tv Street Signs CNBC August 23, 2016 4:00am-5:01am EDT
only at a sleep number store. good morning and welcome to "street signs." i'm nancy hungerford and i'm julia chattily. these are your headlines. >> levels not seen since last november terror attacks in paris. shares in red oaks get to the bottom of the stock 600. left out crucial details. isle oil in retreat. reserve prices down from two-year high as warns recent
recovery is fragile and not driven by fundamentals. a u.s. judge orders the expedited release of another 15,000 of hillary clinton's e-mails which were never turned over to the government. a warm welcome once again to "street signs." we've got some pmi data out this morning. the composite euro zone pmi for august coming in 53.3. the estimated was 53 actually so a touch better than expected. the flash reading 51.8. the forecast was at 51.9 so a touch weaker than expected, but very little there. if we look at the services component there, we got the forecast 52.p. that coming in at 53.1.
that significantly better on the pmi services. if we tie it back to what we've seen this morning overall, we've seen a ten-month high in terms of the private sector growth and on the french side. slightly weaker on the german services sector. a 15-month low on the reading. when you talk about a 53.3 read here, expansionary territory. >> good point. reverse german being the bright spot. it is two months since brexit. you may say still too early to tell. >> if you were going to see something, then you would see it in the survey data first which is what we see in the uk. what we can see from these numbers is ultimately looking at yeah pretty resilient. i mentioned the french and german. let me give you those as well. mixed data. france posting fastest private
sector growth in ten months. flash pmi rose to 51.6 in august. edging down to 54.4. low expectations in manufacturing loss steam. still above the 50 level. the strength in german has been quite fascinating. if you look at the production data. that fell off a cliff. despite what we're seeing in these number ofs, good to go. >> some reason for confidence then. of course we did see euro dollar ticking higher. a lot of focus on the jackson hole talks as well, exactly what janet yellen may say. let's bring you up to speed with how the equity market is trading here in europe just an hour into the session now. looking at a bit of a boost coming from the pmi data. higher now 7% across the stock
600. yesterday closed out flat. give you a view how they are playing out one by one. we have stock specific movers. you can see higher by .70%. good news coming from chris simmons on growth stats there. >> the xetra higher by .70%. in line with french cac higher. give you more details on an emissions report coming out of france in just a little bit. the swiss market higher by .40%. basic resources pushing higher. that sector higher by 1.9%. retail, household goods, industrials and banks all holding firm. oil and gas a lot of focus on this one as we look at the pull back in wti overnight. the worst performance in three
weeks. in fact you can see wti now off by nearly .80%. >> this was the focus on in the u.s. session. a loss for wti. energy stocks under pressure. the second lowest volume day yesterday all year. gold m goldman put out a note. saying they're more worried about a thaw than a freeze here in terms of oil. if you look at the countries the largest source of disruption, they say any one of these coming inline could tip the balance for supply. >> still saying fragile when it comes to recovery. >> yes. euro zone top three leaders who are merkel, of course, and renzi and hollande. we're talking obviously on the
blocks future despite the shock decision to exit the union two months ago. in a symbolic show of unity aboard the carrier, called for a closer cooperation among members and for the end to pop list politics. renzi told reporters despite the brexit vote, the european project was not dead. >> >> translator: many thought after brexit, europe was over. it isn't true. we respect the british people's choice. i want to write a future chapter. this is why external and internal security, the fight for common defense, better intent a project at common security are all absolute priorities on which we'll discuss. >> wheen while uk prime minster theresa may plans to inject 50 billion pounds into the country's economy.
