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tv   Street Signs  CNBC  January 4, 2016 4:00am-5:01am EST

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welcomement happy new year. you're watching ""street signs"" i'm carolin ross. china halts trading early after a 7% selloff triggers the first ever circuit breaker following disappointing manufacturing data. >> and the route in asia leads to steep losses and dax wiping off 1/3 of last year's gains. saudi rain yeah's execution of a shiite cleric sparks protests but the oil rally is
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short lived. >> ferrari trading slows down after they spin off the super car maker. good morning, everyone. let's get straight to macro economic data. the eurozone macro pmi came in at 53.2 so just a smidge higher than expected. this is november of 52.8. that is a nice increase from the previous month. we also had the data for a couple of the regions and the economies in europe. germany beat expectations. german number was slightly below. the tallied manufacturing number grew at the fastest clip since early 2011. the euro dollar 1.0924. nancy, how are we doing in terms of markets? >> carolyn, data of course not
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having a majorism pact ismpact the selloff of china's mainland stocks. investors keeping an eye between increased tensions between saudi arabia. overall stocks 600 off 2%. let's get an eye on what the individual markets are doing one by one. keep in mind that we have seen end of the year really some disappointment across the sectors. the ftse 100 of course ending negative. all the major markets coming off the highs seen in april. now we're seeing selling at around 2 to 3%. the ftse mib down. ferrari was spun off. the ferrari in milan gained a bump. the french cac 40 off 2%. the xetra dax off 3%. one of the outperformers last year now entering the new year in significant below.
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1.8% seeing weakness in basic weaknesses. meanwhile china's csi 300 shed around 7% before triggering a circuit breaker which suspended trading for the rest of the session. this after two major surveys signal a contraction in chinese manufacturing in december. for more on that, let's get out to sri in singapore. happy new year to you. disappointing data from china. i'm wondering if there's something bigger here driving sentiments significant can'tly lower? >> i'll say this, i think the volatility is back and it's back with a vengeance. arguably people got a little bit complacent about the china markets. they thought they saw the washouts, the worst of the meltdown in the third quarter in 2015. this tells me that there's still a considerable degree of margin debt and leverage in the system and with that margin debt and leverage comes renewed volatility. the trigger seems to have been
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the data as you pointed out. we saw weakness in manufacturing activity, both the official and the forecasters, pardon me, for the month of december. so manufacturing under pressure. that's not really new news. still, it confirmed the trend of slower growth for the chinese economy. services was better. we saw improvements. your growth in december. that speaks to the rebalancing towards consumer-led growth. i'll say this. i don't think that the strength in the services sector is really enough to pick up the slack in manufacturing. anyway, the circuit breakers, they were implemented by the chinese regulators today. i don't think many people in market really expected it to be tested today, but that's what we saw. we saw some very heavy selling in the afternoon. we are down by as much as 5%. that was the first threshold, bang. we saw the circuit breakers come into effect and triggered. 15 minutes halt before the trading day. then trade resumed 15 minutes
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later. five minutes later after trade resumed we saw the circuit breakers implemented again, bang, because the market really fed upon the selling. it was down by 7%. that was the other rubicon that was crossed. and that implemented the circuit breaker that really froze trade for the rest of the day. so this was really on the csi 300 which ended at 7% lower, almost 7% losses you can say for the shanghai composite and i think what really freaked people out is the fact that when you have the circuit breakers implemented today, we saw some heavy selling. that panicked the market and it was almost the equivalent of someone shouting the proverbial fire in a crowded movie theater. everyone panicked. everyone rushed for the exits and there was a rash of selling that really snow bald. so that's what we really saw today. big question for the rest of the week is whether we see some buyers come in and sell in -- excuse me, buy out the lower levels here or whether we see a
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continuation of this meltdown that we saw today. let's not forget that we still have a lot of data. we have the trade balances for china, both the external and import numbers. those are being very crucial to see how the external picture is doing which isn't very hot, let me remind you, and also the internal picture so the market still faces a picture. that's where we stand. >> sri, thank you for that. pretty ugly start to the year. you can head to the website for the explanation on china's circuit breakers. cnbc.com. let's get some market perspective. joining us live from zurich. happy new year. what do you make of today's market selloff? do you think it's an over reaction? do you think it's warranted? it's all about china and geo politics it seems. >> indeed. well, you know, the reaction is not really very uncommon one,
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you know, against the uncertainty out there, especially in regard with the uncertainty in the middle east. maybe it's too cautious and too negative and also with regard to china, we think this is just continuation when it comes to macro information. so all in all i think markets have been spooked simply by the introduction of this new tool which is now tested. i think this is a good thing for us. it feels rather too tight and therefore most likely to be in a self-defeating mode. >> christian, what about the outlook for 2016 because 2015 was all about the emerging market. 2016 we should get used to more geopolitical risk and continued volatility surrounding china? what do you think will be the big themes? >> i think it will be a washout in the commodities space.
