tv Street Signs CNBC April 27, 2016 4:00am-5:01am EDT
>> it's donald versus hillary. the front runners take him a at each other as scoring big wins in a number of northeastern states. >> why would i change? if you would a football team and you are winning and you get to the super bowl you don't change your quarterback, right? >> so i'm not changing. >> a warm welcome to "street signs." a look at the market straight away this morning. oscillating out of negative/positive territory. relatively unchanged for the urp 600 this morning. taking stock of earnings we've seen this morning. in terms of sectors. the basic resources is the real
drag here. down around .6%. this is up 35% though in the last three months. bit of consolidation makes sense. more prodly we are seeing gains for commodities. the dollars weaker today. clearly a lot going on here. oil and gas something. here is a look at the individual performers. popping into the positive territory here for the german the french and italian markets. i mentioned earnings. so far this morning. barclays top gainer on the ftsi 100. investors shrugging off a miss in pre tax profits of 793 million pounds. ceo jesse daily has said the lender is making good progress
on its restructuring program laid out in march. >> q1 revenues in the face of what it described as testing market conditions. and commented on a proposed merger preparing shareholder documents and will update the market in due course. >> stocks fell 28%. the owner of ar gas say it is ready for a good future. >> ant shares trading lower. and likely to remain subdued they warned in the near term. >> joined by henry dixon. fund manager at glg.
we know this is a restructuring story. is it the numbers or is it the fact that they are accelerating selloffs? >> i think the keeping in the numbers. the revenue did came in a little ahead. parts of the non core business. i think probably investors would like to see the business maybe without in a couple of years time. the other thing i think standard charted did please on the capital build here. at 11% you have a capital ratio clearly towards the bottom end of the pack. but i think in generally there is a bit of a bid behind the banks. i think we sat down at the start of the year with the clear price to be in mining, oil and banks. i think to get banks a little higher. inflation data seems to be building and natural completion is such and such. and after that scenario
something could be one of the last areas of really interesting value within the uk market. >> are you excited with what you see in the performance? also on the investment banking side, fine. but we're not going to do any further restructuring there. we've gone as far as it goes. does that please you? >> i think the call a little disappointing. i think they can still defend returns near 20%. i think we've got a clear road map. and we definitely had them overnight talking about the merits of banking model and its probability. i think even would concur when banking done well is nearly a 20% return and more. interesting, can you transition from .6 book value to nearly 2
times book value and on that. >> so you think a buy here? >> i think you quite quickly maybe default to rbs but i think banks in general have been left behind. >> how much fear factor of brexit? >> it's colossal. i speak to analysts around the world. the first question is brexit. european investors, brexit. if i go straight to the conclusion, the options market is pricing a 6% move on the day that friday the 24th of june. and just to put that in context we've only had ten of these moves over the last 20 years. so i think we should never lose sight of what's been given to brexit. and others will find themselves
quite a bit higher. >> what about -- >> couple results today. let's stick with the brexit theme. issuing a warning to britain saying it would lose all of its benefits if it voted to leave the eu in june. highlighting the risk of a brexit. said a vote to leave would be poise on the british european and global economies.
chairman at lloyd's of london. in terms of investment environment here we look less attractive? >> i think for lloyds, lloyds of london is operating in 200 countries. it is quite clear to us. that while maybe around 15% of your business is in continental europe in the eu there are three reasons why it is so important for us. one is because of the passporting rights we get from london into the eu, which we would lose. secondly we benefit from the bilaterally agreements with has and continues to increase. and the biggest market for lloyds, the u.s., 40% of our business. and third, about 90% of our
capital comes from outside of the uk. and obviously london is -- one of the attractions of london is we are seen the to be ar a very attractive part of the eu. i think it would diminish the attraction of london. so for us it is extremely important. i hear the argument that okay we can negotiate bilaterals with other countries and with europe. but i think we are very much in front line of negotiating for the lloyds market. and frankly i think a lot of their claims are in the realm of fantasy. >> one of the biggest arguments i hear is look, in terms of london we massive immigration because they would have to
support the city to promote further growth outside of the eu. >> in our space i don't believe that. i think the uk regulators are very tough. i think they are just as tough as the eu regulators. i think if we were to leave the eu, there is no nerve that on regulation for financial services whatsoever. >> clearly we've seen an astonishing picture with the profits coming out of it. but we've also seen international interest. the high interest we're seeing, do you think that is temporary and if we remain in europe do you think consolidation will continue to be a theme in lloyds of london in the second half of this year or do you think other stuff? >> the obvious answer is the market will decide.
