Skip to main content

tv   Squawk Box  CNBC  June 27, 2016 6:00am-9:01am EDT

6:00 am
♪ >> live from new york where business never sleeps, this is "squawk box." >> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin and brian sullivan. joe is off today. brian, welcome. >> thanks. >> check out the u.s. equity futures. better than things were looking on friday at this hour. you are still looking at the dow futures down by triple digits. decline of 130 points right now. s&p futures down by 18. the nasdaq down by 39. it's all been happening as concern over the brexit continues. you can see it playing out in markets around the globe. the currency this morning, check it out pound down at 1.3272. lowest level we watched it trade at last friday. lowest level since 1985. all of these concerns coming an additional decline of 3% this morning. it does come on the back of steep losses of 8% on friday.
6:01 am
dollar is up against the euro at 110.29. dollar down against the yen. currency trades we saw based on brexit are continuing today. check out things in asia. nikkei managed to end higher today. it was up by 357. pressure but not like what we saw on friday. dax down by 1.3%. similar decline for the cac in france. ftse down by 1.2% and check out crude oil prices. we have seen pressures on crude oil. this morning things are relatively flat. wti is down at 47.61 with present trading at 48.47. >> george osborne trying to calm markets. he said there would likely be more volatility ahead but the
6:02 am
world's fifth biggest economy would be able to cope with the challenges. >> it will not be plain sailing in the days ahead. let me be clear, you should not underestimate our resolve. we were prepared for the unexpected and we are equipped for whatever happens. we are determined that unlike eight years ago, britain's financial system will help our country deal with any shocks and dampen them and not contribute to those shocks or make them worse. >> during the campaign osborne warned he would have to raise taxes and cut spending in the event of a leave vote. that's obviously what happened. now osborne says the government should wait until david cameron's successor is in place before deciding on fiscal plans. osborne says he'll clarify his political future in the coming days. later today we'll hear from david cameron. he'll speak at the house of commons.
6:03 am
christine lagarde is warning of market pain if policy makers don't move quickly to reduce uncertainty about the state of their new relationship. speaking at the aspen ideas felt value in colorado on saturday, he said they underestimated the brexit vote but no liquidity problems like during the financial crisis. >> central bankers did their job. all groupings, organizations, imminent policy makers came out publicly along the same lines of trying to reassure that the situation was under control and it was very much under control. we didn't see those sort of panic move. >> lagarde says that if the u.k. follows through, there will be no doubt an impact on the british and eu economies. that's relatively obvious. >> yes. >> the reason now is everyone is calmer this morning because there's the possibility that this whole thing gets rolled
6:04 am
back or gets slowed down. the more you think it's going to get rolled back, the less support there might be to roll it back. >> let's talk about the possibility of what you just mentioned with this next story because scotland's first minister warned that the scottish parliament could try to block the u.k.'s vote to leave the eu. sturgeon said she would ask members to stop a brexit even if it were to cause outrage in england and whales. there's the scotland act of 1998 which as i read the stories this weekend imply that scotland and potentially northern ireland have the ability to veto this entire thing. it's unclear but there was sort of that overtone that maybe this will not happen. >> it may be something that you think is undemocratic but not to constituencies. they voted very heavily in favor of this. scotland voted to stay in the
6:05 am
eu. >> or opposite could be that scotland ireland could pull a fleetwood mac and go their own way. >> the more markets go down, more of a chance that people in britain say this was a mistake? >> do they? i wonder. >> i think every day market is in true trouble, there's a lot of people in leave camp that now say to themselves, i don't know. this might be worse than i thought. however, the more we talk about the reverse and market doesn't go down, more people say maybe leaving is okay. >> the reason the market may be calm may have more to do with just the idea it takes longer to roll out. there's a lot of things that played into this. there's questions, legitimate questions, as to how this would play out. most people agree it would take years before we see the impact of what happens. the pound getting hit so hard does have an immediate impact on their economy. that's likely to impact their economy quickly. >> you look at sunderland.
6:06 am
obviously in the leave camp. very northern. first precinct to vote. more cars made in sutherland than anywhere else and it makes their -- >> it makes things like buying oil more expensive. >> i wonder if the market reaction will impact most of the people in england that voted leave. do they care if ftse goes down? >> that'sy think the pound is much more important. >> it's not about the ftse going down but equivalency of their accounts going down and pound and i think it's all of the other issues. >> if pound keeps weakening, i think "squawk box" needs to be live in london all next week. >> monitoring the effects of the brexit on the markets.
6:07 am
you have been there all week monitoring the leadup to this entire thing and then the fallout. what can you tell us about where things stand right now? >> let me just sum up the weekend's development. first point to make is british politics is in turmoil. corbyn's battle to remain is not just conservative party that faces new leadership election but the labor party seeing ten resignations over the weekend because they don't have confidence in corbyn. hasn't had to stand down yet but there's pressure to do so. the second development you mentioned. sturgeon saying that scottish parliament might veto the brexit bill but i would point out there's no legal basis for her to do that. we can discuss that in more detail. certainly rising pressure for another referendum in scotland like they had in 2014. i just come to this paper. this is the telegraph. we haven't heard much from boris
6:08 am
johnson. just to sum up three main points in that op-ed. he says negative consequences of markets are widely overdone and this is a vote about sovereignty more than about immigration and finally he said "i'm in no great rush to start these negotiations." highlighting that point it's up to the u.k. when to invoke article 50 and not european union. earlier george osborne echoed a similar sentiment on that topic. >> only the u.k. can trigger article 50. in my judgment, we should only do that when there's a clear view about what new arrangements we are seeking with our european neighbors. >> so at this point about regret and a second revereferendum coue possible. people are scared at what the
6:09 am
future holds. i would say a second referendum in the same form any time soon is highly, highly unlikely. both cameron and osborne leave campaigners have come out to say british people have spoken and will back that result. even tony blair with no agenda now saying the mechanics of another referendum are unlikely. we'll have to see what the fallout is and move forward with that. that petition is getting headlines. it has no power behind it. similar to when donald trump -- there was a petition to debate whether he should be allowed into the u.k. or not. if a petition gets 100,000 clicks, it has to be debated in parliament but there's no vote or legal basis behind it. we move forward albeit with uncertainty. >> lots of articles over the weekend after that "telegraph" piece by boris critical of him and his comments suggesting that he was lying both in the article and before that.
6:10 am
is that just a view of the elites or a broader view? >> well, i would say first of all that we have to take all of the arguments with a pinch of salt. it's not like both sides have come together deciding to move on as one happy family. both sides of the argument massively exaggerating certain points of their argument. one i think you're focusing on with boris johnson a national health service would benefit from 350 pounds per week if britain voted to leave and now they are backtracking on that. the reason i think the leave campaign has been seeing way, way more heat over the weekend is because they've been out in front much more and they were the victors. people are pulling apart their argumen arguments. the argument at the top that george osborne made on the remain side he would introduce a brexit budget would see taxes go up and clearly found to not be
6:11 am
true this morning because he said that is not going to happen. there are exaggerations on both sides. to draw from the fact that boris johnson had a huge amount of heat over the weekend that we might therefore see this unwind and there might be grounds for another referendum is a step too far. to suggest that both sides particularly leave exaggerated arguments in the campaign is fair. >> a lot of questions have been raised about what this exit looks like. is this a full withdraw from the eu or is this going to be something much more like norway in terms of still following a lot of the rules of the road and therefore being able to trade freely? what's your sense of which direction things are blowing for that question? >> that remains to be seen. that's the uncertainty that britain faces now. the investment might fall in that uncertain period. if you read boris johnson's op-ed this morning, you want to pull out of political lawmaking
6:12 am
bodies that change westminster's ability to pass laws but he was still pretty positive on his view from migration of labor into the eu and wanting to see free trade. remains to be seen whether he can secure those things without losing significant aspects. it's important to note the next prime minister will be from the conservative party and likely it will be boris johnson himself. it will not be nigel in the conservative party or a member of parliament. so conservative vote leave argument from johnson focused on sovereignty argument pulling out of political institutions. u.k. independence party arguments focus on immigration. he will not be the next prime minister. it's likely that boris johnson but certainly a conservative mp will be. lots of tough rhetoric from members of europe of course over the weekend so we don't know what those negotiations will hold and that is the big reason
6:13 am
the pound is selling off once again 3% today because we don't know. we don't know how it will play out. >> we'll see you a lot i have a feeling. thank you very much, buddy. let's get to eunice in beijing with market reaction in asia. eunice? >> the markets largely stabilized today but policy makers are on edge and investors are focused on two currencies. the japanese yen and chinese yuan. the concern is that could just make it more difficult, the stronger yen could make it more difficult for japanese economy to recover and that's one of the reasons why japanese prime minister shinzo abe told his finance minister to watch currency movements closely and take steps if necessary and many investors read that to believe that possible intervention could be on the way.
6:14 am
in china the direction of the yuan is still up in the air. everyone here still expects the u.s. dollar to continue to strengthen. however, analysts are split as to whether or not the authorities here are going to allow the yuan to track the dollar but that could potentially make the exports from china much less competitive when it comes to its rivals or if authorities here are going to go for a depreciation in the currency and possibly trigger or at least potentially trigger a more capital outflow as we've seen earlier in the year. today the main focus was on where the chinese central bank was going to fix the trading range for the currency. at the end of the day the currency was tracked and fixed at 6.6375 which is lower and it suggests that authorities here are willing to see a weaker currency. one other broader concern across the region though is the impact
6:15 am
of brexit on the larger european economy and consumer demand because the eu is an important export destination for asia. guys? >> eunice, thank you for that. appreciate it very much. we want to turn it to our guest, wilbur ross. trying to help us sort through this. you have been trying to sort this through yourself in part over the weekend. you own businesses in the u.k. and throughout europe. i'm curious how you think about this this morning? >> i think the worst part of it is that there will be ultimately the world's most expensive divorce but like most divorces, it's probably going to take a lot longer than it should. once they do trigger article 50, the eu has two years to work things out with them. at the end of that, there's another curious process which is that at least 20 of the eu member states must approve and those 20 must constitute at
6:16 am
least 65% of the population. so it's not an easy thing to end. i think the longer it goes on, the more severe the consequences will be for everyone because business hates uncertainty. now, i do think that there are complications that give britain some negotiating strength. one of them is that there are 3 million eu residents in the u.k. and 1.2 million u.k. residents that migrated to the eu. something has to happen with them. that's a lot of people. u.k. trade deficit with the rest of europe is about 8.3 billion pounds a year. and germany is the largest single exporter to u.k. it's about 15.1% of eu exports. those are some factors. >> when you look at the markets and how they reacted thus far,
6:17 am
do you say to yourself they haven't gone far enough, we're overestimating the potential problems? i know the longer this plays out the worse it is. how do you measure that and as an investor how are you thinking about it? >> i bought pounds on friday and may very well buy some more pounds today. i do think it's not the end of the earth. great britain is not going to go to zero whatever happens. i think it's easy to have people be too emotional. i also think there was some pretty big short positions in the hedge fund community both in the pound and the euro and at some point they'll be covering as well so there will be some natural demand coming into the market. i really do think getting it over with quickly, whatever is going to be the outcome would be better for everyone. >> how do you think about equity market not just in the u.k. but
6:18 am
aftereffect or shocks around the rest of europe and it becomes a political bet that either europe stays together or doesn't and then what happens? >> it's clear that there will be other reverenda within europe. you have the skeptic parties now feeling legitimate ties so there will be votes. how they'll come out is anybody's guess. a few weeks ago the pew center in philadelphia made an interesting survey country by country and even in france and even in germany, a majority of people polled said they preferred eu to be less intrusive in their local affairs than it is at present. so i think at a minimum, there's likely to be a rollback in the momentum toward total political unification within europe. whether some individual country goes out is really hard to forecast but i think the worst
6:19 am
that the u.k. market becomes, the less likely it is that those petitions will succeed. >> wilbur, two questions for you. do you think that this whole vote is worse for the u.k. or worse for europe? who is in a bigger tight position there? and then second -- >> there's some very good things for the u.k. in it. the u.k. exports to the eu tax dollars, 11.3 billion pounds a year. they get back the 3.6 billion that margaret thatcher negotiated as a rebate. that still means a negative tax flow of 7.7 billion a year. that's a big number. that's around 6% of the whole eu budget. the eu will have to figure out how to make up that hole. people in scotland get 1,600
6:20 am
pounds per year from central government than the people in the rest of the u.k. that amounts to 8.6 million pounds a year. if scotland were to break loose, that would help the budget in the u.k. by 8.6 billion pounds potentially. there are lots of crosscurrents back and fort bh but the most immediate impact will be on jobs because i don't think the big financial institutions will feel that they can afford to wait and not make some changes because they have the danger of losing their passport where they can automatically operate elsewhere in the eu. financial sector is 127 billion pounds a year. that's about 8% of the total gross value added in the u.k. it's a huge thing.