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everybody has this on their radar screens. everybody's worried. these assets when it comes to the emerging markets, i think fundamentally we'll have to see a change in stance, reaction also from the supply side or the bumming get from the emerging market economies which will probably only be triggered if the prices are there. most probably or possibly this could also be the bottom in the emerging market in some stage. unfortunately probably not now. >> christian, just zeroing in a bit more on china. i understand julius baer remains confident on china. we just heard from sri, our correspondent, talking about concerns that a services led consumer economy may not offset the growth slump on the other side. are you concerned that investors
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are too optimistic at this stage? >> i don't think that there's over optimism, especially not after this very weak stretch data we've seen out of china in the second half of last year. it's very difficult rebalancing, which is going on. we actually give it more than the benefit of the doubt because we've been successful ultimately in the divergence and the people's meetings already points to this. this is a once in a lifetime opportunity for this commuumulo economy to become less dependent on the exports. given the fact that there's still a major, major possibility for the stimulus. the chinese could actually stimulate the economy at any time. they don't do it and they do it for good reasons, we think this
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is a healthy sign that the services sector at least are on track. >> we're still waiting on the external stimulus. christian, thanks for being with us. want to take you back to the oil markets because we've seen quite a bit of action overnight. brent crude is down by 1/3 of a percent. wti crude, 36.90 also off 0.4%. those gains were very short lived. let's look at the stocks in the middle east. what we're seeing here is a little bit of a mixed pictures. we're seeing many of the indices off. the tdw main index is up slightly. this comes after saudi arabia has officially cut all diplomatic ties with the iranians sunday over tensions surrounding the execution of the cleric. they've been given 48 hours to
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leave the embassy. sheikh nimr al nimr was one of the people executed. he was an outstanding critic of the ruling assad family. nali, we're seeing some very fierce language coming out of iran this morning saying saudi arabia really only cut the relations with the country to cover up domestic problems. >> reporter: that's right, carolyn. a lot of hard words from the foreign ministry here saying the saudis have cut relations with iran just to exacerbate tensions with the country and they executed shakeh nimr al nimr to deflect from the problems they're having home. the saudis have cut off relations with iran. they've given them 48 hours to leave saudi arabia.
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we've had a war of words here. we've had diplomatic relations cut off. there's the proxy relations between iran and saudi arabia, iraq, lebanon and beyond. that could also escalate because of the problems these two countries are having with each other now. these two have had very little love lost between them. they've never gotten along very well. this is as bad as it's gotten. people in iran are worrying this could escalate further. nobody thinks there will be any direct conflict between iran and saudi arabia, but in the regions where they're having these proxy wars, things could get much, much worse. the other fear also is that they're not going to be able to come to any conclusion on how to defeat isis and how to sort out the problem in syria. iran and saudi arabia for the first time were sitting around the negotiating table in have i naen with world powers trying to alleviate the situation in syria, but that's not going to happen any time soon anymore.
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i don't see saudi and iranian diplomats sitting around the table trying to figure out what to do with syria. this situation looks like it's only going to escalate further. we have to see if the iranians are going to reciprocate and should down all saudi missions here. they haven't said anything here, but that is likely the next step. president rohan ai is trying to keep the relations here. the raid on them was not justifiable. >> ali, thank you so much for that update. let's get some final thoughts with christian. you say commodities is not the asset class to own. what do you want to own in 2016? >> we don't want to own consumer exposure and we do want to own growth, particularly when having consumer exposure. i think this is still the third and second ground effects we're seeing from the lower energy prices, from lower commodity prices overall.
