tv Street Signs CNBC May 6, 2016 4:00am-5:01am EDT
hi everybody. good morning. welcome to strooins. we are live from london. a live shot of tower bridge. >> and another beautiful day. >> let's get your headlines. investors on the sidelines for april. bull at goldman sachs upping their jobs forecast. >> and tumbling profits, sending shares sharply lower.
>> italian something or other. >> and this man sadiq khan in a symbolic win for labor party. >> good morning. >> good morning. >> tgif. >> i know. >> not a good friday for markets. here we are. >> well never know. -- blowing everybody out of the water. >> and have to find out what the number is. we talk about sell in may, go away. and that's shaiching up to be the case this morning. here we are an hour into trade off a half percent but given the
trend for the week that will be zpoing for many of the equity investors out there. the ftsi 100 off .4. the french cac 40 off .7. >> have to find that spot where it's not too strong but not too bad. we'll see what that? >> we'll continue into the second half of 2016. that is the warning from arcelormitt arcelormittal. >> sanofi has announced it could
increase its offer. the french drug maker warned that it would go directly to shareholders of the san francisco based firm the ceo used his earnings call to say that shareholders, they were supportive of the board's decision to reject the officer. >> let's give you a view of shares of intercontinental. the group posted a 1.5% rise in first quarter revenue. the firm got a boost from core u.s. market which saw record demand. and on the italian banking sectors.
coming in ahead of expectations as lower loan loss stuff. hi claudia. >> reporter: good morning. the stock is benefitting from these numbers that did beat expectations in terms of bottom line growth. they were expecting break even to ten million euros in profits. they came out with a profit of 93 million which is lower than what they came in with a year ago which was 143 but again beating expectations. provisions for bad loans did fall to 346 from 468 million. revenue also declining because of the volatile markets the slow growth in loans. as well as low interest rates that have been effecting the banking sector. but they are continuing to work on improving the situation in terms of non performing loans. they are working on reducing
that number which is 40% of their total loans being bad loans. 47 billion is their total. it has the increase in bad loans has gone up again at the higher rate versus what had happened in the last quarter of 2015. but the company did say that they will be selling some of their non performing loans going forward. as far as what they are doing to continue their restructuring, well, they are continuing to cut jobs and reduce the number of branches. they are going to be cutting 2500 jobs between now and 2018. very important part of what needs to be done in a bank that has lost half of its value since the begin of the the year on the stock market. they will be cutting 350 branches which is something that all italian banks are really working on. in order to put this bank in a situation where it can then move forward on the possible merger
possible sale and again benefitting overall the trade today on the fact that also the atlas fund could come in and also support the bank in terms of non performing loans moving forward. they are trading in positive territory. and mont depasty the --. >> another view this time on deutsche bank facing investigation in italy for alleged market manipulation. this according to sources cited by reuters. as soon as we have confirmation and more information we'll bring it to you. >> it is friday, jobs friday. how much more exciting can it get? >> and --. we have a usual kind of bets going on in the office as what the number will come in as. but some investors may have lowered their numbers for the jobs report after that adp
reading earlier in the week. they remain, most analysts anticipate a strong read. also some strength in the other stuff. we'll have to see when we nail the number but it is not just the core payrolls number and unemployment rate. other factors to keep in mind here, especially when it comes down to the inflation issue which has a huge weight when comes to determining the fed's course over the coming months. the most watched measure is th
the --. the big question remains at that level is it enough for the fed to cash in and go for a hike? that is the question on everyone's mind going into the weekend because some saying that june is not off the table quite yet. >> as we count down to the non farm payrolls number we're look looking at the asia session. sri is standing by in singapore. >> u.s. growth cycle, fed, treasury yields. i want to highlight markets. the fed under pressure today. broad concerns about growth in the mainland australia. relatively stable at the close.