but what i would say is the attraction of lloyds to outside investors is that we are the global hub for specialist insurance. long-term we think our addressable market by 2025 is going to triple because of the growth in the emerging economies and because of insurance penetration going up. where it's very low in many of these markets. so there is a real business opportunity. so i think lloyds will remain a very attractive place to invest. at the moment low rates. whether the prices have got that factored that in i think that is something which the market will decide. >> you have been dealing with low rates for many years now. i saw a comment about the german
insurers and the fact they are trying to reduce that maximum. and in this environment that is not going help. how concerned should we be about pockets of insurers? >> i think that is the life sector, which we don't operate in. in general insurance, the impact of low interest rate is that we have to hold our capital in very liquid form because it is have to pay claims. and we quite often have to pay very big claims very quick. so we can't afford the high risk. over the last ten years we've showed an average return on capital 15%. last year, which was a difficult year we still showed 9%. so that is attractive. but i think at the moment as we speak i would probably be even
more cautious than i was last year. >> you said by can't go to these high risk products but that is the path insurers are going down. looking at property investments and some cases emerging market debt. so one year on again you are that much more concerned. >> yes. i'm concerned that if we continue to have significant easing and very low interest rates, there is a pressure to drive behaviors. >> how long can this go on? >> well i'm no better at guessing that than anybody. >> in terms of the policy who knows but in terms of building pressure they face before we actually have a problem? >> for insurers it will correct itself. really. because first of all we've had a very benign major catastrophe period. that won't go on forever. the second thing that will happen is as returns on capital
reduce and reduce and it will encourage insurers and will be encouraged by shareholders to make sure they show a return and some more stuff. sporting gains adding. guidance for 2016 thanks to strong brand momentum. markets the second outlook hike this year. santander. overall net profit dropped 5%. not as negative as expected. net interest income was down more than 5%. the nordic regions biggest buy
market cap said it is facing head winds from the environment. we're going to be speaking to the the ceo of nordea. i'd love to hear from you. any comment, questions, i thoughts from our guests, let me know and i will ask them. now we have to take a quick break but coming on the show a clean sweep for donald trump in five northeastern states. is the republican race all but over? >> i started off at 17. i'm down now i'm winning. it's over. as far as i'm concerned. it is over. these two guys cannot win. why would i change? if you have a football people you're winning and you get to the super bowl you don't change your quarterback. right? so i'm not changing.
apple suppliers have taken a hit after the american tech giant delivered its first revenue decline in 13 years. >> apple component suppliers across the region were under pressure. that was one of the broad themes, tech under pressure. the other is that there is not a lot of conviction in the markets. largely because we're in a holding pattern. investors over here are reluctant to place any big bets until we get some clarity from where we stand on the statement and what we see from the boj
this week as well. elsewhere, we've got march data numbers. in china. the market not really running with this one. i think there is begins of a healthy dose of skepticism associated with the numbers with the high velocity data. and it is really because the get, the bad debt problem at soe level hasn't really been addressed. probably going to continue to exert a drag on the numbers going forward. so some skepticism associated with the durability of this very tentative recovery we're seeing in china. broadly we're in a holding pattern. very much over to janet yellen and mr. -- of the boj.
