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tv   Worldwide Exchange  CNBC  October 14, 2016 5:00am-6:01am EDT

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good morning. jpmorgan, wells fargo and citigroup ready to roll out quarterly results. and the treasury department takes another big step towards keeping corporate taxes in the u.s. and scores send the dodgers packing. it's friday, october 14, 2016. "worldwide exchange" begins right now.
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good morning. i'm wilfred frost alongside courtney reagan in for sarah today. good friday morning to you. >> we made it. it's friday. >> nice friday song in the background for us. sarah will join us later this hour with a preview of her exclusive interview with treasury secretary jack lew. she canceled today's holiday for this interview. well worth it. it shows she's willing to cancel a day's holiday for jack but not me. >> try not to take it personally. >> i can't, it's impossible not to. all of our viewer also watch that later starting from later this hour at about 5:45 today. let's check in on markets at this hour. yesterday was a disappointing day for markets. down about a quarter to a half percent yesterday. we came off the lows for the day. the week as a whole, the dow
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down about 1%. yesterday the banks were the worst performers. as you can see, we expect a bounce this morning, relatively small bounce. the dow called higher by 41 points. the s&p 500 by 3 1/2, the nasdaq by 7 points. the ten-year treasury note this is why banks suffered so much yesterday. we did see yields move a bit. at the moment, 1.775%. yields rising again today. not back up to the highs of the middle of the week. alwa >> inflation data out of china overnight. producer prices rising for the first time in nearly five years. consumer pricing also picking up. major markets in asia reversing their course well off session lows this morning or overnight. the knnikkei closer higher by a
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half percent. the hang seng, just about 1%, and the shanghai flat. if you look at what's going on in europe, also the data out of china on inflation, helping some of these indices. you can see it's a green day nearly across the board. so far spain is the outperformer, up fairly sharply. autos in focus with the european union, new car sales up 7.3% in september. banking doing well in europe at least. >> yeah. almost a slight overreaction in asian and european trade to the chinese inflation data. the day before chinese trade disappointed, so we've seen a china risk-off trade for one day and it bounced back, people from that inflation data feeling things are not so bad. >> the ftse 100, even with today's gains is still down by a half percent for the week, even though the pound continued to slide. so some questions out there that
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it's not clear that the weaker pound is always going to be a shock absorber for the economy and the ftse 100. those concerns now if we see the pound slide further and further that it will be a negative. the broader markets, oil prices have been in the eye of the storm recently. we're up above nearly $51 today. for the week as a whole, up about 2.2% now for wti. another decent week. more volatility this week as opposed to just straight upwards. dollar, let's look at that. it's been a decent week for the dollar. it's up over 1% for the week. it was a bit soft yesterday, the dollar, for the week as a whole, we're ending with a strong day. the dollar gaining against the euro, the yen and the pound. the pound 1.22 this morning. gold prices quickly for you, gold up about a half percent for the week as a whole coming in today. it's flat today, looking at half percent gains for the week.
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>> it may be friday but we have a busy day. let's look at today's agenda. busy day for data. september producer price index and retail sales at 8:30 a.m. eastern in the u.s. at 10:00, business inventories and consumer sentiment data. we'll hear from many federal reserve officials. the two key ones, boston fed president, eric rosengren and janet yellen herself will be speaking at the boston fed 60th annual economic conference. rosengren will speak first, but before that speech other own steve liesman interviews him exclusively at 7:30 a.m. eastern time. don't miss that. rosengren dissented at the september meeting in favor of a hike. it will be interesting to hear from him, particularly before he speaks in boston. fed chair janet yellen speaks at 1:30 p.m. eastern time. her comments will be live on cnbc. switching to the corporate front, an important day for financials. citigroup, jpmorgan, wells fargo
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and pnc report results before today's opening bell. are you ready? >> i am ready, i think. let's -- >> lots of coffee? >> exactly. let's have a preview of what to expect from the banks. heading into q3 earnings, one key thing is the same as q1 and q2, expectations for the banks are fairly low and could be beaten. but one key thing is different. bank shares have already outperformed in the past quarter, rallying around 10%, despite stocks specific underperformers. three areas to focus on, loan growth. having surprised to the upside there q1 and q2, there's room to disappoint this quarter, particularly on the commercial side. number two, capital markets, having been slow in the first half, there's room for seasonal bounce in the third quarter. costs, expense management remains key for all names in this low-rate movement. as for the management calls, the