and also the inflation data really suggesting that we could be looking at the start of an easing cycle as well in australia. this is quite surprising. japanese equities. back after a three day hiatus. seems to have relatively low impact on broader sentiment. perhaps the market is really pretty much pricing in the impact of a stronger yen. there you have it. that's going set the tone for next week. >> sri, have a fantastic weekend and get up to lots of mischief. >> and you. >> as usual. yeah. >> oh i never do. >> and we'll see you monday. talking about the payrolls there. let's look at the euro-dollar. it's kind of been on a tear since december. no stopping the euro.
thetreasuries and the bond markets. lot of people buying in yesterday. reversed a little this morning. the yield was sent down to a level of 1.73%. co-head of foreign exchange and fixed income research and strategy at u bst. welcome.bs. welcome. goldman upping its revision, upping their forecast, 240,000 seen there. wh where do you expect it? >> forecast is very close to 2 hundred.
>> do we see a dollar jump given other stuff? >> i think that we have this study over the past year, year after very strong payrolls numbers that led to higher yields and a strong dollar have driven equities lower. have driven bond yields lower. a slightly -- you know, a number close to consensus, slightly below consensus may within that context have a slightly dollar negative implication, slightly risk-on kind of feel to it. >> how are we meant to read the mix data? other points on non manufacture ing in there and the four week
jobless that a lot say is more accurate. it's lowest in four decades so this could make the case for a much more bullish fed. >> the first is we have seen mixed data and some volatility. partly because we've seen a very significant tightening in financial conditions in q4 and q1. some is reversing. it hasn't fully by the data should steady after the second half of the year which should give some room and some policy for policy makers. other measures of the economy, continue to show the u.s. economy not in a deep problem. when it comes to the fed however it is important to keep in mind the fed's dilemma is not just about jobs. it is not just about inflation.
it is all about financial conditions. and i think one of the biggest surprise of 2015. is that with very little tightening in fed policy you have had a lot of volatility in financial conditions and the fed is factoring that in. >> also factoring in what's going on with central banks around the world as well. particularly last week looking at the b j, the get a disappointment and the shear effect that had on the dollar. how are they reacting to that. >> i think up until the middle of 2015 that was not the most significant variable in the decision making process. i think increasingly they have realized a strong dollar in a area where other central banks are easing policy is something that has more negative side effects to financial conditions in the u.s. than previously thought. that has been our thesis for sure. and now they are trying to assess the impact of the dollar without wanting to interrupt
financial conditions. when it comes to boj it's not necessarily the feds immediate concern but concerns as relates to the dollar. the boj itself has been a little bit of idiosyncratic case in a something something something. or at least ease policy. >> i have to ask about the aussie dollar as well. the as aussie dollars set for a loss this week. in the various currencies, the volatility, what is your favorite one? what do you think is the trade of may? >> in terms of strength or weakness is this. >> in terms of making money basically. which do i have a chance of making money? >> we have been bearish on the aussie and think there is room for the downside there. the australian economy is facing a genuine disinflationary shock
which hasn't opinion addressed by --. would we pair against the dollar? perhaps not. given all the volatility. we have been on the bullish side for the euro. forecast of 114 and the dip may have givenous a couple of points to rallies so euros could be an interesting proposition, consistent with our views. >> anything nice lined up for the weekend. >> hopefully. >> good. thank you very much. now can you nail the payrolls number? that is the question we're asking. e-mail the show. "street signs" europe @cnbc.com. or the other stuff. and still to come here, a
their second evacuation in three days with a province remaining under a state of emergence. ctv reports. >> reporter: new video shows the destruction in fort mcmurray. in some places rows of houses completely gone. in the downtown, the hospital and other major buildings are still standing though in the distance you can see areas that are burning. 85,000 hectares or about the size of the city of calgary. yesterday the fire approached the airport, causing significant damage nearby. but firefighters managed to save the main terminal. >> their defensive efforts worked yesterday. so mild damage to the airport. it remains open for aviation. >> as for the weather it is not exactly cooperating. temperatures have cooled but winds remain a problem.
