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tv   Worldwide Exchange  CNBC  January 5, 2016 5:00am-6:01am EST

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>> china's central bank injects $20 billion in the market in an attempt to stabilize a turbulent start to 2016. >> u.s. equity futures pointing to a regulnegative open on wall street after the worst start to the year in 2008. >> we're getting the first look at a sleek and sporty new concept car today. think part corvette, part bat mobile. worldwide exchange begins right now. ♪
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>> good morning and welcome to worldwide exchange here on cnbc. >> buckle up it looks like we're in for another wild market ride today. >> china once again the big story overnight. let's catch you up on what happened. stocks there dropping more than 3% in early trading and then the central bank stepped in. reports that state controlled funds bought stocks and that the people's bank of china pouring about $20 billion into the money markets. that was the largest cash injection since september. also they were likely using state banks to prop up the currency. after all of that they ended flattish to lower but not a huge boost. not at all and they were saying it would further restrict sales
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and that set up after he was discussing. >> this is what kicked in yesterday. >> exactly. he was highlighting that these big moves are par for the course in china and by putting the circuit breaker there it stops the ability for it to rally back later in trade because if you cut the trade off there and it doesn't get that intraday bounce back that has bigger knock on effects for international markets because we get a locked in close in yesterday's action. we have to look at china with a pinch of salt. now i think it's a tablespoon full of salt. they're trying to control the market. >> they're changing the rules every single day. there's still confusion about this ban on short selling that they put in place last summer. we'll talk to eunice yoon in a moment about the play by play. the sessions are crazy and you never know when the chinese central bank and regulators are
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coming in to put a floor under the market. >> exactly and china control of the market as opposed to manage the economy is different. >> what happens there certainly matters here. a huge slide to start the year. let's show you what futures are doing. they're under pressure after earlier being positive. china managed to stabilize global markets but u.s. dow futures are worsening in this early hour down 88 points right now on top of yesterday's slide. nasdaq down 17. it got hit the hardest in yesterday's trading session. let's show you what's happening in europe right now. remember, germany china, they sell a lot to china. whenever there's fears about china, germany gets hit. the ftse 100 in the u.k. getting good news on manufacturing. >> manufacturing data was
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surprisingly strong today. it's not the crucial reading because services is about 65 to 70% of the economy. in general you'd say u.k. data is getting a lot softer so this is a nice positive surprise but not enough to lead in the big rally. germany was the weakest of them. >> we'll talk about that. that's an interesting one. >> now back to the roller coaster session in china overnight. eunice yoon joins us live from hong kong. bring us up to speed. what's the latest? >> well, wilfred, the chinese authorities are doing their best to stabilize the stock markets. we had the pboc or chinese central bank injecting $20 billion into the banking system and the chinese media has been on overdrive with major headlines like don't overreact, this is normal and the national team, meaning the government is on the move again. there's also some suspected buying of stocks by state backed if i recalled. now the problem is this isn't
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having much of an effect to boost the confidence among investors that drive the stock markets. we spoke to many of them over the last couple of days and most of them are saying they're concerned about the state of the economy. there's one investor that said to me that of all the news that's bad and it's just too much to bear. that the data was bad and the weak currency. people were saying look how bad the economy is. just take a look at the currency. all of this is really scaring people and what we're hearing also is that not only are small time investors but some of the local professionals are starting to worry about a second stock market crisis looming and one of the major events they're looking at is the exploration of government controls later this week on january 8th. the government is going to lift a ban that was put in place over the summer to try to ease some of the selling. so we heard they're going to
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potentially extend that ban but it's not having a lot of effect on trying to keep up investor spirits here. >> is it the economy or the markets? we go back to asking this question and there's obviously concerns right now about both but back to a conversation yesterday of squawk on the street, he has always been positive and a backer of what the government there has been doing to transition this economy but he said there's no period chance of a hard landing. so why is everybody freaking out? >> they thought we're seeing this bubble or inflated market falling and i want to get out but now the conversations that i'm having is more about the data and the economy m. and one investor said i'm just