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main focus is on the fallout from wells fargo, will it weigh on the sector, and contagion from deutsche bank, and some interesting insight there from the likes of goldman sachs and bank of america on whether they are benefiting in terms of market share. and loan growth. there have been some signs this slowed noticeably as the election approaches and perspectives on the election will be interesting to listen tom the key factor for the stocks for the rest of the year will likely be rate hike expectations and realities. that was a factor that the banks sell off yesterday. >> very much so. so far so good. actually in europe, the italian banks turning in good results. the u.s. treasury department issuing final rules to crack down on tax inversions, that's when a company is acquired by a smaller foreign business in a low tax country to avoid paying the higher u.s. tax rate. this cracks down on earnings stripping when the u.s. subsidiary avoids taxes on domestic operations by sending them overseas as tax deductible
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interest payments. got that? sara eisen spoke with jack lew about the regulations which have far-reaching implications on the business world. we'll hear that conversation at 6:00 a.m. eastern time. >> and a tease and a preview on "worldwide exchange" at about 5:45. in other corporate news, verizon indicating it may try to renegotiate it's $4.8 billion merger with yahoo! in light of the data breach. verizon's counsel saying it is reasonable to believe that the data breach may open the doors for the renegotiations. >> stocks to watch today, there are a number of them. this is ahead of the banks. infosys reporting earnings overnight. second quarter net profit rose by 6%, but cut its full year revenue guidance which weighed on shares in the after-hours
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session. down about 5%. amazon's cloud computing unit signed a deal with vm ware. this allows the company to run things on the amazon servers. look at honeywell. up in the after hours session. about 1.3%. the company offering an optimistic outlook and announcing it's targeting double digit earnings per share growth in 2017. earnings of honeywell were off earlier this month due to previous guidance. cramer got a chance to talk to honeywell's ceo dave cote last nigh night. >> yes, i wish i included more of this stuff. i gave credit for people understanding what our long-term profile was. i was wrong. this is one where i could have done a significantly better job of communicating this story.
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we tried to do it in the context of 2017 will be good. but it seemed to get totally lost. >> honeywell's ceo on "mad money" last night. piper jaffray upgrading zumiez shares from profitable to overweight. we'll have the piper jaffray analyst behind the note on the show later. as you can see, zumiez shares up 2%. hp inc., the hardware business of former hewlett-packard says it expects to cut 4,000 jobs over the next three years. it is also upping the share buyback program by $3 billion. hp inc. down 1.7%. still to come on "worldwide exchange," the dollar index up more than 2% this month. is the trend here to stay? we'll ask a currency strategist and our data team crunched the numbers on which stocks should
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investors avoid if the greenback continues it's climb? stay tuned. shipped from here, on this plane flown by this pilot, who owns stock in this company, that builds big things and provides benefits to this woman, with new cabinets. they all have insurance crafted personally for them. not just coverage, craftsmanship. not just insured. chubb insured. we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your fure. how do youolve this? you don't. you partner with a firthat advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you.
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morgan stanley.
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welcome back to "worldwide exchange." happy friday. good morning to you. let's get you up to speed with the market action. yesterday chinese trade data sparked a risk-off trade day sentiment around the world. today good chinese inflation data has done the opposite.
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decent returns across asia. hong kong up 1%. that has helped european trade today. ending the week in a positive fashion. albeit the week as a hold in europe is just about flat. the ftse is down about a half percent, despite today's gain. that automatic correlation between the pound and the ftse 100 breaking down a bit. this means u.s. equity futures are up. up about 0.2%. the dow called higher by 27 points. this comes after declines yesterday but we came off the lows during the day's trade. banks were the worst performers yesterday. today we'll be looking at earnings from jpmorgan, wells and citi among others. let's talk about today's trade of the day. brexit fallout. in anticipation of a fed rate hike sent the dollar index up more 2% this month putting pressure on the market and
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corporations. so our data team at klooked at h stocks to avoid if the dollar continues its climb. overall dollar rallies are bad for the market. multinationals like caterpillar also saw shares tumble if you look back historically. home depot is the only dow component that trades positive during rising dollar turmoil. for a full list go to let's talk in more detail about the dollar rally. joining us now is the managing director of fx strategy. boris, good morning. >> good morning. >> we've seen the dollar do well and yields tick up nicely, close to 1.8%. is this a pretty sample trade because of fed rate expectations and a hike in december? >> yes, it's exactly that. it's pretty binary at this point. as long as yields go up, the
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dollar strengthens and goes forward. and in the currency market, we had a breakout in dollar/yen above 1.04, now we're right back above that level. if we can push to 1.05 in dollar/yen, that would show an uptick. all systems are go for a december rate hike. as long as u.s. yields continue to creep up higher towards that magical 2% level on the ten-year, the dollar strengthens. absolutely. >> i'm a little surprised, of course, by the extent of some of these moves. the consensus has been, okay, we'll get something in december, but next year moving on it will be slower than expected. so the markets particularly focused on the short-term single hike rather than the longer-term trend? >> yes, it's baby steps.
