tv Street Signs CNBC September 13, 2016 4:00am-5:01am EDT
welcome to "street signs". i'm louisa bojesen. >> i'm carolin roth. >> it's not over until the fed lady sings. helping u.s. stock markets posting their best session in two months but europe has a more muted open. >> to the extent that the effect on inflation of further gradual tightening in labor market conditions are like try to be moderate and gradual the case to tighten policy pre-elmively is less compelling.
>> past the buy sell date. pricing pressures despite posting solid sales. >> ian is reenergized. shares rising after yesterday's sharp losses defying the spin off. >> donald trump takes aim at fed chair janet yellen saying continued low rates are politically motivated. >> she's keeping them artificially low to get obama retired. what's going to happen afterwards? it's a serious problem. i think it's very political. i think she's very political. to a certain extent i think she should be ashamed of herself. all right. we'll talk some more about some of those headlines during the show. the global oil demand growth, though, is slowing at a faster pace than initially predicted according to the international
energy agency oil market report which has just been released. they have now downgraded the four year forecast saying oil demand growth in 2016 will struggle to get above 1.3 barrels per day and expect supply to continue to out pace demand at least through the first half of next year. matthew parry is a senior analysis at the ia and joins us on the phone from paris. talks through the changes we're seeing given that this downgrade to the forecast of oil demand growth is slightly unexpected. it seems that 2016 we'll see more of a struggle than what had previously been anticipated for the second half of the year? >> yes. we have slowing in 2016 but the three main pillars that have been supporting demand growth through 2015 and first half of
2016 come off, particularly india, china and europe. so we're seeing industrial slow down in china, pull demand growth in china to almost nothing. india which had strong growth at the beginning of the year that moderates. it was against our forecast but extremities of which it slowed has shocked. so .1 million barrels off our growth expectation for 2016. strong gains in opec supply and it's a case of the low price that is not quite big enough to adjust the fundamentals right now. >> and despite that and despite demand growth slowing you're still seeing as you put it middle east producers opening the taps in full and looking at the countries you mentioned seems like everybody is at the moment. >> yes. we've seen record production in q 8, united arab emirates,
record production in saudi arabia. saudi arabia has taken u.s. the world's largest crude oil producer. opec has gone up to high levels. non-opec specifically the u.s. is down but not enough to balance the whole increase in global supply. it's a case of taking away from one and giving to another. >> do you agree with the thinking if producers were to freeze you want it wouldn't make a difference because they are producing at record levels anyway? >> yes. we're not forecasting any super cut coming in the next couple of months. it looks like opec strategy has been at least partially successful. it's a case right now from our point of view we adjusted demand down more. at this price level it's not sufficient to stimulate strong demand growth. >> you say the opec strategy has
been partially effective. on the other hand i would argue every time the price pops up we see u.s. producers coming back online. is it that successful? >> everybody has been surprised at what price many producers, non-opec producers particularly in the u.s. could still produce. when the price initially fell down rapidly and u.s. price came off sharply it looked like that was the choke off point. but they keep getting more cost effective and lowering their marginal cost of production. constantly moving curve. as the price is inching up we've seen numbers inching up recently. looks at this price many small producers can cover their variable costs. >> thank you for your insight this morning. matthew parry senior analyst at
iea. i missed a lot of hoopla last week. >> a lot going on. >> i was in a place where it was a strict no mobile use. i snuck it out once. >> ecb was disappointed. >> i did see it. our european equity markets this morning flattish beyond the open, a little bit lacklusterness being seen given that you had these massive moves stateside especially on friday that big drop. yesterday markets moving higher, evening it out a little bit. markets moving more in the past two days stateside tan in the 14 tase prior to that. not feeding through here and in europe. when it comes to our main equity markets similar story being reflected there,ing slightly flat start to the morning. the ftse just a couple of points later.