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and the beneficiaries actually will be sectors like consumer discretionary, i.t., anybody who has more of a european domestic or u.s. domestic exposure. i think that's the big theme still. simply the change of the number when it comes to the year actually hasn't changed a lot in terms of the investment stance. >> more of the same then. christian, thank you so much for that. chief strategist and head of research at julius baer. >> coming up, we're shifting into top gear. shares in ferrari accelerate into full speed as the luxury automaker begins trading in milan and cnbc's steve leaseman will speak today from san francisco. plus, at your service, mr. zuckerberg. we explain why the facebook founder wants an artificial butler for his home. find out about that coming up.
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welcome back to ""street signs."" let's give you a check on 49er rar rar shares in milan. remember that shares did open around 43 our rows. now slightly off at 42.35 at this stage. meanwhile fiat chrysler shares,
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the former parent company, are down 20% following the initial selloff of ferrari. this came after they distributed 80% stake to the shareholders. investors received 1 ferrari share for every 10 chrysler shares. ferrari ipoed late in the year. the stock dropped below its initial price of $52 and is now trading around $48. joining us now live from milan is angela meda, head of equities. pleasure to have you with us. highly anticipated debut here kicking off in milan. solid performance so far for ferrari. i have to wonder given that we're seeing such an increase, are we expecting to see more volatility in the coming weeks? >> yeah. probably yes. we have to remind that they sold a 10% stake on the nyse.
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no investor. now that the free flow has increased 75%, it's likely that a lot of them will try to enter and buy. while on the other side, around 15, 20% of the stake is in the end of the holder of convertible bonds which are likely to sell the stock. so we will have on top of the market volatility and single stock even up from these two kind of investor which are likely to buy or to sell the shares in ferrari. of course, the current situation in china is not helping. it's likely we will see a roller coaster in the next days. >> with the increase in the flotation, a lot of analyst investors hoping to get a more accurate portrayal of what the stock is worth going into the listing especially in the united states, there was so much
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expectation that it was treated as a luxury stock but also in the marketplace, it's at a discount to some luxury styles. is this a luxury company or should it be traded as an auto stock? >> that's to consider ferrari as a luxury stock. there are a lot of reasons to consider these, because especially the resiliency, even in the bad years so they were able to increase prices and volumes. the strength of the brand. the history, the technology behind everything. it's likely that they will be able to go from 7,000 to 10,000 in four or five years without impacting the brand. in the end it's 23,000 more cars per year. in china every year we have 5,000 more so it's quite easy for them. the market probably now wants to
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see six months, one year of ferrari stand alone actually trading at the 25% discount. we believe that this discount is going to narrow in the next months. as far as ferrari will deliver strategy. >> angelo, i'm looking at some comments coming from the ferrari chairman. he says he sees 2016 sales at 7,000 sales. they want to ramp up production. i'm looking at a recent note from avacore, they say ferrari isn't the highest margin scale producer. at what point with the rising production do you worry about the margin picture? >> no, i don't think so. i think that they are -- they have been very resilient in margins if you look at the history since 2000.
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the last 15 years their margin has changed very little year after year. i think they are trading only 2% while an automaker can go from profit to losses very easily. i think they have the scale to sustain more action. at the end we have about only 1,000 cars per year. it's not a dramatic increase. probably it will be made also thanks to a new remodeling so maybe one more model every five yea years. more extreme luxury market, very top speed sport car but also familiar ones. not entry, of course, the mass market but remaining with the price stagger about $300,000. angelo, thank you so much for that. head of equities at banor sim.