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one step at a time. the market has been disappointed so many times over so many years and quarters over this path towards normalization. the first thing that's happening is the market wants to be certain that the fed is back on a normalization path. having said this, you're right. all the fed officials have been warning even if they debbegin hiking, it will be a slower path. more likely a three-month or six-month schedule if they continue to hike rates. that's still better than the rest of the world. u.s. rates are the only place in the world that are going up right now. as long as they're on that path it should be positive for the dollar going forward if you're so focused on the short-term, it's a big day today for data, fed speak. anything you could hear today that would change your viewpoint for december? >> well, retail sales come in minus 2%. that could hurt us. aside from just an exceptionally unlikely event like that, i think pretty much there's a very, very broad consensus.
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the most important thing, the thing that's giving the market confidence is that labor data continues to perform relatively well. as long as we're manufacturing jobs, jobless claims yesterday were small, that was the single most important variable that janet yellen pointed out in her communication in september. the market is keeping a keen eye on that. as long as labor numbers are supported, everything else falls in place. it would be great to see a positive consumer spending today that would put trust to what tho that whole thesis. >> sterling's slide, where does it stop? >> zero. no, really, it's the second biggest story in the capital markets. it's not just the fall of the sterling but whether we will have global trade on a normal basis. sterling has felt the wrath of everybody in the marketplace that has decided if hard brexit will be the path they're going
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to choose, they're going to become an isolated economy. uk is facing assaults not only from the negotiations of the european union but even the wto said if they break their relationship with the european union, they would have to renegotiate every negotiation. all of this against the background of 10% double -- twin deficits. so there's a tremendous amount of financial pressure. it's interesting. the market pressure, the economic pressure that you're seeing now may be going to have some political ramifications in the uk. that is i think they'll come back and be much more negotiati negotiatible with the europeans. coming up, the top political news including comments from an outraged michelle obama going viral on social media. who are you? i'm vern, the orange money retirement rabbifrom voya.
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welcome back to "worldwide exchange." now to politics. we couldn't stay away from too long. donald trump is focusing his energy on north carolina today as new polls show his numbers slipping in key battleground states. tracie potts joins us from washington with the latest. good morning. >> reporter: good morning. slipping in part after those allegations by women of sexual misconduct. but we're seeing raw emotion pouring out in this campaign. not only from those women whose
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accounts have not been verified, but also from donald trump and from the first lady. >> enough is enough. this has got to stop right now. >> reporter: hillary clinton's most powerful voice in disbelief over donald trump's words about women. >> i can't stop thinking about this. it has shaken me to my core. it is cruel. it's frightening. and the truth is it hurts. >> reporter: clinton tweets i'm in awe. thanks for putting into words what's in so many of our hearts. president obama blames republicans for acting too late. >> don't act like this started with donald trump. i mean -- he did take it to a whole new level. i got to give him credit. but he didn't come out of nowhere. >> it's a disgrace. >> reporter: trump fighting fire
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with fire denying accusations by five women unverified by nbc. >> i never met these people. i don't even know who they are. they're made-up stories, filed right before the election. right before the election. this is a conspiracy against you, the american people. >> reporter: new polls show trump's down 5 points in north carolina, tied in ohio, two of the four states he's focusing on to win. he's actually going to be in north carolina for a couple of stops today. the other two states he's focusing on are florida and pennsylvania. >> thank you very much for that. tracie potts in washington. donald trump's wife, melania, is demanding a retraction and apology from "people" magazine and is threatening to sue after the magazine published a former wrig writer's account.