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more sen tisitized now so i'm looking at everything and what they are looking at is the economic data and they are worried about the currency. >> eunice, thank you very much for the update live in hong kong. >> the hong kong newspaper called yesterday black monday which they have done many times. they did it last summer as well. what a difference 24 hours makes. at this point yesterday we were looking at a sea of red across global market. by the end of the session the dow posted the worst start to the year since 2008. it was the second highest volume day in two weeks: the financials were the bigger loser. at one point the dow was down 457 and finished lower. >> we did come off the lows but that particular factor, all sectors were lower. this was very broad and a huge risk off day and yet we didn't see much movement in the bond
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market. you'd think if everybody was super scared, you'd think back in august we did see a big two day move in the u.s. ten year because people were running for safety. so that is just something that offsets it because people weren't pouring into the bond market. >> good point. you're saying maybe not as scary as last summer. but you did see some buying of yen and gold. >> you did but we've seen yields tick up as well over the last month from the fed hike and we didn't see any further compression in the other direction but something to bear in mind and the u.s. dollar didn't react that much itself. so we would have seen more movement there and that hasn't happened. >> it was one of the worst starts to the year and if you look back at other really bad starts to the year, we're
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talking 2001. that was the tech bubble busting. 1980 is on that list. '83 and what we learned from 1980 and '83 even though we saw sharp declines worse than yesterday on the s&p 500, there we go. those are some of the lists. it's the fourth worst performing first day start in modern history but what i was going to say about 1980 and '83 is stocks rebounded. so it doesn't necessarily say everything about the year. given all of this volatility in selling wall street forecasts are less optimistic already. joining us on the newsline, is the rbc capital markets chief equity strategy. his firm was the first on the street to take down the s&p 500 target before the new year. good morning, thank you for waking up early. you're probably sitting in bed right now. i don't know if you look smart or not given what we saw with the equity market yesterday but what lead you to take down your forecast before the new year even started?
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>> first of all there's nothing to do with what's going on in china yesterday. but we saw really two things. the first thing is oil prices over the last couple of months are down about 10%. and while there may be some boost to consumers from lower oil, it's a huge weight in the s&p 500 in terms of corporate profits and that's one negative. the second thing and we saw this with yesterday's ism report and for that matter, the chinese manufacturing data that we are experiencing a bit more economic weakness. now we didn't take our numbers down anywhere close to negative territory as of the open yesterday. we were calling for a market that would be up 9% this year but that was down from something that was more optimistic and we didn't think that that exuberance or overoptimism was justified. >> let's quickly jump on your second point in there. the ism manufacturing and what are you expecting for the q-4
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gdp? we've seen lots of downward revisions to that number and this year now that we're seeing stimulus removed do we have to see strong fundamentals for the s&p to end up this year? >> you know, let me rethink the question. what is the trend of economic growth that we're seeing rather than the quarter to quarter? and it's probably not more than 2 to 2.25% and what you found with economist and with investors is this hope that it would turn around and get back to close to 3% and they have been disappointed. we're in a world of slower economic growth and the real story around china is not the fact that they are trying to prop up a bad stock market because they should let it seek it's own level and this will all go away but the fact that they
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had ten months in a row of weak manufacturing data, they had several years of slow and decelerating economic activity and that's putting a dampening effect on the global economy and the manufacturing sector and demand for oil and that's really the more important story. what we experienced yesterday is more noise. >> just to be clear he sees the s&p finishing the year at 22 and 25 in november he was at 2300. >> right. the big auto makers are out with their december sales today. the industry has been going strong for months now but may still be some fuel left in the tank. landon joins us with more on that story. >> good morning to you. what a year it has been. december is expected to be a carbon copy of much of the rest of 2015 with sales at a blistering pace. auto makers sold 1.7 million
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cars last month and that will put the pace of sales above the mark for the fourth straight month for the year. sales are expected to be up 6% for 2014. making 2015 the strongest year on record. the national average is now $1.99 a gallon for regular unleaded. kelly blue book predicts sales rose by 40 and 16% respectively in december and sales are expected to continue growing this year although at a more modest pace with consensus forecast of 1.4% but s&p capital thinks 2016 will be the peak. same margins will be under pressure for all auto makers as they push to compete for more market share. >> thank you very much for that. i suppose as we look at this, sales numbers have been incredible for the autos for quite sometime but the anything u.s. names haven't responded. >> if you look at gm and ford over the last year it's been
