tv Street Signs CNBC October 3, 2016 4:00am-5:01am EDT
here are september manufacturing data with a forecast of 52.6. it is a slight uptick from the office number which came in at 51.7. i just want to tell you about the regional pmi activity growing in september at the fastest rate since april. the italian september pmi also beating expectations in germany with a three-month high. and france is seeing a seven-month high. it seems all is well with the pmis today. >> i know. and it's a good level. it's over 52. we are nicely into expanded territory. >> pointing to gdp growth, not massive, but we'll take that. it's something. also on friday the inflation numbers are kicking up for the first time in many, many months. to 0.4%, that's the sort of uptick the city is looking for. i'm an optimist, can you tell? >> we take all the optimism we can. but remembering the guests who
said we are close to deflation, which we are. you talk about that last week, right? but it still doesn't feel like that. we're not like, oh, we are scared about it. we are not feeling that same sense of panic. >> except for all the deutsche bank news. >> except for that. speaking of which, people are taking a breather a bit today in germany or maybe wishing they could place their trades. but nevertheless, the german market is closed today. you have the ftse and cac trading higher today. less than a handful of markets trading in negative territory. these markets and the irish market are in a bit of red. when looking at the sectors as well, what we're -- the u.s. markets again on friday, it is interesting to see that people are taking things in stride given this report about deutsche bank. they could be negotiating a boj deal. that was better than the initial
deal. >> it is funny how this is the biggest drive for the fixed income markets and for the fx markets. we'll tell you about the big deal this morning. janice capital and henderson announced an all stock merger of equals. the group is combined to have $320 billion in management and asset management around $6 billion. this focuses on the creation of a global entity once janus capital has brought together their european nominations. here is andrew formica. >> bill gross is very supportive. he sees it as improving on the
strength of janus and the combination with henderson can make it a stronger and better business. so i haven't had the chance to spend much time with bill, but my understanding is that he'll be positive on this and continues to be supportive with what we're trying to do. : we'll go back to the big story with deutsche bank recovering after the u.s. recession on friday closing up over 14%. that's on rumors the lender reached a settlement with the department of justice. however, hopes of the deal have begun to fade somewhat. if an agreement had been reached, the german bank would be legally required to disclose details immediately. the german politicians have accused the u.s. of, quote, waging economic war after proposing a $14 billion fine, which sparked the recent volatility in deutsche shares. the deputy chancellor hit back at the ceo for telling employees his bank was suffering from market speculation. mr. gabriel said, i didn't know
whether i should laugh or be furious that a bank which turned speculation into a business model now declares itself the victim of speculators. we'll go out to anita, are the germans are feeling united with deutsche? >> reporter: it all depends on where you are. in berlin, people are not really there but the fact that deutsche bank is in a crisis. according to people we spoke on the ground there, in frankfurt people say the lender is strong enough to weather the storm. sot depends on where you are and how well informed the people are. but let's talk about the potential settlement. of course the bank would have had to come out with a statement of 5.4 billion as the rumor of the settlement sum would have been true, but they would have had to come out with a statement if that had been true. but still we are looking into a
situation where the statement settlement is looming for the lender. what we are hearing on the ground is that deutsche bank is doing whatever it can to come up with a settlement with the doj as soon as possible. so looking at the potential fine, deutsche bank wants to see themselves in the ranges where goldman sachs and morgan stanley is. morgan stanley is 3.2 billion u.s. dollars. they say the business model and the rts market which is here and is a concern is comparable to goldman sachs and also morgan stanley. so let's wait and see what the settlement sum will be. but one thing is clear, if we are seeing a settlement below the $5.4 billion rumored on friday, there's still potential for the shares.