that's according to an hsbc note reported by the telegraph . if the economy slows down as expected the uk government will launch a stimulus plan that could add 1% of gdp to the deficit. warned the uk government that any aggressive cuts to corporation tax designed to draw business away from eu members to britain would make negotiations more difficult. that's according to comments made in a recent interview. hit back saying quote, tax policy is a member for the member states. it's not two months since uk public voted to leave the eu. retail sales data is one of the few closely watched economic factors to improve in the month following the vote. now, let's look at the performance of some major uk assets since the day after the ballot. the ftse 100 is up nearly 8%. come back a bit. up 11% at one point. many companies getting a boost
from the weaker sterling. sterling itself down 4% for the period. while if we take a look at the yield on ten-year gilds, that's fallen sharply on the back of bank of england easing. henry joins us now. great to have you on the show. reports of the economy's demise greatly overkpaj ra kpaexaggera moment. >> we all had crisis meetings and previously a chancellor came into to inform us he felt events worse were on the way. that was an interesting conversation to be had. two months on i think many ways are we pinching ourselves, no. much better momentum going into the brexit vote. while i think it's very definitely political and constitutional vacuum, a lot of sand building docks we could point to. and plenty the government can do in order to continue that economic momentum, stimulus
measures possibly announced. property market. good thing for far too long governments have tried to boost demand for property instead of get the supply right. we all know the economic value of building a house. and hopefully as we continue to grasp and get nearer ho 200, 250 housing completions, economic benefit can come from that. >> interesting you focused on housing. the simmons result today. ceo made a comment, people going to visit their sites is up 20% since the vote. so a self fulfilling prophesy here in terms of confidence. >> we get a little bit london centric and look at the houses around us. i didn't think would represent any sort of value in any's mind. you do move outside where average selling prices are nearer 200,000 pounds: if you can get access to buy, it is
probably outgoing on your mortgage payment would be 50% less. very, very significant and i think we have to be very careful sitting here in london. don't just look at a very expensive london property market and gauge the country as a whole. >> the point too to the dip in sterling. we look at the recovery in the ftse 100, now are you suggesting itself time to look at companies boosting. >> just a little caution. ftse here at 6900, no one would give you that foerng two months after brexit. sterling has been a key contributor. no doubt now sterling is very, very cheap on those measures and positions sterling which is not something i want to talk to great length, but seems people are extremely bearish. everything to do with the dollars, everything with the euro and nothing with sterling. we want to challenge that.
again the action we're seeing in the oil market, big run into many of the oil majors. don't think they're going in dollar terms. yes the market translation will benefit, but we want to look at stronger grower. so maybe things like ftse 100, micro focus within the ftse 250, but with sterling where it is, you need to set your threshold high to expose yourself to overseas earnings. i don't think the tailwind is going to be as strong. i can see it posting gains against the euro and the dollar. >> will also helps explain why we've seen underperformance in the mid cap stocks as well. you're also drawing historic precedence, some upward potential here. is this time different given that with this crisis, if you want to call it or this risk event that is brexit, the time horizontal is pushed out so far as we await article 50 to be triggered. >> it may sound odd to talk about historical analogies in a
unique time adds this. when it came to the currency move, 10% you could point to the early '90s and point to lehman. with regards to the dislocation of large accounts about six periods of time we can look at mid cap by under falling 10% in a week. and always what happens in the next year is mid cap sharp performance. we tend to fly off the scale and get so depressed about everything. i would encourage people to buy into that fear and climb a wall of worry with regards to the economy. and with regards to the earnings outlook and very easy to put together a portfolio in that area with a strong balance sheet where we got way too depressed in my opinion about the prospects of the next few months. >> how closely are you watching this. if we go back to the second
quarter, the first quarter of this year, the correlation between equities and oil was incredibly high. we were in a situation again now whether you look it or not perhaps something happens in this next meeting of peck and non-opec names. >> give the fed credit there. if you continue to raise rates, it's going to put too much pressure on the dollar, too much pressure on emerging markets, too much pressure on commodities. given the money lent to the oil sector, that was worrying. thin slithers of hope. if they slip below mountains of debt, they are the thennest sliver as you can imagine. refinance the bond market does seem to be open. we're writing back the horrible write off in january. we hawkishly look at and relative to where the forward