the province today sent water bombers, though officials say even with all that help it will be a tough fire to fight. >> let me be clear, air tankers are not going to stop this fire. this is an extreme fire event. >> reporter: the fire was expected to expand away from fort mcmurray though overnight several areas to the south had to be evacuated. residents waiting in the towers of smoke. >> we just don't want to go too far from our home. >> i just want to get my pet, put some fuel and i'm heading out of here. >> with 25,000 people strand north of the fire zone, efforts under way to air lift some out. >> this could become the biggest insurance event in canadian history causing up to $9 billion in damage.
the impact of the fire remains unknown but from an economic point of view initial estimates suggest stuff could happen. some even forecasting a dip in the economy as energy production in the region is suspended. and there is an e impact from the fire. the oil sands region having to curb its outputs the price slightly lower. >> we did get about the 1% bump. still off the highs yesterday. shifting focus here, the counting has started for the next london mayor. the final poll carried out by research firm -- suggests that a win for khan over the
conservative party. tell us what we know up to this moment. >> as of now we know nothing at --. >> reporter: we do have some results trickling in from the local elections? scotland we've just seen the official results. the scottish national party has another victory. and what's more interesting in there the surge of the conservative party. they moved into second place coming in ahead of labor. what we're really looking out for the rest of the day is to see whether labor has suffered the same disruption throughout the rest of the uk. >> thanks for that. we'll be following the ratest results throughout the day. meanwhile another twist in brazil's political crisis. the supreme court has now
removed the speaker of the lower house of congress accusing him of obstructing justice. rousseff allegedly hampered lawmakers. >> they have now downgraded brazil's rating further. from bb plus to bb. citing a deeper than expected economic contraction. brazil lost its status back in december and they are saying that the economy's outlook has weakened since then citing the high level of political uncertainty. >> and we are getting just days closer to perhaps another key impeachment vote coming today. if the committee members give the go ahead, the full senate
will then vote on whether to put rousseff on trial that. should come some time next week. joining us now for more on these developme developments. thank you for joining us this morning. another turn in the brazil impeachment story. do you think we eventually see president rousseff step down? >> i think the fate that rousseff is nearly settled now. she has lost the support she needed to prevent this impeachment. the development of the removal of -- yesterday as the head of the lower house is a significant move and possibly will help vice preside president, who is expected to take over from president rousseff. has the support of the private
sector and he's promised to implement some policies to tackle the fiscal deficit. the problem is he's facing two problems. the first one is whether he will get with him the support of congress. and secondarily the investigation is hanging in the air and it could undermine whatever good willing initial positive short honeymoon could enjoy. everybody will be looking at his cabinet and how much support he's going to get in congress. >> you just said the kuna announcement could help timmer. why is that? because it helps clear any allegations? what is the benefit there. >> because the move by the congress to remove president rousseff by an impeachment,
argument against that and kuna a person was leading the charge against president rousseff and this association with kuna wasn't very good for him. with him out of picture he'll at least have the claim of something. so removes an unwelcoming partner in all this and possibly support for timmer in congress from those tellemer. >> if that government falls now, how far right do you think potentially that brazil will move given the strength that we've seen in some of the
outlying more right wing parties? >> well i think it is not necessarily going to move extremely to the right because the two parties are the -- [inaudible]. i think rather that temer will at least come with an initial support for two or three months. or the central right. the pmdb has never been a clear right wing party move to the interest so not necessarily to the right. think crucial by president temer to try to keep some of the programs in place because otherwise they could face unrest
hi everybody. welcome back. you're watching "street signs." >> here are the head lines. investors on the sidelines ahead of the big u.s. payrolls number for april. dampening expectations but the bulls at t goldman sachs are upping their forecast. >> arcelormittal profits falling sending shares lower.
downside pressure here in europe. this after weakness in asia specifically when they look at the chinese mainland markets we're some 3% just a bit earlier. today the ftsi 100 and the xetra dax off. the french cac 40 and the ftsi mib lower. >> noh lockheart not going to panic. that's always good to hear. current economic conditions they seem strong but didn't necessarily guarantee a june rate hike. >> i think we should keep the option open but i'm on the fence at the moment and depends ow how the data come in. today we have a disconnect between the growth numbers and the employment numbers. and clearly i'd also like to see inflation numbers continue to move in the right direction.