6:21 am
it's the largest recipient of foreign direct investment. 3.4% of the jobs. and london of course is the area that will be particularly hard hit. i think we're going to see it first is in the london real estate market particularly the high end, which i think has been somewhat overbuilt and in the process of getting further overbuilt anyway. >> good morning. it's brian sullivan. let's talk about your business deals. actually got a couple tests this morning from someone in europe saying that two private equity deals, i wish i knew what they were but i don't, two deals were put on hold this weekend. do you think this freezes the m&a market? >> it will make it more difficult to complete. if you don't know what the ground rules are and you don't know where the economies will be, that's the real problem. that's why i think it should be
6:22 am
done quickly. business can adopt to good news and bad news. business has a hard time adapting to uncertainty and we're in an uncertain period. you see these petitions. there's a petition to have london cc'd from the u.k. if it pulls out and create a monaco up here. most of these things are never going to come to pass but it's more confusion and that's not a good thing for business decisions particularly foreign direct investment. u.k. has been the world's largest recipient of foreign direct investment and largest contributor to that has been the eu. second largest contributor has been the u.s. there are a lot of crosscurrents and that's what makes it very, very difficult to forecast. >> you own a number of financial institutions in the u.k. and throughout the rest the europe.
6:23 am
the health of those institutions, people och talk about this saying is this a lehman brothers movement. i argue it isn't. you may have a different view. when you look at institutions you own and at other banks, do you fear or look at them and think that maybe you should buy them up meaning there's more financial institutions to buy in the meantime given what might be a sell-off? >> i think in the u.k. they've already overdone it with the challenger banks. virgin money. we sold most of our stake but we have an 11% position. virgin money has no exposure to the eu. it's a direct lender in u.k. mostly mortgages. and the fear that the whole market will collapse to the point where mortgage jones will go bad is silly. in the case of virgin, their loan to value ratios are under
6:24 am
60%. unless you think that the real estate market for individual residences is going to collapse by 40%, which i do not think is realistic, there's no big danger. two biggest selloffs in the activity on friday. i think that whenever you have panic, you have dislocation of individuals security and i think what investors should try to do is to pick out which ones has been unnecessarily dislocated versus ones that really could have a problem coming from the turmoil. >> i know that your focus on this is business and how business relates to this. is this a bigger problem for business or bigger problem politically in the grand scheme of things? >> i think politically is the scary problem and my biggest worry there is you notice that the day after the election, vladimir putin made an announcement that he had nothing to do with the vote.
6:25 am
that signals to me that he's looking at this whole turmoil with very interested eyes and i wouldn't be surprised if he made either a political or perhaps even a military or quasi military move because here you have the eu government in shambles. u.k. government in shambles. everyone in a variable state of affairs and lame duck president in the united states. that's a ripe circumstance. >> pushing nato like some of the things we've seen in the last couple years? >> i don't know how far he'll go. military strategy is certainly outside my area. i bet he'll do something to take advantage of the turmoil. he normally does. >> you know, wilbur, to quote
6:26 am
hamlet, i think if lady does protest too much, putin says i have nothing to do with the vote, does that indicate to you that maybe he had something to do with the vote or tried to influence it indirectly? >> i'm sure that he would have preferred the vote to go the way that it did because if you're him and you're looking for opportunities, you have to like the idea of the people that are your potential targets being in chaos. so whether he influenced the vote, i've been over here for a couple weeks now. there was no visible sign of it. that doesn't really prove anything. i am less worried about whether he tried to influence the vote than what he might do to try to take advantage of it. >> okay. fair enough. we appreciate your time this morning. and your perspective. love seeing you. hope to see you again throughout the week if you're going to be over there.
6:27 am
>> great hard numbers on a lot of these issues. >> he knows his stuff. coming up, more fallout from the british votes. stock futures indicating another drop for your investments today. your monday morning strategy session is next. at 8:00 a.m. eastern. do not miss this. steve liesman's exclusive interview with jack lew. important context and advice from the u.s. treasury secretary in the 8:00 a.m. eastern hour of "squawk box." more to come here and we'll be right back.
6:28 am
they may want the latest products and services, but they demand the best shopping experiences. they're your customers. and by blending physical with digital, cognizant is helping 8 of the 10 largest u.s. retailers meet their demands with more responsive retail models... ones that transcend channels and locations, anticipate expectations... creating new ways to engage at every imaginable touch-point. it's a new day in retail, and together, we're building the store of the future. digital works for retail. let's talk about how digital works for your business.
6:29 am
6:30 am
welcome back. your money facing a british hangover this morning. futures indicating another drop for stocks. it keeps getting worse. dow futures indicated down another 151 points. >> just to put things in perspective, i was surprised when i looked for the week, it was down by 1.6%. puts us back three months where we were. even big losses came after a build throughout much of the week. >> it's good context. jim cramer put it right. it's bad. no one is saying it's not. we were much lower than this in february. about 1,800 points lower on the dow in february. we've basically gone back to the
6:31 am
early may levels on the dow and s&p. remain vote got traction. >> fear mongers were just fear mongers? >> there were serious implications that we still have to play out through some of this. it's not the sky is falling sort of situation. >> it's funny. probably a lot of people out there, i have a 401(k). over the weekend i looked at my 401(k). i have 30% invested in europe. the fund that i was invested in was 28% on friday. i'm not wearing pants. i had to sell them. that was unnecessary. currency is perhaps the biggest story of the past few days. dollar rising against euro and pound once again. in fact, the pound suffering one of its worst one-day drops in history on friday. it's now at a 31-year low. joining us now, senior european economist at jeffries international and jeremy cook, chief strategist at world first.
6:32 am
jeremy, currencies are the big story here. do you see any stop in the drop of the pound? >> no. political uncertainty will continue to weigh and as we start to price in further shocks to the demand, the likelihood that bank of england takes interest rates down to zero and prints another 200 billion pounds worth of quantitative easing and you would have to stay sterling is tied to risk. the u.k. is exporting risk at the moment. as long as markets stay uncertain, sterling is headed lower. >> we talked about the yen earlier today. is there any entity, i don't know, bank of england, maybe even ecb coming in with euro that could provide a sort of artificial floor, jeremy? >> i don't think the bank of england wants to intervene in
6:33 am
sterling at the moment. the belief that it may help the u.k. economy. it hasn't helped our export base and maybe weaker currency from here does. if we see movement from bank of england into these markets it's to make sure trade is orderly in the short-term. you would have to say pressure may push bank of england out of the market. >> dig into that first point you made because becky made the point earlier that maybe people will wake up and say what have we done because the pound is falling. does a weaker pound in any way help the british economy? any sector -- i got to imagine there's going to be at least some benefit to a weaker pound somewhere. >> it may help somewhere but to be honest price elasticity of our exports isn't that great. our main exports here at the
6:34 am
moment is u.k. if you look at financial services or legal services, the regulatory environment makes it in such regardless of the change in price, it's an uncertain landscape for them trying to sell. it may be cheaper but whether they can actually do it or not remains to be seen. >> okay. let's talk about the monetary impact from a stockers expectative. the dow futures down again another 151 points. we tried to put in context about where we were. how weak do you think the underlying aspect of these markets are especially the european banks, jpmorgan coming out again negative on markets today and the bank specifically are down big again. do you see any thwart thea floo? >> it's significantly worse over the last 72 hours. when we started the year even a few weeks ago market expected u.s. fed to raise interest rates some time this year. yields at some point globally
6:35 am
were going to start rising. all of that is completely out of the window now. as previous speaker said, at this point we're waiting for monetary response. we know bank of england will cut rates and rate rise is out of the question for the fed for all of this year. banks will be hurting. we know it's lower interest rates. we know flatter yield curves and issue of nonperforming loans will come back into the picture. all of the things will catch up with the banking sector. that's the sector that's really exposed to what happened in the u.k. on thursday into friday morning. >> i guess one of the bigger aspects of this whole thing -- i don't want to get too deep in the weeds, another risk to the sovereign bonds especially in southern europe. you look at the second and third derivative potential impacts here. does this weaken demand for greek debt and italian debt or
6:36 am
freeze up any mechanism to help that debt? where do you see the sovereign story playing out here? is this 2010 with greece all over again? >> i don't think so. i think greece is a separate story. as far as spain, italy, portugal, i think overriding factor is ecb. we know they are big buyers of sovereign debt and will step up and increase the size of program in the coming couple of months and extend beyond march 2017. those things we can be certain of at the moment. i don't think risk in the system will express itself in the sovereign bond market. there's a floor. minus 40 basis points at the moment seems like a natural floor but hard to see bonds widening out significantly because markets know there's a big buyer out there and when there's a widening out in spreads, ecb will come in and
6:37 am
buy whatever they need to buy. this is one market that cannot let go. they have little control over equity markets. we think that's where pressure will show. as far as sovereign bond markets, we think those will hold up relatively well. >> gentlemen, thank you for your insight. we do appreciate. coming up, reaction to the brexit from the european content. we'll get a live report from brussels and politicians in the u.s. sounding off over the weekend and ben white will be here with the latest from the campaign trail and how it relates to brexit as we head to a break a look at last week's s&p 500 winners and losers. back in a moment.
6:38 am
the first stock index ♪ (musicwas createdughout) over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? it's time to bench the benchmarks. ♪ it's here, but it's going by fast. the opportunity of the year is back: the mercedes-benz summer event. get to your dealer today for incredible once-a-season offers, and start firing up those grilles. lease the e350 for $499 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.