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>> thank you. meanwhile, tesla delivered 17,400 vehicles during the fourth quarter meeting estimates and achieving its highest ever number of quarterly deliveries. the electric car maker said it delivered 75% more of the model s than it did the same period a year ago. it reached the total of 50,000 vehicles a year. tesla shares are up over 9% over the past 12 months. you know, carolyn, we've been watching the stock throughout the year. they're meeting expectations. it's at the lower end of a range already reduced. investors want to see how the suv model in particular can real dloi. >> and also the model x because if you drill down into deliveries of that, that was a little bit disappointing. only 208 deliveries of the model s crossover. that's what tesla is banking on for growth. elon musk has always said, look, we want to go for quality, not
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necessarily for quantity. hey, if you're giving a guidance number in terms of production, of course, investors are looking at quantity as well. remains to be seen if they can ramp up production and ramp up deliveries for the tesla x model, much anticipated. >> we were talking about with ferrari, is it luxury or an auto company. >> here it is is it an auto company or tech. >> or tech. >> all of them speculating it could be a tech takeover. when you look at the company burning cash to expand models. electric cars not getting the success. >> another interesting story we're following for you. u.k. drug maker shire is on the brink of taking over baxalta according to a number of weekend reports. the two companies are believed to be finalizing a deal which could see shire pay up to $48 a share. baxalta had rebuffed shire's
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first demands to turn hostile in the month of august. they tried to buy shire back in 2013. they failed because of the crackdown on tax diversion. since then shire has been trying to bulk up. they tried to buy one company for 5.2 billion last year. that's 75% of their own market cap. >> yes. >> but at least they've removed themselves as being the takeover target. >> interesting, too, we were talking about a share deal. now there's a cash component coming in. shire originally feared there would be negative tax implications. it seems there is advice that they could get around that. we could see a cash component with this deal as well. meanwhile, another stock moving is the determine man sports brand of adidas. more than 2 billion our rows of sales. heiner said he was maintaining a positive outlook of increased
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sales and earnings and that he was, quote, confident that order books were full for the first half of 2016. it's interesting with adidas coming with pretty solid results coming from their top competitor, nike. really putting the emphasis on china. we talked so much about consumer demand in china. if you look at nike, adidas, most of them seem well. >> niko results pretty solid? fantastic results. futures orders and also the china performance. they're defying all odds. they're also defying the dollar impact and what you need to keep in mind is that nike and under armour especially in the u.s., they've been gaining market share at the expense of adidas in 2015. adidas many people say has lost touch with the u.s. consumer. given that this is their second biggest market -- sorry, their biggest market, they really need to put in more work. >> extremely competitive space, no doubt about it. okay. and gold prices were higher
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today. landgold ended a deal with anglogold. they walked away once they found that the deal would not meet the investment criteria. the move is a financially disciplined one by the african company following a difficult year for commodities. that puts it very mildly. i guess landgold once again is also higher because we're seeing gold move up today on safe haven fears. the fear is that gold is going to be falling below 1,000 an ounce obviously given the continued pressure and commodities, the rise in the u.s. dollar and the fact that there simply is no inflation y. would anyone buy gold at this point? spot gold this morning up by 1.1%. 1,071. >> i think with the dollar strength it's really impacting all the commodities across the board here. getting a key data point today, the ism manufacturing grid, disappointing chicago data out on friday.
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so it will be interesting to see if that has any impact. some question whether or not we could see the floor hikes that are projected. if you do have any thoughts on what you're seeing on the show, if you want to get in touch with us, tweet us directly @carolyn @cnbc and your twitter handle is? >> @nancycnbc. >> european markets taking a beating after the sharp losses we saw in the chinese main land markets. as you can see most of the major markets off 2 to 3%. we're seeing selling across sectors here with just a very few bright spots. the auto sector among the worst performers as fiat chrysler is really taking a beating after spinning off ferrari. we'll have more on the individual market moves coming up in just a few minutes after this short break.
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welcome, you're watching "street signs." i'm carolyn roth. >> and i'm nancy hare grave. these are your headlines. >> china halts trading after a 7% selloff is a disappointing manufacturing data. >> the route in asia leads to steep losses. the dax wiping off 1/3 of last
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year's games. saudi arabia's execution of a shiite cleric sparks trouble. the oil rally is very much short lived. going to bring you some breaking news on u.k. manufacturing pmi. the december figure falling to 51.9. that's versus a revised figure in november of 52.5. and we still get expectations coming that this data were much higher in the range of 52.8 to 53. so the number of 51.9 for u.k. december manufacturing falling shy of expectations. we're also getting manufacturing pmi new orders coming in at the lowest since july. the new orders figure is 52.2 compared to the november new orders of 53.6. also take a look at the mortgage approvals here at 70,410.