>> san francisco fed chief says he supports yellen's views saying they could handle a couple hikes this year. >> typically people said two or three rate hikes this year. i think that is a reasonable view. but, you know, we'll be watching the data, making sure that q1 blip or kind of slowdown in gdp doesn't persist. watching things globally. making sure we're making the right call. i think we should stay on our basic strategy of gradually removing policy and combination over the years and yes that would involve some rate hike this is year. >> and if that was enough of the fed speak, trying to read their crystal ball there. we also heard from bullard and he said some stuff too. and dallas fed chief robert caplan said he could continue to
kaplan. underestimating the odds of a fed hike in june. david is with us. what makes you so sure that we are going to see this market contradiction this month? >> first we've been bullish the last three months. positioning was way too bearish and we thought concerns china was exaggerated and dollar was over bought but now we are ripe for correction. speculators also long oil. and third fed is still on the fence with regard to hiking in
june. and with regard they hike or not right now we have priced in virtually nothing. so the risk reward ahead of that is not great. so we think there will be a correction but then we will buy. >> so if the fed hikes in june how big impact on emerging market flows? it is only 25 basis points if they hike one would assume. >> yeah indeed. and we have become used that fed hikes ares inially bad more yen but --. we actually think the impact on the yen if yen continues to be better will not be that bad. that's why we think that we should buy that correction ahead of the fed meeting. what really matters most is when data continues to get better. and that is the case. earnings are to the upside and
we think that will actually continue in the second half of the year. >> how long are you holding that position? for the long haul or through the end of the year. >> i would say even through the long haul em should be outperform ing outperforming. >> when it comes to selection, what are your preferences? it is not just the macro effects we talk about with the fed and global from china. when you look at a place like brazil, still you could say a political mess there. what is the case for brazil? and the other side which markets do you like. >> first we are not saying rosie picture for the market you want
to normalize the positioning. and risk is still reasonably elevate elevated on the whole you want to be in markets like brazil. like russia. >> we all have inflation fever it seems. looking t inflation so closely. and you talk about how we should be long the inflation winners. who are the winners? >> what we mean by -- is not a huge improvement. reinflatiflation
reflation. the winners are commodity exporters -- [inaudible] a lot of investors that would say i don't want to two near russia for the time being. but you are saying go long russia versus south africa versus turkey. how much in there is russia to the upside? >> you still have easily another --. significant elasticity. yes investors have been pulling
back because of oil. also because of what happened in ukraine. but we feel as the fundamentals are getting better the spreads are still very high and local currency debt. we think investors are going to overcome their fears and gradually come back. >> on the oil question we have seen a rebound as well. that is good news for the emerging marketers. are we out of the woods yet? >> no one has a crystal ball. but our view is that oil will be going higher. we think we are seeing contraction in global supply. and that is not because of saudi because continue to pump whatever they can but really because supply is shrinking.
