tv Street Signs CNBC May 23, 2016 4:00am-5:01am EDT
>> in this episode, our "secret lives" super tally blings out at $205,767,500. >> in this episode, our "secret lives" super tally good morning, everybody. you're watching "street signs." bayer's shares are sinking after putting a $62 billion bid on monsanto. shares of fiat decelerate after the automaker is being investigated for using illegal software. but the company said it is compliant we missions
regulations. headwinds on the horizon? ryanair warning that the egyptair could hurt bookings. and japan's governor tells cnbc he has more monetary fire power as the u.s. warns japan there's no reason to intervene in the yen. >> i would say if necessary we can further the ease conditions in three dimensions. >> good morning, everybody, if welcome to "street signs." we just got data at the top of the hour that is weaker than expected. the may eurozone unexpectedly slowing to a 16-year low. you're looking at the reuters
poll looking at 1.19. just glancing through these at the pmi, weaker than expected 53.3. in april we saw 53.1. just to underline, we are looking at business growth unexpectedly slowing to a 16-month low. the euro dollar on screen right now dropping a bit on the back of the data, 1.12 and a bit is where we sit. we have a fantastic guest joining us here imminently. i think he's in the green room, so we'll get into a lot more where our fx markets are heading. but start of the week, nancy, fresh start to trade. that's right, louisa. we have a downbeat here with the underperformers outpacing the winners an hour into trade.
overall, the stoxx 600 are a little weak. keep the losses in perspective, it was a solid week for european equities finishing higher. some of the best performances we saw in a month. a different story on wall street where they price in the fed-rate high risk. number is still in focus because energy, wti, seeing a 3% gain on last week. that was good news for some of the stocks here in europe as well. we'll also give you a view how the horses are faring one by one. a lot of individual stocks here, particularly when we look at the german market, we're looking at bio. we'll get into more details on that megamerger proposal coming up in a minute. we'll get to the big news of a morning, it's a $62 billion mega deal. bayer is offering $122 a share
for monsanto and a tie-up and the german chemicals firm said it would create synergies over a billion dollars in year three. the company has been quick to say it was confident in its ability top fund that transaction through both equity and debt. well, let's get a look at how bio shares are faring in the announcement here. the stock up 2.8%. that underperforming the broader market losses we're seeing in germany. some investors cite concerns over the financing picture but also the price when you look at it, $62 billion higher than many anticipated when we got initial reports of this deal in the works. on the other hand, this is monsanto closing 1% higher on friday. they perceive this deal as good news. for more perspective, alex
tarrant is joining us on the phone. it's a blockbuster proposal, no doubt about it, but how tough will the job be at bio to convince investors it is worth it? >> well, good morning. yes, we have had some reaction from the investors with the shares down this morning. we had a few comments last week from certain investors that they were perhaps questioning the deal and i think even over the weekend and this morning you have union investment question whether this leaves enough firepower for bayer to fault on acquisitions after this. but obviously what bayer will try to do is highlight the general space consolidating and that these companies do need to move. you have syngenta being bought by jchina.
and we know that basf was looking. so they will argue that they have to do this dea in a coolidating industry. >> and alex, on the issue of additional firepower as you touched on for other acquisitions, we heard from the ceo this morning saying, yeah, we are still looking at bulton, but does this mean fewer acquisitions in the drug space? >> yes, it could. and obviously, bayer is largely in the drug space. but, you know, the big picture, they are going to get this deal through to see how much they can actually come out in synergies. the highlighted 1.5 billion usd of synergies might be quicker. it all depends on whether they can use this deal to get a height on dupont. if they can do that, then perhaps maybe they'll have the
firepower. i know they are trying to keep a better credit rating, we'll see what the credit rating agencies say about this. and the phrma space, there's usually appetite for deals due to the value that the deals make that you have seen in the past. so look, if they say they have space to keep doing them, then we have to give them the benefit of the doubt. >> yeah. alex, good morning, it's louisa, we have not heard a comment from monsanto yet. what do you think that their response potentially could be? yes, it's a massive deal, but it wasn't all that long ago they were trying to be the aggressor and they put a bid in for syngenta, that didn't happen. what do you think they'll be saying? >> well, you are right. monsanto was the one out there that really kicked all this off for syngenta.
