings. we will take a look at consumer spending and pce, coming right up. this is bloomberg. ♪
session. you have under armour tanking in premarket puritan on the upside, procter & gamble solid. -- losses related to roundup and the cable rate down .3% continuing to think. here's personal spending for june, coming in in line with estimates. you had may revised higher. personal income coming in at .4% and in terms of inflation, if you look at the core pce year on year, a little lighter than estimates but sequentially right in line, 1.6%. this feels to me like feeding into the same story. consumers crushing it, inflation is not there. david: we're looking forward to the fed and there is not a lot that would persuade them to go to different direction.
pce core deflator is the thing they look at. it is what they like. alix: conjuring to be puzzled. personal income continuing to rise. where is that? where is it going? david: exactly right. it is a puzzle, including for the fed. nothing there with that would change people's mind. bonnie, as we look at these numbers, does this have any affect on what you are expecting from the fed later this week? no these are in line with what we have seen, which is a flattening trend in inflation. the central banks including the fed have seen these numbers have not gotten where they wanted. we do have more numbers coming out later this week. the employmente cost index and friday the average hourly earnings. everyone will be watching those as well. no expectations any of this will expectations, and
i think the market is primed more for looking for inflation numbers that are lower rather than a higher. any number that is higher will be treated as a blip. alex's question. incomeix -- disposable -- if we see disposable income rise, why are we seeing it? bonnie: we are seeing the savings rate is elevated among the u.s. population. consumer balance sheets are healthy. they do not have the debt they did 10 years ago, but in general there is a conservative thinking with the uncertainty going on around the world with trade, etc.. alix: is there still opportunity to buy the consumer? mark: sure. a couple different places. you look at the quarterly chipotle put out. they can't much higher -- they
comped much higher than what the market was expecting. 17% of the revenue is now online, which is staggering. they have done good things with their menu and the average ticket has gone up. they have done good things. i think some of the restaurants are good spot to be. david: same thing with starbucks. mark: starbucks, i wish we own starbucks. i was leaving that out because we do not own starbucks. starbucks killed it. they had a good quarter. it was a good quarter on innovation and revenue and earnings. they are doing a lot of things right. i think bonnie is absolutely right. saving, but they are not saving everything. a lot of these consumer companies have gotten pricing which we have not seen for some time. alix: flip it for me.
if you continue to see rising , who is getting squeezed on margins? someone has to be. bonnie: what we are also seeing is there has been a lowering of prices because of technology. structural changes. efficiencies have been brought to the market and to businesses by technology and that is part of what you are seeing in these lower inflation numbers, not just the higher savings rate by consumers. david: are we seeing investment in tech? it is really going into technology which is keeping the prices down, we should see a substantial ramp-up in capex in tech. seen uncertainty around that because that sectors extremely vulnerable to trade. there has been pullback in that particular sector, but what we are seeing in inflation right
now is a result of prior investments in technology and that ongoing trend. alix: how do you view that? in terms of tech whether it is ai or semis? mark: i think bonnie is right. there was a lot of investment. when you look at the consumer companies we talked about, they have increased their investment in technology. buteverybody is doing it, when you invest in you get that fast pay off, which certainly starbucks has done, chipotle has done, it feeds on itself and allows you to continue to invest. i think there is enough investment being made from these consumer companies to keep the consumer's attention and help with margins. is it an overstatement to say the u.s. consumer is supporting a lot of the global economy? bonnie: a lot of that is going on because we see the divergence
between the services sector and the manufacturing sector, not just here but in europe. there is an argument to be made that a lot of the growth we are seeing is consumer driven. thank you both very much for being with us today. now listed an update on was making headlines outside the business world with viviana hurtado. viviana: donald trump lashing out at china for not willing to buy u.s. farm products. he tweeted beijing continues to rip off the u.s.. the president said those tweets not long after a top-level trade delegation are alive -- arrived in china for trade negotiations. expectations remain low. it is round two of the democratic presidential debate. in detroit, 20 hopefuls will square off on cnn. tomorrow will feature rematch between joe biden and come along harris. harris moving up in the polls
after attacking biden on race related issues. the u.s. education department is looking into a controversial financial aid package. parents have transferred legal guardianship of their college-bound children to relatives or friends that allows them to claim they need financial aid, according to the wall street journal. only the child's earnings would be considered in that case. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. hurtado.na this is bloomberg. david? david: you said this morning and i cannot believe it. i cannot believe it is legal. that has to be fraud. alix: what is the difference between your zone for a school in new york and you want to go to a different school so you pretend you live in that seminarian to get into that school? that happens all the time. david: it is not different in
the sense that you are still lying, which is not a good thing, it is different in you get a lot of money. you do not get a lot of money by going to different school. they had examples in the piece of people with tens of thousands of dollars. relatively wealthy parents who are pulling this off. alix: which also goes into how expensive college tuition czar. -- how expensive college tuitions are. david: that is the larger point. college has gotten so expensive that it is causing people to do strange things. alix: it is super gross. david: coming up, we look at pharmaceutical earnings in pfizer's big spinoff. alix: and remember, check out featuresdo browse the and check out some of our charts. this is our bloomberg -- this is
viviana: i'm viviana hurtado in hewlett-packard enterprise greenroom. coming up in the next hour, mike wilson, morgan stanley chief u.s. equity strategist. this is bloomberg daybreak -- here is your bloomberg business flash. capital one sza massive data breach exposed personal .nformation a former amazon employee has been charged. services rented from amazon's cloud unit store the data. capital one says it is unlikely any of the data was used for fraud. shares of merck rising in premarket trading.