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sleepy. they fairly moved. phil has been talking about this for awhile and says it's because every time you get the blowout record numbers on auto sales there's always the expectation that they peaked and demand cannot possibly stay strong and this sector benefitted from low gases and having the cycle renew itse itself. >> but it's a sentiment that you can understand. you think this has been perfect for them. >> but they're barely moving. >> they think we're going to turn down at some point and the market is usually a little bit ahead of that. i'll bring in volkswagen very quickly. separate stories on the autos up about 4% in europe today. this is off the back of the story facing litigation in the u.s. of about $90 billion of fin
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fines. now this is the expected civil suit and vw may still face similar charges. saying at the end of the day it all depends on how volkswagen can solve the issue with the cars and it's relationship with customers and this will be a bigger cost of the litigation but shares down some 4% today. again sticking with autos, check out this. faraday is unveiling a sleek sporty concept car in las vegas last night during the annual show. the company is only 18 months old and has been super secretive. it's primary backer is the chinese billionaire. it's a pretty odd looking car if you ask me. >> a lot of people haven't hear of faraday and would be surprised to see this name. it's been operating secretly and mysteriously in los angeles poaching talent from tesla and other awe moe takers. >> it also had a very low roof.
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>> it's like the batmobile. >> just in terms of market action we're seeing safe haven buying. the euro falling to under 128 yen. we're going to be all over this market action moving as we speak. a world of worry. tensions running high in the middle east as well as saudi arabia halts flights and trade with iran. we'll take you live next. but first as we head to break, check out the price of oil this morning on the middle eastern tensions. oil just can't catch a bid. to your point. two major oil producers in the spotlight and wti crude under pressure. below $37 barrel this morning. brent below that level as well. stay tuned. you're watching worldwide exchange on cnbc. first in business worldwide. ♪
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>> tensioning running high in the middle east amid a fight between saudi arabia and iran. hadley, good morning to you from the u.s. tell us how much more this could elevate and how serious of a concern it is. >> well, good morning, wilfred. what we have seen over the last 48 hours is the kingdom striking back again. we saw them cutting diplomatic relations with iran and they're going to halt trade or also going to halt commercial flights to the country and we also see them now taking their fight to the united nations.
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take a listen to what the u.n. ambassador had to say. >> those attacks were unprovoked. they con stitwere very serious violations of the convention and diplomatic and koconsolate offices. >> of course this is not only just a serious violation of international law but also a wider series of violations over the last several years including what's happening in leb bonn and hezbollah and what's happening in syria as well and in yemen. you have to remember that saudi arabia is fighting a war there against rebels that are backed by teheran. they say iran is making trouble in their backyard and the bigger question going forward is amidst
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the geo political tension does anyone benefit? the answer to that is complicated. saudi arabia does get it off the back of the news. one of the things it takes is the fact that there hasn't been much progress in the on going war in yemen and this is a kingdom looking to cut back. their entire budge and economy is based off the back of oil prices and with oil prices being what they are they had to introduce subsidies for the first time and that could be a problem for them at least domestically going forward. >> thank you for that. >> now for today's trade of the day. we have this great tool, cnbc invests in looking at historical data. if the shanghai composite sees another bear market like in august are there u.s. stocks you should try to avoid in your portfolio? turns out there have seven times
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in the last decade been when china's stock market fell 20% or more in a month time. on those occasions here were the worst performers, alcoa, ford, wynn resorts, micron and level three. you can check out cnbc pro. it's interesting to see the names like that. in question alcoa with the aluminum exposure. any commodity exposure is beaten up hard. >> it's a bigger thing on a longer term view as well how important em had been in the last five year for developed markets. there was a massive carry trade. money throwing into all of the emerging markets. it's not just that we're ending qe for the u.s. but loads of ems are struggling this year. brazil is looking terrible. russia has lots of problems. india, maybe hong term
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attractiveness but political gridlock there as well. and you just wonder if it's an extra dividend that developed market versus had taken away and it's further pressure. >> and why a basket of emerging market stocks fell 17% the next year. depends on the commodity and the feds. >> that and much more still to come. also the college basketball game everyone will be talking about. two top teams and three overtimes but first, as we head to break, check out this moment from jimmy fallon last night as we try to get your day started with a smile. we'll be back in a couple of minutes. >> i heard that china just installed new pub hick bathrooms in beijing that offer wifi. a wifi enabled bathroom or as we call that in america, starbucks.