brent over $46 a barrel. what a rally we've seen there. wti just approaching that $45 a barrel. as i mentioned, more than 3% gains yesterday. positive sentiment overnight. unexpected drop there too. of course then we've had the likes of total and stack oil today. the french energy company adding that though margins were down the business is strong into the second quarter. sat oil beating profits. since the start of the year the norwegian oil company in a bid
to combat the sliding prices. >> a 6% drop. weakness in spain the uk and mexico. the utility laid out a strategic plan back in february. let's talk oils now. what do you think of total's earnings hits? the downstream supporting the operations. >> look at the upstream and these --. also i think we definitely want to make a distinction between the oil market and the -- market is still incredibly depressed. we see a concern of build up in the sector and
[ indiscernible ] looking to the debt structures of some of these companies because what we can find is the well documented --. where you can find an attractive run in yields looks to us much more comfortable to take. we want to go up the capital structure. we want to get. the other thing is as the -- [inaudible] starting point was 1.3% bond yields. under is that scenario, little
more cyclical. little more value orientated and tilt away from areas such as consumer staples that have gone up. >> what else? >> the clear is financials. very uncomfortable portion of the market but we discussed retail banks. maybe we could look at a viva and the ftsi hundred and the weakness in sterling. the p is about 7, 8 times next year. so i think you do come back to those really beaten up areas of financials. financials, oils and banks. banks and -- are the ones you
have to get right. and the catalyst will be just a slight pick up in inflationary data and therefrom improvement in bond yields. >> if we go back to q1, buying into the uk assets in general, you were being pulled around by the china factor by concerns over federal reserve policy. there were so many different things combining. what are the risks here that investors should be aware? >> first quarter you can get incredibly emotional. i always try to stick to the earnings and also the net debt. earnings fell in the first quarter about 7%. pushing 17, 18 times now in the uk. what they are is interesting areas of value. and the piece that has consumer staples on one end and finances
at the er is stretched. and a catalyst will be bond yields and maybe inflation expectations and maybe modest interest rate rises and you could look at the financial pitch that looks very much different in six months time. >> great to chat to you. now the after hours moving apple stock wiped off $46 billion in market cap. ouch. josh lipton has the story. >> results didn't meet analysts expectations. earnings per share of 1.90 on revenue. analysts have looked for --. iphones at 51.2 million. better than expected. ipadss a 10.2 million. better than forecast. macs, 4 million.
services revenue, everything from apple pay to apple music. that jumped. the second largest for apple now. the apple watch at 2.2 billion. gross margins at 39.4%. turning to guidance. from. we did also get an update to its capital return program. apple's board did authorize an increase of 50 billion and boosted dividend by 10%. iphone units down. he pinned the pressure on tough comps. the iphone 6 was a block buster. he talked about macroeconomic weakness and currency head winds. the key question is where's the iphone franchise head from here? he remains bullish.
he talked about new markets. india was up 40%. he talked about the latest iphone, the iphone se. that's opening up a new range of customers who perform the smaller form factor. and he says apple continues to see the record number of android switchers. and we're still in the early innings of the iphone. and more apple reaction after this. you're watching "street signs."
traders. --. apple suffers its first decline in revenue since 2003 as iphone sales stumble. the pain spreading to suppliers in asia. it is donald versus hillary. >> let's go forward. let's win the nomination and in july let's return as a unified party. >> i started off at 1. i'm down now i'm winning it. it's over. these two guys cannot win. there is no path. so why would i change? you know, if you have a football team you're winning. and you get to the super bowl you don't change your quarterback, right? so i'm not changing o. >> so we've got some preliminary gdp stats out for the uk this morning coming in at .4% on the
first quarter. 2.1 on the year. so that is in line with forecast. expect to see it weaken slightly from the back end of last year down from .6% in the fourth quarter. is it to do with brexit and uncertainty around that. the office of statistics says they have no evidence for or against the slowdown being linked to uncertainty around that june 23rd referendum. i point the what we've seen in the gross stats in the u.s. and what we're expecting this week too. isn't a global slowdown attributing to the volatile we saw. weakness in asia overnight. weakness in europe as we await for the fed tonight and bank of japan tonight on thursday. a big risk events. a touch lower for the s&p 500 and the nasdaq and dow.