demand continues to grow steadily. >> thank you. keep your e-mails coming. nice to have you with us this morning. "street signs" -- i had to think for a minute what the address is. >> we continue to watch the action state side. and the speaker of the house is casting doubt on donald trump's candidacy. saying i hope to support the candidacy fully. at this moment however i'm just not there right now. tracie potts is in washington. we know donald trump has a serious task ahead when it comes to uniting the party. what does the latest development from paul ryan mean for that? >> it means he's got an uphill
battle for he even gets to that convention. paul ryan is the chair of that convention where he is expected to be nominated. but if he doesn't have the chair's support what's going to happen with the other key leaders. he's the highest ranking leader to come out publicly so far and say i just don't know about the guy who looks to be the party nominee. donald trump says he wants to focus on the issues in the fall campaign, hopefully with hillary clinton. it looks like his position on some of those issues like whether or not to have a ban on muslims in this country. on trade agreements and immigration that are giving some republicans like paul ryan pause. so there is the leadership problem within the party. and then the ted cruz issue. all the ted cruz supporters. can he win them over. some are saying they are not
sure. so even though he may end wut the numbers, in delegates the support and yada yada, what they don't want to see is republicans sitting out this election like we've already seen with former presidents bush for example saying they are going to sit out the convention and stay mum on this one for the first time ever because they are not keen on -- apparently not keen on the apparent's nominee. so this is a big problem and he is trying to bring them together. but as paul ryan said just not there yet. >> on that very fear people sitting out november as you suggest, a really interesting poll coming from reuters yesterday saying nearly half the american supporters supporting hillary clinton or donald trump say they are trying to block the other side. so does this mean we're getting ready for a negative general election here? >> certainly could be. it has the potential to do that. and you have got a really
interesting electorate here going into this. because you have who are obviously very much for these two candidates. you have people voting because they are against the other side. and you have this chunk in the middle that are just not satisfied with their options. and both parties have the risk of people sitting out because they don't like the nominees. >> tracie, thank you for that update. live from washington. tracie potts. have a great weekend. north korea is holding a workers party congress today. first since 1980 that the event has taken place and only the seventh time in the country's history. took thousands of workers 70 days to clean up and decorate for the event. a red run for gopro after hours as they announce a slump in sales. we'll tell you more after the break.
good morning. and welcome back to "street signs." a tough day for investors in gopro. shares falling more than 5% in extended trade. >> gopro bulls are not easy to find. that stock has nose dived over the past 12 months and only 28% of analysts think this is a buy. gopro's latest results for a mixed bag. for q1 it reported a loss of 63 cents. and gross margin clocked in at 33%. on the plus side revenue came in at 184 million. analysts expected 169 million.
one big piece of neuse. gopro is delaying the launch of its new drone. now gopro is simply saying that the launch will benefit the holidays. investors are focused on the drone as the potential catalyst for the shares. as well as a new camera. they say gopro has made a series of specific miss steps, turning ahead gopro did maintain its full year revenue guide. for cnbc i'm josh lipton in san francisco. >> we were just talking. we've never tried gopro. >> never tried but i am curious. >> extreme sports. it is phenomenal to watch these pictures, right? but for most of us it is kind of
not. >> i did a mountain wyc in --. ite pretty proud i. >> what i'm doing i assume is only interesting to mi and the people oim doing with it. but other -- >> [ inaudible ]. >> -- once put on a video of a six hour wedding. and after like the first two hours of handshaking on people you don't know you think this is interesting for you but maybe not for the rest of us -- yeah. herbalife is in settlement talks with the ftc. it added a number of issues remain that could hamper a quick outcome. they grew user base by more than 6% with china and beat the share in the first quarter. >> news corp has reported a net loss for the first quarter.
the group's quarterly revenue declined more than 7% as its struggles with the transition from print to digital. >> shares of dream works largely flat in afterhours trade. despite reporting profit in sales. revenue saw increase of 14% in the first quarter and reported eps of 16 cents versus the thomson reuters --. >> and activision shares also in focus after the call of duty has helped beat profit and revenue for the first quarter. shares rose, up now more than 6%
in afterhours trade. >> neither of jack dorsey's companies enjoying 2016 so far. some disappointment if square as well,. >> -- hurt mainly by a jump in costs. analysts are also worried about slowing growth. shares down sharply on the news about 2.5% in the aftermarket. ceo jack dorsey sounded optimistic last night. >> the core business is strong. the small business economy and moving up market towards medium size businesses has always been our sweet spot and seeing more growth in the mid market and up market opportunity and we have this fantastic new reader as
well that allows any one of our sellers to accept apple pay, also samsung pay and the world is moving towards chip cards and we have the fastest implementation out there. so we're seeing a lot of that in the business itself. >> there were some bright spots, including a 51% jump in net revenue and 45% increase in total dollar pamt of all card payments processed by sellers. square will be one to watch at the open. yesterday we saw a slight positive return for the dow. slight declines for other two indices. at the moment futures are pointing down by 0.1. slight declines. the jobs number the big focus today. and the weekend ahead of course. back to you.