the sector rounding it off, health care, financial services holding on to gains while basic resources in oil and gas selling down a touch. >> let's get back to the reason. fed reserve governor has struck a dovish tone warning the fed shouldn't raise rates too fast. it's one of the last officials to speak before the central bank's meeting next week. said the case to tighten is less compelling citing below target inflation and overseas risks. >> the market potentially still has untapped slack because of the international environment that does have some risks and clearly inflationary pressures and demand. all those things we need be asymmetric in my policy approach. >> the fed members, those are divide as the atlta
president dennis lockhart has a more hawkish note. he says whether the debate on hike rate deserves serious discussion. he's confident unemployment will fall and inflation is heading in the right direction. he later then commented there was urgency to act at any one meeting in particular. now in an exclusive interview with cnbc, it was said the u.s. needs fiscal policy. >> we're seeing trends all around the world, low interest rates, sluggish recovery. i'm asking like many people are why is that? the rule of the thumb deeper the recession strongest recovery. yet we've had the weakest
recovery since the great depression. it's things like demographics, slowing growth of the workforce. the ageing of our society. lackluster technological innovation and psychological scarring coming out of the crisis. >> meanwhile barclay ceo said tighter central bank policy would damage stock markets suggesting rates should move higher. in an exclusive interview he also said the fed pursued the right approach. >> the fed has shown the right level of caution. they are data dependent. i think what they see in the labor markets and underlying economy, that's what's driving this move up in interest rates. so the stock market should respond to underlying economic activity. if there's a correlation between where interest rates go, economic growth, the labor market that should translate also into a pretty good
environment for corporations. i'm not quite sure i would make that connection that rise in interest rates would hurt the equity markets. i think it could be the opposite. >> goldman sachs has lowered the odds it places on a september rate hike to 25 from 40%. they said the absence of a clear signal that the fomc will cut in september is significant. if they have an intention to do that they would have given the market more of a nudge and the fed is more difficult to read. they don't say there's a paradigm shift but more difficult to under their actual framework. they now see the chances of a hike in december, 40% from the previous 30%. >> completely shifted from where we came back. we were anticipating a big chance of a september hike. now it's off the table. >> goldman is one of the investment banks that predicted four hikes this year. many other banks too.
the fed' thinking has changed. inflation hasn't picked up. >> for this year. they had two at the end of last year. they are looking for six rate hikes by i want to say nine months ago. >> seems like a long time ago. let's get james butterfield in. does it matter to you when the fed hikes and how many times it hikes? >> it does. at the moment we have asset classes that are very extended to exceptional market policies. like in the december rate hike it ended up in the first part of the year creating exceptional market volatility. so the longer the fed leaves it the greater the market asset price volatility particularly in bonds and equities. we believe september probably is unlikely, but there are three really fed members you really have to look out for. janet yellen is one. dudley and then fisher who is
the intellectual powerhouse he's one that other fed members follows. he becomes more hawkish. that's when the markets really start to listen. >> so many guests on this show tell us there won't be a temper tantrum or a tightening tantrum this time around don't worry about the emerging market. it seems based on comments on friday there might be a tantrum lurking around the corner. we saw volatility come back. >> that's when you tend to get market volatility although this time around with the fed rate hike, i think the emerging market balance sheets are much better prepared to weather the storm than say a stronger dollar or just weaker emerging market. >> you still favor european equities? >> yes, we do. we've had that view for quite
some time now. the u.s. has enjoyed seven disqualify quarters of declining revenues. one point is rising wage cost which is something that the fed is looking at quite closely and one of theee signals for potential for raising rates. so the weak earnings season and europe it's been flat. and there are also some key differences. cyclically adjusted. europe looks more attractive and trades at a more attractive yield. we believe there will be political volatility, it's a much more attractive option. >> we were just talking about this slump in demand growth. you think that we're looking at a bottom of $40 per barrel in oil. why are you so confident at this
$40 barrel. >> $1 trillion of cap ex over the last year. that's eating into supply. the north sea, for instance supply has fallen 36 cents since 2014 and we expect over the next year 140 fills to be shut down. that's where we're seeing supply side destruction. over the next two or three years to 2020 all new supply coming on which is 20 million barrels per day has a much higher production of cost around $60 a barrel. that will create a flaw of around $40 a barrel. the current margin cost is say round $40 as well. that fundamental fact suggests that oil should at least stabilize when it falls. we expect it will go up to around $55 a barrel. that's roughly their marginal
cost. it was interesting when we saw the oil price rise to $52 a barrel we saw an uptick. that suggests it's becoming profitable again for them to come back online. so maybe they are the new spring producers. >> that's what the iea was pointing out a lot more adept than you would have thought in the first place. you were overing weight. europe you like some commodities. do you want to add risk overall to your portfolio now these days that volatility is back. >> our key goal has been industrial metals. the problem with gold, we continue to like gold but if you look at the future position, it's exceptionally high, decade high, same as silver. these safe-haven commodities, everybody is bullish. we're bullish for now. industrial metals, for instance we haven't seen that same
bullishness and met swral als al attractive. we're starting to see supply side destruction. so industrial and industrial pressures metals are likely to rise. >> james, thank you very much. james butterfield head of research at etf securities. you're way ahead. already tweeting some comments out. find those comments on twitter. >> of course e-mail the show, email@example.com. still coming up on the show after we take a quick break investors throwing ocado due to being under pressure. that's next. send your tweets in. hought i was crazy to open a hotel here.