of thear sales best-selling cancer drug rising. profits thatrting miss the lowest estimate in the third quarter. consumers do not care much for the new games. it left its forecast unchanged. lead: time for all of the -- time for follow the lead. today, we are looking at health care. pharmaceutical companies reporting earnings yesterday. merck and also eli lilly. pfizer announced its spinoff to merge with mylan. --ning us is near red chain nirad jain. armstrong,s is drew who leads bloomberg's health-care coverage. start with this big news with mylan.
in washington, regulatory uncertainty, on the other hand, consolidation in the industry. at thisu have to look as companies that had questions that needed to solve. mylan is one of the biggest generic makers. downturn has been on a as the market for generic drugs has been more and more challenging. epipen has based its own troubles, and then you have pfizer, which is a company that ,s so big anything it does people say will that move the needle? they are so bake the moves they need to make for investors to start thinking anew about the company are sizable. they've been talking about a split for years and years, even under the past ceo. they were looking for what we do with these profitable but older drugs that are generating lots of cash, many in developing
markets, but not at the core competency of trying to do development of new therapeutics. it lets these guys get together and solve the problem for mylan. it gives pfizer somewhere to put this business that does quite well for them but is not necessarily the thing investors are focused on. david: every deal is idiosyncratic in some way or the other, but when we talk about health care doesn't it make sense to be making the decisions , given the uncertainty. we will see tonight on the debate stage in detroit about have to regulation in washington. drew: i think there are two truths in pharma. innovation will continue to be rewarded. , unlike most industries, you do not see a correlation between overall sale and profitability. you see that in a lot of industrial businesses.
you do not see that in pharma. what you see is a correlation between leadership in specific categories. having a leadership in oncology or diabetes, and we call that the category leadership index. what you will see and what we've been advising clients over the last decade is you have to shift your portfolio towards innovation, but focused innovation we can be more effective on your r&d and more efficient on your sales and marketing. you will continue to see divestitures and acquisitions. david: that raises the question on whether innovation is homegrown or you need to acquire it. we talked eli lilly cfo and he says he prefers growth. >> major acquisitions or major , andrs do not create value that they are counterproductive to bring a new medications to market. we are focused on the five therapeutic areas we are in. we do want to make investments but it ise companies,
around acquiring best in class medication. david: eli lilly is a leader, so they do not need to look at acquisitions. >> what i will say overall is it can be through organic growth. if you feel you have the assets in your r&d pipeline to focus on your category position, you should continue to do that, other players will say i've to go outside to acquire it. that is fine as well. alix: who does? nirad: if you look at the type of m&a in the last few years and the biggest drugs, bristol-myers had a few. that is a drug that came from the acquisition. there is a huge amount of m&a that leads these drugs that are the top line drugs came through deals. they might've also been massive and state with you. -- if we look at the future of these companies, there are a lot of questions. pace -- it's cancer
drug is on pace to be a $10 billion a year drop. gileadare always asking, just went through they were selling $15 billion year of their hepatitis c franchise, and people are saying what have you done for me lately? m&aook at the mma -- at the , there are number of deals. i doubt we are done with this. david: we talk about medicare for all of medicare for more. are these companies looking at a net risk from washington? nirad: there is always regulatory overhang that persists across the entire health care profit. the health care profit is $350 billion and is almost 20% of the u.s. economy. everyone will be looking at u.s. health care to see where we can be more effective. pharma has to be the largest part of the profitable. it is 20% of that profitable. insurance is another component ,hat is about as equal in size
and then there is the provider landscape, hospitals, physicians. people will be looking across for increased efficiency. drew: we spent the last more than a decade dealing with the idea that some piece of government legislation will come and completely remake the health care system. we still have a vibrant pharmaceutical industry and the vibrant insurance sector. we have tons and tons of venture capital and investor cash going to start up companies. companies are used to dealing with this environment. huge operations in washington, some of the biggest spenders on lobbying. this perpetual worry from washington is the cost of doing business in this industry. we talked about medicare for all. yes, it would be a major change. what has to happen for that to become law is a big hurdle. there are a lot of people that have doubts about whether or not we would actually see all of the