if the sum will be higher, then we'll see probably a very adverse market reaction. keep in mind the litigation reserves at 5.5 billion euro. and there are still many cases to settle out there, talking about money laundering in russia, talking about manipulation of the foreign and commodity markets. now back to you. >> joining us is chris wheeler and david levowitz. chris, let me kick things off with you. it's now a number for deutsche when it comes to the fine, what sort of fine could they stomach without their capital level being severely impaired, without them going back to the market to raise more? >> well, i think the $5.4 billion number is about what they can stomach, maybe a little higher than that, but not much higher than that. after that it becomes difficult. it makes me wonder or not if they can rebuild their capital over the next few quarters so
they can actually wouldn't have it as painful. but obviously the news is suggesting this will happen quite quickly. >> that would be so much worse dragging things out right now. you have seen the volatility last week, you have seen massive amounts of speculation against deutsche bank shares, wouldn't that be a much worse outcome for them? >> no, the much worse outcome is massively diluted shareholders to pay settlement now. it would be much better to kick it down low. it wouldn't help them deal, but it would allow them to leave the balance sheets more to give them more capacity to shoulder the higher fine. >> do you think the government is going to have to step in? >> well, obviously it is very difficult for the government to step in. we have heard a lot of discussion on the credit markets as well as the equity markets. clearly, the government doesn't want to see deutsche do anything other than prosper. and so i think it's keeping a
wet eye on this, but the cost of that, there will be so many plans on the table to what deutsche can do to resolve this particular issue. more than angela merkel stepping up to the paint. >> do you think there would be more contagen coming up from these woes, that we have felt enough of it, quote/unquote, the european banking performance in general is doing quite well. >> we have had a debate in deutsche since 2008 when it avoided government help. and when this issue goes away, there is still plenty down below john has to deal with. he said it's a couple years before he gets to the capital of leverage where he thinks the bank can kick on. my main concern is that they safeguard because obviously what he wants to do is say we can make decent returns because we have had got a better platform
and we still are working wit our clients. >> david, i was scratching my head when i saw comments from the ceo of credit suisse last week that said it is not a place for an investor right now, is it to you? >> well, part of it is because there is so much headline risk associated with the names right now. fundamentally, it feels like europe is still overbanked. i think we need to see consolidation and reform like you just mentioned so the banks can get to a place where they are once again profitable. right now i prefer the u.s. bank shares over the european bank shares. i think there are some issues getting worked through over here, but somebody with a time of more than six months, there's really opportunity there. >> that's the fundamental problem. european banks are favored because they are grabbing market share from the banks. the european banks are losing. that's the fundamental problem
once litigation is out of the way, isn't it? >> yeah, i think it is. somebody follows u.s. banks really closely, it clearly is -- we see the value looks much better in those banks because they have gone further down the load in solving the issues and are turning capital in substantial quite amounts to their shareholders. but mackenzie put out a survey recently talking about the fact that there are three or four global banks left standing at this, generally more local, and they suggest ed the u.s. banks over the europeans because there's still a lot of work to do at barclays, deutsche and ubs. >> why hasn't this happened earlier? we are ten years on from the financial crisis beginning, almost ten years? >> i'm older than anybody sitting here. and what i have seen is a lot of down sense in the banking sector. the oil crisis collapse in the early '80s. you came out of it quite
sharply. same after tnt. we have not seen that revenue boost. in fact, big chunks of the investment market just went away and disappeared into the ether after the subprime situation. so we have not had the lovely strong revenues to allow banks to restructure, sort themselves out, while they are still general generally generating decent returns. >> i think that has been the problem for companies globally. you were talking earlier about deflation, we are in such a low inflation environment that revenue growth can't support the bottom line. with margins basically tapped out, particularly in the u.s., i think the question is how do the banks remain somewhat profitable while they get their house in order. to me that's the biggest question. >> is there anywhere in europe where we have seen the cleaning up of the books over the last eight to nine years and where you feel that it's sound to investment financials at the moment? >> well, i think a lot of banks are digging themselves out of big holes. you know, you can argue that the
bank in the uk has done a good job. you can look at the spanish banks recovering remarketbly well given what has happened in the economy. but the european market is making it difficult for them. and the overall ma lay is what people say exists. >> it is no longer isolated to individual names. it has become a much broader issue. to your point, the past seven, eight years a lot of banks have done a lot of really good stuff. we need to look at the progress that's been made and understand sentiment is really driving the markets right now. and people hear banking problem and immediately what they think of is 2008. you know, it's like when you mention recess, people think, financial dry scrisis. no, it's very different than that. >> chris, do you buy deutsche bank at these levels? >> i think it's a really difficult situation for them at the moment. i think if we look at the long-term view, it looks really
interesting. but it is a long-term view. >> chris, thank you so much for that. appreciate it. chris we'ller at atlantic equities, and dave levowitz who will stay with us a little bit longer. >> e-mail the show and give us your e-mails and comments. bless you. that was a very big sneeze. the address i is @streetsignscnbc. and you can tweet us at we well @carolineroth and -- >> @louisabojesen. sprint. sprint? i'm hearing good things about the network. all the networks are great now. we're talking within a 1% difference in reliability of each other. and, sprint saves you 50% on most current national carrier rates. save money on your phone bill, invest it in your small business. wouldn't you love more customers?