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produce. welcome back, everybody. you're still watching "street signs". china has released a whole swath of economic data for the month of august. the country's fixed asset industrial output numbers came out fraction swrally ahead of economists expectations. and given what we're hearing and speculating about the bank of japan could be looking at some changes we may not be expecting in terms of pushing up a yield curve? >> i think so.
for the record you're a word smith both eloquent and erudite. consumer led growth is gaining some traction. the august number for retail sales at 10.6% was based on 10.3 is emblematic of that transition. the overall economy is the problem there andp higher. that's a challenge for the authorities. it's a transition that does require a more policy support at this junk you're the. the markets, chinese equities typically agnos the ic about the rates. let's get on to your pet subject and that's japan monetary policy betting close to that boj meeting highly-anticipated towards the end of this month. there are a couple of scenarios
here and there's very interesting conversation about the prospect of rates going deep near to negative territory and coupled with the idea of tapering of jdb purchases. the ultimate aim is to steep the yield curve and help benefit and bolster the bank. sounds radical but does have some basis in it. it's one possible scenario whether the market sees that as constructive and positive and whether that will help the japanese yen is an open ended question. overall we did see some risk on movement in the north asian markets after those dovish commentaries from brainard. southeast asia was on the ropes today. singapore up by 1.9%. that's where we stand. back to you. >> now mega relief rally for eon shares. second day of trade.
it spun off from it's parent e.on. nice bounce back. meantime air liquide has announced a raise to fund air gas. it will make it the world's biggest industrial gas company. they are down 8% this year. now online shopping in food, ocado is the biggest loser after warning of sustained and continued margin pressure. this caution coming despite a 15% rise of gross sales in the third quarter boosted by strong growth. shares is off more than 13%. good morning, stewart. average weekly orders are up.
they see margin pressure. they've been as strong as they have been in five years or so. 13% or so in share prices. is that an over reaction to what we're hearing? >> it's a twitchy stock. big short position out there and it definitely has lovers and haters of the stock. i think it's an over reaction. i still like it. i think it's a winner in online grocery. people were concerned about the margin discussion they had. >> why is it an online winner. you shop via amazon fresh, full disclosure. many other out there.esthat the possibilities? >> besides amazon and i believe just switch from ocado -- >> the delivery time is much better with amazon fresh.