oscillating this morning between positive and negative. but you would expect pairing of risk here. 25 basis points lower for ftsi 100. heading into the gdp number sterling did touch --. it dropped and we're now a few ticks off. a bit of dollar weakness feeding in and that continues the trend we saw yesterday in the session as well. let's move on the streak could be over. the group reported a drop in revenues for the first time since 2003. compounded by a slowdown in china, its second largest market. apple announced a 10% decrease
in its dividend. apple was in the early innings still of iphone. however the numbers tell a more worrying story. apple sold 51.2 million units in the second quarter, 10 million less than a year earlier. >> good morning. >> early in the first innings? >> i think the innings have caught up with them to be fair. they were the forefront 2007. but the first time ever in nine years they sold less iphones than the quarter before. and down from a year ago and looking into the summer of the next quarter looking into even worse. >> it wasn't just about the current quarter they are reporting on. they are actually weaker on the guidance they gave the current quarter now too. >> back in january they gave guidance for the quarter and a change.
and it just made the bottom end of the range. and it is forecast even weaker. and, you know, one of their huge growth markets is china. and they were down 11% last quarter. >> it was always going to be tough comparables with the iphone 6. samsung galaxy s7 as well. that was always going to make this tough. tim cook says it will pick back up again. the market is saturated. is the market saturated? >> the market is saturated. particularly the chinese market is coming into the market and in march they mentioned the se. >> do you think if they were excited about it they would have cone? >> they would have done yeah but the problem is the se, apple
doesn't refer to itself exclusively as the technology company. they look at themselves as the design company. so design company, what they did was put the modern day technology which everybody has, nothing new. just the basics of what everybody has in last year's design. >> they are still playing catch up with the android eco system. >> i think they have been since iphone 4 really. but one of those things where they are caught in a cycle and everybody is waiting for the iphone 7. and what happens with the iphone 7? well that is why the guidance for next quarter is weak as well. because they won't even start talking about it until september for probably october sales. >> what is the big thing that drives them forward here? is it virtual reality? is it the car? because they have some really
fierce competition in that zone as well. >> tesla for one. sold more revenue in three days. it took months for the iphone to do that. so they are hiring engineers in tesla do this car. they tried to do the things with daimler and bmw last week that were announced that weren't going to happen. so they are caught in a twilight zone of you don't know what they are goin' to do and i don't think they know what they are going to do either. >> -- yesterday. >> they talked about various lilil things. the call lasted under an hour. and there was no real specifics on things. these calls are made to look rosie. so there wasn't big mentions of numbers or big mentions of new things coming because it would cannibalize what happens. >> they are still generating
incredible amounts of cash there, buying back share, they raise the dividend. >> right sitting on a huge cash pile. but what do you do with that cash pile? it is one of those things where you have to have a strategic investment in it. but what do they look at? do they look at cars? do they wait on the iphone 7? nobody knows where to go with it. >> do you think it is a stock to sell? >> i don't think so no. i think you wait till what happens for the iphone 7. it is a solid hold for the moment but realize you aren't going make a lot of money on it. >> do you think it's still quite punchy though, that's the point. >> make it look good somehow. >> stick wit. shares also took a hammering
after hours. >> twitter's better than expected user growth wasn't enough to overshadow disappointing guidance. the reason brand advertisers did not increase spending as quick as expected. there were positive signs. the company adding 5 million monthly active users, two million more than excpected. and twitters earnings came in better than expected. 15 cents a share compared to the 10 first projected. i spoke to twitter ceo adam bayne who saids twitter has a number of features that will rev up the company's revenue in the third quarter. ceo jack dorsey addressing investors on the earnings call. >> we've seen increases in
tweets and replies and retweets and also likes obviously. so we want to continue to make sure that we are refining that time line and making it better and better and better. so when people come back to twitter they see what is meaningful. >> guidance for the second quarter along with concerns advertisers aren't spending more weighing heavily on the stock. >> we've had a whole host of brokers coming out this morning, lowering their target price. seems on average, barclays cutting price target from $18 to 19. we've just had goldman sachs coming out raising their target price from $22 to 21. a . and jeffries, cut their price target to $32. i think the range of price target
targets and cuts, raises here, shows you how confusing and what twitter can doing going forward and grow this business. e-commerce now. off setting growth concerns following the spinoff of paypal. comcast could be trying to build on recent success in animation. comcast is set to report earnings later today. donald trump has called himself the gop's presumptive nominee. nbc's tracy potts is in washington. despite speculation of whether or not strategic voting might take place?