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that's slightly higher than the 69,807 in the previous month. sterling dollar there up just slightly at 0.1%. we can also take a look at how u.s. markets are set to open as we continue to see this global selloff coming after sharp selloffs on main land china. u.s. stocks again closing out the year on a sour note. the s&p 500 and the dow having their worst year since 2008. let's take a look at european markets are trading this morning. we continue to see sharp losses in the neighborhood of 2 to 3% across the board here. the french cac 40 off 1.8% along with ftse 100. the xetra dax, the real performer down 3%. what's the trigger for that, nancy? oftentimes it is china. that's the case once again. the first trading day of 2016. china csi 300 shed around 3%
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which was a trigger breaker. this was after they signaled a contraction in china in the month of december. also want to show you what this meant for the fx markets. we're seeing a lot of moen flowing into the safe havens. that means money flowing into the japanese yen. we're seeing the u.s. dollar pair at 119 back below the 120 line. that is an 11 week low. we're seeing many of the commodity currencies and the aussie dollar under a fair bit of commodity. it's down by 1.4%. in the bond markets, no surprise. more safe haven flows here. we're seeing prices increase, yields down. the ten year treasury note at 2.23%. the 10 year bund yield at 15 basis points. last time we checked oil prices were down fractionally on the day and now they're up again. so a little bit of seesawing
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here. protests have broken out in tehran as well as iraq and elsewhere in the region following the saudi execution of a well-known shia muslim cleric and 46 others for terror offenses over the weekend. joining us now is jason gemma. let's talk about the geopolitical impact first. isn't it a big surprise for you to see on the first trading day of 2016 that in the oil market it's all about geo politics, not about supply and demand? >> i think that it's not spiking there is a fundamental back drop to the market now. there's been conflict in the middle east for the past three years. syria, yemen, libya all experiencing quite a bit of conflict, yet oil prices really are not putting any political risk into the process right now. >> you think this will remain the case for 2016? now it's different. you have the two most biggest, powerful oil producers in the middle east going head to head. this can't be good for opec's
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aim to stabilize oil prices. >> i think opec no longer really functions as an organization really. it's all about saudi policy and saudi arabia putting a full level of output into the market. really, the proxy war in yemen has been going on for a while now. that conflict has been with us. i think it really is an issue of the market being over supplied by about 1 million barrels a day. that's likely to persist through the first half of the year. >> jason, so much has been made of the response from iran to saudi arabia. we've also seen a reaction from iraq as well, the top shiite cleric demanding the execution. what happens if iraq gets strapped into this as well. >> you're dealing with the three largest producers between iran, iraq and saudi arabia. i think it's a issue of whether the political situation will lead to an interruption in the economic rallies in the oil market. i don't expect that the oil market is going to see a supply interruption from any of these three very important countries.
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>> let's just go back for a minute about what you said about the oversupply situation, kind of staying with us at least for the first few months of this year. how does this play out in the he can at this time which is space when we look at some of the top players in energy. when does this become a buy in? >> it's going to be more weighted towards the back end of the year. as long as the oil market is over supplied, they're going to have a hard time to get a bid. the market tends to react in an be tis si pags. i think maybe by the second quarter this could be a good entry point for some of the equities. we like shell. shell is very attractively priced right now. that would be something we would be taking a look at. i don't expect the performance to occur until the back end of the year. >> what happens if shell cuts its dividend. it hasn't done that since 1945. the fear is many of the oil majors, even the more a robust one. >> if shell cuts it i'm wrong. i think the balance sheets of the big integrated companies are
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strong enough that they can get through another year of low oil prices and not need to address the dividend. the risk is definitely out there. >> they're going to have to borrow more to pay out that dividend. at what point are you going to be worried about the debt ratios. they're pretty low at this point. at what point would they be creeping into territory where you would feel comfortable with? >> you've hit the right point. we do see leverage increasing throughout the rest of this year. i think that really we need to see net to net capital is 30% because of the risk. that's more of a 2017 event. we do need to start to see fundamental correction in the oil markets to make us confident that the leverage ratios are going to stay okay. >> speaking of shell, they face a crucial vote at the end of the month or an approval of shareholders for an approval of bg group. some concerns, again, we saw a major holder in bg, nearly half a stake in the company. do you see concern about that vote getting approved? >> i think the deal is going to
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go through. i think if we look at the front page shareholders of the stocks, there's a lot of crossover. so i think there is acceptance of the deal, but certainly in a low oil price environment you've already o brought the risk of a dividend as you put more shares into the market and buy bg, that becomes more of a concern. i think that's where the risk element comes into play. i think this is a very good strategic deal that will come through. >> jason, thank you for joining us. jason gammel at jeffries. stanley fisher says the central bank's normalization tools have proved effective. he added it's still early days and the fed stands ready to adjust policy. he also sounded the alarm on the potential reduction in the fed's role in a financial crisis saying, quote, the lender of last reduction function is very important. >> very unusual, nancy, not to see so much if he had speak in the year between christmas and new year's. john williams says fiscal