k curve is. we have no edge on the oil price at all, but what we do have an edge is where analysts sit thatle forward curve. as days go buy, everybody time he needs to put pen to paper to recut numbers, the pressure is down. i would be cautious of oil. represent a slight blind buying of u.s. dollar rather than a thoughtful buying of u.s. dollar and time the get more thoughtful. >> do you think goldman is right. >> goldman is always right. never known it to be wrong. >> that's a great way to end. anything else more lifeless. >> henry, you're staying with us. henry dickson. fund manager at glg. >> we want to hear from you. get your e-mails in nice and early. plenty to talk about here. oil get you view ngs there. do you agree goldman is always right? let us know, the address is
firstname.lastname@example.org and reach us directly on twitter. find me on @nancycnbc. we're going to take a quick break. coming up on the show, we're going to be talking holes in the pro. report surface that france emission inquiry to red oak lacked crucial details. we're back in two. announcer: don't let e. coli mosh with your food. an estimated 3,000 americans die from a foodborne illness each year. so, always separate raw meat from vegetables. keep your family safe at foodsafety.gov
august. compares to 49.3 in july. market reaction on the session in asia. let's get straight out to shri. >> reporter: you really have to be concerned about the export component here especially when you have dollar yen at these kind of levels. we've taken a little bit of a tumble once again. it's not collapsing, but then again we have been pivoting around this century mark for quite some time. japanese yen, appreciation, that is still a powerful pun putting pressure on the nikkei 225. australia is outperformer today. we ended the day on a reasonably upbeat note. that's .70%. some of the earnings number vts been resilient from the health care sector. the market responding to that. otherwise not a great deal of conviction in the markets. very much in a holding into we
get clarity from janet yellen and her speech at jackson hole at the end of the week. that's where we stand. back to you. >> thank you for that one. bring the focus back here to the european trading session. the french government investigation into red oak has failed to explain why left off harmful emissions. this comes to a report in the financial times. official sources told the paper that certain vehicles are equipped with a niet general ox side trap. that is the key one here because over and over again they have said like other european auto makers outside of volkswagon, we do not have a defeat device like they do in the case of volkswagon, but there has always been a discrepancy between the lab results and real road conditions. >> that is a problem.
there's no given standard of what emissions need to be per car and a regulator problem rather than auto maker problem. this is a discrepancy between a test and what goes on on the road. >> they're not the only ones though. it's across the industry to keep in mind. here question haves been raised when you look at the french government 20% stake in renault. do they have a vested interest in not releasing the information. there is no defeat device, but the report is saying investigators have welcomed additional testing to work out what is behind that discrepancy. meanwhile, no progress yet. that is the message from volkswagon regarding on going talks with two of parts suppliers in a battle expected. refused why from major car makers to extend the period on
analysis regarding fuel efficiency targets. swiss watch sank 25% in july to 1.64 billion swiss francs. 12% drop in sterling. >> as you can see there, the stocks holding their ground. swatch basically flat. meanwhile, general electric is expected to make a bid for french wind power company this week. that comes according to a french media report. owned by areva and also received a bid fr . unicredit shares have risen to the top of stock 600. poland's biggest insurer is in talks to take over credit arm. second largest bank in the country. rank has announced profit of
4 million pounds beating expectations. uk casino said it expects brexit to have little impact on the business. dropped bid alongside 888 for rival bookky william hail which would have created uk largest gambling company. persimmon reported 12% rise in revenue. uk home builder plans to be cautious with new land investments after the eu referendum added to uncertainty. >> still with us is henry dickson fund manager at glg. touched on the persimmon sector. now with the bank of england a
lot of concern around the sector. >> used to cover up many frailties. the banking system really struggles to make a lot of money rates to zero. view on rates is low and going lower. i think from that perspective does seem from the big retail deposit banks, duds seem the earnings picture quite tricky. got a lot of information and new share prices. new sector, people are cautious about it. they were flying high two years ago trading above book value. they got below book value and we think these businesses have the wider profit margins. with the rates going lower and lower, is the fear of that portion of the sector was bad debt. i don't think we'll get a bad debt cycle. >> the balance sheet to back them up either in terms of the challenger banks. i spoke to the cfo about this
and for him that's the real concern here. they have the cushion. >> i completely agree. with regards to the longevity business model look to other banks. the key thing main high street banks need the rates. biggest asset is deposit base. try to make money and you cannot do it. from our perspective, we want the banks in those areas that are lending and maybe the fears are about asset quality. when rates go down, asset quality improves. we want to buy into that fear of asset quality concerns and hopefully that will come out in positive share performance. >> if we look at the japanese situation and backup in yields. you can argue the fiscal stimulus is announced. what happens if we get a chunky fiscal package from the uk government. do we see a rerising yield in the back of the uk curve. >> japan is less negative. is it back up or back down?