no? tracy. >> hi there. this certainly puts donald trump in a much stronger position. he was the front runner. he is the front runner. picked up another 109 delegates last night. and now he moves into indiana with a lot of momentum. indiana could be the last stand for his rivals ted cruz and john kasich who have come up with this alliance to try to stop him there. kasich backing off. allowing cruise to take him on one on one. and while cruz isn't calling it his final opportunity, the numbers prove that could be the case. because now trump needs fewer than 300 delegates to clinch the nomination. hillary, she could actually lose every contest, pick up a few
delegates in the states, but lose every state on the way out and still clinch the nomination. which creates a really difficult situation for bernie sanders. his campaign is still saying they are dedicated to staying in through the end of the primaries and then they will decide whether or not they think they can turn some of the super delegates and get enough to be competitive. >> sounds like a bit of a challenge tracy, thank you so much. we have to take a quick break. comening up, heading for a collision. union leaders are locked in a dispute with volkswagen bosses over wage demands. stay with us. we're back in two.
we put a 20 billion number. just to assume there are some unknowns out there for further litigation. >> nancy is in wolfsburg. what can we expect from the ceo over the coming days? it shouldn't ultimately be down to the individual workers to suffer for the operations of a few individuals. >> well julia, clarity is key here when it comes from what to expect from volkswagen. investors have been getting some stuff but need more details. the labor union could be the next big hurdle here. one hand we have the labor union saying we don't want to be to be blame for this. in fact we're not to blame if the company is right saying it came down to a few high level
engineers and they are to blame and we aren't going to pay the price. and volkswagen the last thing they need is strike from labor uni unions. so it will be very interesting to see how the wage talks play out. and how that plays into their margin forecast. one says he expects the group to maintain 6%. but the questions tomorrow will be about the path to getting that margin. there has ban relibeen a bit of relief rally under way.
first quarter operating profit missed expectations. the nordic regions biggest bank said it is facing head winds from low volume growth. thank you for joining us this morning. you talk about severe pressure on your net interest income, the volatility that we saw in the first quarter also meant subdued customer behavior. a tough environment. >> it is. low growth and negative rates and that is the environment we have. i've said all along we need to be able to adjust to. because i think this is here to stay at least for the foreseeable future that i can see in front of us. >> do you think negative rates in the likes of sweden have gone as low as they should? perhaps even too far? >> i would -- i would agree that
i think it has gone -- probably i do not -- we do not expect necessarily further cuts deeper into negative. but you can never rule it out. and i have at least a personal view that maybe this has gone too far. deeply negative rates can not be healthy for a economy that grow likes sweden does. >> what we saw in 2015 was that your net interest income was cushioned by the performance in your treasury to some degree. is there hope of support from the treasury net interest income in 2016? or is that not a possibility with bond yields continuing to fall? >>. >> i would not expect. i think the improvement i can see is more on that we have -- we look at pricing on the le lending book side and i can see in all countries an improvement.