6:39 am
with usaa is awesome. homeowners insurance life insurance automobile insurance i spent 20 years active duty they still refer to me as "gunnery sergeant" when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and i'm a usaa member for life. usaa. we know what it means to serve. get an insurance quote and see why 92% of our members plan to stay for life.
6:40 am
a good car has to maneuver quickly. that's also true of a good car company. people have always bought cars. but we saw an opportunity in sharing cars. so we moved fast and launched car2go in 29 cities, all around the world. doing that required dozens of data centers, designed for speed and performance. we built our business on the ibm cloud. because that's what the ibm cloud is built for.
6:41 am
♪ we are never ever getting back together ♪ >> the music is perfect this morning. welcome back to "squawk box" here on cnbc. look at u.s. equity futures at this hour. 72 hours after brexit. dow opened down 170 points. s&p 500 off about 24 points. not as bad as some people expected. look at the yield on the ten-year treasury at the moment. 1.468. it's now time for the executive
6:42 am
edge. we're taking closer look at europe's reaction to the brexit. nancy joins us from brussels. good morning. >> reporter: good morning, andrew. right here in brussels the countdown is under way for david cameron's arrival in brussels due tomorrow and he'll face the 27 other eu member states for the first time since that referendum outcome. a big focus of his appearance will be the timing of the negotiations and actual process of an exit because as you know, article 50 must be invoked to actually start the legal process. a lot of questions over when that will take place. a lot of divisions among european policy makers. david cameron in his speech said it belongs to the responsibility of the next leader of the conservative party. a change that may not come until october. we've heard from angela merkel over the weekend saying there's no need to make hifty decisions here. she's on the side that's encouraging time for the
6:43 am
process. other eu leaders including french foreign minister are not convinced and want to move as swiftly as possible to remove the great uncertainty. that will be the focus in brussels tomorrow. today, however, all eyes are on berlin where angela merkel is hosting a meet with eu president. you can imagine those parties will discuss timing and also the great concern over avoiding contagion. we heard sources say that angela merkel was addressing her party on that issue saying we must do everything to contain this crisis. all eyes on the meeting tomorrow as the eu leaders heads of state come here to brussels. back to you for now. >> thank you very much. when we return, political fallout from the brexit vote. hillary clinton attacking donald trump for his reaction to brexit. as we head to a break right now, a quick check of what's
6:44 am
happening in the european markets. things are weaker and have gotten a little bit weaker over the course of the last hour. ftse down by 1.6%. dax off by 2%. "squawk box" will be right back. & in a world held back by compromise, businesses need the agility to do one thing & another. only at&t has the network, people, and partners to help companies be... local & global. open & secure. because no one knows & like at&t.
6:45 am
trolling for a gig with can't blame you. it's a drone you control with your brain, which controls your thumbs, which control this joystick. no, i'm actually over at the ge booth. we're creating the operating system for industry. it's called predix. it's gonna change the way the world works. ok, i'm telling my brain to tell the drone to get you a copy of my resume. umm, maybe keep your hands on the controller. look out!! ohhhhhhhhhh... you know what, i'm just gonna email it to you. yeah that's probably safer. ok, cool.
6:46 am
6:47 am
welcome back, everybody. hillary clinton is going on offense speaking to a mayor's conference on sunday clinton criticized donald trump for promoting his golf course on friday as the country dealt with the brexit vote. >> to put the interest of the american people ahead of their personal business interests. >> two new polls out this weekend nbc/"wall street journal" and "the washington post"/abc news shows clinton widening her lead over trump. joining us now is ben white. this morning "the wall street journal" says clinton has an advantage in polls but when the race is looking at third-party
6:48 am
candidates included, it's tied. >> right. you have two different polls out there now. abc/"the washington post" with clinton up 12 and then the journal six. i would put it between those two. she's clearly got a lead over trump in the 5%, 6%, 7% range and state polls are close. if you look at florida, ohio, even pennsylvania, the lead shrinks a lot. by no means has hillary clinton locked this up but she has a significant lead and trump is not in a great position. he has no money right now. he's not up with ads anywhere. obviously she's trying to cash in on the brexit turmoil a little bit as you showed in the clip to say if you play to voters' concerns about immigration and play to nationalism and play to a lot of these emotions and you get a result like brexit, maybe you get complete chaos in markets and you get the pound crashing. do we want that in the u.s.? she's saying to people this is what happens when you give into those sorts of instincts and
6:49 am
emotions and get chaos and let's not do that. >> is that effective? i guess it depends on where you're sitting from this entire thing. there are a lot of people saying, look, it worked in britain so it could work here. other people say forget it. this is a very different scenario. >> it's a very different scenario and too early to say how it plays because we need to see more market reaction and does the pound stabilize and become -- this isn't the worst thing that ever happened in the u.k. we get our sovereignty back. all of these things. if a positive brexit ceremony breaks out, trump's argument is more compelling and that it's too risky goes down but she is saying i'm the safe choice. >> i have a name for you. two. you saw the op-ed over the weekend calls trump a phony. says he's voting for hillary clinton. he goes actually farther than romney does in terms of what he's suggesting. we had a commentator, member of the political class also leave
6:50 am
the republican party in george will. do either of those things have any impact or do people say those are elites and it actually just feeds more into that narrative? >> i don't think losing hank paulson is the worst thing the t thing in the world for donald trump particularly as he comes from goldman sachs, wall street, plays into the whole anti-wall street thing. trump himself amazingly said i don't know anything about hank paulson. hard to imagine a person who spent his life in new york doesn't know chief executive of goldman sachs, treasury secretary. >> may not know each other personally. >> but knows who he is. george will, more significant, not that anybody cares in the broad populace who he is or what he said but in terms of conservative those leadership and being someone identified with real ideology free market conservatism to say donald trump is not my republican party. that means more people on the fence might say this is not my
6:51 am
guy. conservative ideologues might hold their nose and say hillary. >> a billionaire, investment overseas, worried for business and how long it drags on. he thinks the bigger risk isn't business but politics and how putin might take advantage of the situation. >> i think that's absolutely a big concern. he loves anything destabilizing to you were and will look to capitalize on it in any way he can. perhaps he wasn't involved in the voting. he declaimed any responsibility for it but it's good for putin. anything chaos for europe is good for putin and his severe of chaos. broaden the more political story, what's next in the rest of these european countries declaring they want to get out of the eu. does the each u itself unravel, further chaos in the market, further impact the u.s. election, which it could. >> one note, talking about paulson, trump said he didn't
6:52 am
know anything about him. he did an interview four or five years ago with wolf blitzer where he talked about him. >> are you saying trump said something that wasn't 100% accurate? >> yeah. >> i find that hard to believe. >> kind of sort. >> good to see you. glad you're wearing pants, brian. >> when we return new data from google, find out what brits were googling in the hours after the vote to leave the european union. we've got the answer when we return. who lives here and flies to hong kong, to visit this company that makes smart phones, used by this vice president, this little kid, oops, and this obstetrician, who works across the street from this man, who creates software. they all have insurance crafted personally for them. not just coverage, craftsmanship. not just insured. chubb insured. before the band separated over unknown creative differences. [ crash ]
6:53 am
and reunited three decades later for a tour that sold out in three minutes. and your cisco hybrid cloud handled millions of ticket orders without breaking a sweat. before all of this, [ crash ] the experts at cdw orchestrated a cisco hybrid cloud solution. scalability by cisco. orchestration by cdw.
6:54 am
6:55 am
6:56 am
welcome to "squawk" this morning. brits googling frantically googling to find out what the eu is. what is the eu? is the second most searched term about the eu since the announcement of the leave victory. kind of wish they would have asked the question before hand. >> it's only about 1,000 people. a lot has been taken out of context. roughly about 1,000 searches done. that wasn't put in the context of the stories. i read another story last night. >> fair enough. i don't know the detail. >> top 2 participants in the poll. >> search term 1,000 people looked up what does it take to leave the eu. >> was it 1,000 people? >> the story i read last night said 1,000 people.
6:57 am
>> 1,000 manchurians. >> sure. >> coming up, a busy more than jeremy siegel vince rinehart and bill rhodes, they are all set to join to weigh in on -- every year, the amount of data your enterprise uses goes up. smart devices are up. cloud is up. analytics is up. seems like everything is up except your budget. introducing comcast business enterprise solutions. with a different kind of network that delivers the bandwidth you need without the high cost. because you can't build the business of tomorrow on the network of yesterday. because you can't build the business of tomorrow freshly made in the tokyo-japanese tradition, each batch is small. special. unique... every bowl blurring the line between food...and art.
6:58 am
when you cook with incredible ingredients... you make incredible meals. fresh ingredients. step-by-step-recipes. delivered to your door. get your first two meals free blueapron.com/cook.
6:59 am
7:00 am
facing brexit fallout. after $2 trillion in losses, global markets are under pressure again. >> it has been sold nationalistic pride on a lie. >> i think we can more than adequately survive on our own. >> live to london and asia for the latest on britain's decision to leave the eu. >> wall street set to start the week like it finished, in the
7:01 am
red. the u.s. market said to struggle again. will all this turmoil create buying opportunities for you or set off another market slump. marketwatch and jeremy siegel will be your special guest. >> no worries about brexit under the seas. >> remember something. what was i talking but? >> "finding dory" fend off sequel to independence day. the second hour of "squawk box" continues right now. live from the beating heart of business, new york city, this is "squawk box." >> welcome back to "squawk box" right here on cnbc. first in business, brian sullivan in for joe today. our guest wharton school professor of finance jeremy siegel. he's with us for the hour. find us if he's bullish on
7:02 am
markets. after the break exclusive interview with jack lew. we'll get his take on global financial stability as part of the fallout for brexit vote. meantime get to becky who has got marks action. becky. >> afterward $2 trillion losses around the world, major anticipation of what it will bring. start with the futures. things have gotten worse through the course of the morning but we're still not talking about the types of losses we have seen back on friday. you're talking about triple digit losses for the dow, defined 175 points. remember even after the steep losses we saw on friday if you looked at the week, the dow was only down by 1.7% last week. you're still looking at s&p futures under pressure as well. down by 24 points. nasdaq down by 48. based on where we saw things headed friday, that really only got us back to the levels we'd seen since march. remember, put this in context. markets go up, markets go down. a huge surprise for the markets.
7:03 am
watching fallout this morning. take a look in europe. there are red arrows there as well. right now it looks like the dax is down by 1.9%. it's been down by as much as 2% earlier today. cac off 1.8%, ftse down 1.6%. italy and spain where we saw declines over 10% on friday, you can now see they are down again but now talking about a decline of 2% for italy and decline of 1.4 per for spain. check out asia where japan actually managed to end higher. nikkei up 2.4%, hang seng flat. teja look at oil. a lot played out last week in oil, extreme weakness. wti down 3/4 percent, 4728. brent crude down half a percent to 48.13. now when you look at treasury market, overseas treasuries, very interesting to watch.