i completely agree with you. what we can look at a curious curve bottom left top right we know the short end is going to be anchored to zero. a stimulus comes through follows we should get some sorts of yield to work into. we think an easy way would be life insurance. you can view them as one big pension deficit. you know liabilities are coming down in real term. that's an interesting way to play it. the banks won't get drawn up into it. it's our feeling if the short end is zero, you'll be better rewarded in life insurance. >> we are waiting for it to take effect, what do you think the impact will be. is there an investment opportunity given we seen moves on just the announcement. >> the ten-year gilt yield, the view is the reaction in europe where draghi is buying u.s.
debt, uk debt. very bizarre. we will look from this package in time and go that was absolutely extraordinary. while it exists, we have to make deal with it. as i say, we feel with the world moving from monetary to fiscal, you can be a little more confidence the long end tilts up and that plays to life insurance and companies with pension deficits as well. >> were you surprised that mark carney mutual fund with so much force, so much action before the auto statement, budget the fiscal budget could kick in. >> probably dammed if he did, dammed if he didn't. if if economy is better, he wants to be able to take credit for it. he definitely wants to be preemptive and therefore take some credit if we do get through this with a growth rate next year. he can say that was all my doing and all my standings pre-brexit were merely cautionary. >> wrap this up for us now,
where do you think investors should be focusinfocusing, giver top trades today. >> i believe there's way too much concern about the kmesic economy. i would go for it will most beaten up areas usually goes hand in hand with the best performance. i would look at house builders. i would look at some of our domestic banks as well. lurnsst life insurance, if you put a basket in those shares. aviva, looking at ps of 7 and 8. yields of over five. i think that would be a reasonable place to start for the next 12 months. if you are kind enough to get me back in 12 months time, i'm more than happy to hold those. >> how about we get you back before. we're going to take a quick break. check out world markets live. our blog that runs throughout the trading day. stay with us, we're back in two.
welcome back to "street signs." i'm julia chattily. >> and i'm nancy hungerford. these are your headlines. europe market higher. rebound to levels not seen since last year's november terror attacks in paris. shares in renault skid to the bottom of the stock 600 as the media report says a french emissions probe left out crucial details. oil in retreat. supply side concerns drive crude prices down from two-month highs as goldman sacks warns the recent recovery is fragile and not driven by fundamentals. and a u.s. judge orders the expedited release of another 15,000 of hillary clinton's
e-mails, which were never turned over to the government. >> welcome back to "street signs." if you're just joining us, good morning. i said earlier in the show, you hexed us saying it was the sum of all markets. we had the second lowest volume day yesterday than we've had all year. we saw a mixed cloud sideways session of relatively little change. the focus yesterday, oil, wti losing 3% and that took energy sectors down. the bio techs were also a big focus. outperforming based on the pfizer deal. showing you the u.s. futures on the board. tilted to the topside. following what we're seeing in the european session this morning. as you can see, .50 higher for the ftse 100.
the autos once again in focus. the cac making gains. to have a quick chance to give you a look at the sock torres of what is driving it. we have the oil and gas sector topped to the side too. basic resources seeing the bounce. dollar weakness story, as much anything else. >> thanks for that, julia. ewant to bring you a check on volkswagen shares. extended early gains here on a report coming from a german newspaper that volkswagon and the supplier have reached an agreement in the contract dispute. we've been watching talks with suppliers over the last few days. heard that vox walkilkswagen pl have production concerns. auto maker reaching an agreement
in the dispute. for now getting the report from a german newspaper. we will bring you any confirmation updates as they come. >> any idea how much that is going to cost them. >> been various estimates. again that summer tends to be a quiet period for production of itself. also interesting city with a note out this morning saying they could survive this without a meaningful impact. they have kept their buy rating. >> meanwhile a recent slide in dividend yielding stocks could be a warning of broader downturn to come. that is according to barons. as a sign that will markets may have piqued. joining us now is eric. very interesting report coming out of baron really showing what