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try align for a non-stop,ive sweet-treat-goodness hold-onto-your-tiara, kind-of-day. live 24/7 with 24/7 digestive support. try align, the undisputed #1 ge recommended probiotic. >> welcome back. time for the top sports headlines this morning. it felt like madness in the first in college hoops. the game went to triple overtime with the sooners last second shot to tie it falling short. kansas winning that one 109-106. now the day after the regular nfl season ends is known as black monday when struggling teams fire their coaches. the biggest casualty so far is tom coughlin re-signing after 12 years and two super bowl wins. the giants haven't made the playoffs now in four years.
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eli manning has nothing but praise for his coach. >> how i feel about him and the respect i have for him and he's done a great job and he definitely has not failed we as players have failed him. >> one man that could replace him is peyton. several teams seeking his services potentially. >> now three teams are seeking to make los angeles their new home. the st. louis rams opened raiders and chargers all filing papers on monday to relocate. nfl owners will vote on that master. you can switch city. >> anything in the u.k. >> do you have a team yet for
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the nfl? >> he's been in the u.s. for a week. >> the rams i'm slightly tied to because their owner owns my soccer team. >> they're not in the playoffs. >> no, they're not. >> the sell off is accelerating in europe right now. german dx ax down to 1%. going back to levels we haven't seeb since the second week in december. we're all over that story. a lot of interesting cross currents. all roads leading back to china. we'll talk to a top wall street strategist on how it will impact the session with futures under pressure. you're watching worldwide exchange this morning on cnbc. first in business worldwide.
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good morning, more pressure on u.s. equity futures. things look stable overnight after china stepped in to calm the market. the european stocks marching lower right now weighing on u.s. futures. dow jones set to open lower by almost 100 points. s&p down by 11 after yesterday closing down 1.5%. that was the worst start to the year since 2010. -- excuse me, 2001. the nasdaq as well had the worst start to the year since 2001. futures down 20 as well. >> some positivity overnight but europe is negative and weighing on equity futures. our next guest expects slowing global growth with falling
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exports, low commodity prices and the end of the credit boom. he does remain bearish on the u.s. economy. let's bring in the market strategist and portfolio manager at washington crossing advisors. a very good morning to you. thanks for joining us early today. my first question is why didn't u. s. bonds react more yesterday when we saw such risk off sentiment in the equity market? and as you look at the year ahead, do you favor equities or bonds? >> yeah. if you think about, well, first of all, we're bearish on u. s. equities and that's not true. essentially what we saw is a risk off trade but it was absorbed by several other places. we saw the japanese yen for example strengthen. overall the tone was negative. there was no place for traders to express a negative view on china directly. now overnight they opened the market. there has been central bank intervention and there has been the government intervening by
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directly buying stocks and imposing regulations. none of that was able to turn a negative trend into a positive one. we still see weakness and the global markets are looking at that and saying well, if given all of that intervention we still can't generate a positive tone in china, at least in the near term the selling sprpressu is going to continue. >> let's go through the psychology of this again. at one point the dow was down 460 points but we kept hearing from the experts that it had more to do with the chinese technicals of their market as they try to figure out the ruling making and the ruls of the road there so you might think that the buying into the close coming well off of the lows of the sessions yesterday was a buying opportunity. why should u.s. equities, why should corporate america get sold off because they're trying to figure out the rules of the road of their market and yet again this morning the selling pressure continues. explain why that's so scary to
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u.s. investors and whether you can be a buyer on these dips? >> well, there's two things. one, even though china is some what walled off from the rest of the world they're moving toward becoming more integrated with the rest of the global economy and you can't separate out particularly one of the largest economies in the world from the rest of the global financial system. so you can't wall off china and say that's not going to effect equities. obviously it's going to have a spill over effect on our economy and financial markets too but once you get beyond that, once you get beyond the official d digestion of the issues it comes down to growth and growth in profits, et cetera, and what we're seeing here in the united states is middling kind of growth. still better than many other spots in the rest of the world and profit growth has been good. profit levels have been very high. so we have been afforded a
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higher multiple and some descent profits underneath and i think that that's a positive thing and a positive take away as we look out to 2016. >> thank you for joining us. good morning to you. >> thank you. >> meantime the consumer electronics show doesn't kick off until wednesday but ford isn't waiting until then. announcing three new future tech initiatives. landon tell us more. >> ford has been very busy. ford is looking to get the jump on on the competition in the world of self-driving cars. the company plans to triple it's fleet of self-driving test cars to 30. ford will test them on roads in california, arizona and michigan using a new lower cost sensor. industry executives say cost is one of the big hurdles to the commercialization of self-driving cars. they're also looking to link amazon's echo.