if bayer doesn't work out, you may see basf decide to make their move. again, monsanto, they have been quite quiet over the last couple of months we have seen. just as they look at the nature of the industry, they are obviously going to assist the deal and see how good this is for them. but this, obviously, is a very aggressive company that thought they were at the forefront of the consolidation efforts. now they are, what, fourth in line in terms of the q. so it will be very interesting to see how they respond. i guess we'll have to wait and see. >> sure, i know. how about monsanto's reputational issues, though. they are known for genetically modified crops, which has led to a lot of activist criticism over the years and a lot of criticism from european activists where europe tendso take a different stance or slightly different
dance on genetically modified crops. is that going to become an issue? >> well, i guess you have national governments able to set laws of whether you have gm or not. so this won't create an issue in europe because of gm in the u.s. what we are looking at in terms of politics was a potential national security deal in the u.s. i know bayer is a german company, but where it expects this deal to have a serious review. and it also comes at a time of the u.s. general election. we've already had one republican senator saying he will at least raise concerns with the doj in terms of the antitrust review in the u.s. because if all these deals go through, you have base you cannily one remaining domestic ceaseflow in the u.s.
so we expect food security in general to come up in the u.s. genetic modification, obviously you'll have environmental campaigners, whether or not this deal happens or not. >> alex, thank you very much for being with us. alex tarrant joining us from dealreporter. by all means, we would love to hear from you and what you think of the possible deal. we'll also speak to bio's new ceo first on cnbc at 12:00 cet, westerner baumann. we'll ask him lots of questions on what is going on there. you can find us on twitter. we are also on e-mail email@example.com. the united states has warned japan against intervening to weaken its currency. speaking at the g7 over the weekend, u.s. treasury secretary jack lew said countries have to refrain from competitive devaluations and describes the moves as orderly.
the contrast with the japanese finance minister said that the yen's appreciation was one-sided and speculative. the bank of japan governor kuroda said he's willing to pull to reach the target. kuroda said the sharp slump in commodities has forced major economies to push back the inflation targets. we have had this g7 meeting over the weekend, akiko, what do you think of how it was viewed successful or not? >> reporter: well, not a whole lot to be frank because japan in all the g7 countries essentially went into this meeting hoping to perhaps hash out a framework for a coordinated fiscal stimulus. they walked away without one and essentially left it up to the
countries to come up with a good policy mix to boost their economy. so there was no unified front in terms of the two-day meeting. now, i did get a chance to speak to governor kuroda. he insists that the boj has plenty of ammunition left despite all the criticism that the central bank has gotten regarding negative interest rates and all the questions on whether they still have credibility. we started the conversation by talking about the yen. it's gone from a 13-year low one year ago to an 18-month high. gained more than 10% against the dollar so far this year. and i asked governor kuroda whether he thought that the current level of the yen was affecting the boj's price target and whether it strengthened the case for further easing in the june meeting. >> policy is real target to inflation rate. but of course inflation rate is affected by many factors including output, equation
expectations and so on and so forth. and they, in turn, could be affected by the exchange rate. if there are factors including exchange rate for expectations, underlying inflation trend, we can adjust as necessary and will further ease the monetary policy. >> is the yen reaching a level that is dangerous that is enough for you to believe that it's going to affect the price target? >> i can't say, for instance, if exchange rate -- then we would ease monetary policy. i can't say this because we do
not target modern policy exchange. we target our policy to inflation rate. >> so it doesn't sound like there's any type of red line that has been set, if the yen reaches 100 let's say -- >> 100 or 120 or whatever rate, i can't say anything about the exchange rate, which would be necessary or which would be risky for achieving the exchange rate. because as i said, there are many factors. >> new data that came out showing new gdp growth 1.7%, but that incorporates the extra year in with the leap year. we look at capex falling in private consumption, what does that tell you about the health of this recovery process?