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policies may be more effective at battling weak demand rather than interest rate moves. he argues government spending and other targeted efforts were better in aiding the economy. and cnbc's steve leaseman will be speaking exclusively with john williams that's at 17:10 cet from the american economic associations taking place in san francisco. let's cross over to japan. japan's central bank is considering cutting its forecast for 2016. that's according to the nikkei. >> yes, the b.o.j. is to release a quarterly report on the outlook of the economy and prices later this month and the nikkei reports that it's likely to lower its inflation forecast of the consumer price index from 1.4% to around 1%. the largest factor hampering consumer prices from rising is cheap oil. the b.o.j. had expected oil prices to be around $50 per
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barrel. it's hovering in its 30s. cheaper oil helps people shake off the deflargs ri mind set. people spend less when they think they can buy something cheaper later. the survey of business sentiment show a clear drop of inflation expectations. it's this mind set that the b.o.j. governor had been trying to change by massive scale monetary easing. now faced with the risk of falling back, they're watching another round of easing. at the same time though they say the central bank can only make one or two more moves towards easing and timing is key. now ending deflation has been prime minister abe's goal ever since he took office three years ago and in a new year's speech today he admitted that there is still a way to go and vowed that along with the b.o.j. the government will do everything possible to achieve it. and that's all from the nikkei. back to you. >> thank you so much for that. carolyn, i don't know if you've come up with your new
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year's resolutions yet but if not -- >> i don't have any this year. i'm not doing any. >> maybe this one will give you some ideas because mark zuckerberg, facebook's founder, expects to build an artie figuresal intelligence program for his home and that, of course, includes a butler. mark zuckerberg said the assistant will help with home and office tasks and compared his vision to jarvis, you may know, is a computer in "ironman." >> what's not to like about this plan? >> i love it. >> you worry with artificial intelligence whether something goes awry. >> that's true. there have been so many worries about how a.i. can harm humanity. he hit at that. he said that is farfetched. he said artificial intelligence could help humanity more than hurt it. i think what he's talking about here is a very, very simple form of artificial intelligence. what he's talking about is the smart home, the internet of things idea. he wants to regulate music,
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lights, temperature through voice recognition. so to me, actually, it's not that big of a step. this is something that your smart home should be doing already. >> exactly. music functions, that's a perfect party piece. >> though i think dishes, that would be amazing, if the robot could do this. i put this out on twitter. one viewer writes in taxes as something my robot or hero bot and dishes and maybe the grocery shopping. >> the irs may have a few gripes with the taxes issue though. >> that's true. >> have to make sure the ai robot is quite precise. if you do want to get in touch. >> if you do want to send us your tweets on what the ai robot should do for you. tweet us @carolyncnbc o or @nancycnbc. what makes a technology superstar? we've been asking a number of top innovators some key questions to find out the secret of success. gerrard grek is up first.
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>> wow, good question. i guess it is when music suddenly became available on your mobile phone. the ability to discover, download and consume music on your phone was great for me. great tech level. i think a mobile phone is your remote control to your life these days. it's not everything, but you clearly need it nor many things, whether you're booking a car, whether you're looking at bus timetables. it clearly does a lot for you and makes your life so much more efficient. i think it's going to be a lot about emerging intelligence. so the notion as more and more datasets are created, there's going to be a need for crunching that data and making sense out of it. so there's going to be quite a lot of investment and research
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and development around how we make the most of this data so through artificial intelligence or machinery which i'm looking forward to. i think not just a tech super hero, i think super hero in general says about steve jobs the way he was brought up, the way he lived his life in the early days and the way he looked back on his life and always made decisions based on connecting the dots through his life and obviously he went on to produce some amazing products that we all live by and live with every day. that's going to be vinyl records. it clearly already is making a comeback slowly but surely. you cannot simply replicate the sound and the vibrancy and the dynamism of a good vinyl record no matter what people say so i'd love to see more vinyl -- vinyl records and record players on people's desks at work as well as at home by the sofas.
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and you can head to our website to hear more from tech innovators on what to expect in 2016. that's on cnbc.com. nancy. carolyn, saudi arabia has given iranian diplomats just two days to leave the country as tensions escalate between the two nations. we cross out to hadley gamble who has the very latest coming up after this short break.