>> yeah. thanks for sending the sunshine our way. we were just saying at the break new york is pretty dire at the moment. >> may i was expecting glorious sunshine but we haven't got it. >> you will have the summer wilfred. >> have a good weekend. some investors may have lowered expectations today after the disappointing reading. forecasts remain high. they are a lot of them. in april with the jobless rate holding steady. richard kelly, hi. what are you expecting? >> i think the payrolls number headline is 188. we came in thinking it was going to be below consensus. i don't think we need to chase it lower. >> we just had a tweeter tweet
in and say 175. why the relative bearishness? >> i think if you look through, some of the manufacturing, the mining side. we know that is still a struggling sector in the u.s. you are still going to see job losses there. and we've seen significant slowing in the housing market. so you would expect some of that to show through on construction. but i think what you want to also notice is 170, 180,000 is still a fantastic pace of job growth. >> if you are right, if the number comes in below 200,000, where does that put the fed? we heard dennis lockheaartlockh.
>> we know the labor market recovery itself is okay. we know there are other soft spots they are worried about but we're looking for the traction on wages. we haven't seen it yet. as long as there is none i think the fed allows the economy to run hot. >> i know goldman sachs is looking for about a .3 up tick. is that enough? >> i think we can get .4. it is hard to get a firm forecast but yes i think you are going to get that and i think the fed will want to see 3, 4 months of that decent up tick in wages before they respond. is june off the table? no. is it extremely unlikely, yes. >> given you are head of global strategy how are you positioning at the moment? >> you started to see breaks in effects. fx.
if you get a strong number -- now that is the move we've had. i think you have seen a lot of the bilateral moves if you are looking on aussie, on euro, on sterling. most of the local strengths look a bit stretched where we've gone so i think you are probably moving more likely into a period that wants to have some dollar strength. >> i look at the yields on the treasuries. why aren't we any higher, you know? given all the indications on where we are heading plus the rate hike that already happened in december. why aren't we seeing more of that filter in. >> when you look at data surprises in the u.s. and the market is pricing in new news. you have seen a significant hit to the sort of surprising we're getting relative to consensus. so that disappointment is going to hold you back. and we are still? a very low yield global environment in which u.s. treasuries are very high yielding and that environment that goes on, that search for
yield is going to be a significant anchor to seeing treasury yields higher. even though the fed is ready to hike at least once this years and twice is possible. it is still hard to say 10 year treasuries can move above 2.10 this year? >> do you think they are starting to pay attention to washington and the white house as opposed to just look a fed. you could argue political risk globally is picking up. does that become a risk. >> i think it becomes one more. brexit and opec meetings and there is a lot of risk that makes it very complicated to trade. i think what having now it seems the two clear nominees come through. i think it is probably too early but you will get to conventions in july. you will move to august and i think markets will have a bit
more focus there. >> jeff also saying, full employment. at some point the amount of new jobs has to slow down. >> absolutely. and participation rates picking up. and keeping the unemployment rate flat. >> thank you. have a lovely weekend. great to see you. >> and just ahead of that countdown underway, we'll give you a look at the markets. disappointing day in asia and europe. we'll have to see how the weekend ends. that is it for today's show. have a fantastic weekend. "worldwide exchange" is up next. take care have a lovely day bye