signs." checking in on the price of oil, let's do that. we have seen pretty big moves over the last couple sessions as indicated here. you had on friday, nimex and brent leveling out. but for september as a whole, near 8%. brent up by 4%. the second monthly gain that we're seeing for the month as a whole helped by the opex plan production cuts. sri is in singapore looking at the performance overnight. and we have china on holiday for the entire week, sri. hi, good morning. just a quick word about the oil crisis, yes, it is looking constructive, isn't it? we seem to be basing around the levels of 45 or 50. so that has implications on the inflation expectations side. it has implications for the boj on one end and has implications for the rbi. the reserve bank of india. remember, inflation has been quite sticky in that emerging market and the rbi will be
meeting this week. the first meeting under the new governor urgent pattel. when you look at the markets, broadly constructive as we pick up on the lead from wall street and the rebound from the financials. it's looking a little bit healthier for deutsche bank, i must say. having said all that, the bank is still under siege and i think there's still some clear and present danger on that particular saga. so watch out for financials. we could see some fading of the rally in that end of the market. elsewhere, i want to talk about the liquidity. there's that much more in terms of the turnover. china is out of the action for a big week. so that's a big sway of turnover in the broader regional markets. you're watching the pmi numbers coming out on your end of the spectrum in europe and ism new component tonight will inform the direction of travel in our markets. that's where we stand, back to you now. >> sri, thank you very much. good to see you. we'll chat here again throughout
the week. the ecb has rejected a plan to buy three smaller italian banks according to a local media report telling the lender it needs to raise an additional 200 million euro of fresh capital if it wants to pursue the deal. ing plans to cut 7,000 jobs in a major refocus to a single digital platform for the largest bank in the.net ea netherlands. that's equivalent to 13% of the global workforce. speaking earlier on cnbc, the ceo outlined the growth strategy. take a listen. >> where we really grow is where we are a full digital only performer, like in spain, like in australia, like in germany where we grow a thousand new clients a day. if you want to change one model to the other, you have to do it gradually for sure. but if you digitalize all your processes, regretfully, it will
affect some of the jobs that are here. and that's why as part of the announcement today and some of the intentions that we have in belgium, we will have some job losses as well. >> tesco is reportedlyet to face legal action brought by 60 investors claiming to have suffered 150 million pounds in losses due to the accounting irregularities. according to the financial times, the lawsuit to be brought by asset and fund managers is the first to be taken against the uk. te tesco shares are up. and vw has agreed to pay $1.2 billion to u.s. dealers for the emissions scandal. the german automaker said the cash payments will be made to resolve past and current hits to franchise value suffered by the 652 dealers. vw shares are almost a third
lower since the emissions scandal broke back in september of 2015. david is still with us from jpmorgan asset management. david, when looking at the health of companies at the moment, the european companies, in particular, do you think those company values, we were just talking about the banks and the erosion seen there to some extent, not during the third quarter, but do you think there's company value and the companies are sitting in on the cash piles that they need to put to work? are we going to see a bump in the fourth quarter? >> i think there's value in europe. and i would actually say for the past couple of years earnings have looked pretty good, but the past six or seven quarters have been fairly lackluster. our expectation is that profit globally could actually pick up. you have the u.s. with the headwinds from the stronger dollar and low energy prices are beginning to fade. you have europe where we're seeing signs of stronger inflation, manufacturing activity is hanging in there, emerging markets, which is a primary market for a lot of the
european names are experiencing inflation. so i think there's a nice tail wind for corporate europe right now. and i wouldn't be surprised to see earnings move into positive territory over the next couple of quarters. >> people are writing in saying, with iron ore down trending from 63 in august to 55 currently, are the miners becoming overvalued? >> so i'm not a commodity expert and think it's difficult to bet on the price of any individual commodity, but when i look at commodity markets in general, you know, what we see is that it feels like supply and demand are coming back into balance globally. so could they be a little bit overvalued? perhaps. on the other hand, you have energy names which are beginning to look more and more attractive. what happens with opec later this year really to be seen, but you're seeing supply and demand in a lot of the commodity markets come back into balance, which creates opportunity for investors. again, these are the names that have been so beaten up over the past year and a half that in some cases they are starting to look attractive. >> let's switch over to talk about the u.s. companies. third quarter is upon us.
