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tv   Street Signs  CNBC  November 18, 2016 4:00am-5:01am EST

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good morning. welcome. you're watching "street signs." i'm louisa bojesen. >> i'm julia chatterley. the areeuro slides to a 12-month low against the dollar. >> the euro area recovery still relies to a considerable degree on accommodative monetary policy. 30,000 job cuts worldwide. vw stocks bounce after the carmaker says it will make significant work force reductions and shift its
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strategy towards electric vehicles. cementing returns. lafargeholcim pledging to buy back stocks worth 1 billion swiss francs over the next two years, as the ceo tells cnbc he welcomes the republicans stateside. >> it's something that's bound to happen in the u.s. it will be a significant renewal of the infrastructure program. we see ourselves as a positive beneficiary of this. janet yellen signals it's full steam ahead for a december rate hike. sending the dollar to a 13 1/2 year high. the fed chair also downplays rumors donald trump's administration could push her out of her job early. >> i was confirmed by the senate to a four-year term, which ends at the end of january of 2018. and it is fully my intention to serve out that term.
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a warm welcome to "street signs" once again. happy friday. >> happy friday. this week has gone like that. >> i know. another one. our guest said it is five mondays until christmas. we'll talk about that shortly. let's talk about draghi. ecb president mario draghi struck a dovish tone in frankfurt. he outlined how inflation needed to be self sustaining before accommodative policies could be unwound. speaking at the euro finance week he reiterated his rational. >> the recovery remains highly reliant on financing conditions that in turn depend on continued monetary support. >> five mondays until christmas, james bitterfil joins us now. let's talk about draghi. he said a sustained rise in
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inflation needs unprecedented financing conditions and at the same time said stimulus withdrawal. in my mind that means continued qe. >> a few years ago he talked about well anchored inflation expectations. you could hardly say that's the case since august of this year. break evens have been rising p rapid rapidly. so he may want to wait longer before he wants to act, he should be getting pressure from the bundesbank to act somehow. early next year maybe we start to get some mentions about tapering. perhaps a bit too premature to say in december he'll start discussing this. >> will he extend qe in december? i think that kind of comes before the tapering question surely. i get your point about -- about inflation expectations, but at
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the same time we have a program that's running into scarcity issues. everyone is expecting him to extend. do you think he does that in december? >> i'm surprised he didn't mention the u.s. dollar in this respect. the u.s. dollar strengthened so much, that helped mario draghi out. he may use that as an excuse to say we don't need further qe. certainly the markets have been pricing further qe. >> because of these currency moves, a lot of that -- a lot of that has to happen quickly is taken off the table now. also if we are to see a change in the u.s., especially the expectations for u.s. fed hike have gone through the roof for december, but also for 2017. it wasn't all that long ago we were looking at less than 50% thinking the fed would hike once or twice in 2017, now we're looking for once or at least once, right? >> yeah. it's our suspicion that janet
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yellen's dot plot which says two rate hikes in 2017, there probably will remain two rate hikes but the markets will price in more. they already eluded to allowing inflation to run above that. so the dollar could be quite volatile because the market also start pricing in extra rate hikes and they'll be disappointed when they don't come. >> probably something janet yellen is struggling with. she has to price in what trumpnomics means, and the stronger dollar which kind of does the work for them. >> absolutely. no one knows about trumponomics, the fed has the same issue. give you an example with the infrastructure plans. i've seen one paper that suggested that he goes to the market with $160 billion and
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leverages this up five times to fund this 550 billion. this would be unprecedented to leverage government finances. >> jpmorgan asset management said the probability of a fed hike in december has been reduced after the election result and investors should be well diversified out of u.s. stocks. others say we should still be invested in u.s. stocks given this run. do we take profits? >> for us, yes. we think u.s. stocks have been really overvalued, because we were quite surprised by the market reaction to the trump win. they have emphasized the tax cuts and infrastructure spending and not thought about the damage to trade that trump is proposing, and also the damage to the geopolitical -- trump will have a challenge next year when he's inaugurated. will putin decide to test him.