a lot of people were predicting, perhaps utility, consumer staples, some of the bright spots for the first part of the year. finally this has piqued. is that your view? >> yes, absolutely. all you have to do is look at the earnings growth of those businesses and it's just not there to support the dividends, yell yield and this thirst, this unquenchable thirst for yield is probably a misguided approach. what people should be focused on are the dividend growth companies and more importantly the companies that can grow dividends in future. not necessarily the company who is have the highest yield. i think that's a fairly troublesome area, especially coming off a 2014 where those were the strongest sectors only to be the worst performing sector in 2015 and now again here we are in 2016. seeing the same thing repeat. >> some of those names because of all of a sudden we're seeing a reverse for utilities, for
consumer stap lts. where should investors be moving then? >> it's just if you look through the businesses that are in the s&p 500, for example, or any of the major embassies. what you have to look for are the healthiest businesses. high quality companies. we define that as companies that grow dividends over time. not necessarily the highest yield. a strong yield, but can grow the dividend over time. the management team philosophy on where they see the business going. so if you think about things like nike, starbucks, some of the businesses that maybe are established businesses, but they've recently started to pay a dividend or in the case of nike that have paid a dividend for years, but have always maintained a stability of that dividend, and, of course, followed the earnings growth right along with it. >> eric, if we look at the current payout ratios we're
seeing relative to historic collaboratives for the large caps in particular, where are we at there? i wonder if we should be looking at sectors like tech. they have a lot of cash on the balance sheet. looks like the payout ratio is very low compared to the average. >> yes, that's what you have to really associate with is the companies that can grow their dividends right, so tech would be a perfect example of that. tech has a one of the lowest payout ratios of the entire s&p sector. if you think about tech of the '90s had an entire sector just coming of age. trying to figure itself out. not really in the stage where they could pay a dividend. now we have companies like microsoft, intel, some of these major businesses that have a significant amount of cash on the balance sheet. apple is a great example of that. they can continue to pay the cash back to the shareholders, but also to increase it over time. one of the things, speaking of
payout ratios. we found earnings can be so volatile that you can't really define it as an earnings or dividend payout ratio. you should look at the free cash flow to dividend ratio. that's a much more meaningful figure of really health factor and whether or not the business can sustain the dividend growth. >> that's a great point. if we look at what we saw from the dividends though in the second quarter, i think maybe the slowest growth we've seen since 2013. i guess as you point out, that's an actual follow through from what we're seeing in terms of profit expansion and a stronger dollar. i wonder whether this is bringing light into more sustainable levels at this stage. >> yes. if you look back a significant period of time, going back to 1973, we've only seen three negative years of dividend growth in the s&p 500. on average it's been around 6.5%. for the last five years, as you
point out, the dividend growth has been very strong as we came out of the depth of the recession. double digits for those five years. now we'll be on a more level playing field we'll see dividend growth in the 5 to 6% range. gw again it's a function of earnings. if you expect to see some kind of economic expansion, you should expect to see some kind of earnings expansion. right now dividends are up around 3% for the year. 5.5% year over year. again, we think they'll probably end the year around 6, 6.5% this year. >> eric, great to chat with you. thank you so much for your wisdom. i shouldn't be surprised by that, but that is an interesting fact. s&p 500 dividends have only been negative three times in the past 45 years. >> meanwhile, taking another look at fund flows.
nearly $1 trillion have flowed into index tracking fund and etf since 2009. this comes as approximately $6 billion has activelily hedged funds in the period. >> investors trying to beat the stock market. long running rush of money into index fund has accelerated this year. simply seek to match the overall market performance. more than $900 billion was floed into index funds since 2009. with $160 billion entering in the first half of 2016 alone. on the losing end, activelily managing stock funds. manager tries to pick funds to out performance an index. now, the virtues of index fund are well-known. deliver prod market exposure. their appeal has groan in part
as investors focus more on how hard it is to find active managers to outpace the market all the time. oskt, indexing becomes fashionable after a bull market has been rolling along for a while. as the current one has. often piqued just add stock pickers amount a comeback. some market analysts suggest we might be nearing such a point right now. know the money is going to funds that don't research companies. so does this mean more opportunity for active manager to find those attractive stocks. perhaps. in the past few months the average stock in the s&p 500 has been outperforming the index. that's a hint the stock pickers are having it a bit easy. active fund managers start with a handicap of higher fees. stock pickers will have to go on a convincing winning streak against the market if they hope to turn the tied against those efficient mechanical index funds.