>> i think the target monetary policy figure shows steady yet somewhat slow or moderate -- libya could be a factor, but still consumption has been fairly busy based on strong diesel and employee income. the trend is quite strong as far as fixed investments are concerned, because the corporate sector enjoys a profit. so a fixed investment concern, i have no worry about continued improvement. >> the question now is in order
to stay on that moderate path to recovery as mr. kuroda characterized, mr. kuroda didn't want to weigh in on the timing of the issue saying that's up to the abe government, but japan is on track to reach the target of fiscal consolidation by 2020. in order to do that, they have to move forward with the sales hike. back to you. >> akiko, thank you for bringing us that great interview. we'll bring you a check on how the yen is trading with the g7 in the background and the japanese export data spooking investors a bit, but overall the surplus came in stronger than many expected. nevertheless, the dollar is weaker than the yen by half a percent. for more they are speperspectivg in simon derek, great to have
you around the desk. we were just hearing mr. kuroda say there were no red lines when it comes to currency, do you believe that? >> well, if he says there is a red line, then instantly he's going to raise the ire of the other members of the g7 and g20, so by definition you have to say know to that. i do think if you look back historically, when you start to see these kinds of moves through certain levels, the bank of japan is moving us through this and does react. you can go back to 2004 and see exactly what was happening at the 105 level. yeah, i do think we start to get back to then 105 or 106 when the bank of japan says yes. the question is can they do something about it. >> one of the things they are doing is offsetting other areas. we talked about the retail tax hike, the government so far
saying we want to move ahead with this. but can they afford to? >> probably not given the fact there's actually so little space for them to do anything with the yen. i mean, this is an age old battle. the foreign exchange markets, they have been going through this pretty much since i started my career. so since dinosaurs ran the earth. back to the 11980s, there was te battle of japan, the reagan white house, the clinton white house, back to 2003 and 2004, it's the same story. it's about the u.s. complaining about japan manipulation and currency. the interesting thing is japan's never ever won against the u.s. the u.s., if they are determined to do this, i wouldn't bet on the japanese. >> if you were guessing then, what is the invisible line? >> i think we could get back down to 105, then they will start to get really concerned.
but intervention is off the table, they can't do that, so all that is left is more qe and to get the approval of the other g7 members. >> what do you think is driving currency markets now because looking back a couple of months, you know, you have either europe and the euro air woes that are driving the euro and hence all the other pairings as well. then we switch to the emerging market currencies and the story was there, is it the fed now or the u.s. dollar story? >> i would make the argument over the last couple of years it's been about dollar demand. whether that has been generated externally by whatever the japanese and the europeans are doing or by what the fed has been doing. this year it's all about the fed and is this fine balancing act between trying to get rates up to a certain level or the strong dollar. >> okay. we'll be getting more dollar views here on the other side of the break. >> you mentioned all about the fed and more comments coming out
over the weekend. so we'll get to look into the crystal ball there in just a few minutes. >> the euro dollar forecast for the rest of the year, by all means, get your e-mails through. firstname.lastname@example.org. good morning to all of you writing in. you can also find us on twitter. >> @nancycnbc. >> coming up, are we on the vernal of the rate hike from the fed? one official thinks so. details on that coming up next.
version of being met. a more positive picture is being painted of the economy. simon is still with us looking from the current perspective. yellin is speaking on friday and you have the fed speaking from san francisco, st. louis, minneapolis, all bunch of speakers this week. are we going to hear anything different? >> there's been a clear narrative over the course of the last two weeks. and i think what they are really trying to do is remind the market that back in march when we had that meeting and the plots that said there are going to be two rate hikes this year. the market said, no, we don't really believe that. so the narrative now is reminding people of what the fed has been saying all along.