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these are to the priced in. we could see concerns build. the trump moon may be over soon. >> i think it's a buying opportunity in gold, very quickly, why? >> in the run up to rate hike, gold always sells off. we're seeing that play out this year as we did last year. after rate hike, finally gold tends to perform well. certainly has historically. there's plenty of political issues in europe next year to cause markets andurrency volatility. >> james, thank you. james butterfield from etf securities. this friday, looking at european equity markets, just seeing more red out there. maybe just reversing some of the earlier trades we've seen during the week. showing the stoxx 600, off 0.3%.
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when looking at some sector moves this morning, also just a bit of rejigging. lookinged a mixed markets netanyahu. you have technology, travel and leisure, autos among the main gainers. oil and gas off, the price of oil down 1% or so. utilities and basic resources off by just shy of 2%. plenty of bigger stories. vw will be cutting 30,000 jobs worldwide at the vw brand. the german carmaker plans to save 3.7 billion euros by 2021 by reducing 23,000 jobs alone in germany. the company gained labor union approval for the move by agreeing to invest in electric and create rolls in that particular unit. the carmaker is holding a press conference taking plays i in wolfsburg.
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when looking at the numbers, we hear 30,000. and vw has 600,000 jobs worldwide. it's about 5% of the work force. >> that's about right. when you talk about the 23,000 jobs in germany alone, it's important to point out they would not be forced redundancies or mandatory. they're talking about phased early retirement redundancies through attrition. that's one key point. i'm sure that's how they got the works council on board. it's been difficult for volkswagen to make changes to labor agreements down to the lower soxony seats on the government. i was listening in to the press conference, a real clear message, this is about a fitness program, about the volkswagen of the future when you talk about a transition to electricification. it's about a transition, building job into electrification. a key component is the battery
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factory nearby which the works council wanted to secure because they want the jobs to be involved in the transition. >> which is maybe why we're seeing the stock price reaction initially positive. >> they're encouraged that they got the works council to agree to the challenges. the diesel scandal may have been the catalyst for this change. they've been wanting to boost profitability way before diesel case kicked off. there was some skepticism that diess could make a change with the works docouncil. >> mario draghi was just talking about a jobless recovery in europe, i know that doesn't necessarily apply to germany, but we're talking about a technological change, and 30,000 jobs being phased out and 9,000
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jobs being created as a result to electric technology. is that a problem for angela merkel? >> politically it's not helpful. for a long time before the diesel crisis, she was close to the volkswagen management. volkswagen seen as a symbol of german export prowess around the world. they distanced themselves in light of the scandal, but it hurts when you talk about a symbol of strength for the export economy in germany. but it's inevitable. it's not just germany. a lot of workers around the world are facing this transition, they have to cut costs if they are to remain autonomous. volkswagen says we would rather cut the jobs now through early retirement so this company can withstand what's coming ahead for the sector. >> wonder if others will do the same as well. >> it does raise the question. we heard from ford they're making changes to the profit outlook due to what it takes to invest in technology and others
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said expect more consolidation which often comes with job cuts, too. >> nancy, thank you very much. as always, get in touch. e-mail the show, streetsignseurope@cnbc. we are also on twitter, @streetsignscnbc, at @louisabojesen. will lafargeholcim get a boost from trump's mexican border wall. find out after the break. we'll be back in two.
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. welcome back. you're watching "street signs." live pictures from berlin where president obama is preparing to hold talks with his german, french, british, spanish, italian counterparts. merkel already arrived.