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welcome back. we do need to correct an error in our reporting of the ferrari ipo pricing. the issue pricing of 21 our rows on our graphic was wrong. apologize for that. shares in the luxury car maker opened at 43 shares. trading at 43.24. if you're just joining us, let's give you an update on the other top news stories this morning. isis has released a video of the execution of five british spies. they threatened the u.k. prime minister david cameron calling him, a quote, slave to the white house. a 6.8 earthquake struck killing at least 9 people and injuring nearly 200. nor endra mode did i said he was in touch with authorities in the northeast. an official at myanmar's airport
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said there were no casualties on that side of the border. the operator of the dubai hotel that suffered a huge fire said the event will not have a, quote, material impact on the group. the chairman of mr properties said the address downtown will be rebuilt and has yet to give a time line. the controversial steve jobs documentary quotes steve job, the man and the machine, has made its cable tv debut sunday night when it aired on cnn. it was a series of interviews of people who worked closely with him and focused heavily on jobs' flaws. a new year, 2016, started a couple of days ago. we have a new show going on, starting today, wor"worldwide exchange" returns. how's the big apple treating
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you? >> very well. may i start by saying happy new year to you. we're looking forward to getting things started here on "worldwide exchange." we're going to pick up where you are leaving off. what a day to start. dreadful risk sentiment across the board. you've been highlighting it. we'll continue with further analysis on that and start looking ahead to the u.s. trading day. the u.s. trading year, indeed, and futures currently pointing to a negative open of 1.5%. a lot more market analysis to come. all the essential trading information needed for traders state side before they start their day and their year. we'll also have a bit of fun along the way. joe kernen will join us. we'll review the nfl scores. he'll help me pick a team who i should root for in the playoffs which will be starting next weekend. missing london but excited to be out here in zblork how did arsenal, your team do over here? i know now you have to pick a new team over there.
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on this side of the pond, didn't they do pretty badly? maybe i'm wrong. i don't know. >> you're wrong, i'm he afraid to say. i'm pleased to say. i've got to focus on the nfl. i'm delighted you've given me a chance to talk about soccer. arsenal started top of the year at the top of the league. we're starting the year looking pretty good. hopefully i can pick a winner in the nfl and perhaps some stocks and markets as well. >> will, thank you so much for that. best of luck with your endeavors over there. we'll miss you. meanwhile, back to one of our top stories today. saudi arabia has officially cut all diplomatic ties with the iranians sunday over tensions surrounding the execution of a shiite muslim cleric. iranian diplomats have been given 48 hours to leave the embassy. sheikh nimr al nimr was executed on saturday after being convicted of terror offenses. al nimr has been an outspoken
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critic. tensions between saudi arabia and iran have been getting worse for quite some time. >> reporter: after a mass execution, mass protests. iran erupting at the killing of a cleric by its main rival, saudi arabia. crowds burning u.s. flags to protest america's links to saudi leaders. they burned the saudi embassy in tehran. iran's president condemned that but protests have echoed across the arab world and asia. this was india. rioters clashing with police accusing sunni/saudi arabia of executing a shia cleric as a provocation. in bahrain, more riots and calls for the death of the saudi royal family. it was the biggest execution in decades. 47, mostly al qaeda linked sunni
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men, but number 46 was a cleric known across the shia world. nimr al nimr was a charismatic saudi preacher. he said he preferred words to weapons, words harshly critical of the saudi regime which executed him for inciting unrest among the shia minority. iran's supreme leader warned saudi arabia would face devine revenge for a crime. iran is seathing. sectarian tensions between iran and saudi arabia have always been high. now they seem to be boiling over. many iranians from all walks of life see saudi arabia as a threat determined to hurt iran. >> reporter: the execution has inflamed tensions between shia and sunni muslims. faiths led by iran and saudi arabia. they are already on opposing sides in syria. their war of words now worse than ever.