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unemployment rate, job growth and consumer spend iing e distrusted by donald trump supporters. 48% of the trump backers distrust the data, 5% of hillary clinton supporters do. now to sports, the chargers topping the broncos in thursday night football. philip rivers threw for 178 yards and one touchdown. the final score, san diego 21, denver 13. >> i was not up late enough to watch that. looks like a good game. from the football field to the baseball diamond. the dodgers defeating the washington nationals 4-3 early this morning to win the national league division series. the dodgers will move on to face the chicago cubs in the national league championship series. that opens at wrigley field tomorrow night. i know so many cubs fans that are just beside themselves. we don't want to jinx this. i will stop talking now.
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>> you don't want to keep pushing it. okay. fair enough. speaking of a championship run, cnbc's half time report with scott wapner hits the five-year mark next week. they have filled with the biggest names in investor. half time report is the place to be. it all starts monday, halftime at noon eastern. congrats to the team. five years. >> great lineup. awesome market movers. coming up, the top stories and a global round up of the news. and sara will join us with her interview with jack lew. stay tuned, you're watching "worldwide exchange" on cnbc. th.
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good morning. earnings central. financials in focus toes day, as citigroup ready to roll out quarterly results. and what the youngest buyers are buying. market movers ahead. and martha stewart and snoop dogg are teaming up. we'll tell you why. it's october 14, 2016, you're
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watching "worldwide exchange" on cnbc. ♪ >> a very good morning. warm welcome to "worldwide exchange" on cnbc. i'm wilfred frost alongside courtney reagan in for sara today. good morning. >> good morning. >> happy friday to you. sar sara will join us late their half hour with an exclusive of her interview with jack lew. yesterday we declined in the markets, but we came off the lows of the day by the end of trade. we were down by a quarter to a half percent. for the week as a whole, we're down about 1% for the s&p, down 1.5% for the nasdaq. higher today in the premarket 61% for the dow jones, s&p by 6%. european trade is green across the screen to the tune of 1.5%
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for france. ftse 100 up 0.75%. asia is sparking these gains. yesterday, of course, chinese trait data did the opposite. today, chinese inflation data better than expected allowing asian markets to rally. >> today is a brand-new day. things are different today than yesterday. we look now at the broader markets, a look at oil prices, brent, wti called higher. wti above $51 a barrel. yesterday we saw some strong draw downs for crude inventories from the government data. that's part of the reason. also some potential disbelief in what opec is going to do. if you look at what's going on with the dollar, we've had a steady incline this week. but we have actually pulled back a little bit. we'll go to the treasury note
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first. sorry, i got ahead of myself. seeing things track okay, but not nearly at that 1.8% that we saw at one point yesterday for the treasury. we saw utilities have a very strong performance yesterday. if you look here at currencies, you can see the euro to the dollar, 1.10, yen actually, around where we were last hour, 1.04 which we were talking about is the key level with boris. not quite the 1.05 level. we'll keep watching it. things can always change. looking at gold, safe haven trade as see where we are, after expectations continue to build for a rate hike in december, you can see -- if we have the gold board. >> gold is pretty much flat. we have had a stronger dollar, you would have expected it to be lower, but it will end the week
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about 1.5% higher against a broad currency index which is strong. that's something to watch for. let's look at today's agenda. busy day on the data and corporate front. september producer price index and retail sales at 8:30 a.m. eastern time. at 10:00, be on the lookout for business inventories and consumer sentiment data. we'll hear from multiple federal reserve officials two key ones, eric rosengren and janet yellen. both speaking at the 60th annual economic conference. rosengren will speak first, before that speech, to our own steve liesman. he interviews him at 7:30 a.m. eastern on "squawk box." rosengren dissented in favor of a hike last time. janet yellen speaking at 1:30 eastern. her comments will be live on cnbc. on the corporate front, citigroup, jpmorgan, wells fargo
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and pnc all reporting results before the bell today. investors pulling cash from u.s.-based stock funds for the second straight week. lippor reports outflows of $3.7 billion ending wednesday. u.s. based taxable funds saw 2 billion in withdraws during the same period. the u.s. treasury department issuing final rules to crack down on tax inversions, that's when a company is acquired by a smaller business to avoid paying a higher tax rate. this rule will cut down on earnings tripping. complicated, but the person that can explain it to you all is the treasury secretary, jack law. sara eisen spoke to him about the regulations which have far-reaching implications on the business world. you can hear that conversation on "squawk box" at 6:00 a.m.