7:04 am
10-year under pressure for the yield, 1.47%. that is below where we had seen it on friday. the dollar is holding up across the board. pound has continued to get hit pretty hard. down 3.4% this morning to 132.13. dollar against euro and down against yen at 101.63. finally gold, which soared last week up another $11.50, at 1333 an ounce. submit add bid for 17 sports authority stoers stores according to reuters. held for retailer's assets. dick's said to be the only bidder for a single sports authority location. meantime trans canada requesting arbitration over white house's rejection of the keystone xl pipeline. company seeking $15 billion in damages after failing to settle
7:05 am
dispute in talks with u.s. government. intel considering sale of its cyber security business, that according to eft. unit known as mcafee purchased for, get this, $7.7 billion five years ago. becky. >> let's bring in our guest host for the hour jeer any siegel wharton professor of finance. jeremy, great to see you this morning. >> happy to be here, becky. >> you've had the weekend to think about what the brexit means. what's your takeaway? >> i think there's two very important things to keep in mind. first of all, i do not believe any other major country is going to leave. that's the fear in the market, is this going to start. first of all, known in the euro is going to leave. once you're in the euro, you're so tied in, there's really no way, this talk about frexit, no one in the euro will leave. second thing, look at those spanish elections.
7:06 am
i think that's important. the ruling party, better than expected. what we saw in london obviously, in the uk was theousers doing better than expected. maybe they are saying, wow, look what happened in the uk. we don't want to go in that direction. the idea this could lead to an accelerating push for exit, i don't think is necessarily true. once you're in the euro, it's a totally different story. >> why do you think it's so different than the uk. >> take a look at what happened with greece. if there was any country that would leave the eurozone it was greece. you know, anti-european, renounce the debt, we request do that. why did he not bend and finally cave in, so to speak, to the eu? because the greek people did not want to leave the euro. as much as they hated it. >> jeremy, they are recipients.
7:07 am
>> they are on the weaker side. >> uk was paying money in, providing 6%. >> once you leave the euro, it's a feeling oh, my god, all my money -- whatever money i'm going to issue is not going to be worth as much. euro last couple of days, strong currency. any country that wants to leave, spain, portugal, wants to leave and set up their own currency, wow, it's not going to be worth much in europe. >> trying to carve out their own deals. just look -- before we can get to the eu piece, what do you think happens to great britain? do you think scotland stays? >> yes. i think there's a referendum in scotland and it might leave. >> that lead to more thoughts of how pliable this whole program really is? >> one thing that disturbs me is this idea should we punish britain, make it really hard for them? look, here is a major -- one of
7:08 am
the most major countries that said i don't want to be in your club. i think the club should say, just a minute here. what can i do to prevent this from happening. don't forget, the original eu was much more economic than it turned out to be. this was the rebellion against centralization that was much more than the 1970s when britain, you know, entered into the union. i think personally, as i said, if i were germany and the rest of them instead of thinking how to punish them, i'd say, hey, guys, the public is telling me that step back with some of this uniformization, if you want to say, of everything, the rules, regulations and everything more than just the question of trade. >> okay. jeremy is with us for the rest of the hour. we're going to continue this conversation in a moment. why don't we get an update how things are playing today? >> happy to do it. tense weekend in london as uk and the rest of europe absorb
7:09 am
the magnitude of this brexit vote. wilford has been there every step of the way as part of cnbc's coverage of this historic event. let's get to where this leaves britain and what may lie ahead. wilford. >> reporter: thanks very much. i want to touch on the topic could there be further votes, further referendums, to touch on, a repeat of what we just had. could there be another ukwide reverend. earlier i caught up with ceo of the leave campaign, the guy that masterminded this extraordinary as a result of his second interview and i asked him that. could there be a second referendum? >> there's not going to be a second referendum. the key, high turnout. 17 million votes. that's a bigger democratic mandate than any other decision ever made in the uk. there was overwhelming support.
7:10 am
as for the position there should be a second referendum, the vast majority of signatures came from overseas. >> of course he's on the leave side, so he doesn't want another referendum. either way the point he makes about the democratic vote is a strong one, overturn will of the people in the short-term. second issue scotland, you touched on with mr. siegel. could there now be another referendum in scotland on its membership in the united kingdom like we saw in 2014. we have to say that is much more likely. a clear decision on a very important topic between scotland and the rest of the united kingdom. i do want to point out in order for that to happen a law needs to be passed by parliament, behind me, and that isn't likely to happen any time soon. more likely? i don't think we should jump to conclusions when that might happen. third issue, could scotland block a brexit from happening in scotland if it happens in the
7:11 am
rest of the united kingdom. the leader of the scottish nationalist party was clear might try to do that. the scottish parliament has full powers in areas like health care and education does not have powers in these areas. so it cannot formally pass a law to block it. the other question is how complicated a scottish exit would be. would they introduce a scottish pound meantime to rejoin europe. coming back to the point jeremy siegel made other european countries less likely to leave eu part of the currency, scotland to leave uk had to leave british pound to join euro in the future but that's a very long process. so the overarching point, yes, there's huge opposition, huge uncertainty about the future of the united kingdom but i think the first step will be to see what the lead camp negotiates with the eu and then people can decide, okay, do we actually want to be part of that. jeremy made a great point. maybe the likes of germany offer
7:12 am
some form of associate membership and end up happy with that. at the moment clear divisions but complicated legal processes to be overcome before these sorts of votes can happen again. >> will for, thank you very much. by the way sarah eisen will join us with a report on three key industries likely to be impacted by that big british vote for now. >> big british vote. >> big british referendum. i can't say brexit. >> you can't? >> i can. too early to be sick of it. >> i was sick of it last week. >> you heard what we had to say. just look at the market reaction. how do you think this continues? >> i'm not surprised by the market reaction. certainly i think europe looks really cheap to me right now. i think it's selling for about 12, 12 1/2 times earnings. in a low interest rate
7:13 am
environment, all of this means low interest rate environment. >> it looks really cheap right now because there's so much uncertainty. as we heard earlier this morning from wilbur ross, business hates uncertainty, investors hate uncertainty. >> correct. >> you don't really know what you're betting on. >> but the question -- yes. that's when you get discounts when some of that uncertainty -- i believe in a month we're going to be talking again, of course, about the election. but really earnings, the stallout in earnings i think is going to reappear as the biggest impediment for the u.s. equity market. if we get earnings increasing, we know july's total, yeah, we're going to debate whether one in september, one in december, depends how things play out. so the fed is not going to be a threat. if we get earnings pick up in the second half of this year, i think our market is going to do
7:14 am
well. europe might seem cheap for a while. rewarding for people three to five years. invest 12 pe ratio in a 0 interest rate environment, i think you're making a good bet. >> do you prefer europe over united states? >> for three to five years i do, yes. this uncertainty buys you opportunities. whenever we look through history. i think this uncertainty is not going to roll out into disintegration but something worse. that's why i think this actually does present opportunities. >> professor siegel is our guest host and will be with us for the rest of the hour. >> will people get buyers remorse after voting for brexit. talking about fallout next. one of the top soccer players in the world may be hanging it up. nothing to do with brexit. we'll tell you all about it when "squawk" returns. >> i think you're okay falling all together.
7:15 am
>> frustrated because age group going to have to pick up the pieces, pay for all of this. >> i think we're an independent ostrong independent country. i think we can more than adequately survive on our own.
7:16 am
investors were not exactly cheering s&p coming off worst open. >> financials worst, levered to global growth. >> i don't think it's over in europe. policy members will have to respond. >> dow down 611
7:17 am
welcome back to "squawk box" this morning. britain's exit from eu could have effects on the international economy. on this topic former treasury
7:18 am
sect joins us. good morning to you. >> good morning, andrew, how are you? >> good morning. we've talked about economic implications. the bigger implications are politics, what happened to europe and eu. a lot of people betting on financial implications of that. when you look at what took place friday or thursday, rather, and where we go from here you look at the rest of the eu in the next couple of years, it's smooth sailing ahead, stays together or you think there's some larger breakup that takes place? >> the most striking feature for me, andrew, is how inward focused the debate has been since friday. focused inside the united kingdom, inside europe. for 25 years u.s. supported a stronger europe coming together on outward looking basis. now we see europe started on inward basis. not surprising you have people from president putin, president
7:19 am
assad, president rouhani smiling dawes europe is so focused inwardly, that external engagement we need from europe, united states, the alliance needs from europe i think is not going to be there for a while. >> john kerry going over to uk today. do we still have special relationship with united kingdom or is our first call now going to be to germany. >> we still have special relationship with united kingdom. a permanent five of the security council. in g7, nato. that relationship will remain special. i do think you're seeing a shift toward the center of gravity of u.s. policy toward europe moving from london to berlin. >> ambassador, jeremy siegel is here. he made the point perhaps people in europe or eu will look at what happened in uk and no inclination to break up. nobody in spain or portugal saying they want to break off. do you agree with that or no? >> i hope professor seeingetieg
7:20 am
correct. the one thing we do know there's going to be a lot of internal discussion, pressure, pressure for referendum in france and elsewhere. i hope professor siegel is right that no large country exits. but again, the real focus is going to be internal rather than external. we need an externally engaged europe. one other point i think is really important for u.s. companies and banks. i think this is going to be a very difficult period as europe focusing on inward looking basis. i think people in brussels will be looking for ways to get right with other countries in europe. i think that means they will try to get right with european banks, european companies. i really wonder how u.s. banks, companies will be treated, whether investigations or merger and control activity. so i'm a bit concerned that this sort of growing protectionist sentiment that we're seeing as
7:21 am
europe tries to move away from that on a european basis could affect u.s. companies in ways that are not positive for either the u.s. companies or transatlantic economy. >> ambassador, do you see anything analogous between what happened in the uk and what happened here, thumb of the nose of the establishment, we don't care. screw the 1%, screw this, we're going to go our own way. is that also what's happening here? >> i think we're seeing that trend certainly. to me the most concerning manifestation of that has been hesitation on the part of both parties about a commitment to free trade. to me the key elements of a successful global economy are free trade, flexible exchange rates and open investment policies. right now it seems to me that both parties, because of pressure, have dropped back a little bit on that traditional u.s. commitment, u.s. confidence we can play a leading role in
7:22 am
the global economy. we certainly saw that in the uk vote, actions of the european union more broadly. i think we need to recommit our selves to open global economy based on those principles. >> ambassador, hank paulson had an op-ed suggesting donald trump was a phony. he said he's a republican and he plans to vote for hillary clinton. what did you make of that? as a republican, do you plan to vote for trump or hillary clinton? >> i'll let hank speak for himself. i notice he did call out mr. trump for pursuing protectionist policies. i think it's note to note mrs. clinton strong supporter of tpp, trans-pacific partnership has reversed her view on that, which i think is concerning. right now i'm following the political scene. i'm not engaged with or involved with either party. what i would really like them to do is commit to a confident u.s.
7:23 am
leadership in the global economy and also in the global security situation. >> okay, ambassador. we appreciate your time this morning. >> okay. thank you, andrew. >> thanks. when we return, fallout from copa american tournament. one of the greatest soccer player in the world is saying no mas after a loss. check out the price of crude oil, down again this morning, almost down by 1 point, 47.22. "squawk" will be right back.