let's say there's a second rate hike, you won't move into that mode because you're within days of the election. that leaves you june, july and september as to when you'll make the move. september's not a great one because you're running into that, you got thin august before and still have a natural of weeks -- you don't want a market fretting about the possible rate hike. july, you have the same problem. so if it hasn't been for the problem at the eu referendum, we all would say june is the natural date for the rate hike anyway. it could be just possibly that with market tensions around some of the international factors, maybe just relaxing a little bit and june looks like the easiest day to go with. >> why do we have to see a rate hike in december? do we have to see another one this year? >> well, the simple fact is that
m monetary levels are extraordinarily low. if you want flexibility going into the future, you want rates higher than they are now or you'll have a problem with the dollar strength. >> simon, you mentioned if it weren't for the eu referendum they would go with june. why are they worried about a possible brexit, what is the fed's concern about th scenario? >> it's a broader concern. if you look at the fed over the course of the last nine months, they have shown a very clear concern about the international markets. think back to last september, it was china they were worried about and said international concerns. the very last thing you want is market volatility, particularly in an election year. you want to keep things calm as possible. and i think there is also the realization that some of the factors that are driving market
volatility were a direct function of dollar strength. so they are concerned that what they do can fit into the international markets and back into the domestic markets. >> you might say the ecb has the risk to be more concerned than the fed considering the case with brexit. where do you see the euro? is it accurately pricing in the risks? and where will it be at the end of the year against the dollar specifically? >> if you look at the performance of the euro, it is almost never priced in the west. it is always monetary policy and nothing else, so it is really seriously believed the risks in the eurozone, whether the north/south divide that continues to develop over the monetary policy and over the subject of greece, i really don't think anything -- >> she wants a number. >> 120. >> 120. all right. by the end of the year. >> yes. >> here we are today at 1.12. we'll hold you to that.
>> that is simon derrick at bny mellon. fiat is trading sharply lower amid report that is the carmaker is expected to be using illegal software for emissions test. they say all their vehicles comply with regulations but last year fiat was expected to hold a meeting with the german transport minister but provoked anger canceling at the last minute. apple told suppliers to prepare for an output of 72 to 78 million units of the new iphone 7 by the end of the year according to the economic daily citing supplier survey in china. the news sending shares of dialogue semicon higher. and aixtron shares are trading higher after they announced a $670 million euro offer for the conductor maker.
aixtron's chairman said this would support their business in asia. they will maintain their headquarters in germany as well as britain and the u.s. goldman sachs downgraded sports direct to neutral remove ing them and sending them to the baht testimony of the stoxx 600. a demanding european clothing environment would stall sports direct's progress for the next three years. let's bring you an update on the biggest story we have been watching since last week. egypt now deployed a robot submarine to join the search for the egyptairplane that crashed in the mediterranean sea on thursday. ships and planes involved in the hunt have already found body parts and debris. the search is now focused on the black box which could shed light on the exact cause of that crash. the egyptian president said it could take some time still to find out exactly what happened
to the airbus 320. and we need to take a quick break here, but remember you can keep watching us through our world markets live blog running throughout the european trading day. get all of the latest trades, the action, the quotes out of the g7 meeting. keep following us, we'll be back after this short break.
and fia trt's shares decelee after reports of them using illegal software. and haruhiko kuroda tells cnbc that he has no reason to intervene in the yen. >> yeah, we have enough information and if necessary we can further ease our monetary conditions in three dimensions. good morning and welcome back to "street signs" this monday morning. hope you had a good weekend. and we are giving you a look at how the u.s. markets are set to open as traders went into the weekend on a soft note there with the dow having its first consecutive four-week loss since october 2014. we are expecting a bit of a
rebound here this morning as you can see the dow jones higher by 45 points. the s&p higher a modest 7 points and the nasdaq higher at this hour as well. we'll look at europe heading into the depths of the summer months. we're a little bit mixed this morning in trade. the vast majority of the european forces are trading in positive territory but only just. the xetra dax is up by a half percent. the ftse is up by just over 1%. you look at the sectors out there, you are looking at basic resources with the chemicals, that's a bio reaction we're seeing. we'll talk more about that. >> and the recovery in the last 30 minutes, when we opened the door, we had the stock up half a percent. here we are pairing back the losses. >> precisely. in asia we'll check on the markets there. dan murphy is in singapore. hi, dan. >> reporter: good morning to you. most asian markets are finishing the first trading day of the week in mixed territory. you have to say, the major focus