mike san toely, cnbc, business news. a u.s. judge has ordered is the state department to review hillary clinton's e-mails and attachments for possible release. the fbi uncovered the documents while it investigated her use of a private e-mail server during her time of secretary of state. a hearing of when to release the e-mails has been scheduled for september 23 ahead of the u.s. election in early november. this as donald trump cancels a speak of immigration. speculation the republican candidate is walking back his tough stance on illegal immigration. nbc edward lawrence joins us now. i get to ask the same question again. is that the sound of a mexican wall crumbling we hear? >> reporter: actually t wall is the only thing that is not going to change in thiz plan. he says his plan may change, but the wall will remain and be
built. he's walking back the possibility of departing all 11 million illegal immigrants. at the same time he's going to separate into two categories. the bad ones will be deported immediately. everyone else will have to go through existing immigration laws in order to get into the country. you mentioned hillary clinton taking the day off from campaigning yesterday, but went on jimmy kim el live for some laughs. her campaign isn't laughing. another e-mail controversy. mentioned the judge and 15,000 e-mails. those were released by a watchdog group, judicial watch. the e-mails were deleted off her server, but fbi was able to get e-mails and retrieve them. show a pattern of requests from big donors to the clinton foundation going directly to chief of staff when she was secretary of the state. not all of the donors got what they requested, but they all got access. >> i just want the get your thoughts on some lines we heard from donald trump's new campaign
manager kelly ann conway speaking to cnbc yesterday. admitting trump had a rough few weeks, but pointing out hillary clinton's absence on the campaign trail. >> exactly. trump has turned a corner thanks to her. a lot of experts say in his speeches a softer tone and not quite attacking as much as he has in the primary. and a lot of folks attribute that to hero. he has been reading off a teleprompter as he goes to the last couple of days, but hillary clinton has been laying low. in fact it's been something like eight weeks since she's done a one-on-one interview with the media here. she is up in the most of the polls that are out. so as far as if front-runner, he campaign says if it isn't broke, don't fix it. they're going to continue doing what they're doing until the polls show movement. >> edward, great to chat with you. edward lawrence from nbc there. of course he's building the wall. he's a real estate baron.
what was i thinking? >> that shift. interesting to see when we get to crunch time and closer to the first debate. >> she said too, watch the polls for the next two weeks. watch this space. meanwhile, kate kelly has been hooking at the level of denations from the hedge fund community skblr hillary clinton has been hauling in dollars from hedge fund managers, more than 25 million for the first half of the year, to donald trump's 2,000. a speed of fundraisers marked by appearances from the likes of john paulson and carl icahn were chosed to change asupposed to cl that. showed that trump took in just over $2 million for the month so far. the vast majority of it from renaissance technology robert
mercer, but some say the big names that are acting as trump's economic advisers, including icahn and john paulson were absent for the month of icahn has given just $50,000 and paulson has given $250,000. both were made in jeb buune and any case didn't move the needle far towards hillary clinton's tens of millions of hedge fund donations. >> head to cnbc.com why city is warning the u.s. election outcome could be worse than any black swan event. let's move on. sarkozy announces bid for french presidency. i felt that i have the force to wage this battle during such a
terr tormented time in history. expected to run a campaign on hardline ideas to combat terrorism. he must first win primaries in november from a number of rivals in right center party. still to come on "street signs," super charging your life. could a breakthrough lithium battery push your electric car for longer? stay tuned to find out.
get an agreement, thaim go direct to the shareholders. ceo saying he's absolutely determined to complete the transaction. apparently that direct from the ceo. if they can't agree on price, watch this space. >> not always to the shareholders liking as well. we heard from henderson saying this is a immediate destruction. >> med vation. pfizer paying 81.51 in cash which amounts to a total of $14 billion. that represent as 21% premium to med vation close on friday. significant premium that sanofi offered. now pfizer won the bidding war
which included not just sanofi, but gilead and maerk. so what does pfizer get for $14 billion. a suit of cancer drugs. approved drug is called standy and treats prostate cancer pfizer will also get two experimental cancer drugs. one in advanced clinical trials for breast cancer. the med vacation closed up almost 20% today. while pfizer was down slightly. some question the veracity plies of the deal. analysts said it made sense for pfizer which is increasing focus on cancer. expect the drug giant to do more similar deals. speculation helped the space broadly with the ibb. the etf that tracks buy tech up
2%. >> meanwhile shares fell in iowa after iowa senator officially requested the drug manufacturer to explain why the company has increased the price of epi pen. it will price has increased by nearly 400%. last week disgraced ceo told nbc news in a phone interview, these guys are really vultures. what drive this is company's moral compass? >> let's bring you back to another check on the commodities trade today. brent wti continue to be big drivers on the equities trading session. otherwise quiet trading session. brent crude lower. we did get a new note from gold man sax calling any recovery fragile. it will analysts say that as i
mentioned it will be fragile. warning the disruptions in niger ra, iraq, and libya are easing. they added the recent move higher was not driven by market fundamentals, but expectations of a potential output freeze and the weakening dollar. goldman has kept forecast of 45 to $50 a barrel for brent. >> startup called energy systems is close to a new lithium battery double the energy of current lithium ion batteries. the breakthrough reduces the tendency of such batteries to burst into flames is down to a thin lithium metal foil. the company expects to sell the batteries for smartphones early next year and for electric vehicles in 2018. >> mik peter. great to have you on the show.