7:24 am
7:25 am
7:26 am
one of the world's greatest soccer players may be calling it quits at least in some ways. messi deciding to quit argentinean national team after missing a big kick and losing copa american tournament final for the second straight year. messi will continue to play for his club barcelona but can't take the losing. a gut reaction after the loss but may be done playing for the national team. call it a messi. coming up when we return, three key sectors likely to feel the burn of brexit, a global report. a weekend of destruction has
7:27 am
nothing to do with brexit. big independence sequel but did it have another explosions to beat disney and dory? that's next. "squawk box" returns in a moment.
7:28 am
7:29 am
7:30 am
welcome back, everybody. among the stories front and center, brexit related precious still in evidence in the market this morning. check this out. stock futures pointing to losses in the united states. dow fell 600 points friday. right now dow futures down 175 points, s&p futures off, nasdaq down 52. we'll have more on the impact of the brexit vote in just a moment. in corporate news, amazon will announce the expansion of its dash button this week. that's according to "wall street journal." the service allows reordering frequent used items with the push of a wireless button. designed to be attached to refrigerator, pantry. dory topped north american
7:31 am
ticket sells with $72 million. the sequel to finding nemo. resurgence took in 20% below estimates. the brexit not yet fully played out in the markets. there will be some sectors that feel it more than other. sarah eisen joins us in london with more on that part of the brexit story. sarah. >> andrew, you've heard about the pain potentially facing britain's economy and uncertainty facing big business? here is a taste how messy it could be. take the auto sector, a lot of cars are still made in great britain, one of the biggest exports of the country. in fact, a lot of the british automakers, jaguar, rolls-royce, owned by foreign companies they are still made there. in fact, 1.6 million were produced in the country last year and 77% of those were
7:32 am
actually exported out. more than half those exports went to eu. therein lies uncertain. in the absence of free trade deal with the uk and eu, there could be taxes, as much as 10%, if it reverts back to wto rules. talent could also be a concern. how about the airline sector. british airlines, like british airways have benefited from the open skies agreement within the eu. if the uk does lose access to that, that could mean all sorts of changes. you could see britain be forced to get permission to have new routes within european cities. it may have to face taxes, see restrictions when it comes to setting fares. in fact, just this morning easy jet became one of the first big british businesses to warn on q3 profits citing in parts impact. shows shares have been beaten up. concern weaker pound may limit travel for british people across
7:33 am
to europe. finally the pharmaceutical companies, giants like glaxco smith gin and 'stro astrazeneca. employs hundreds of people and already calls to move that now that britain voted out, a lot of european countries competing for that. that could bring uncertainty when it comes to getting approvals for drugs. the timetable for that and pricing as well. so clearly there's a lot of confusion about what comes next. it gives you a snapshot of how complicated these negotiations are going to be. it gives you a snapshot why taking down forecast of britain's economy. with all this uncertainty potentially weighing on investment and hiring decisions. >> when you think about the airline issue, for example, doesn't this get back to why potentially the sun may come out tomorrow? in terms of if you're a country
7:34 am
in the eu, you're going to wan those planes to come to you, not going to want to put a major tariff on them. if you do, less tourism dollars. we've sort of made it out they are going to want to be punitive to britain but in many cases they are going to hurt them selves even more. that becomes the debate. no? >> well, there are two arguments against that number one, it's in the political interest of some of these european leaders to make it unpleasant and difficult for the british authorities, because they are punishing them for voting out. also, they might wan to take market share for their own country's. the agreement is beneficial for some of europe's airlines. in fact, even american airlines had problems with it because there's so much access and so much barriers removed within europe. so it's still pretty much unknown at this point. >> all right. sara -- i listened to sara on
7:35 am
the special last night. i thought it was like 3:00 in the morning you're time, sara. i hope you're getting some rest. fantastic reporting over there. see you soon. >> only 1:00 a.m. >> sounds pretty late to me, sara. thanks very much. joining us now more on the brexit economic impact vince reinhart, still with us dr. jeremy siegel, finance professor on set. vince, first to you, so much commentary out there. the best i can gather and i mean this with all due respect to you and your industry, ultimately everybody is kind of just guessing. >> no question about it. that was a leap into the unknown. british people voted to leave but they didn't tell us where they are leaving to. there's immediate uncertainty about exactly who governs the uk. near medium term uncertainty how the uk will fit into the
7:36 am
european union and longer term uncertainty exactly what the uk will be. >> what do you think that is? >> for now, uncertainty is just a dead weight loss. investors do not like uncertainty. business people, particularly if they have decisions to defer don't like uncertainty and will defer those decisions. activity in the near term over medium and long-term, i'm not sure anybody really knows. perhaps a small hit to the level of activity associated with trade being paired and less mobile factors but not a large hit. to an economy under 4% of world gdp. >> uk is. but collectively, vince, as you know, the eu, which many people might not realize is bigger than united states. collectively european economy is just slightly bigger than the u.s. we've seen economists shave half a percent or 1% off
7:37 am
expectations for the eu. are you doing the same? >> not quite that much. you put your finger on the real problem. this is a big aggregate demand shock because of this uncertainty, level shift down in future prospects to produce. but exchange rates adjust that aggregate demand shot and reing a gates it around the world. the problem for most of the european area, their central bank ecb is pinned to the lower effects. they really can't cut rates anymore or much more in order to offset that aftershock. so for europe, it's a significant headwind. >> vince, how do you even begin to try to estimate what investment will look like both in the uk and europe over the next, say, 18 months? sit there with a spreadsheet, what do you do?
7:38 am
>> so you look at the overall share of investment of gdp. you try to figure how much is replacement. try to get particularly the long lift portion of it, investment structures and work on the assumption it's going to be delayed for a bit. it will be delayed for a bit in london. it will be delayed for a bit across the uk. but if firms are relocating from london to the continent, they probably will have to build some structure. so net it's a bigger hit to the uk than the rest of the economy. >> i would like to bring up, i think he must be happy with it down, upset 115, a lot of talk he wanted down between $1, $1.05 to help the european economy. i think he did get some there. >> below 110 this morning. >> 109. >> professor, isn't that the
7:39 am
fear? vince can chime on this as well? drago, cameron, let's remember one thing, if the eurozone has to devalue, the pound is devalue. they need to devalue yen. china devaluing offshore water, china doing it for them. what is the risk of global deflationary trade war. everybody can't devalue currency at the same time. >> so far u.s. saying okay, one of the strong ones. >> corporate earnings and devaluations. >> despite the fact we're looking at potentially full employment. >> we're near there but we're saying we're strong enough, we'll give you guys china. a trade war would be bad. first of you a, japanese, they don't want the yen at 100, below 100. you know, on thursday that's
7:40 am
crazy. there's no way can get any of their plan through without the yen getting weaker. we're willing to do that. we were down to 105 on the euro, so we have tested those levels and i think actually got a little bit of a pump up on europe from that result. so just mentioned, the pound has gone down 7, 8, 9, 10%. whatever. that helps cushion the uncertainty. >> many of our viewers, vince, probably don't care much about the currency markets. they care about 401(k) and kids 529 plan. if everybody is going down, our currency going up, u.s. exports are less competitive, corporate earnings get pressured by the stronger dollar, guess what? stock prices come down because market valuations have to come down. do you see the u.s. dollar continuing to rise, vince? >> in the near term, professor siegel had it exactly right. from the u.s. perspective, if
7:41 am
you tolerate currency appreciation, you're basically expressing a willingness to share your domestic strength with your trading partners. the big question is how much domestic strength we have. i suspect attention will turn pretty quickly to that number that's going to be released on july 8th, ie, employment report to see if the worrying down trend in job creation is continued. but in the near term, what the federal reserve sees is a tightening of financial conditions. significant appreciation of the currency. we've seen the market response to that by future policy tightenings. at least in the u.s. we have scope for policy offset. future tightenings can be priced out. there's even a little scope for cut rates for govern ckuroda, bank of japan, there's not much room.
7:42 am
president drage not room either europe appreciated the dollar, significantly against an portrayeding partner uk. >> vips, thank you for joining us today. good to see you. >> thanks for having me. >> banks around the world on high alert, like we've been talking about, could europe's decision trigger global recession. bill rhodes will be our special guest right after this. then coming up at the top of the hour, treasury secretary jack lew on maintaining financial stability in a great time of uncertainty. right now as we head to the break, quick look at european market action, weaker, dax down 2%, ftse 4%, dow 1.9%. "squawk" will be right back.
7:43 am
7:44 am
a good car has to maneuver quickly. that's also true of a good car company. people have always bought cars.
7:45 am
but we saw an opportunity in sharing cars. so we moved fast and launched car2go in 29 cities, all around the world. doing that required dozens of data centers, designed for speed and performance. we built our business on the ibm cloud. because that's what the ibm cloud is built for. welcome back to "squawk box." take a look at futures. we are in the red. kind of a little worse. dow opened off 193 points down. nasdaq looks to open down about 55 points down and s&p 500 opening down about 27 points.
7:46 am
>> central banks around the world standing by to intervene and fears global fallout from brexit will get worse. joining me bill rhodes president and ceo of william rhodes ceo advisers. bill also a former senior vice chairman at citigroup. your concerns around this liquidity concerns what the central banks are doing? >> i think so. very much. we're very lucky to have someone as experienced as mark carney, governor of the bank of england. he saw canada through the great recession. he's head of the financial stability board. i think we could ask for no better person to be at the helm of the bank of england at this particular point in time. also we're fortunate to have mario draghi in there at the central banks. two real pros there. both of them have private sector experience in addition to all their public sector experience.
7:47 am
>> there are limits, though, to what a central bank can do. what do you expect them to have in their tool bag and when do you think they hit those limits? >> well, i think they will make sure there's sufficient liquidity in the market, which is what you expect them to do. i think the bigger problem right now, the uk has to get its act together, both parties. it's not only the conservative party has to pick a new leader, as you see there's an active revolt going on in the labor party. i think you need a new leader in the uk so they can start this negotiation under article 50. and the sooner the better. because right now that's what's disturbing the markets most. >> politicians seem to think more time is better. it will give them time to put a better deal in place and sounds like eu came to that over the week. forget it, we're going to make sure this happens as soon as possible. business perspective is
7:48 am
different. businesses don't like uncertainty and our reluctance to invest as a result. is that what you're talking about? >> exactly. i think angela merkel has pulled back brussels on this idea of fast negotiation. the other thing we have to be concerned about is fragmentation. you have talking about another referendum to take scotland out of the uk. there's even talk northern ireland uniting with the republic. so all of these things have to work their way out. in the meantime, i think the banks are under a lot of pressure, particularly retail banks in the uk. lloyd, barclays, royal bank of scotland but also a number of banks in italy and germany. all these things i think have to work their way out. but it's a period of great uncertainty.
7:49 am
one of the positive things, if you want stability, was that they come out better in the election in spain. this is a reflection of what's going on in the uk. i think people decided to back what they knew as against what they were not sure of with the other party. >> bill, let me ask you, we have secretary jack lew joining us at the top of the hour. what would you like to hear from him? what would concern you? what's on your mind when it comes to what the treasury secretary is thinking about? >> one of the things we're going to ask him chairing this meeting of britain. one of the questions he's going to get is about the g7. what sort of action is the g7 thinking of taking or will take to back up the situation, you know, with the announcement that george osborne that he made this morning and yesterday on trying to recreate stability in the
7:50 am
marketplace in the uk. i think this is where, i think, cooperation, coordination is going to be very important because we see this volatility worldwide. we see it in asia, china, japan. we see it in the emerging markets. so i think this is a time for coordination and cooperation. secretary liew is the one to led that effort. >> thank you for your time today. we appreciate it. >> it's great to be on with you guys. coming up, when we return uk treasury chief osborne saying the economy will have to adjust to the brexit. how will the u.s. economy adjust also is another question for us. another big question at the top of the hour we're going to put to u.s. treasury secretary jack lew. he's going to join us for an exclusively interview 8:00 a.m. eastern time. "squawk" returns in just a moment.