in our region really has been in japan today. we saw the shenzhen finish down half a percent. and japan's numbers fell after the boj was told to stabilize the economy and wrap up growth. as we dive into the numbers, imports fell 23.3%. exports falling 10.1%. really reflecting some growing concerns in this region about when demand from china and also the strength of the emerging markets are more broadly. of course, as we have been discussing this morning, we had the boj governor kuroda telling cnbc today that the boj still has room to move if necessary if the conditions warrant it. keep focus in the region of japan as i mentioned, we are also looking at a drop in commodities like oil also weighing on the sidney died
finishing down .60%. across china, will be hang seng and shanghai are down.66% a and .22%. we also saw gains elsewhere with the kospi gaining .40%. back over to you both. budget airline ryanair has seen profits rise by 43%. this as it plans to sharply cut fares in order to compete. speaking to "squawk box" earlier michael michael o'leary said this. >> airlines respond by lowering
airfares again and traffic begins to rite itself in quick order. but the impact is not there for traffic but on yields and fares. >> joining us now for more analysis is oliver sweep, the european airlines analyst over at barclays. oliver, thank you for joining us this morning. we were just listening to the ceo of runair explaining his view on how this should affect passenger interest on demand going forward. what is your view? very sadly this is not the first terrorist attack, but we don't know what the cause is, but if that's the assumption and passengers are worried on the heel of that, what would be the real impact? >> obviously, we have a number of these incidents that have happened over the last 12 months. we had the brussels attack, paris, the istanbul incident earlier this year and then the german air crash last year. after any of these types of
events, you see soft bookings for a couple weeks in general. and the airlines respond in different ways to that. ryanair is going to cut prices and other airlines may sit and take a hit on the traffic side. but i would say after all of these incidents so far, the underlying consumer in europe has appeared to be relatively robust. and after a couple of weeks the bookings have returned. maybe there's questions for the u.s. tourists and japanese tourists, that could be longer term damage through the summer. >> of course, because of this incident it's different than the others because we don't know yet whether the cause is terrorism. of course the investigation is still out there, but back to the point you're making on fares specifically because ryanair's ceo is saying we expect a price war when it comes to fares yet they want to stay on top of that. how can they do that and preserve their margins? >> the language of ryanair is quite aggressive on fares, that's their sales pitch.
they have the lowest fares in europe and it helps to get passengers on board and to scare other airlines. i would say a couple of points. one is they are dealing with a lot of fuel benefits. they were hedging at $90 a barrel up until march and now are down in the $60 a barrel region. unless it shoots up further, they should see further benefits last year. the fuel savings will protect their margins. at this point in the year, it's ryanair's first f'17 outlook. they are looking at the trading through next march and do have a habit always of being quite cautious. they have said they're expecting fares to be down 10% to 12% next winter. they don't have the -- that's the worst case scenario. >> they are talking about a possible brexit and what that would do to the sector. he's been adamant saying we would remove foreign investment into the u.k. and put it
elsewhere. and put downward pressure on the aircraft prices that would mean they could stock up if there's a downturn. do you think there would be a downturn if there's a brexit? >> i have to keep my comments to what i officially published as an analyst. but we think the immediate consequence would be sterling and the weakness there. and ryanair in the uk is a very important market. any movement in sterling downwards will cost. and i think you have sort of a counting impact on them, they have more revenues and costs in sterling, but the second question is what would it do to consumer demand? do u.k. consumers want to go to europe or do they stay home? do more european tourists come into the country? there's a lot of second and third order effects of what could happen. and things and questions are on the regulatory side as well as route rates, but the primary issue is sterling.
>> oliver, thank you very much for being with us this morning. he's a european airlines analyst at barclays. now vietjet is going to buy 100 boeing planes for $11.3 billion. the orders are expected to run through 2023. they are saying a supply glut could weaken orders and cause the shares to slip by 15%. well, our next guest offers that a corporate bond could be fruitful for investors despite the associated risks. let bring in christopher wright u investment strategist at usb management. he's joining us live from zurich. christopher, good morning, pleasure to see you today. i want to get into your point about attractive returns and
high yield because it wasn't so long ago we were talking about a potential bubble, specifically when looking at the u.s. what is your view on europe and what makes it attractive relative to the u.s. market? >> yeah, when you look at the u.s. market relative to the eurozone, on a return on return basis, you have similar returns but the risks in europe are quite a bit less than the u.s. right now, particular two points, firstly, europe is much earlier in the credit cycle than the u.s. and the big one would be the ecb as the fed continues to ease further and further. the announcement in march shows them increasing the program further. that's doing wonders for the vending standards in the eurozone that couldn't to cheapen. and the big one where they stop by the corporate bonds in the region. that's naturally going to yield hungry investors of the risk curve into the high-end space supported as well.