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eastern time. let's talk retame. piper jaffray upgrading zumie's to neutral from overweight. the goal is to get a feel for teen retail trends. they talked to 10,000 teens across the country. joining us is the analyst behind the report. thank you so much for getting up early and joining us. i have a lot of interest in this report. but what's your biggest surprise from what you saw? >> the biggest surprise is everyone knows that spending in retail has been choppy this year. when we looked at the overall numbers, total spending was down, but down less than what we saw in spring. what was positive were teens that live in upper income households. they were positive on the total spending and particularly positive on fashion. this is really encouraging heading into the fourth quarter and the all-important holiday season. >> we've been talking about denim strengthening again in
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retail. it looks that's what this report showed as well. are there key names you go to when thinking about denim strength? >> absolutely. what's great about the survey, as you indicated, we have so much fun talking to 10,000 teens. we can ask them pretty much any reasonable question. we do ask them about the hottest trends in school. so, one of the things that -- they can write anything. and they do. but we found that jeans and "ripped ge "ripped jeans" are really hot with the upper income females. when we asked them where is your favorite place to buy genes, american eagle outfitters was the resounding winner with one-third of the vote. we think it's american eagle. >> american eagle has been strong in the survey history. is that right? is that consistent throughout the country? is it regional at all? >> they have clearly done a great job of catering to that
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core clientele in a real and relevant way. to date it's the only brand in all 16 years and 32 surveys that we have history of that shows up consistently in the top ten. kudos to them, but they are gaining strength even in the survey, they were voted number one favorite brand among females, denim or any other product being sold. those girls like to go to american eagle outfitters. >> can i ask about some findings in terms of the survey on social media? what were the main headlines? >> you know, kids very much like to spend time behind the camera or in front of the camera, taking selfies. we saw that through and through. they continue to gravitate towards social media outlets like snapchat, instagram. so the real trend here is they want to look good. they probably want to showcase those textural jeans behind the camera and they want to be shot
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with their friends. this is how they -- this is how they play. >> the report, facebook down at number four, snapchat at number one? >> that's what the results say. yes. that's what the results say. i think the rise of snapchat is evident. if anyone has a young person in the house. our family laughs all the time playing with those filters. it's an engaging platform. >> in terms of online spend for retailers as opposed to social media, which are the top websites? >> you know, amazon continues to be the top website according to the survey. it's been fairly strong and consistently the number one. it's never clear to us if they're choosing amazon because their parents are paying that bill or if it's because they want to shop at amazon. but, you know, like i said, 10,000 teens, they'll render whatever opinion you ask them. >> many of those households are prime memberships. neely, thank you very much for joining us from piper jaffray.
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appreciate it. >> thank you. to today's top trending stories, martha stewart and snoop dogg are teaming up on a new cooking show, the first trailer released last night. the two are hosting a weekly dinner party series on vh1 called martha and snoop's pot luck dinner party. vh1 describing the show as a half baked evening of cooking, cocktails and conversation where nothing is off limbs it will start airing on november 7th. completely out of the blue, i knew nothing about it. sounds great. >> martha told me a bit about this when i talked to her. i could do nothing but laugh. a day of levity before the election. >> i wonder who will be on. >> do they have guests at the dinner party? >> otherwise it's not a dinner party. >> guests we know? >> isn't that the idea, a new form of snapchat. >> snoop and martha, entertaining. chris rock signing a deal with netflix for two stand-up
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specials. the multiple emmy winning comedian is getting $40 million for the specials. >> amazing. once you make it in standup, you really make it. so cheap, all you have do is have a microphone. >> you have to really think. >> you have to be hilarious, but still -- >> interact with the audience. >> it's worth it. laughter is the best medicine for everything. >> so they say. mark zuckerberg is looking for a voice to an artificial intelligence system to control his home. he posted on the social media site it's time to give my ai jarvis a voice. who should i ask to do it? it was only a matter of time before ironman himself came to save the day. robert downey jr. offering to be the voice of zuckerberg's ai assistant. i like this. i think that if siri and the qu equivalents had celebrity voices, we would use them more.
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i remember when tomtom's came out, well before google maps, in the uk you could download certain voices. that was taken up quite widely. i don't know, maybe they should explore that, do that more. >> imagine how many things you would have to say, how many questions you would have to answer. >> to record -- >> fine, okay. they might have to pay the celebrity a lot. >> a lot. hours and hours and hours. >> again, if it's the same money that chris rock gets, i'm sure they would do it. >> that's true. if it works. coming up in today's must-reads, we'll get through that after the break. first the weekend box office preview hitting theaters today, ben affleck stars in "the accountant." >> which looks good. >> it's an action thriller expected to do very well at the box office. >> the word accountant appeals to us business geeks any way. >> sure does. warner brothers could make up to $20 million.