the quality is equally good. i'm not sure about the pricing. i think that's pretty -- >> one of the things ocado said they haven't seen any impact from amazon. part of that is you're getting a lot of slots available because not a lot of people are using it. as it ramps up that might change. ocado is the leader in its cfc methodology. that's the key. not using store picking. sansbury use pickers in the store. that's not a viable economic model. ocado is a model which you're removing costs. even though they are picking your groceries and delivering them to you you don't have the massive storage issues. >> now that they are seeing
amazon fresh coming in and this competitive pressure in the markets do you think they are going to address this or going to wait it out and see what happens. is there anything they can do? >> i don't think they are particularly nervous. i think they would prefer amazon fresh to be a better competitor globally. one of the reasons they haven't been able to sell their technology to foirother firms globally there's not a reason for others to buy it. you need amazon to take share away from kroger or woolworth or whoever in order to get information buy ocado technology. until that happens people are happy to sit on their hands. i don't think they will address amazon fresh in particular. it's an industry issue. we're seeing that with tesco, sanbury. they are to concussion on that gross margin and not really talking about the, the net margin which is where they get
their leverage from going forward. so this is a goss margin question affecting all players in the industry. >> time and time again we see speculation somebody like amazon can buy ocado. is that likely? >> i did write a piece not that long ago walmart or amazon should definitely buy ocado. >> should definitely buy. >> yes. there's a lot of reasons why that's true. walmart ended up buying jet.com. i think that's off the table right now. for amazon they are looking at a very different technology. i went to an amazon warehouse last week. i looked at the technology what they use and it is completely unsuitable for food. for them to do what they are doing requires a vast amount of labor and money. what ocado provides is technology that amazon doesn't have. >> ocado looks at trunk online grocery store divisions of other retailers as well. >> what they are trying to do is
sell their technology as a turn key approach so other people can use their software and hardware. >> you still have a rating on the stock? >> i do. >> thank you very much. we got to take a quick break head to our world markets wide. lots of good stuff on there. find caroline and myself @twitter on cnbc. we'll see you in a second. ♪ you're gonna hear what i say... ♪ i love taking stuff apart and building new things out of it. anne: pal's my most advanced annedroid. [gasps] this is awesome. ♪ oh anne: you haven't seen anything yet. announcer: give your cardboard box another life.
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conditions is likely to be moderate and gradual, the case to tighten policy preelmively is less compelling. >> crude realities. wti falls a dollar on the day after it was downgrade the four year forecast citing weak demands. >> italy's finance master said he will revise down growth forecasts as the country grapples with much need structural reforms. >> donald trump taking aim at fed chair janet yellen saying continued low rates are politically motivated. >> she's keeping them artificially low to get obama retired. what's going to happen? it's a very serious problem. it's very political. i think she's very political and to a certain extent she should be ashamed of herself. hi, everybody. welcome back. uk inflation just hitting the wires, unexpectedly holding steady. we're seeing producer prices,
7.6% year-on-year. that is the biggest annual rise that we've seen for a very long time. the poll was for 8.1% year-on-year. the cip 0.3%. the forecast was for 0.4% so that's slightly light by a tad. year-on-year 0.6%. forecast was 0.7%. august cpi holding pretty steady is the takeaway. producer output. >> sterling against the u.s. dollar dipping to 132.97. at 1.3301.
>> senior uk economist joins us. what do you make of what the headline figures are saying, at least? >> i don't think much of the fact it came in lower than expectations. doesn't change the story over the next few months. there's a 15% entry fall since last november, 10% since brexit. that will pass on to higher import prices and then that will thread an increase in cpi over the coming months. i suspect the next few months we'll see sharper rises in inflation than we saw today. >> you stimulus have a 2% target of inflation by the end of the year. 2% target. you're also saying it's unlikely that inflation will play a big role for what the bank of england decides to do it. could the bank of england decide to curb rate or put more stimulus into the system? >> i would pay no attention to inflation in thinking about the bank over the next two years.