and now wall street analysts are expecting to return to revenue growth since first quarter 2015. do you think that is sustainable or would it just be one quarter? >> i would be surprised to see revenue growth turn positive this quarter. i think you're still seeing some headwinds from lower commodity prices and headwinds from the dollar. it takes about two years for dollar strength to work through the system. so if you stay we started at the beginning of 2015, we're almost at the end of 2016, there could be a little more pain there, but generally speaking the earnings picture is improving. energy companies should be taking fewer write-downs. we're seeing margins really hang in there, which is a positive sign given our view that wages could begin to pick up into the end of the year. the third quarter, we may see things get better but we are not necessarily out of the woods quite yet. i'm more in the fourth quarter growth for when it turns positive again. >> historically we have seen stocks up 80% of the time,
average return of 5% over the last 20 years. i know that's all history. this year we have the u.s. election to contend with. we have a fed rate hike potentially. it's a lot of things. >> there are a lot of things. politics globally represent a risk. you not only have the u.s. election, which is its own risk, but the referendum in italy and the fed meeting. my view is that investors should stay the occur. we still see upside in risk assets but i think the upside comes with a healthier dose of volatile i. i said to somebody the other day, this is not the time to fight with your asset allocation. stocks and bonds look expensive. this is a market you stay balanced and can participate on the upside. but getting the protection is coming on the downside. >> very briefly, which will move the markets more, possible fed hike or the u.s. election? >> so i would say that if donald trump starts to gain more momentum in the polls, that's going to move the markets, simply because it is priced for a clinton victory right now. to me the fed in december doesn't really represent that much of a risk.
i don't think they are going to do anything in november. but come december, they have been priming the pump for this all year and started this process back in august, the jackson hole, knowing september wasn't going to happen. so i'm not sure that is a future risk. >> david, thank you very much. david levowitz, global market strategy from jpmorgan market management. in other news, kanye west walked off stage during a concert after kim kardashian was robbed at gunpoint in paris by two armed men that reportedly stole several millions worth of jewelry. she was visiting paris for fashion week. the 35-year-old reality tv star was badly shaken but physically unharmed. >> that's the most important thing. but that was a huge security breach. and earning a par on the 18th hole at hazeltine.
europe is only a third ryder cup over team usa. the tournament was marked with unusually raucous crowds to warn that they could be removed from the crowds. >> do you play golf? >> no. >> i was on the driving range and the next few days i could hardly walk. the muscles you use here -- >> it's a sport. >> such a long game. we'll take a break and check out the blog that runs throughout the entire trading day. world markets are live. we are on twitte twitter @carolineroth, @louisa bojesen. see you after the break.