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kevin hart, now the other film making the debut, universal expected to earn $13 million in sales in the comedy's open weekend. pretty decent returns since the film cost 10 million to make, one forth of that netflix pays out. stay tuned.
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attention. in the financial times, u.s. bank earnings, five things to look out for. here's the author's list. one, the wells effect. we'll all be focused on that. listen to the conference calls, not just the wells one in terms of reaction to it. the mood on main street, number three, brighter bet trading, number four, the return of litigation risks, and too-low roes. overall, one thing similar to q1 and q2, the expectations are pretty low. we could see some beats today and early next week. the one big difference is the bank stocks have already outperformed over the last month and three months. so there's a nice little dichotomy there. we bounced after q1 and q2 because expectations were low but also share prices underperformed. >> i don't have a good feeling about today. >> i do. we're approving the top of the hour. the team is getting ready for
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"squawk box." sara will be joining "squak" today. >> surprise. >> you were meant to be off. what happened? >> what happened was the treasury made news, and we went down to washington to hear about tf it. the treasury department, a signature issue for this administration and this treasury department, announcing more rules to crack down on inversions, where companies merge with foreign companies to move headquarters and avoid u.s. taxes. this time secretary lew announced amendments to rules that were announced back in april. he said he listened to the business community and lawmakers and the restriction on earnings stripping has been watered down a bit. this is a technique that's complicated and technical. some of these inverted companies use u.s. subsidiaries to make loans that are tax deductible in order to pay the high 35 u.s. corporate tax rate. i asked secretary lew about the
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move, why now and what he wanted to signal. listen. >> i think there's a lot of frustration in the united states and around the world in tax systems that just don't seem fair. we've been saying it for a long time. we've taken action. in taking this action today, i think we've shown we're taking tough action to stop the egregious behavior but also listening and responding to reasonable concerns. >> that was really what the treasury wanted to convey there, that while they are being tough, cracking down on companies that are trying to avoid u.s. corporate taxes, they're trying to listen. the big complaint around this one was that it would have unintended consequences and affect other companies that are not just inverting to try to avoid taxes. though this is still seen -- there will be complaints from gop lawmakers, the business community as unfriendly to business. we'll have more of the
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conversation on "squawk box" at the top of the hour. >> time is running out for him to get anything past, whether it's popular or not. how confident was he that he could get this through and the other big issue of tpp? >> this does not need to be passed. he is using the treasury and the administration's authority to basically interpret the tax code. because what he has said all along was this is a symptom of the problem. it's not actually getting at the disease, which is a broken tax system. that's something that has to be handled by congress. it's something the administration has been frustrated with, because they haven't been able to work with congress on anything like business tax reform, cutting the corporate tax rate to prevent inversions. so as a result, he's going at it alone. he still thinks there's time for tpp, clearly that time is dwindling. we also talked about the problems plaguing the banking system, which you know well. deutsche bank and some risks coming out of the european banking system. of course we talked about wells
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fargo and the wake of john stumpf resigning. tune in to see the treasury secretary's answers to all that. >> you have another interview coming up later today, is that right? >> taping an interview for monday with the ceo of pepsi. that should be good. we'll talk to her about what is going right in the business and some portfolio changes. >> the reason i brought that one up, you're willing to cancel your days off for these high-level business and political leaders, but not to sit alongside me. i get it. that's fine. >> there are few men i would ditch you for, but the treasury secretary is one of them. >> fair enough. i think i would probably do the same if it was theresa may. >> that's fair. >> that's fair. sara, thank you very much. look forward to that coming up on "squawk box." coming up here, it's been a volatile week for the markets. today banks and the fed are in focus. janet yellen is among the speakers and things to watch
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today. we'll get ready for it all with paul sheard. this man creates software, used by this bank,
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. welcome back. happy friday to you. we have the futures -- the currency board. the dollar continuing its strong week. up around about 0.4% against the dollar. decent move against the yen. well above 1.04. the pound slipping. joining us is paul sheard chief global economist at s&p. thank you for joining us. >> good morning. >> let's talk about the dollar strength and we hear from janet yellen later today. is it purely predicated on fed rate hike expectations or is there more fundamental strength in the economy that it's looking at? >> i think those two are related. the u.s. economy obviously has been doing better than many of the other major economies. unemployment is down. the fed has been holding back on