apparatus of the private health care insurance system disappear in this country. always a risk from d.c., always a risk of change. the health-care system will still be around in some form or the other. alix: some form or another. what are your clients talked about in terms of what they see as the biggest risk? nirad: the clients i'm working with, particularly on the health care investment side are saying any companies making the system more effective, increasing access for folks, we want to be on that side of the equation, and all of these discussions means that changes will continue to happen in the health care environment and we want to be on the right side of those and take advantage of the disruption and find ways to provide access to as many folks as possible. tech: does that mean med more effective, more efficient? nirad: med tech is a place where you see efficiency rewarded.
if you think about the hospitals and other providers that are purchasing med tech products, there is a lot more efficiency that can happen. david: is med tech. ? yet? med tech here nirad: we mean a lot of different things. we have seen a lot of funding go to new development of companies focusing on trying to use technology and data to figure out how we more efficiently -- david: is it -- the cost curve yet? drew: i will say who knows. right now it is not something that is more pervasive that you can look across the health care system and say technology has saved us. if you look at individual insurance plans, efforts that are local in nature, some of which are very technology focused, some of which are nuts and bolts of doing care better at the doctor level, you see individual successes. i do not know any of those
successes have translated across the u.s. helped her system. we are still spending close to 20% of gdp. we will not know that for years and years. david: you say to his percent and going north as a percentage 18% and- you save is going north as a percentage of gdp. it cannot continue. what will change? drew: i think you'll be increased efficiency of care. you see the system trying to ensure patients are in the right setting. not everyone needs to be in acute care hospitals. hospitals are designed for sick patients that have specific issues. if you see a proliferation in new york city of urgent care clinics, of other alternate care. you will continue to see a push, not just from government regulatory actions but also from the private sector to engage with consumers. you will continue to see these types of efforts. jain of bain and
weaker and they see a slight decline in north american revenue. i get that. overall they are still looking at a 3% to 4% increase driven and international sales and their margins are getting better in their inventories are getting leaner. david: this is a turnaround. that is not a surprise. they are selling down their inventories and they reduced their debt significantly and their forward guidance was positive. the third-quarter revenue we see down 2% to 3%, we already knew that. if you look at the chart, it says north american revenue and you can see it continues to be lower. for retailers getting crushed on margins and cannot manage their inventory, their inventory was down 26% and they see their margins that will increase, they see their gross margins increase of the top and 130 basis points. david: my reaction was it looks
like a turnaround. they are not out of the woods yet but they seem to be turning around. finally selling author inventory. alix: overall, the market punishing it. the call is underway, highlighting the headline that sees the decline in north america revenue. forget that international will be holding up well. earnings, if you miss, you get punished. a lot on the downside. that is it for bloomberg daybreak: americas. , theg up on jonathan ferro janice henderson cohead of global bonds on the day before the potential fed rate cut. this is bloomberg. ♪
comingg up -- jonathan: up, the fed meeting begins. investors are expecting the first rate cut in a decade. the u.s. trade team lending and shanghai to talk. andctations remain low easing together another day full of earnings with apple headlining today's result. good morning. here's your tuesday morning price action. futures negative 16 on the s&p. in the fx market, firm or. 1.1153. your yield, 2.05%. .et's begin with a big issue low expectations for the latest round of trade talks. >> the expectations are fairly low. >> i do not expect to see any near-term settling of these trade talks. >> there does not seem to be any incentive for the trump administration to finish the