signs." i'm caroline roth. >> and i'm louisa bojesen. >> the german market is closed as the doj deal remains elusive. henderson shoots to the top of the stoxx 600. the ceo says it's a positive step for both companies. >> this is about two businesses coming together in a defensive way that actually have to strong businesses who recognize the combination together could be even stronger. the ceo of ing tells cnbc europe's banks are better equipped to deal with contagen as they announce thousands of job cuts as part of the digital overhaul. >> since the crisis in 2008/2009, the way all the banks manager exposures has really professionalized. and sterling slumps to a three-year low as the uk prime
minister theresa may says they won't quibble or backslide on brexit. >> there will be no unnecessary delays in invoking article 50. we will invoke it when we are ready and we will be ready soon. we will invoke article 50 no later than the end of march next year. hi, everybody. welcome back to "street signs." we have the u.k. manufacturing pmi at 55.4. versus the august reading of 53.4. that means it's the highest reading since june of 2014. it's also better than a reuters poll that had anticipated reading 52.1. very much beating expectations. pmi knew export orders would be 56.2. and the manufacturing pmi rebound according to market puts
the sector on course to provide further positive contribution to third quarter gdp. it's going to be interesting to see what the gdp readings are in the wake of the -- >> well, the second quarter was revised up from 0.7%. that wasn't too bad. what we are seeing, you can see the tiny blip to the upside after the big fall earlier this morning. there you go. we're still at three-year lows against the u.s. dollar and sterling. but maybe a little bit of offset for sterling. but very depressed levels of 28 and change. >> definitely. after we are now hearing that we have this timeframe now set out from theresa may for brexit. by march of 2017, march of next year, that will be triggered and take two years in order to unwind the process of being a member of the eu essentially. >> absolutely. we also have a headline from the bank of england's financial policy committee. they were unanimous in september, there was no need to change the expectation set in july for a counter cyclical
capital offers. now donald tusk welcomed the additional clarity given by theresa mays announcement speaking on article 50. he vowed that the united nations will safeguard the brexit talks once it is triggered. and mr. hammond said britain needs a new fiscal plan to work through the uncertainty planning to cut infrastructure investment. jeff is at the conference -- jeff, we have this timeframe laid out. we still don't know what the economic forecasts are. >> yeah, absolutely right. so we have gone a few steps further down the road of trying to understand what this brexit prs wi like. i think we've had a number of commentators say, well, at this point, we're not going to expose specific negotiating points because that would, inevitably
mean, we have a weaker hand going into the discussions. but the current line is, now we have a timetable. we're expecting mr. hammond to speak in just a few hours or so to give us a clear indication of what the economy will look like running forward as this timetable approaches. and there are those on the hard brexit side of the equation who are now saying they feel that theresa may's agenda very much suits the position that they wanted to see. berner jenkin probably accounts himself among that number. let's hear what he had to say about the announcement of where that now leaves the uk. >> this is a force dichotomy. if you are going to leave the european union, you're going to leave the european union. there are certain things you're
going to take control over and certain conditions you're going to make a relationship with the european union. people talking about a soft brexit are really talking about only half leaving and finishing up like norway in the customs union or in the single market. well, that is clearly completely off the agenda. and it wouldn't be a soft option incidentally. it would mean that you lose control over immigration and of your regulation and your payments to the european union, but you wouldn't be sitting at the table. as they said very clearly during the referendum campaign, if you go for the norway option, you have the worst of both worlds. why would we want that? we want to be like canada and have an agreement that canada has with the united states, for example, in the north american free trade agreement, where you haven't compromised any of your sovereignty or control over your laws. but you have a very strong trading relation with the united states. that's the kind of relationship we would like to have with the european union. >> carlos gohn said he would like to see opportunities
provided by the british government as a result of the brexit arrangements that are ultimately determined. can he go and whistle in the wind if he thinks the british government is going to step in and start providing support for international business people who try to put pressure on the government? >> well, we're not going to go in for subsidies on request for inward investors because that would put us full of international rules on stage. but if the european union is mad enough to want tariff-laden trade between the uk and the eu, we would make considerable money out of there, calculated between 8 and 9 billion pounds a year. we could justifiably spend that on reduced corporation taxes, reduced employment costs, bigger allowances and bigger incentives for investors in order to offset the costs to the whole supply