>> it's having a ripple effect even though the high bonds are included in the ecb bond itself. what does this mean from the corporate angle? today we are looking at the mega merger coming from bayer and the proposed part is somewhat in debt. is the this a sign to take on more favorable questions as a result of the easing of the ecb conditions? >> yeah, absolutely. we have seen increased flow and issuance into the eurozone high end market because of that lending or borrowing right now that is much cheaper than in the u.s. so it continues to be an attractive place to wish you debt. and because the fields and risks of goods, investors are hungry for it. >> christopher, hi, it's louisa. u.s. lending standards are changing a lot. do you think that's going to have a material impact on potential he faults at this stage? >> yeah, that's a clear signal of where we are in the credit cycle in the u.s.
leanding standards in the u.s. have been tightening for some time now. we look at the senior offices survey, not showing the last three quarters, we are seeing a tight anything. do your analysis historically, you do get a fairly good indication of the default rates coming from the surveying. >> so liquidity concerns aren't on the agenda for you. how would you divvy up your portfolio in terms of high yield? what should the u.s. be waiting versus europe? >> yeah, i mean, technically we have an overweight in the u.s. compare compared to europe. given similar returns but higher risks in the u.s. relative to the eurozone. >> christopher, thank you very much. christopher wright, ultrahigh investment strategy at ubs wealth management.
a new nbc news/wall street journal poll shows that donald trump is closing the gap on hillary clinton. nbc's jennifer johnson reports. >> good evening. >> reporter: a hillary clinton/donald trump match-up in november would be a tight race according to a new nbc news/wall street journal poll showing 46% of voters supporting clinton and 43% backing trump. a big drop from a month ago when clinton held an 11% lead. >> polls this far out mean nothing. they certainly mean nothing to me. >> reporter: that same poll shows bernie sanders beating trump decisively 54% to 39%. >> i am the stronger candidate because we appeal to independents, people who are not in love with either the democratic or the republican party. >> reporter: trump is now hunting for a running mate meeting monday with tennessee senator bob corcoran. >> donald trump said many times he would like a republican insider, someone with congressional experience to help
him on the republican ticket. $another brash billionaire says he would consider being trump or clinton's running mate but not run as a third party candidate. >> just to try to wing it, just to try to shake things up, the unintended consequences creates more problems that it solves. >> reporter: but that same poll found 47% of americans would still consider a third-party candidate. that's because the poll shows both clinton and trump have high unfavorable ratings. over 50% of voters have a negative opinion of both of these candidates. jennifer johnson, nbc news, washington. still to come here on "street signs" with earnings season coming to a close, our next guest tells us why he's sticking with facebook and paypal. find out more after this short break. halatest data say? our customer is a 21-year-old female. heavily into basketball. wait. data just changed... now she's into disc sports. ah, no she's not. since when? since now. she's into tai chi. she found disc sports too stressful.
hi, everybody. you're still watching "street signs." i'm louisa bojesen. greece's particle. is completing a necessary step in the process to securing new rescue loans. key initiatives include increasing taxes, setting up a new privatization fund and easing the sale of bank loans ahead of a crucial meeting of eurozone finance ministers taking place on tuesday, tomorrow, to discuss the bailout package. meanwhile, austria's presidential election was too close to call sunday evening. this following a recent run-up in support for the national right candidate. the count so far gives a 144,000 count lead to the leader. just glancing at all the things taking place in turkey. the transport minister and
long-time ally binali yildirim will replace the current prime minister as he calls for a change in the presidential role. the head of turkey prada residential capital. we have to separate these out. you have the potential for elections coming up, the executive presidency coming up and turkey's parliament stripping unity from a third of mps. what is going on? >> well, i think turkey has no political equalibrium going on right now.