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that would allow drivers to open the garage door, turn on lights or heat in their house from their car or turn on their car and check things like the fuel levels from their living room and in a third move, ford was teaming with the drone maker on a contest to develop drone to vehicle communications systems using the f-150 pick up truck and the system would be used to survey disaster areas and the winner gets $100,000. between three of us, we could come up with some high flying ideas. >> we'll work it out after the show. >> i'm not sure we could execute it well. thank you for joining us. >> don't miss phil will interview the ford ceo just after the auto maker reports december and full year sales forecast. those are the big report today and that interview will be coming to you live 9:15 eastern on squawk on the street. whenever people talk about the strength of the u.s. consumer lately, they point to the strong auto sales.
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>> indeed and they continued, how many months in a row? 16 or 17 months. they have done well. let's have a look at some of the morning's top trending stories. forbe's 30 under 30 list was published last night. nba star stefan curry plus ashley graham and some notable names from finance including the founders of robin hood and acorns. >> isn't it amazing that steph curry is under 30? donald trump with his first television ad reiterating the call for the temporary ban on muslims. he sums it up with of course make america great again. the ad set to run heavily in iowa and new hampshire. >> he loves doubling down. >> he does. >> it's time to throw out your old periodic tables for new super heavy radio active
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elements were added meaning the 7th row is finally filled. you knew that, didn't you. >> i had no idea. >> neither did i. most high school chemistry textbooks are now out of date but of course given that sarah and i know it by heart you can tweet us. >> i did terribly in chemistry. that's why i dropped out of pre-med actually. another story. starbucks adding a drink to its menu today. a latte machiato. there's confusion about what it is. both of those things are their own drink. >> this is obviously trending. >> when i heard we were going to discuss this i was waiting for something really excited. >> like pumpkin spice latte. >> that's a good one. >> when we come back, the morning's must read. one financial columnist says
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china should be cheering the stock market collapse. it's an important read on what chinese authorities should be doing to try to get a grip on their markets. first check out the euro this morning under heavy selling pressure. you might think that would be helping german exporters. 1% decline in euro markets and one month low against u.s. dollar. you're watching cnbc. first in business worldwide. we'll be right back with the move on u.s. futures. ♪
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welcome back to worldwide exchange and a very good morning to you if you're just waking up and getting ready for another wild ride in markets. a volatile session in china overnight. stocks ended up dropping out of the gate before rallying. traders say the central bank was likely using state banks to prop up the yuan and china managed the economy and gave brief reprieve but still ended down. hong kong down 0.6%. let's have a look at european stocks because they were positive at the open. just shy of 1%. the stoxx 600 up 0.6% at the open. we lost it throughout the session. dax down sharply three quarters of 1%. volkswagen is down 1% but more broadly euro zone inflation data did underwehelmed as well.
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called down about nine points down by 86. nasdaq by 15. >> now to this morning's must reads, the op-eds that stood out to us that you'll be talking about today. china front and center. this one titles deflates the stock markets. the author is some of what an expert. he says they should let the stock market deflate. he says they often resolve sharp reversals. it was after the realization that four decades of planning produced backwardness and starvation that abandoned thlea abandon it in the 1980s. he said they should let it deflate and goes into decisions they're making.