any inflation above the 2% target, their main focus is supporting the domestic economy through brexit shock i think. if the economy is weak we'll get more stimulus. economy is strong we won't get more stimulus but inflation won't play a part in those dlebations. >> it reduces real income growth for consumers. in a way they can't go through. >> that's one of the risks but you have two options. you have weaker gdp growth plus higher inflation which hits consumers if you don't do anything to offset that with lower interest rates. there's always costs and benefits. the risks to not cut interest rates if the economy slows are much greater than say the impact of higher inflation on wage growth. >> once we have been getting this better data on the macro economic side we'll see sterling strengthening meaning inflation
pushed through won't be as extreme. maybe inflation is never going to get to that 2% target. >> we'll get to 2% around the turn of the year. fall in sterling since last november and since brexit is enough to push prices to rise to 2%. certainly sterling will increase as economic growth improves so next year we may find softer inflation. >> also inflation rising as well before you see a beginning hike in rates stateside. there's an argument that goes along the lines once rates start changing to the upside that the u.s. will be better off because of the structure of their mortgage market you have these fixed 30 year mortgages. here we don't. in actuality that's a discussion we should be having before the back bone of the economy unravels via the housing market. >> that's an interesting take. i would say central banks don't
think that far ahead. the economy is doing better than most people expected. it suits my consensus forecast for next year. i expect 1.3% growth. first and foremost let's consider trend rate in the uk 2%. broad market consensus has growth significantly below 2% is wanting for further cuts in interest rates before the end of the year. >> what do you expect to hear this week? >> he'll be muted versus august. no change in forward guidance. the next rate cut is a binary issue. if the economy produces, most expect a rate cut. >> thank you very much. senior uk economist at barron berg. julian king the diplomat
nominated to become the uk's last commissioner to the eu has a confirmation hearing at the parliament that we'll serve only the general european interest if appointed. he emphasized the uk would be a robust partner for the eu even following it's withdrawal from the bloc. he's in consideration for the new post of commissioner following the resignation of the brexit vote. barclay ceo told cnbc that barclay's preparations for britain's withdrawal were in hand. >> brexit is a reality and we'll embrace that reality. we had an kpuf meeting for four and a half hours thinking what our response would be. all right. let's take a quick look at these equity markets. we saw that big rally in the u.s. yesterday. the dow at 1.3%. nasdaq pushing ahead by 1.7%.
that was the rebound from the sell off on friday. some of that has been filtering through to europe but not so much. the dax is the only index still benefing from that bullishness. we're up by a smidgen. yesterday we did drop to two week lows, stock 600 off bio.9%. >> we saw a little bit of movement in the pound on the back of the inflation data. not much. the pound right now 1.33 against the dollar. euro/dollar 1.34. and u.s. futures as well we're looking for the open to be lower once again, to be lower. >> now donald trump has changed course on low interest rates after telling cnbc in may he was quote for low interest rates. yesterday the republican presidential nominee shifted gears telling "squawk box" and
that janet yellen is only keeping interest rates low to help president obama. >> saying it's zero because she's obviously political and doing what obama wants her to do and i know that's not supposed to be the way it is but that's why it's low because as soon as they go up your stock market will go way down most likely or possibly and don't forget i called brexit, i did a lot of calling. what they are doing is -- i believe it's a false market. >> now trump also lambasted hillary clinton for calling hoof of his supporters a basket of deplorables. trump said clinton has been running a hate-filled and negative campaign with no policy, no solutions, and no new idea. nbc news reports an altercation breaking out in the stands at the rally when a man violently confronted a group of protesters. meanwhile hillary clinton said she didn't think pneumonia
would be a big deal. in an interview with krn clinton said she wanted to get back on the campaign trail as quickly as possible. a clinton spokesman also acknowledged to msnbc that the campaign could have done better to disclosing the initial diagnosis. let's get out to tracie potts who joins us from washington. looking at the time. 45% of voters believe clinton's illness or explanation, 46% do not believe the explanation. the country is very much split on this big health issue. >> reporter: exactly. and it remains to be seen how long this will be an issue. obviously if she comes out for the debate and has a strong debate whether she wins or not, this issue is probably going to fade to some degree. clinton's health has been an issue before this, it's going to continue to be an issue. but what she's doing, she's trying to stay out there even though she's literally behind closed doors for a few days under doctors orders.