chain, not just the costs of exporting. we are determined to maintain the competitives in the united king doll kingdom. but the german industry, they don't want tariffs either. we would be the biggest eternal market for the eu in the world of cars. let's be sensible about this. >> that's a robust line there from vernon jenkin who would count himself as a hard brexiteer. where does this announcement leave us as far as the soft brexit/hard brexit position is concerned? you have berner jenkins say it is a hard dichotomy. we are joined from the fc, good to have you with us here. berner jenkin is saying we don't
need to talk about soft and hard anymore. theresa may made it clear with her issue of immigration. this is now a hard brexit. >> there's no doubt that the speeches so far at this conference have been towards the harder end of this debate. politicians will argue about whether they want to use particular words to describe it, but in the end the conference is sending to it a signal something is going to happen. and in the run-up to the conference there's a lot of debate about what is the next step going to be? and this is all about signaling, the government has a plan and that they are going to take the european law into british law, for example, but they are moving ahead. and that is the thing they are trying to say here. >> i do think given the timeframe that has been set out here, that theresa may has understood the complexities of the negotiations that will be involved, march next year almost seems indecently early given some of the previous signaling
we had. >> i think what has been said here is definitely to keep the whole momentum going with the sense that something is going to happen. i'm sure that back -- there's a long way to go on specific issues. it will be a complex process, the negotiation with countries. and that, of course, is still needing to be started. so i think everything that's going on at this conference is about removing any doubt that this is not going to happen, see what i mean, it's going to happen. that's what the messaging is all about. that's why berner jenkin and those strongly in favor of leaving the eu are happy. those on the other side, of course, will be wondering what to do next. >> we have already heard the chancellor talk about turbulence around brexit and the abandonment of the 2020 targets, the surplus targets that george osborne laid down. do you think this is about
providing some room for maneuver in the event that some of the worst predictions about the impact of the economy begin to come true? >> well, thus far the predictions, the worst predictions haven't come true. but the question is, what will happen after 50 years of trade, what will then be the impact on the economy? there's no doubt that phillip hammond is going to soften the reduction target, that's already been made clear in his speech. i think he'll tell us a bit more about the treasury's stance in terms of the wider economy. are they going to invest a lot more in big capital projects? how long will it take to reduce the deficit? in the end the deficit will be irradicated. the only question is by what end point? it won't be 2020. >> the immediate reaction to theresa mays' speech was sterling weakened. there was nervousness in the international community about further investment into the uk. from what you have heard so far, is enough being done to soothe the nerves of the global
business community? >> i'm not sure quite enough -- in the uk about to leave the eu, there's this protracted period before which it's very hard to get any final signals. the reason for that is what is going to happen to the negotiation? nobody can expect the points of negotiation. it's hard to be certain with each side's negotiating position. for that reason, there's uncertainty about investment. and although the government is trying to send out one signal that is certain, which is we're definitely going to do this, it's certainly not in the details on what happened to the city in london, what happens to free movement in labor, all these things. this is still uncertain. i can say every time we get near the article 50, the sterling will fall. there will be uncertainty in the markets. that's almost inevitable. >> something we have to begin to live with. professor tony traverse joining us from the london school of
economics. let me send it back to you in plon d london. >> jeff, thank you so much. mayor rudy giuliani called donald trump a genius for reporting a nearly $1 billion loss in 1995 that allowed him to minimize his tax bill in following years. the report says trump could have avoided paying taxes for 18 years regarding the loss in 1995. we'll go out to tracie potts in washington and the clinton campaign calling this a bombshell, tracie. >> reporter: well, the clinton campaign says this is exactly why we need to see donald trump's tax returns going back four years. he's yet to release them and said he won't while under audit on advice of his lawyers, but the irs says no problem, you can release them. trump said no. the latest report from the new york times shows that $916 million loss that could have,
could have allowed him to avoid taxes for up to 18 years. and it's important to note that it doesn't necessarily say that he did avoid paying taxes for that long, we just don't know because we have not seen the tax returns. and that is part of the challenge here. on defense, donald trump's surrogates including rudy giuliani say he's smart, as he said in the debate. and that he's a genius as rudy giuliani put it in the way that he handled his taxes. the clinton campaign, they are pushing back saying we need to see the paper is the bottom line here. as for trump, he tweeted about it saying that he knows tax law better than anyone who has ever run for president and he's made no bones about it in the past saying that as a businessman, he has taken advantage of the laws. if you don't like the laws, change them. but as a businessman, that's what he's done. in fact, his campaign issued a statement saying he's got a responsibility to make sure his company pays no more tax than