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renzi arrived as well. this is at the german federal chancellory. they will be holding talks there. this being obama's exit trip before he leaves office. alsomerkel will hold a news conference on sunday where she is expected to announce whether she will be running for a fourth term. lafargeholcim cut its nemedm turn outlook, however they plan to increase the dividend. so they are cutting medium term profit outlook and pushing cash out to share holders. aren't there better things they could be doing with that money
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to boost profitability? >> i put that question to the newly merged cement giant worth $41 billion, he said there will be money out there we can spend on acquisitions. that was one of his key promises to shareholders when he became head of the newly formed company. he said we will return cash to our shareholders, that's what they're doing, aiming for a payout ratio above 50% and increasing special dividends. that's the good news. the not so good news is the fact they had to cut guidance for ebita. that was expected because this company is now operating at a smaller size because of the 5 billion swiss francs in disposals, but some are still skeptical of those new targets, one at davie research who says the targets are a stretch when weak end markets are accounted for. they see continued overcapacity
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and energy cost headwinds. reaction to the share price, it may be some profit taking in there. shares in the company, they had a fantastic run since the surprise victory of president trump on the prospect of more infrastructure spending. shares up by 8%. profit taking may be the reason for decline in shares. naturally eric olsen, the ceo of lafargeholcim is excited about the ramp up in infrastructure. >> believed for a long time that the u.s. needs to increase infrastructure spending. in fact, that's very much on the table today. we believe lafargeholcim will benefit significantly from that. it's something that's bound to happen in the u.s. it will be a significant renewal of the infrastructure program. we see ourselves as a positive beneficiary of this. >> there's a lot of question marks as to how this will be funded. one avenue is ppps, public
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private partnerships. can that work in the u.s.? >> yes, i believe it can. it hasn't worked as well in the u.s. as in many other countries around the world. but it certainly is a source of capital and investment that we would look to have more of in the u.s. to fund the infrastructure. >> the flip side of the trump trade is possibly slowdown in the emerging markets and weakens of the emerging market currencies. that will also affect you in a big way. what's the netanya net of a president trump presidency for you. >> there's a real need for real infrastructure and a need for housing around the world, and for growing populations. that's our business. the growth potential of lafargeholcim is 60% of our spent business is in emerging
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markets, places like india which are bound to grow overtime to fill the needs of the population. >> some of donald trump's proposed policies are extremely controversial, such as a wall on the border of mexico. if he asked you to build that wall what would you say? >> we believe in infrastructure, we're interested in supplying the infrastructure needs. the real infrastructure needs in the u.s., the bridges, core roads, infrastructure throughout the u.s., there's a frietremend need for building there. >> bernstein ran some numbers on that proposed wall, between the u.s. and mexico, they would need 700 cubic meters of concrete, the main supplier may not be lafargeholcim but ironically the mexican cement giant, cmex. >> that is ironic. thank you very much. we'll see you soon again back in the studio on monday.
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>> it's because they're cheaper and aren't they talking about fencing now? >> they are. a fed rate hike will come relatively soon according to janet yellen sittiuggesting tha december meeting is still alive despite donald trump's victory. she also defend her own position along with the central bank's independence. during her testimony, she outlined her rational for sticking with the current rate path. >> if the fomc were to delay increases for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting. both of the committees longer-run policy goals. moreover, holding the federal funds rate at the current level for too long could also encourage excessive risk taking and ultimately undermine financial stability.