she has president obama going out to philadelphia on her behalf today. she's got former president bill clinton taking her place at these events and fundraisers out west for a couple of days. she's also working the phones and working social media. she talked about she posted on twitter last night tweeting that she was feeling fine, thanking people for their support and saying she can't wait to get back out there she's anxious to get back out there. she did that interview you referenced with cnn where she said she didn't think that would be a big deal. whether that's enough to satisfy half those voters who are not believing the explain swrags we'll have to wait and see. her explanation at this point yeah i got sick, the doctor said i was sick, i tried to power through it, i didn't think it was a big press release kind of thing to disclose but obviously when she was sicker than she thought or not responding as well and nearly collapsed it became a much bigger issue than
she thought. >> it's hard. this is a very long campaign that you guys run in the u.s. as opposed to when we see elections here. you're bound to get sick at some point. anyway putting that to one side, looking at the trump campaign at the moment i see trump indicating that america's leverage over china because it owns so much u.s. debt and you also have this latest trump luxury hotel opening what six blocks away from the white house, the cheapest room being $700 per night, something like that. >> reporter: not so much fanfare in the beginning. it's opening. but the big event for the opening of this will be next month. >> okay. tracy, thank you so much for that. tracie potts joining us from washington, d.c. u.s. treasury secretary jack lew says european commission's tax decision against apple shows the need for u.s. tax reform. in an official release lew said
there's widespread agreement that the tax code needs fixed. he added he hopes the eu's decision will help to spur action from congress at the start of the new presidential administration. 2016 has been notable for its lack of high-profile tech ipos. how has the slow down in listings affected tech firms. >> reporter: this year's tech crunch brings together 500 start ups competing for investors attention at a time when it's increasingly tough for the little guys here to take their business to the next level. venture deal volume decline in the second quarter and though overall venture capital investment rose slightly the majority went to private giants such as uber and snapchat rather than newer players raising the bar for start ups. >> you need to have a business model that makes sense. in my opinion that's good. survival of the fittest. you pull out the ridiculous
companies that exist in the first place and we're all thinking from the beginning what's our business month pell. >> reporter: start ups, including air mule says it's getting harder to secure funding. >> we're finding its taking more meetings than a few years ago. >> reporter: another factor all the folks have been watching this has been a slow year for ipos. through august 1st slowest year since 2009. the ceo of shanghai based itwitter group says his company sees the advantages of staying private longer. >> there's an opportunity for a lot of these organizations to grow at a significantly fast pace by staying with private funding. so companies like ourselves what we can do is invest heavily on cutting-edge technology, solutions that really drive results. >> reporter: industry watchers say this ipo drought can't
continue as investors are looking to cash out. >> there's a lot of pressure not to go public why you see companies not going public. but i think that temperature is slowly changing. the investors are starting to say when do i get my money back. >> reporter: mostly early stage companies here are far from an ipo but eager to get on the radar of investors who come here to discover what could be the next generation of unicorns or companies worth more than a billion dollars. julie boorstin cnbc business news, san francisco. >> some biggest names in investing are set to take the stage. we'll bring you the highlights including insights from bridgewate bridgewater. we'll give you a quick preview right after this. comfort food, you've had a good long run.
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finally here it is some of the biggest names in investing are set to take the stage. ahead of the summit cnbc kay kelly takes a look at what made hedge funds gold this year as well as those that picked up the wooden spoon. >> some remarkable calls last year got the down side and upside. the best ones for starters, bill miller and founder of lmn talked up amazon.com. up more than 70% since the conference last july 15th. jamie dimon talked about the cancer treatment biotech that was acquired by pfizer. american reality was liked and changed its name and up 18%. and ethan allen is up 13%.
that stake was sold in the first quarter after losing a proxy battle in november of last year. some tough calls in there too. bill ackman liking fannie mae and freddie mac, still does. those names are way down since last july by teens and by 47% respectively. jeff smith made a case for macy's saying the realtor has huge value but should be split. those things haven't happened and the stock has fallen more than 46%. jamie dimon on pharma predicting consolidation in generics that didn't work out. they tried but mylan and others are still standalone companies and in the last year or so dimon sold out of those names late in the year and early this year in one case missing out on some of their down side but not all. back to you. >> now the african finance minister said the country's second quarter growth of 3.3% is not sustainable unless major changes are made.
he in assisted the economy isn't in recession. and that he can see quote small green shoots. we spoke to mr. gordon and asked him about the concerns among foreign investors about rumors that his government position could be under threat. >> what we're looking for is not individual so much as much as what drives institutions and in the case of investors whether they have the levels of certainty and confidence. that's possible for us not with standing all the political noise that happens in every country to reach that point where we can give that kind of confidence. >> now italy's economist said that his government's growth forecast will be revised down as the country contends with structural reforms. >> the italian economy is growing if you look at figures. of course not growing as fast as i would like to see. growth forecasts have been
revised down and will be revised down, the government is about to release and as a background to the budget framework which will be handed over to parliament. >> this seems to contrast to what was told to cnbc earlier this month that italy's growth forecast would not need revisions. take a listen. >> growth continues so it's not flat. indeed it's improving with respect to previous forecast. this is disappointing. unfortunately disappointing not just for italy but for eurozone and i would say for the global economy we're heading to the g-20 summit in a couple of days and this would be the main topic. which means that policy must do more and we must mobilize all the instruments we have at our disposal. >> let's remind you where we are in terms of european equity markets. we're pretty flat today. germany eking out a modest .1%.