7:51 am
7:52 am
7:53 am
this hour jeremy siegel, professor of finance, wharton. what we're really going to do. we asked vince this, when you sit there trying to figure out what the stock market can or cannot do, how do you actually look at brexit and walk through the permutations and come to a conclusion about pes? how are you doing it?
7:54 am
for investors sitting at home trying to save themselves, where is it going? >> in the short run it's all emotion, psychology. we're trying to look at valuation, whether this is going to have deep economic consequences. i think one thing that's really important is, if this does shrink world trade, it is a big negative. but i think it is different -- a lot of people talking, is this similar to what trump is doing? a lot of similarities. two biggest issues was immigration and regulation, not as much free trade pacts. they know 30% of their gdp is related to trade. they know it much more than the u.s. we're much smaller. that was the biger bush than free trade. >> let me ask you, looking at 10-year treasury, sitting at 1.47. is that telling us there's a real demand in the globe, looking at a recession going around the globe, this is going
7:55 am
to kill them. >> we're looking at very slow growth. a lot of uncertainty an incredible desire for safe assets, a risk off environment as a result of this. i think that's really what it's saying. >> a lot of red on the scene. i'm going to play sunny side up. is there an up side on the u.s., i'm not trying to get you to be overly bullish on the stock market. will drop close to 3%, capital flow to the united states, we're seeing the dollar strengthen, which has negative impacts but can be a positive in in ways. what do you see as potential benefits for the u.s. >> rate hikes really push, we don't know how far out. big for the market. >> the fed off the table for this year. >> i would say that's premature because i think things are going to return to normal but september we'll have to look as one of our guest said, jobs report a week from friday. is it going to reverse what we had there.
7:56 am
i think standard economic concerns what we're going to have a particular earnings revival will be the most important thing facing the market more than brexit the second half of this year. >> okay. got to thank you, sir. >> thank you. >> i hope you're right about all this. you've been the most bullish of everybody except for sunny side saul. >> buyer and seller on every side of the trade. the money is going somewhere. better than the other option. coming up "squawk box" exclusive treasury secretary jack lew will sit down with steve liesman on the brexit and market fallout. you cannot afford to miss that. "squawk" returns in just a moment.
7:57 am
7:58 am
7:59 am
containing brexit fallout. cnbc exclusive interview with u.s. secretary jack lew, weigh in on the broader impact and u.s. currency war. global markets taking a hit, currency under pressure, hedge fund mark master bruce william here for a remedy with the brexit hangover. in addition brexit sparking political turmoil across uk.
tv-commercial
8:00 am
here at home, hillary clinton bashing donald trump. >> every world tested by world events. donald trump thinks how his golf course will benefit. >> economy goes down, more people will come to turnberry. >> announcer: live from the most powerful city in the world, new york, this is "squawk box.." welcome back to "squawk box" on cnbc. first in business worldwide. i'm becky quick with brian. 0 minutes away from opening bell on wall street will check this out, we've seen futures worsen, dow futures down 200 points, declined of 200 points. s&p down 27 points and nasdaq looks like it would open down by
8:01 am
about 57 points. of course this comes after a decline of 600 points for the dow on friday. you're looking at some similar declines in europe. actually declines there a little bigger with dax down 2.2, cac 2.1, ftse down 2.1. shanghai composite higher, up 1.4% with hang seng closing flat. if you take a look at currencies, this again is where much of this is played out. the pound at this point all the way down to 131.67. euro below 110 and 109.24. dow down. >> trying to make sense of brexit and implications, our top story billionaire investor weighing in on consequences of
8:02 am
uk leaving eu earlier on "squawk box." >> it will be like the most expensive divorce. like most divorces it will take longer than it should. i think the longer it goes on the more severe the consequences will be for everyone because business hates uncertainty. >> corporate news this morning intel is considering the sale of its cyber security business. we should tell you that according to "financial times" uniformly known as mcafee performed for $7 million in 2011. that's quite a loss there. it's a busy week for economic data in the u.s. today you've got to look for trade deficit numbers. may trade deficit numbers. tomorrow we'll be getting final estimate first quarter gdp, case-shiller home price index, june consumer confidence. on wednesday we get may personnel income and spending and pending home sales.
8:03 am
thursday we look for june chicago pmi, ism index for june and may construction spending and also june auto sales. >> we're going to get to a reader here -- that's news speak for a story. i'm going to call an audible for a second. i know we've got kayla there. do we have potential to put up royal bank of scotland shares in london. i don't know if we can do that on the fly or not. i want to call your attention to them. they are down 25% right now. royal bank of scotland shares, one of the biggest banks in the united kingdom. great job, guys. thank you so much. royal bank of scotland down -- that shows 23, i show 25. we knew it was a weak day for banks. jpmorgan came out with a note mostly u.s. banks, citigroup and others. their exposure may be writing down some assets, cutting evaluations. we're looking here, and i know kayla is going to join us, we'll get to that yellow thing in a
8:04 am
minute. this is too important. we saw markets and banks get whacked friday. we saw them open weak today. we're talking about some of the biggest banks in europe, if not the world, seeing another quarter of their value being wiped out. kayla tausche. >> brian, they didn't just open lower, barclays at one point in european trade were halted for volatility and when they reopened selling continued. that happened despite uk finance minister george osborne said london is open for business, british economy is fundamentally strong. but there are worries about what is actually on the balance sheets of some of these banks and then there's the fact lenders are the life blood of any economy. when you have concerns about home building, commercial real estate, industrial companies and then about retail, too, the backers of these companies, financee financiers are going to suffer too.
8:05 am
goldman sachs calling for a recession in the uk by early 2017. jpmorgan chase lowered earnings estimates for 40 european banks by an average of 13% and cut the price targets on all of them. then deutsche bank came out and said boe is going to have to cut rates, we're going to get further easing. that's going to hit their margin, too. they just can't win. hits keep coming for companies. deutsche bank titled political crisis, not financial one. you are seeing, brian, some financial cracks start to show. we watched pretty closely, saw a spike in cds. that shows you cost of buying insurance. it gets more expensive if a bank is riskier, despite to levels we haven't seen in a couple years. it wasn't necessarily worrisome. now with equity prices coming down, that's going to price a little more risk into the system. i talked to a lot of executives watching that closely, libor spreads how banks fund them
8:06 am
selves closely. they are watching at some point where we could see consumers take deposits out of the bank if, in fact, confidence starts to falter in the uk. we didn't get those signs over the weekend. when you see the performance of these shares like barclays, rbs, lloyd's, credit suisse, deutsche bank, goes on in the market, it's hard not to think this has a ways to go. >> kayla, thank you for that report. we can continue about where this is headed. i'm sure we'll see you later today. meantime top policymakers annual meeting in d.c. discussing fallout. steve liesman joins us with a very special guest on hand. steve. >> i'm here with treasury secretary jack lew. thanks for joining us. >> good to be with you, steve. >> obviously one of the most challenging parts of your tenure as secretary. do you think what the british people did last week was a mistake? >> i was clear i thought best outcome for the uk to remain, uk
8:07 am
and european and global economy after geopolitical stability. the democratic process in the uk has produced a result. now the challenge is for leaders in the uk, in europe, around the world to manage through a time of change to provide as much continuity, stability, and foundation for strong economic growth as possible. i believe there will be economic head winds. i think as we've seen friday and through the early market hours today, there is a kind of orderliness in the markets. there was a surprise and reaction but the systems are all working. now it's going to be very important as leaders look ahead to speak with the kind of reassurance that makes it clear that there's going to be a period of time through which responsible parties will work through this. >> how could this be managed in your opinion? quickly, as sumner advocated or wait until british has a new prime minister. >> i leave the timing to be
8:08 am
worked out between uk and eu. i think yarls regardless of what the timetable is there's going to be a period of change. during that period of change there's going to be attention on policy and actions and words used by leaders. the more there's a focus on restoring confidence, the more there's a focus on obtaining conditions to promote growth, the better. this is not just a question what are the legal relations between uk and eu, what are governments doing to promote growth using tools they have. not just monetary but instructial as well. >> will brexit hurt u.s. economic growth? >> the u.s. economy is doing pretty well. it's performing in a stable, steady way, even though there have been substantial head winds from the economy. >> goldman sachs and a lot of other economists vp marked down, is that accurate? >> there's no question this is
8:09 am
an additional headwind but i think it is something we can manage through and europe and the uk can manage through. you've seen policymaker react in a responsible way days leading up to and through the vote. there's no sense of a financial crisis developing. obviously this is a change in policy that has implications which change the decisions that investors make. i'm not saying there's not an impact on markets, but it's been an orderly impact so far. >> president obama has said that britain will get to the back of the queue if brexit happened. it did happen. when it comes to trade agreements is britain at the back of the queue? is that the policy of the administration? >> to be clear we've been negotiating a trade agreement with europe for a number of years now. that negotiation is ongoing and it will continue. any separate negotiation with uk will have to take a course that is in part determined by what happens between the uk and eu.
8:10 am
so i think it is very much in the interest of all parties to maintain open trade relationships. u.s. and uk have a special deep relationship that will continue. but it's already in track and there will be ongoing discussions where to -- >> let me be clear u.s. comes after -- >> there's a practical matter. we're several years into one negotiation. the other has to be geared up and thought through. so just as a chronological matter, you know, the ttp negotiation under way. >> how much potential crisis systemic risk by brexit. for example, will the european banks need another bailout? >> i think if you look at the preparations made between the uk and the bank of england, the ecb, other central banks including our fed, a lot of steps were taken to make sure that all central bankers could be reassuring about liquidity
8:11 am
positions. that is very important. i think if you look at the position of banks they were better equipped than they were in 2008. there's more capital, better resolution procedures, better trans barnes. i think before the vote there were questions about some european banks. the market is reflecting that not all institutions have the same degree of capital and soundness. i think that there are tools in place for policymakers to manage this. there's also longer term challenge making sure all financial institutions are set as possible. we've said for some time we've made more progress than others. >> i want to ask you a question. it's really three questions but all part of the same idea. first of all, are you concerned additional countries will leave european union? are you further concerned about rising protectionism global and
8:12 am
even in the united states. donald trump said our country will be better off when we start to make our products again. is that true? do you agree with that? >> i'm not going to comment on anything in the u.s. political stage right now. i think what we're seeing around the world is there's a lot of anxiety on the part of working people about an economy that doesn't necessary work for them. we've seen better than we've seen distribution across income classes. making sure the opportunity gets to working people? >> i think all of us in our countries focus on what we do to promote more growth. in a lot of countries that means fiscal policy more. we have to focus on what can we do to correct some of the inequities that made it a better economy for people at the top than people in the middle. we have tool to do that, we know, in the united states.