so until dejuan changes the constitution, every decision in turkey is driven by the political map of controlling the country. >> am i wrong in thinking the exec tutive presidency as completely ignoring the leaders who got you in power in place and the immunity issue you can do what you want and you have one person running the country and. >> that is always the fear. but we don't know what the new constitution will look like. one of the things they are flirting with right now, heir dejuan had nationalists rallying around the flag but still didn't get 50%. he needs to convince more of the referendum to get the power. the other is to manufacture an
election in an environment where not enough parties clear the 10% threshhold. so they suddenly have two-thirds of mps and can change the constitution like they want to. so the math, the decisions will be driven effectively by their belief. can we change the constitution, do we have 50% support. so one idea they are floating is just to allow the president to lead a party. that will effectively legitimate heir dejuan. if i were a turkish scholar, i would say somebody probably crossed the line but there's been no challenge on that basis. because of that sensitivity. he needs this to be political and in control. so i think it will remain messy for quite a while. >> michael, that raises a question of how should investors view the developments because we see a lot of the negative headlines about the power grab going on. in some ways the markets are looking for a more definitive outcome here. >> we saw at the beginning of the year, turkey was a political
equalibrium. turkey and brazil did well. brazil did well because political change was coming. turkey did well despite politics moving in the wrong direction. so the resignation has effectively made it very clear and present to most people that turkey doesn't have the political equalibrium. unless turkey shoots itself in the foot. generally politics don't matter unless there are policies that explicitly upset investors or if there is instability. and instability can come from the immunity on the kurds but that can take a while. the biggest risk is the global risk entree. if i could just jump to trump not doing as well many the polls, this discussion is very important for fur key. september fed hike, you know, that tells me development market economists don't appreciate the emerging market politics. trump is emerging politics and trump will not allow the fed to
raise rates when there's 20% unemployment, when he says the u.s. is going into recession, if the fed hikes in september, trump will attack. it will be a gift for him and a terrible political situation for the fed. are we going to get day in the next month or two to cause the fed hike in july? otherwise it's not until november. turkey is depending on the next one or two payrolls in the u.s. >> we'll have to get you back. you also have the managing director at renaissance capital there. 13 s&p 500 companies will report this week including toughny, best buy, dollar general on the list. on the tech side, hp enterprise and intuit. kevin, good morning and good to see you with us once again.
what do you expect from this round of earnings? >> good morning. we expect a lot of what has happened throughout the rest of earnings season. we have seen that earnings season is about 8% down right now. so far, when you take out energy, it's down 2% on the earnings side. we expect much of the day. basically we've had a strong rally off the february low. so any earnings beats have really been priced into the market right now. >> kevin, we are looking at the prospect of a fed hike. some say june, some say july, will that change anything for corporates? >> that shouldn't change anything for corporates at all because the fed has communicated they expect to raise at least once this year. i mean, if you bo back to december, there are dot plots indicating they would raise four times that led to extreme volatility in january leading up to february. so basically the market told the
fed, don't raise four times but if you have to, the market will be fine with one more rate hike. >> kevin, what about the banks? surely if we get the rate hike, that is good news for the bank. it is not really inspiring looking at the financial side. >> what is really going to move the bank stocks have to move. right now a fed rate hike is being priced in and you're seeing that across the board. but if you look at the base earnings season, they are down 14%. when you look at the real at the real earnings, that does have to do with the real environment.
jobs are banking. >> winners, losers, who came out on top? >> reporter: you know, the clear winner this earnings season and last year is facebook. if you look at the sales growth, over 50%. earnings growth was over 83%. and facebook is only scratching the surface on what they can do. they have not up locked the value of all their assets. they can implement more and do more video ads. they have not touched what is on the app and they have that. they can increase their earnings as well as their revenues. that's indicative of a stock you want to be in during the -- we
are starting to see there may be an impact going forward. that a lot of consumers are pulling back, auto sales may start to pull back, we have seen the majority of people now actually water compared to 2007. >> we have to go. kevin kelly joining us. that's it for today's show. i'm louisa bojesen. "worldwide exchange" is coming up next.