necessary. >> tracie, i'm seeing that lebron james is endorsing hillary clinton as the champion for children. what could this do for the important swing state of ohio? >> reporter: well, it's important in ohio because she's not ahead in ohio right now. donald trump seems to have a slight edge in the latest polls there. she's actually going to be in ohio today talking about the economy and doing a voter registration event, keeping in mind that early voting starts there next week. >> tracie, good to see you. thank you very much. tracie potts joining us live there out of washington. all right. quick look at u.s. futures as we begin another quarter. the s&p 500 up just a fraction by 1.2 points. the dow jones is higher by 12 points and the nasdaq is higher by 1.5 points after the rally in financials over lower concerns from deutsche bank that sent relief through the markets. that's why we saw a rally on the u.s. stock markets on friday.
the s&p 500 is up there. germany is now looking for the reunification day meaning no trade for deutsche bank. maybe it does need a breather for a day or two. the ibex 35 is down just fractionally. the cac 40 is up because oaf the emergen -- because of the merger in the u.s. a quick check on the currency markets, the big story is cable close to a three-year low at 1.2875. down by 0.8% of the day. that deadline triggering march 2017 just off the session lows on the back of slightly better that expected uk manufacturing pmis. we need to take a short break. however, the yuan has a spot in the basket.
hi, everybody. welcome back. the power of hurricane matthew is being felt in jamaica with torrential rainfalls and strong winds striking the island nation. nbc's miguel almaguer has this report. >> reporter: tonight after slamming the coast of columbia, one of the most powerful atlantic hurricanes in nearly a decade is barreling towards jamaica, haiti and cuba. matthew which peaked at 160-mile-an-hour winds is now a violent category 4 hurricane, triggering deadly flooding, washing away homes, roads and bridges. lashing out and lighting up aruba, the monster surf has officials pleading for locals to
stay away from the beach. though not everyone is heeding the warning. in jamaica millions are bracing. how worried are you about this one? >> very worried. >> reporter: a run on supplies, lumber, groceries and gas. >> there's no point in worrying. because if it's going to come, it's going to come. but you would be foolish if you didn't prepare for it. >> reporter: up to 20 inches of rain could quickly fall as winds like these get set to pound a region hunkering down for impact. with beaches closed and shelters open, we are beginning to see the first waves of the hurricane here in jamaica. steady rain will likely develop overnight. then we'll have that punishing weather in the early morning hours. we're also told by the prime minister there is nothing more this country can do except to brace and be prepared. now back to you. now in politics the interior
minister says that the government will not step down whatever the outcome of the constitutional referendum. this happening despite the prime minister renzi saying repeatedly he'll resign if voters reject his senate reforms. the referendum will be held on the 4th of december. according to those in favor, is aimed at simplifying the political system. oh, sorry. columbians rejected a peace deal that left farc rebels and a major setback to the war. the yuan becomes eligible for imf loans. this is an affirmation of the success of china's economic
developments. let's talk about this and investing in china with our partner at east capital. now china says this is a big success. others would argue it doesn't really change anything because the currency is still not widely tradeable. it can't be settled everywhere, it doesn't change anything. what do you say? >> well, i think it's very important. it's a milestone for china. the international process has been ongoing for years for investment currency. and in terms of impact, it is being chased by central banks around the world. but again, it is an important step for china. and myself heading to washington, d.c. after london, going to meet with a lot of people from the imf. and it will be interesting to hear, of course, if it has any implications so far. >> does the inclusion and the
reserve have any say about where the currency is going to be headed, whether it depreciates further, some say it will because they will intervene less. >> when the decision was made for them to enter the imf base set, they said it will mean more stability for the basket. clearly it did not materialize because we have seen a lot of volatility on this currency. but i think what is important for investors at east capital and others is that it is normal for the second largest economy in the world to have its currency in the case of the imf, in the same way it is normal for the chinese equity markets to be more integrated in the world capital markets. >> do you find this integration is actually happening? there have been attempts quite recently to open up the chinese market, more for investors as well, but i can't work out it is initially working.