>> the use is far more broad. can you give us a sense of what it's used for and what your priceout look is too. >> just demand originally driven by glass and ceramics. that's where it was in 50s and '60s. moving to portful electronics in the '90s. once your start moving to vehicles which is now where the industry is heading, many are talking multiples of kilos. full lielectric up to 50 kilos. demand is growing significantly and pricing has reacted to that. most of the lithium market is sold on the spot. so on the term contract. those are contracts that are set forth three or four years. price is probably growing 4-5% per year. spot market year. big movement. you saw it go from 10,000 to
20,$000. i think it piqued and starting to see more series command in term contracts. >> you think pricing has piqued too. >> i think spot pricing has piqued. inning term pricing is continuing to grow. >> why has spot pricing piqued? if i look at it, you've got four big players in the market. 90% of the volume basically. >> and then you've got a whole host of other guys, usa trailia coming in, china coming in. bolivia supplying china as well. >> is the market saturated? >> the market is growing. the demand side is growing 10% year on year. dhand side growing on 20,000 tons. not enough new products coming into production to meet the demand. as you see the slow catchup for new products coming in, you see the spike in pricing. you have new projects coming in argentina, you'll see supply catching up with demand.
so pricing will start to level off and move up slowly rather than peak. >> part of the supply equation goes into the difficulties of extracting lithium. you're company is using a new method for that in mexico. somehow that process going and how confidence are you that we will see positive in the future. >> working for the last five years. built a pilot plant in mexico. been running that for the last 2.5 years. last six months made sample ls. supplying it now to users. demonstrating by production we can make lithium out of a deposit in mexico. >> going back to what julia was touching on, the demand for electric vehicles specially. here in europe we have another story surrounding renault concerns over emissions. when you talk about emissions in the wake of the volkswagen diesel scandal, is there a silver lining that people will get behind a real recharge in
vehicle production demand support from governments. >> you're seeing it all over year. by 2020 all electric. german saying 2050 wants to have zero internal combustion engines china is saying they want 10% of cars to be electric or battery operated by 2020. you're seeing a massive drive across the world. >> peter, great to have you on the show. ceo. we'll get you barrack ck on to about progress as well. let's take a look at top stories. 000,000 data earlier. france posting fastest sector growth in ten months. flash pmi rose in august. beating expectations. a contrast in german, flash pmi edging down to 54.4. below expectations is growth in certifies and manufacturing. both lost a bit of steam. >> just another check on renault shares because the investigation has failed to explain why the
diesel vehicles left off fewer harmful emissions in a test that be they did in every day conditions. the car maker moving lower in france by 1.2%. we can give you a quick check on vox wagon because we heard from v volkswagon. have not disclosed the terms of the agreement. preparing to gradually resume production after the deal. that's it for the show. i'm nancy hungerford. >> i'm julia chattily. "world wide exchange" in just a few moments. don't move a muscle.
good morning. a fragile recovery. why golden sax says crude climb isn't all it's cracked up to be. and today's test for the housing market front and center as investors focus on every available economic indicator. and late night laughs, hillary clinton takes health rumors on headfirst. it's tuesday, august 23, 2016 and "world wide exchange" begins right now. ♪ ♪ >> good morning and welcome to "world wide exchange" on cnbc. i'm sara eisen along with our friend dom choo in for wilfred os