basic resources really the big player, the cac 40 off bio.4%. the bone market, buyers are back after heavy loss in the last couple trading days. 0.01 and uk at 0.834. let's step away for a moment and talk about credit. that's what portfolio manager and european credit is here. the big question everyone is asking now that the ecb has been active in the equity market the boe is starting its buying do you think this is the start? >> when you look at european credit that part that's trading at negative views, yes, that definitely looks like it has got
some critique to it. peak in general no, i don't think so. when you look at that, we're sitting just at the start of in england and we have a good start of the ecb buying program, i think there's more ahead of us, there's more upside to the european market. >> in the uk specifically aren't people usually buying the rumor selling the fact, aren't we buying in anticipation that the boe will buy? >> yes and we saw that. the reaction instantly, certainly pushed the market in that direction. however, we've seen the ecb every week buying one to two billion. that over a long period of time it holds the market in a firm grip and that's why i still think the more yielding part of the market you can actually get a very steady income and steady yield out of it. >> we've seen these be super
active. we're running into trouble. there's a lot of investment banks who think by the end of this year that they will be running out of options what they are allowed to buy under these rules and they will have to beef up a lot of corporates in germany, for example and have to hear more about that. do you think the ecb is running out of option. is it too much too quickly? >> as we sit right now they are not running out of it. if you competent it's basically stipulation the extension beyond march 2017 then certainly looks ecb has to change the gains slightly. but currently in the corporate bond market there's liquidity to buy and you can see the amount of funds they are buying and broad range of bonds they are buying. >> i read an article how money is a hot potato and investing especially if you want to invest in cash is difficult. a couple of months low asset
managers would never have bought negative yield in bonds but now things are changing and now asset managers are looking twice at that as opposed to bark the ebc. do you think asset managers are heading in that direction? >> we're certainly keep seeing a case of field in the form of positive yields. no one can stay constant negative 50 basis points or so on the short end. you need to reach up and you can do it still in europe. 17% of the market is off the corporate bond market is trading in negative yields. you can still find a good path that provides you with a good positive and it's doing that active selection of the bonds not just buying the passive. >> you said 17%. >> 17. >> that's right. i'm not that surprised.
when you see the two year garment yield and two year spanish garment yield negative and you do your credit work, you got single rate of corporate bonds trading through those for good reason. >> looking for the yield in the european space you suggest 46% is what you're getting, 46%. that's pretty risky stuff. >> yeah. actually it's 4% to 6% you would get out of leasing in to that so when you look into the single b market in europe you can still find -- the companies will have sound structure and get these around 5% to 6% yield. when you go to the banking sector same yelled. >> do you think the ecb is distorting the credit market because the prices that we're
seeing now and the corresponding yields are not reflecting the fundamental health of the issuer? >> the market is trading very technical and many of the yields we're seeing are not fundamentally priced, they are typical priced yes. >> thank you so much for that. >> this according to the minister the ecb is set to discuss the struggling italian lender. the ecb had given preliminary
approval to the appointment of morelli head of italian unit of bank of america merrill lynch. >> the bank will also or has announced it will hold an extraordinary shareholders meeting on october 14th. after its cleared shareholders aren't in favor they have the right to withdraw their funds. that's it for today. >> great to have you back. u.s. futures pointing to triple-digit losses. that's set for today's show. we'll see you tomorrow, bye-bye. >> take care. bi.
good morning, breaking up international energy. crude prices under pressure. >> bank backlash, outrage growing against wells fargo. senate preparing a hearing on the firm's sales tactics. going the extra mile, new this morning, general motors announces its chevy volt can drive longer than its competitors on a single charge. it's tuesday, september 13, 2016. "worldwide exchange" begins right now. ♪ good morning and welcome to "w