8:13 am
>> a lot happened during obama administration. you guys put forward tpp and struck an agreement and yet not even the democratic front-runner supports it. so how much of that responsibility falls on the obama administration and other administrations that do not promote a globalization. >> so look, i think if you separate the issues, i think tpp is profoundly in the interest of american workers and u.s. economy. it will promote a level playing field, higher standards for labor, environment, business practices. it will make it easier for americans to compete in the world. i think at the same time we have said there have been decades where we've seen a drifting away from shared prosperity that makes middle class feel they have a stake in things like global growth. we need to restore that. that doesn't mean stepping away from the world. being engaged in the world made america strong. given ability to project values and pursue policies like pressure on iran. i think it would be a big mistake to step away from the world.
8:14 am
we have to pay attention to problems at home. you and i were talking earlier about the things we can do to provide comfort that we're dealing with things when we need to. this week congress needs to act to make it possible for puerto rico to restructure, it's not global financial issue but responsibility. do we take action to give puerto rico tools to avoid a crisis for 3.5 million americans. that's the kinds of things we need to do. we know it's a crisis. we know we need to act. governments around the world need to act. >> let me turn to an issue, the effect of brexit on the dollar. are you concerned about the strength of the dlaer here on the u.s. economy? are you prepared to take action if it gets too strong. >> i have long taken the view, as have my predecessors, that a strong dollar reflects a strong u.s. economy and u.s. interest. we have had imbalanced growth around the world. we've seen exchange rates reflect that.
8:15 am
we're in a particularly volatile moment right now. we're watching exchange rates very closely. we've made it clear we will work as g7 and g20 to communicate clearly unilateral action to intervene would be destabilizing has to be a reason based on disorderly markets and the need for there to be action. i think the united states is a leader in the world economic community and we play an important role making sure those kinds of conversations take place in a responsible way. >> sir, one thing you'd like to see official in the uk or eu do in the next week or so to calm the markets, something you're recommending they did. >> i've spoken to all my colleagues over the last few days. many of them several times. i think being ready and being able to step out with the assurances that the financial system is working was very important. i think moving forward and being clear that we're going to use the tools we have as policymakers to get our economies moving, not to talk
8:16 am
about how much faster it would have moved with or without the vote in the uk. to do things we can do as policy max to make our economies work better, that's important. i think we have to let some of the immediate reaction flow through and not overreact to a volatile day here or there and look at what's happening as we settle into what's going to be a fairly long period of change. >> thank you for joining us. >> great to be with you, steve. >> back to you guys. >> steve, thank you and our thanks to the treasury secretary as well. a lot of things he brought up. this is a point he has been talking to colleagues around the globe. he said many of them several times. obviously central bankers are not only included into what's going on but communicating with each other. when we come back on "squawk box," market fallout after brexit. we will talk to top hedge fund manager bruce richards about the economic impact in the united states and uk. futures are weaker, dow down 180
8:17 am
points below fair value. s&p down 25, nasdaq down by 51. "squawk box" will be right back. my name is fred and i carve heads out of cheese.
8:18 am
it's not easy. i was once working on a bust of shaquille o'neill in swiss. i haven't worked in swiss since. everyone called me crazy. things really took off when i got my domain name headsofcheese.com from godaddy and now they're selling like hot cakes...made of cheese. got a crazy idea you think you can turn into a success? we know you can and we've got a domain for you. go you. godaddy. enis really built into theat foundation of the company. whole foods market is engaged with pg&e on many levels, to really reduce energy and reduce our environmental footprint. for a customer like whole foods,
8:19 am
saving energy means helping our environment, and we can be a part of that. helping customers save energy is a very important part of what pg&e does. we can pass those savings on to the environment, the business, and the community. pg&e really is an expert in saving energy, and that partnership is extremely exciting. together, we're building a better california. welcome back to "squawk box." next guest sound of alarm on
8:20 am
what might happen potential fallout after brexit on "squawk." back weighing in on the market impact implications for uk and european economy joining us bruce richards marathon asset management ceo co-founder and co-managing partner. marathon has $13 million in assets management, house speaker and cnbc alpha conference. welcome to you. you've been working all weekend to make the best of this. royal bank of scotland, does that start to suggest that there are systemic risks in the system we haven't thought about? >> i think that banks, first of all, reading the marketplace, going to be low very long with flat yield curve which means their inability to go forward has been hurt substantially, number one. number two is that the banks, given the lower dollar prices, you have to start to worry about
8:21 am
some of the convertible debt that's outstanding. does that become equitized. risks with equities. number three, italian banks in particular may need to bail out. potentially uk banks. economy slows, this will have a profound economic impact. economy slows number will rise. >> how does that work in italy? up to the italian government to bail them out? up to the eu. >> like the fed, that's the blueprint. when ecb says we're going to equityize some of the banks -- >> every country in the eu is going to be responsible coming up with the money to do this? how does that work? >> each cb is regulator. ecb will set the measure. each country will then have to come up with the money to be able to do that.
8:22 am
>> britain won't be responsible for any part of that. >> britain shouldn't be responsible for that but britain will be responsible for their own banks. their own banks have issues, down 15, 20% friday, down 20, 25%. >> let's put it on the table. do you see potential for bang failures or bank runs that could lead to the prospect? >> not with the trillions of liquidity that's been pumped in the system by the ecb, by the bank of england. >> too big to fail still exists and we're very much -- >> i don't see a run in the banks or major bank failures. what i do see is a bank's ability to earn going forward greatly impaired. i do certain bank bailouts, not failures. >> if that's true, let's think through implications for credit available for system in the eu and therefore investments or lack of enforcements. >> this political risk has
8:23 am
profound economic. first of all, take global growth down half a percent, eurozone growth, euro growth down from 1.8% to 0.8%, looking out take uk in recession, currently grog 1.8%, expect is to grow 1.8 next year and next year will be recession. >> go back to the banks for a moment. even with banks down 20% today, 20, 25%, you wouldn't be a buyer of those banks because of your concerns what will happen. >> in it's too early. you need to put together your shopping list, do your homework and look later onto buy. there's more to come, more fallout. >> giver us implications you've mapped out over the week. equity market in the u.s. and europe. still overvalued or opportunities here and should be
8:24 am
jumping in. >> certainly equities under pressure. i believe they will go down further. europe will have 10% for declines. the star performer for europe will be uk, ftse. reason why, 70% of companies in ftse get ruse from exports and sterling a lot cheaper. so their ability to sell rely 'tis to their competition because they have their own currency. >> right after all, not doing to hurt them? >> it will hurt uk. it will send uk into recession. >> right. >> number one. number two -- >> ftse stocks will do well. >> ftse down 9% on monday, rallied back, closed down 3%. last week actually up 1% on a week. >> i don't want to harp on the banks and i don't want to scare anybody. however, i'm going to tread into your waters because you literally wrote the book on this. we're looking at barclays down 30% in one week. royal bank of scotland down 40%
8:25 am
in five trading sessions. 40% in five trading sessions. 2008 banks had a problem because there was real concern capital requirements. this is just the stock price. bruce, is there any concern that when you see bank stocks, which by the way they can use as capital themselves all by one-third in three or four trading sessions there won't be some knock on effect we might not necessarily be able to anticipate? >> there's certainly knock on effects. you can certainly come up with that scenario. that's not my base case. the base case will be not a huge banking crisis in europe to the extent in 2008 where bank after bank after bank failed, it was a financial system failure. >> because assets were bad. >> this is a political risk failure that's going to turn into economic failure at a time when central banks around the world are pumping trillions into
8:26 am
the system. >> in 2008 banks failed because they rotted effectively from the inside out. because the stuff they owned went bad, tore them up and they collapsed. is this different because this is simply people taking their money out of bank stocks? >> yes. >> the asset quality should still be okay? that's the key. andrew, correct me if i'm wrong. >> time when nim manages what they make because rates are coming down is going to be punishing them. that's not a good dimension. that's why the stock is down. the evaluation has to be a lot lower on that basis. >> if customers start taking money. >> you've got to be careful talking about it. if i'm a shareholder, i have my money in a bank and i see that bank stock fall 40% would i not sit around the breakfast table and say to my husband or wife, do we want our money in the financial institution. >> i don't believe there's going to be a run on the bank.