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rate hikes. i think the markets can see an economy that's set to strengthen in the second half. certainly given the problems in europe and with brexit and the u.s. is looking much more attractive in those terms. >> set to strengthen, but despite a massive downgrade in gdp forecasts from the imf. does that tally for you as well? >> those forecasts really are backward looking. the first half did come in weak, about 1.1. i think this year we're looking for 1.5. there's a base effect in there. it's all about the second half. we had the third quarter now looking better. looking out to next year. next year u.s. growth should be 2%, 2.5% range. >> the fed data showed loan growth with businesses, does that bother you or worry you through the balance of the year and what expectations are? >> again, i think the economy does look like it will strengthen in the second half of the year. the labor market is doing well. looking at policy as well,
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courtney, and what the fed is trying to do is juice up the economy. so, monetary policy is sort of one of the factors here. the fact that the fed is holding back, you might say does that mean the economy is weaker? turn that on its head, the fed is taking a fairly explicit approach of not wanting to take chances with this recovery and really try to juice it up. >> we have the prospect of the fed at some point hiking because inflation is picking up for the right reasons. is it plausible with the plummeting british pound that the bank of england might be forced to hike rates because inflation is coming through for the wrong reasons? is that something on the cards? >> i don't think that's on the cards yet. that's the nightmare scenario for any central bank. it's more of a '70s stagnation scenario. for the moment policymakers in the uk would be happy sterling made the move it has.
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this is the exchange rate doing its job. the exchange rate up front is really providing a better context for that to happen. >> these sort of short-term falls, self-proliferating falls, headlines around it, a slight overreaction at the moment? >> i think an overreaction is a good word. the uk, the brexit issue, this is the long game. policymakers have got their eye on the longer term horizon. >> what about the bank of japan? you have a note out there saying some things they're trying to do is attempting the impossible with monetary policy. why? >> courtney, the bank of japan is doing what it's done in the past, be a trailblazer. all of the unconventional policies over recent years have been pioneered by the bank of japan. here they go again. targeting the ten-year point on the yield curve and committing to overshoot inflation targets. the impossible is the sense
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they're trying to determine both quantity and price. the yield curve in terms of their monetary base expansion and also the ten-year point on the yield curve. you look into the framework and they have quite a bit of flexibility in how they'll do that. this is net-net, a positive move by the bank of japan, doubling down on commitment to end deflation. >> sum up your view on europe and growth there? >> we've taken the forecast down around 2% on a two-year basis for the uk. a bit less than 1 % for the eurozone. i don't think the economies go into recession but it crimps investment, employment and cop s consumption. paul sheard, thank you. about 20 seconds left, court. what are you watching? >> retail sales numbers. >> and, of course -- banks. >> banks. >> just 45 minutes or so left
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untim u until jpmorgan morning kicks off the numbers. that's it for "worldwide exchange." have a great weekend. "squawk box" is within a 1% difference in reliability of each other. and, sprint saves you 50% on most current national carrier rates. save money on yo phone bill, invest it in your small business. wouldn't you love more customers? i would definitely love some new customers. sprint will help you add customers and cuyour costs. switch your business to sprint and save 50% on most current verizon, at&t and t-mobile rates. don't let a 1% difference cost you twice as much. whoooo! for people with hearing loss, visit
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good morning. earnings and banks in focus today. kicking things off with jpmorgan later this hour. the results and market reaction. and a tax code crackdown. the treasury department looking to curb tax inversions. an exclusive interview with jack lew straight ahead. and chris rocklanding iland massive pay day from netflix. $40 million for two stand-up specials. "squawk box" begins right now. ♪ live from new york where
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business never sleeps, this is "squawk box." good friday morning. welcome to "squawk box" on cnbc. it is great to have you here, tyler. >> have you been in studio? have we done this together? >> i don't know you and i did this together. i was here a couple weeks ago, you were off, joe was off. went for the veteran right hahner ohahn hander out of the bullpen. u.s. equities slated for a positive open. the dow would open 69 points to the upside. s&p by 7, and nasdaq by 13. asia closing mostly higher after positive factory data out of japan. china up by 1%. hong kong, 1%. shanghai roughly flat. european equities, green across the board.


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