it seems like they have not been plowing into the chinese market as one maybe could have anticipated. >> well, there are a lot of reforms happening. we have been investing ourself for quite a few years in the chinese shares in the onshore equity market. through shanghai connect. we are excited to be soon able to join the shenzhen connect. there are a lot of companies that you can find in shanghai but not in hong kong. and i think more investors the look at the market. >> what are some of the main differences between investing in the shanghai market versus investing in shenzhen? >> very big differences. to start with in shanghai, 75% of the companies are state-owned enterprises where in shenzhen it is only 25%. on average the companies in shenzhen are more like high
gross talk stalks. and in shanghai it is mainly banks and materials, which is fine in hong kong. in shenzhen the most important sector is the i.t. and consumer discretionary. another important sector we are specializing in is related to the environment and environment protection. so very different. we think people will be looking into this market. of course, it is paving the way for the inclusion of shares that might come quite soon. >> but there are also pitfalls because the shenzhen market is where investors are very fickle. they are mom and pop investors who tend to react a lot more to headline news, not like in the shanghai market. there's a lot of volatility in the market,s t it's not for everyone. >> on average 08% of the trading, 80% of the trading is
made by private investors, they are momentum driven. they don't care about evaluation. and they don't understand what the evaluations mean, but it is still a market. besides a lot of companies that are very expensive, we would not touch the interesting companies that you can find great value in. one of the stock prices we like is byd, build your dream, which is ev producer of batteries and so forth. and this company is not that expensive and it is a very interesting company. >> you talk about evaluations, china overall, is it cheap, is it expensive? can you pant it with one brush? >> depending on which china you're speaking about. hong kong now has had a good run this year with the onshore markets down. the evaluations are actually more acceptable. but in some cases we have high evaluations but with very high growth. >> thank you so much for that. let's get back to one of our
top stories. asset management firm janus capital and henderson is announcing an all-stock merge. this focuses on the creation of the global equity. earlier on cnbc, henderson's ceo spoke about working with the so-called bond game and janus capital's bill gross. >> he's aware of the transaction, you wouldn't be surprised. he's very supportive and sees it improving already on the strengths of janus, what he thinks should be there, and the combination with henderson can make it a stronger and better business. i haven't actually had the chance to spend much time with bill, but my understanding is he'll be very positive on this and continued to be supportive
of what we're trying to do. >> a quick look at the european markets on the first day of the fourth quarter, the ftse 100 is pushing ahead to the tune of 1%. now that we've got a deadline in place for invoking article 50, now the fund management activity we just told you about, germany is closed today for the reunification day. no trade in deutsche bank. in the u.s. and how we are setting ourselves up for trade there, the implied open to the upside having come off the down week last week, closing up by just shy of 1%. europe incidentally closing flat. and as you just saw this morning, it is hanging on to slight gains. that's it for today's show. we'll be back tomorrow. >> yes. >> i won't. >> you're traveling. >> ab capital market day. >> very good. we'll be hearing lots about it afterwards, i'm sure. do join us tomorrow. i'm louisa bojesen.
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good morning. it's a new week and a new quarter on wall street. we'll tell you why the markets could be in for a wild ride. behind the wheel, tesla poenss new records for vehicle production and deliveries. plus a big win for the usa. the americans beat europe to cap thursday the ryder cup. typical headline for me to read. it's monday, october 3rd, 2016. "worldwide exchange" begins right now. ♪ a very good morning and welcome to "worldwide exchange" on cnbc. i'm wilfred