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they're thinking about it. the party, beijing and they're not swooping in to just intervene like we might see say fed style. put a floor under the markets because even overnight with the stepping in, this intervention that we saw t market ended down and it's not giving a whole lot of confidence. >> a agree that everything would have been better years ago if they let things happen and not try to manage things down but because they committed to that they're now stuck to committing to it and very hard to continue. yes they're slowly managing it down but the free market trading level we don't know. we're at 6.5. would bit 7 or 8? that transition is tough. >> or perhaps it's a communication challenge. there were a lot of messages out of various newspapers. there's no real statement as to what are the rules and what are we going to be doing? nobody -- there's a lot of confusion about the short selling ban that they put in place in august and set and
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that's helping to create this effect we're seeing now. >> absolutely right. the next must read this morning, wall street journal piece titled bill clinton, the big dog gets fixed. >> good one. >> describing the subdued performance of the former p at a campaign appearance for hilary. fascinating from my point of view. the fact that he's being managed because of various issues and donald trump is being pretty proactive. trump was trying to go after him and it's just another fascinating part of this election campaign and i am just very excited to be out here for the u.s. election. there's so many different levels to it. you have the other aspect within the democratic race and the republican race. >> i'm glad you're excited because we'll be talking a lot about this and we'll be seeing more popular perhaps than his wife who is running for president. we're approaching the top of the hour. that means that joe, becky and
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andrew are getting ready for squawk box. joe, we're not going to ask you about bill clinton. we're going to ask you about futures under pressure again. we thought there would be stabilization about what china did or did not do or tried to reassure but that doesn't appear that it's working out. >> you don't have to ask me to get me to -- i'm telling you -- >> you couldn't help yourself. >> no, this is my spot. so you can't control where i go here. i'm sorry. >> not bad. >> it is going to be. >> that was pretty good. >> it's going to be very interesting. the impeachment when it was all said and done it looked like it was layed to rest all the questions but you look at the world we're in today and it's just not answered. not with a thing like bill cosby and you have five other women. some of them that were actually paid money and it's going to keep coming up and yesterday was interesting because you would think he'd have a really solid answer at this point and he
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looked completely flustered when the reporter actually asked about it. so we'll see whether we see a lot of him. whether it has anything to do with hillary clinton because there's a whole body of people that think wow she stuck by this guy and that's an admirable quality and then there's another contingent that says wow the lust for power or position or prestige, she would put up with just about anything. so you came at a good time, wilfred. a very good time although you guys have some wacky elections over there too. don't act like we're some circus over here. >> i'm saying it's exciting. i'm looking forward to covering it. we had a great election last year and things since then changed sharply as well. so it's very interesting political dynamics everywhere and across all of europe we had lots of people coming out as well. it's fascinating. >> don't you have fisticuffs until the house of commons all the time? if you go a week without someone
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throwing a punch that's a big deal? >> you're right. but they have been more subdued. he has taken a slightly different approach but you're right. there's always lots of fisticuffs in the u.k. as well. joe we look forward to covering the election and seeing if it effects markets as well. >> i heard your comments about china. i didn't realize that they were sort of being halfhearted about the -- i wonder if we know if it's really halfhearted. i wonder where we would be if they hadn't done anything and if you don't know real price discovery that makes everybody nervous. yesterday we were very nervous. today they're doing something. it's down just fractionally but what if this is the best we can do? we were triple digits awhile ago. i haven't looked recently. but we haven't found a bottom here yet. it doesn't feel like. but we'll be talking to a lot of people today. he has been doing these predictions for awhile and we'll
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get his predictions for 2016. looking at some of his predictions for 2015. he says that hillary clinton beats ted cruz. that's one of his predictions or surprises for 2016. >> okay. joe, great stuff. thank you for that. we look forward to squawk box in about 12 minutes time. up next on worldwide exchange we're speaking to peter boockvar. we're back in a couple of minutes.