we are trying to do more and will work more. but i cannot see in this environment a growth. if it is flat, then we can manage the other income lines and of course we are doing a lot on cost and doing a major transformation to make the bank more efficient. that will allow us to keep our dividend policy, which as i said is a gradual increase in dividend. and sticking to that. >> you mentioned going through major it restructuring as well. for some there is concern of cost overrun there too. how are you going to ensure? >> we have an obligation in place it is extremely focused
and i think we have said this year, year on year costs will grow but a because of the very big agenda we have. and we are very focused on delivering on both execution and cost and certainly there is no reason, now after first quarter, that we are not able to do it. >> thank you so much for speaking to us this morning. tech earnings front and center this week. apple, ebay and twitter. attention turns now to social media darling facebook. wilfred frost has the details. >> facebook expected to post earnings of 62 cents a share on
revenue. the stock is up about 30% over the past 12 months. among other things to watch in today's report, mobile advertising. and how about the news feed reporters say that even within nearly a billion active users on average, users are tiring of posting personal updates of their own lives. and looking for more insight in boosting future revenue and the big question is can facebook surprise and beat earnings estimates where twitter, microsoft, apple and others have failed and all moved to major moves in the stock price. apple and twitter ones to watch at the open to see how they trade. both trading sharply down of course in the pre market. leaves us with about .25% client
with the s&p and the dow and the nasdaq down about 1%. and the all of that and lots more coming up on "worldwide exchange" today. big big political discussion as both hillary clinton and donald trump all but secured the nominations. they took big, big steps towards getting the nominations for their parties. and one final thing, we got some diamonds onset today. more on that in "worldwide exchange" in what, seven minutes time. >> now is our reasonable time to buy u.s. treasuries. this from fund manager jeffrey gundlach. we'll give you a look at that there. what's fascinating for me is what's goingen the for inflation expectations. the break evens there in the u.s. for the 10 year it is something like august. so despite the mixed data, expectations are rising. interesting for the fed who's
expected to leave rates on hold when it publishes its latest statement today. joined by ted, great to have you on. the markets -- 20% possibility of a rate hike in june. how does the fed play this here? >> if you look at the march 16th minutes they pretty much say there is going on the gradual increases in the fed funds rate. and i'm thinking that we're going to see in june. the u.s. economy has been fine. slowly just going up and up every single month. job creations first two months have averaged 209,000. unemployment rate is around 5 or 4.. the dollar has weakened a bit, which is good it. helps u.s. exporters and everything. the only caveat is
internationally there is some issues out there internationally. i feel confident the rates will be increased by the fed in june, after a june meeting. and also one other time this year, probably at the september or december meeting. you have to remember the fed wants to get the fed funds rate up to about 3.5 and it is way belov there now. and it is between one quarter and one-half point. they want to get it up if nothing else to give them ammo when the next recession hits. we're still at very low rates and then the fed doesn't have a whole lot which it can do. so i think you are going to see janet yellen and her crew want to slowly raise the rates in 2016. >> i look at the s&p 5 hunz and
seems their -- >> eventually get rates up a 3.5 with the fed funds which is a normal rate. when we came out of the recession it just kind of slowly went up and up as to opposed to normally it just kind of hockey sticks up in the hard. so that it's been harder for the fed to do the things they want to do it. you have to remember that quantitative easing has increased the fed bounce sheet to 4.5 trillion and the feds are just reinvesting that money. so that gives them less ammo as well. because it is hard to go a qe four or five or whatever we're up to if the fed's bounce sheet is that high.
>> very hawkish this morning clearly. what is the risk then of a hawkish surprise from the fed today? >> well i think what we have to do is really parse the language. and there are a lot of fed watchers out there and spend most of their time doing that. you have to look at the language. are they somewhat optimistic? are they talking about a couple of things out there that aren't as good? so i really think even though there is almost a zero chance of rates going up today, i can tell you that the language -- >> ted thank you very much. we have to finish the show. we'll watch those numbers. that is it from me. "worldwide exchange" up next.