8:27 am
can you believe that. >> i don't believe it. i want people to know that. i simply -- >> i got it. you're walking through permutations. thank you for coming this morning. >> my pleasure. >> all right. coming up, we actually have breaking economic data today. we're going to get international trade numbers, although they may look different in a few months at 8:30 a.m. eastern, big in europe, futures indicating a drop. eckti ecktize
8:28 am
8:29 am
8:30 am
yeah, there's news outside of the brexit. in fact, we're seconds away from international trade data for may. as we await that, there's your futures. get on the radio driving to work, turn around, go home, hide under the pillow. dow back down 173. implied open 611 point loss on friday. we are indicated down as well today, s&p 500, dow declines. rick santelli on trade data, sir? >> trade data is supposed to be out at 8:30 eastern. some of the systems have it, some don't. well, as i wait for the number, we are looking for the may read. anybody picking it off? still don't see it. maybe somehow tied in with brexit referendum subvotes. of course everybody is trying to handicap what's going on. there's no way to tell. we're going to continue to see volatility especially for a vote
8:31 am
that triggers a program that may not get triggered. if it does trigger, could make many years to complete. we were expecting a number that was going to be basically unchanged from our last look, around 57 1/2 billion, looking for it to expand. as we get this number, brian and the gang, i'll get back to you. >> rick, just crossed 60.59. the magic voice in my ear. thank you, by the way. 60.59. >> all right. that would be the biggest trade balance in terms of the deficit since february when we had 63. yeah, there it is. 60.6. good call there, big guy. markets aren't going to really be looking much at this. of course we'll be looking at under 150 ten-year. looking at potentially challenge 2 1/4 quarter year, minus 10 on
8:32 am
deals. where will it stop? fixed income has a reputation for sponge equity markets. right now there's quite a few of those around the globe. we'll continue to moderate and handicap how rates move lower as we follow stocks. you do have to add in a bit for that quarter hour difference in cash and future settlement on friday that always puts them out of kilter so to speak. fair value definition. back to you. >> i appreciate it. literally one of those moments everybody thinks this is how they operate. it was. somebody said something in my ear and i said the exactly thing out of my mouth. thank you to the crack team. they said it. coming up continue to talk about brexit reality, the governor about the economic impact of the uk leaving, plus a
8:33 am
potential silver lining. as we head to break, he's got a silver lining for us. yes, he does. u.s. equity feature, dow in the red 179 points. back in a moment. yet alternatives can tap opportunities that traditional assets can't. and even though they're called alternatives, they're actually designed to help meet very traditional goals. that's why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20. ♪
8:34 am
8:35 am
8:36 am
all right. welcome back, everybody. you've seen the initial reaction to britain's decision to leave eu. brexit which is officially a scrabble term. what does it mean for you and u.s. economy and federal reserve decision. ceo of lindsey group and former federal reserve governor. mr. lindsey, thank you very much for joining us. a lot of talk about june, that goes away. do you think this takes any fed hike this year off the table? >> i think the fed will make uppist mind later on. i was never a great believer they were going to hike very much. at most once. and you know, i don't know, i think wait and see until december. let's hold off. >> do you believe that a quarter point either way, though, would
8:37 am
mitigate the impacts we're seeing now? whether the federal raises rates or cuts them or keeps them the same, will it have any impact on what we're seeing now? >> look, the first two picks, first of all, the one thing we all should be aware of, monetary policy after seven years is kind of losing its efficacy. so you're right. i don't think it matters very much. the second thing, and i think the most important thing, is that the doom sayer scenario is far from baked in the cake about what's going to happen here. i think everyone needs to keep that in mind. let's start with the reaction since thursday. president obama has pivoted from you go to the back of the queue to talking about the special relationship. believe me there's nothing special about being in the back of the cube, so that's a complete pivot. south korea has already announced it wants to negotiate a free trade agreement with uk. the people who will be coming
8:38 am
into power in the next uk government, michael gove, johnson, very sensible people of the key to watch is whether europeans will be equally sensible. so far the indication led by chancellor merkel is that they will be. folks can work this out. i think the uncertainty is going to have an effect. we're going to lose a quarter to half percent global growth over the next few weeks mostly concentrated on the european continent. people want to know what's going on before they make an investment decision. this is not the enof the world. this is a political decision. it is not a financial decision and, you know, i think we should all take solace from that. >> it's risky talking about bank, had people talking about it, no one trying to create
8:39 am
anything, the fact barclay fell in a couple segs does that concern you or interest margins aren't there, valuations not too high given macroconcern, stock isn't worth much, which is entirely possible. >> it's hard to imagine how a world of zero much less negative interest rates is good for anything. we'll start there. i think british banks in europe have an opportunity as well as some risk. after all, i think the city of london is going to need to be even more competitive than it was. britain has a lot of advantages, particularly rule of law. i think they even lead us on that. they certainly lead the continent on that. i think that before there's all this redeployment to the continent, people are going to be taking a deep breath. i would definitely not rule out the future of british banks. >> larry, let me ask you, we've been talking about what we've
8:40 am
been watching with interest rates, 10-year trading at 147 today. might have seen it dip slightly below that as well. what does that tell you? a read on world demand and global economy. what does it tell us now? >> well, first thing i think that a lot of this is a safe haven rule, began also rallied jtb's rally. and the main result of that is that europe, not just britain, but europe is now no longer a safe haven. you are going to see more moves for exit in the eu. you know, if things work out well, the people in brussels will consider this a swift kick in the rear and will actually start behaving better, start being competent instead of incompetent, being less arrogant. it was very interesting during the campaign, cameron and osborne, both tal ended leaders,
8:41 am
by the way, never wen out to the public and said, we're so lucky to be regulated by brussels. they couldn't do that because no one except mothers of brussels bureaucrats believed them. as a result this is largely a vote against an overbearing beaurocracy that makes poor decisions on a political basis, reducing the power of that beaurocracy is a good thing. >> can you try to relate what's just taken place in the uk to what my or may not happen in the u.s. donald trump has tried to align himself with what happened in the uk. at the same time people like george will has left the republican party. hank paulson coming out in favor of the hillary clinton over the weekend. >> first of all, with regard to former secretary paulson, this is really a ruling class versus people kind of decision and doesn't surprise me that a former ceo of goldman sachs,
8:42 am
whose very close relationship with fannie and freddie would be on the side of the ruling class. i don't think that should be considered a surprise at all. we have two shall we say less than perfect candidates running. they both have issues. i don't know what's going to happen. there's clearly a worldwide revolt against what has been incompetent and arrogant government. i think that's true with europe, i think that's true here. you know, we'll see what happens. at the very least, we should keep in mind that the unexpected can happen. the unexpected certainly leave vote and unexpected if trump would win as well. >> always great to see you. thank you for your perspective this morning. when we come baca new reality for uk, britain's two political parties in turmoil following brexit vote. we'll talk to steve forbes about the fallout in the uk and u.s. "squawk" returns with him in
8:43 am
just a moment.
8:44 am
8:45 am
welcome back to "squawk box." hillary clinton going on offense. speaking to a conference on wednesday clinton criticized trump for promoting his golf course friday as financial markets were dealing with the brexit vote. >> bombastic comments in turbulent times can actually cause more turbulence. and to put the interest of the
8:46 am
american people ahead of their personal business interests. >> two new polls out this weekend nbc "wall street journal" and "washington post" abc news shows clinton widening her lead over trump among voters. however, "the wall street journal" does point out today when third party candidates are included the race is essentially flat. joining us right now is steve forbes. he's chairman and editor in chief of forbes media. steve, we just spoke with larry lindsey. he said, look, this is not end of the world brexit vote, political decision not economic one. if cooler heads prevail, damage will be limited. you've said this is a disaster. how should we look at this thing? >> in terms of economics, it's going to continue economic uncertainty. divorces are often very messy even if both parties want to make it smooth. on the political side, have you uncertainty as well. particularly, how will people like putin react. he's already done a lot of
8:47 am
military maneuvers around baltic states, sending italians over there now, probably send armored brigades as well. if he makes a move in this turmoil, that's not going to be good for europe. all that urn certainty means u.s. economy in second gear playing like yankees, not going very far. in term of the rest of the world, it's going to continue to contract especially central banks misbehave by suppressing markets and not letting them set rates. >> political or economic fallout. >> what putin will do when they see europe in dissolution or disarray, i should say. >> in term of the economy, is there a chance that if cooler heads -- what's better? we've had a number of different people who said things from a political perspective they seem to think slower exit is the better way to go, time to negotiate an agreement and cooler heads prevail. every business leader we talk to
8:48 am
say they would like to see it immediately because uncertainty lingering for years is what will be more concerning. >> well, they are going to have uncertainty whether you make it quick or this thing that drags out. the key thing is when are companies going to wake up, make structural changes to get moving again. europe overtaxation, so-called hysteria 2008 fell mostly on private sector, very little on the government sector. as a result you have this built in stagnation, people feel economies are not moving ahead, the feeling economies don't know what they are doing leading to political turmoil we have now. >> steve, political turmoil here and how this plays, there is a view if it gets worse globally and here that's better for donald trump than hillary clinton. do you agree with that? >> this election is for donald trump to lose. in terms of people don't want third term, continuing stagnation but he's got to put out there credible alternatives
8:49 am
to what's out there, otherwise she will win by default and huge rise for third party candidates, johnson from libertarian party. some states he's getting double digits now. >> what do you think of lindsey's comment hank paulson comes out in favor of hillary clinton. of course he's coming out in favor of hillary clinton, that feeds into this idea about the elites? >> it does. trump, that's an opening for trump. part of trump's campaign problems has been his communications department of which there isn't. he should be all over that saying, see, this is elites versus the people. when he responds it will probably be after the story has been hot. what you're starting to see, though, even though you've got headlines of particular individuals is the bases of the party are starting to return to the candidates even though both are unpopular with many sectors in the party? >> what do you mean by that? >> coming saying on the republican side we don't like trump but we've got supreme court appointments, maybe he won't be so bad. we know hillary will be pad.
8:50 am
>> what do you think about george will? >> no surprise. he's been loggers head with trump, they have had lot of ta lot of the sanders voters go for trump, some will, some go on the sidelines or gary johnson but a lot are starting to return home. . >> i guess you wonder how this plays out and -- >> part of the playing out is going to come in terms of what happens globally. if putin makes a move, that's going to throw it in turmoil again. if some economy or bank get in trouble, even though the banks in the u.s. are in far better condition than in 2008, not nearly as leveraged and not nearly a vibrant economy in the back of them, so it's the uncertainty or the unexpected that happens. i'm surprised very little attention has been made what's
8:51 am
happening in the baltic states and poland. the baltic states are scared to death about whether they're going to have effective independence. the polls are worried -- >> [ inaudible ]. >> the polls are worried. they never believed that history had stopped. they've been between major powers for their whole existens. >> thank you for coming in today. good to see you. >> good to see you. >> coming up we will head down to the new york stock exchange. jim cramer will join us with his take live and ahead of that your stock futures indicates a down open. 160 more points on the dow. we will be right back. hi baby! hi daddy!
8:52 am
gain the freedom to fumble with the new water and shatter- resistant samsung galaxy s7 active. buy one now and get the samsung gear s2 for free. exclusively at at&t
8:53 am
8:54 am
let's get down to the new york stock exchange. jim cramer joining us. i was listening to the special last night, awesome job as always. here's the thing we're seeing the huge declines everywhere and people say you're fear mongering or whatever but you i thought you brought up an important point. we are still 1800 or so points on the dow above where we were in february. >> right. look, it's so easy, i mean sometimes you feel let me put the fear hat on and really just get people very nervous, but the fact is, it's not a credit risk in this country. look, absolutely is credit
8:55 am
suisse on my list of things i worry about, deutsche bank, lloyds, royal bank of scotland worry about all of them but we had an issue with oil which spilled to our banks and that was a far worse kind of let's just say potential crisis than we have here. if oil were up $1 we would be up in our market. that's how -- that linkage has not stopped. our decline is linked to oil, whether that's right or wrong i don't care, more linked to oil than europe. the only reason i say this the bang stocks will be bailed out again. there's no doubt about it brexit was just a colossal failure of thought by the british government not explaining to people how you may want to save $8 billion but could be on the hook for 100 billion pounds with a boulailout last time. the fact that they didn't explain that shows you how stupid they were. >> goldman out with a note over the weekend saying the uk doesn't use much oil even if we see a slowdown there, probably
8:56 am
not going to have a meaningful impact on the oil market. we could see oil according to goldman turn around which might give us a list. >> iran turns out to be pumping far less. not a lot of places to do it. false stories about the gulf of mexico. it's not pumping 500,000 new a day. it was 300, 400,000 that's been out there a while. stop lying and being stupid. >> see you in a couple minutes. >> thanks. >> when we come back just keep swimming. disney's "finding dory" topping the box office once again. how much it made when we come back. and a programming note tomorrow a guest host double play on the brexit and your money. larry summers and mario gabelli will join us for an hour, that is tomorrow here on "squawk box." .
8:57 am
8:58 am
8:59 am
welcome back to "squawk box." "finding dory" topping the box office for the second straight week. the disney film brought in 73.2 t million after last week's record-breaking debut. in second place "independence day resurge js" $41.6 million. the sequel to the 1996 film brought back jeff goldblum and
9:00 am
included liam hemsworth to save the world from a new alien threat or us from brexit. sort of [ inaudible ]. >> interesting time. >> thank you for being here. >> sure. >> it was fun. >> see you back here wednesday. >> if i'm not, alert the authorities. >> join us tomorrow. "squawk on the street" begins right now. good morning and welcome to "squawk on the street." i'm david faber with jim cramer. we're live from the new york stock exchange. carol quintanilla has the day off. give you a look at futures. the key here as we start the day, after friday, after brexit. and there we are with a look at the s&p which is going to be lower, the dow as well. see the nasdaq also which was the weakest of those three, i believe, on friday. certainly weakening as the day went along. european markets a key here. last night when jim and i were on, with

112 Views

info Stream Only

Uploaded by TV Archive on