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>> the global sell off continues. futures down 87. europe down a percent. he'll help us figure out the trading markets today. chief analyst at lindsey group. when we went to bed, of course we go to bed around 6:00 or 7:00 p.m.. china not doing much to restore confidence overnight. intervention not doing it for you? >> china doesn't like anything
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disorderly and they got a taste of it again obviously the first day of the year and they tried to calm things down but china is part of the picture. china's economy has been slowing for years. their stock market had the craziness last year but the underlying context is the chinese economy has been slowing for years but it's a wake up call to the markets that the u.s. economy is slowing down. >> there's more to the story. >> and they're losing their effectiveness in propping things up. it's the expensive markets. the earnings story is changing. it's all coming together and i think that yesterday the most important thing was the high valued stocked immune to this finally cecumed to the selling of the stocks. >> is that globally or retrained to emerging markets and china. >> well, 2015 a third of the s&p
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500 down 20%. about half of the s&p small cap stocks are down 50% -- okay. 20%. so underneath the surface. the question for 2016 is do they play catch up and rebound to the bigger names or do they make bigger cap names give in to the under lying stocks and historically it's usually the latter. yesterday we got the first taste of it. >> are there pockets where we'll see attractiveness? commodities could they bounce? >> installed vvestors have to g what's beaten up. the drop in oil last year is the last phase of the market. i'm not trying to pick a bottom here but that's an area of arack t -- attractiveness. to me that's where the values are. not in the u. s. but outside of the u.s. and in commodities.
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>> i made a chart for you on manufacturing. we got that number in the u.s. yesterday. it was pretty ugly. pretty bearish. manufacturing in this company is shrinking. on wednesday we'll get the nonmanufacturing number. it includes all sorts of industry and retail and that has held up. that's expansion territory. high frequency economics looks at the correlation between the manufacturing and the non-manufacturing and the big question there is whether the manufacturing component, a smaller piece of our economy is going to drag down the services which is in red which has held up quite nicely or if the services is going to keep us healthy. u.s. economy, u.s. consumers, u.s. jobs, you can't deny the fact that most of the economy is doing well. >> the services sector has been the stand out and you raised the right question is whether manufacturing effects services. there's plenty of service industries that service
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manufacturing. it's looking to 1%. we'll see potentially below 2%. so while services is out performing it's on a relative basis and unfortunately i don't think it will be a new one. it will still be the stand out. it's still the predominant part of the u.s. economy. it's not subject to dollar influences an exports and slow growth overseas but anybody that does business with manufacturers is going to be impacted. >> can we touch on the issues in the middle east? you said you thought commodities could bounce back. is iran and saudi tension is that potentially a catalyst for that. lots of middle east tension. no response in terms of oil prices catching a bid. >> the catalyst for the rise in commodities is going to be a continued reduction in the supply. it's not going to be a pick up in demand because it's modest. we're beginning to see a dramatic shutting and the oil in the u.s. and expect further
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reduction and u.s. production. other non-opec supply and we're seeing china finally cutting production in a variety of industrial medals. that's what gets you to an eventually bottom. when that is i'm not sure but the process is in place for one. >> given this world of worry we're in and your outlook and world view which is pretty cautious, where are you in? you have gold exposure, right? >> right. >> i understand the dollar rally. i understand the dollar bold case but i think if what we saw yesterday in the markets is a precursor to more, i don't see the fed raising rates again. therefore the dollar strength is not there. commodities may get a bottom from that. gold and silver will be a big beneficiary of that. they had a rough four years and the bottom is in. >> thank you for joining us and a good morning to you. thank you for joining us this morning. tomorrow, cogoldman sachs chief
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equity strategist will join us with his outlook. a very good morning to you. thanks for watching. ♪
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>> china manages to stop the bleeding. the country's central bank injecting 20 billion into the market in an effort to halt yesterday's sell off but here in the united states no signs of a bounce back. a lower open on wall street after the dow's worst start for the year since 2008. but remember in the open we thought it would be the worst start in 80 years so down less than 2% and three nfl teams.
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and you want to go back and a decision could be coming soon. it's tuesday, january 5th and squawk box begins right now. ♪ >> live from new york where business never sleeps this is squawk box. ♪ >> good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick along with joe concerner and andrew ross sorkin. our top stories are the markets in china, dropping more than 2% in early trading today but then the central bank stepped in. pouring about $20 billion into money markets. that's the largest cash injection since september and you can see how that eased some of the panic there. traders also say the central bank was probably using state banks to prop up the yuan. in the meantime top

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