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>> and tonight saudi arabia cut off diplomatic relations with iran giving iranian diplomats there 48 hours to leave the country. the saudis may already have pulled their diplomats out of iran. there's no sign this will boil over into conflict, not yet anyway, but iran's anger is very real. >> and as world powers react to the escalations and tensions in saudi arabia, we are just getting a breaking news wire from reuters saying that russia is ready to act as an intermediary to help settle the dispute between saudi arabia and iran. well, let's get out to hadley gamble who is en route to riyadh. we're just getting that comment from russia. we've seen various reactions around the world. is this hitting home that the tensions between the two powers threatens to escalate beyond the region as well? >> reporter: oh, absolutely, nancy. it's interesting, of course, that the russians have weighed in here. we haven't heard much from the
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americans in terms of what they want to do to mediate here. they've said they don't want tensions to escalate but they haven't really put their foot in the door and said they want to help do something. i think that reflects something we've seen over the last year or two because, you know, the united states really taking a back seat when it comes to what's happening in the region, at least overtly. what the saudis are basically saying, that this incident that their embassy in tehran is a serious violation of not just the convention but they're also suggesting that the attack on their embassy was politically mow the vatded as well. you have to remember who this cleric was, his prominence in the arab world, his prominence in the shia cleric. to the saudi royal family, you have to remember this is a person who was driving the protests in the eastern province, in the eastern part of saudi arabia near the oil facilities. of course, the oil price pretty central to the stability of the saudi kingdom. of course, the protests, while they were quite muted when it came to the residents in the arab world during that time,
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during the time of the arab spring, they were very real to the saudi royal family because, of course, many people were talking about the assad regime as being the next group to topple following hosni mubarak. this is facing a bigger problem in the region. two major powers, iran, saudi arabia often backing opposite sides in syria, iraq, yemen, others. you have to think about the fact that the united states isn't at the forefront of what's happening now. we aren't hearing that much from the president. the biggest issue facing the kingdom right now -- also, you have what's happening in oil prices on the flip side of this, while we have some geo strategic tensions, it couldn't be that bad for the oil price to spike given the fact that they are facing tightened spending, higher deficit and what looks very much like for the first time austerity for a gulf country in the sense that they're talking about cutting substance. cutting back on that spending. so not half bad for a country
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that is basing their budget for 2016 on a $45 per barrel price for the first time in history. >> and they're increasing their fuel prices by 50% which i think is quite extreme. they've never really done that. look, de facto leader of the kingdom, do you think he's certainly taking a more assertive stance? is he changing his tact given the recent actions? >> i think that what we've seen across the board, some serious actions from saudi arabia. this regime change in terms of king abidal la. we've seen a new overt policy. they're certainly changing takt in terms of what they've been doing in yemen. the big outstanding question on that is how much have they actually achieved. i think in terms of the casualties, you see casualties for the saudis. not just the saudis. how much is all of that death and violence actually achieving in terms of changing the regime and bringing back the former
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president which is what they say they really want to do and to push back the iranian backed rebels. that's a big question going forward. you have to remember that is going to continue to play on oil prices because we're still talking about the saudi and iranian gulf community, the persian gulf, whatever you want to call it. this is something people have been talking about. also, what access is going to happen in terms of what they're going to do about syria, the question about bashar al assad. when it comes to that, there are suggestions that the saudis will do just about anything to make sure that any kind of diplomatic solution that would involve mr. assad's presence has to be off the table. some serious tensions, i think, that are going to need to be addressed, guys. >> hadley, thank you so much for that. appreciate it. let's get back to the markets. china's csi 300 shed about 7% before triggering a circuit breaker which suspended trading foort rest of the session. this after two major surveys signaled a contraction in china's factory activity.
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the shanghai comp down 6.86% before being halted for trading. in terms of european markets, we're not looking any brighter here. the ftse 100 off by 2 points. the xetra dax off 3.5%. the cac 40 also showing losses more than 2.4%. pretty ugly start to the new trading year, 2016, but you've got to point out that the xetra dax, for example, it has gained some 10% in 2015. maybe it's china concerns and some profit taking. >> there is something driving it down but you have to consider looking at china as sri was pointing out, the first day the circuit breakers came into effect, a big reason that they were taking that dive. the leverage, the margin trading and whether the pboc can have an impact. >> then you have concerns about the pace of fed hiking. you shouldn't forget about that. then you have more concerns about whether the ecb will step
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up to the plate. so a lot of people say 2016 is going to be very much like 2015 with continued focus on diverging monetary policy. and how much central banks can actually do or change. skbl absolutely. when we can actually break that dependence on central banks. if you do want to get in touch, tweet us directly @carolyncnbc o or @nancycnbc. "street signs" all new in 2016. i'm carolin roth. >> i'm nancy who will graves. "worldwide exchange" is coming up next.
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