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>> the yuan plummeting to an eight-year low against the dollar on janet yellen's comments me commentsme commentsment. fears for trumpenomics cannot to intensify. james baino is the co-head from schroders. thank you very much for being with us. we just heard from the lafargeholcim ceo that emerging markets are well positioned for growth, and political changes. a survey put out by deutsche bank said they're convinced of emerging market revival. what are your thoughts? >> we are already seeing major emerging markets like russia, brazil and argentina are going
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from significant recessions in 2015 and 2016 to moderate growth in 2017. from 2017 we expect emerging market growth to be double that of developed market growth. >> for how long? >> into the foreseeable future. the headwinds are demographics and debt. emerging markets obvious i will have much better demographics, less debt. so structurally we should continue to see better growth in emerging markets absent a negative -- significantly negative market reaction to a new policy mix in the u.s. >> james, how about protectionist sentiment? surely that would be not a good thing for emerging markets. on top of that, people critical of the elements of capital market infrastructure that tends to be lacking in many of these markets. >> that's absolutely right. we think the worst hit is
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potentially asia. those countries run big current account surpluses, do a lot of manufacturing trade with the u.s. if protectionism is a cornerstone of u.s. policy going forward, that region, we think, will be the worst hit. again, there are significant patches of emerging markets with diverse export mixes that will be less affected by a protectionist u.s. >> what's vulnerable here are the open economies. i guess if we look at the bond market specifically, those with the highest level of foreign ownership, indonesia and malaysia. would you agree with that? putting all the things you discussed, is this a buying opportunity then and people are overreacting to the threat that trump and his policies represent to emerging markets? >> certainly we've priced in a reflationary/inflationary outlook for the u.s. well before
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a shift in policy. so, we think the market has probably come too far too fast. however, interest rate risk is going to be heightened in the future with additional fiscal spending in the world's biggest economy. having said that, there are significant opportunities in emerging markets with bonds that represent more credit risk, shorter duration bonds that still have a something can yield over developed market bonds. rather than long-dated bonds that have significant sensitivity to treasuries. so, emerging market currencies will certainly not do well in a strong dollar regime, which is what we're seeing. long dated sovereign debt will certainly not do well if the reflati reflationary themecontinues to play out, but there are
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opportunities specifically in markets where default risk will not rise despite what happens with u.s. policy and u.s. growth will benefit the entire world and emerging markets in particular. >> it also depends on to what extent we see real yields rise. if you look at the shift we saw higher in u.s. ten-years yesterday it was matched in inflation break evens. if you don't have a widening of that spread, ie real rates rising, you have to separate that out from a nominal yield rise which would have a far greater impact surely on emerging markets. >> right. we've seen emerging markets adjust to this. yields in local currency bonds have widened. yield s yields in dollar bonds have widened significantly since the election. so emerging market nominal yi d yields have risen significantly. in general for the asset class
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as a whole, inflation is actually declining. we've had emerging market currencies from june of 2014 to january of this year have their worst fall on record. when they recovered in 2016, it's led to a decline in inflation. if currencies can stabilize, real interest rates in emerging markets don't have to rise significantly. >> can i ask briefly your thoughts on mexico as well given that the mexican central bank hiked rates by 50 basis points yesterday. a lot of people anticipated they would hike by more. they didn't. they're trying to come to terms with this volatile peso after the trump election. mexico? >> the problem with mexico and the technocratic economic leadership is sterling there. they don't have a lot of cards to play with a significant policy shift from the u.s. 71% of their exports go to the
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u.s. if they jack up interest rates significantly, 100 basis points or more, they'll be seen as inducing a recession in mexico. if they do it incrementally, which is what they've done heretofore, they will be seen as not being aggressive enough to stem the currency decline. in a sense, they're in a no-win situation. we saw the mexican peso sell off, they don't have a lot of policy flexibility to deal with a policy shift in the u.s. >> james, great to chat to you this morning. take a look at world markets live, our blog throughout the day. you can keep abreast of the top trading and stories we're following. stay with us. we'll take a quick break. we're back in two.
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welcome back to "street signs." i'm julia chatterley. >> i'm louisa bojesen. your headlines this morning. the euro slides to a 12-month low against the dollar as ecb president mario draghi reiterates the need for continued monetary support. >> the euro area recovery still relies to a considerable degree on accommodative monetary policy. 30,000 job cuts worldwide. vw stocks bounce after the carmaker says it will make significant work force reductions and shift its strategy towards electric vehicles. janet yellen signals it's full steam ahead for a december rate hike sending the dollar to a 13 1/2 year high. the fed chair also down plays rumors donald trump's administration could push her out of her job early.
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>> i was confirmed by the senate to a four-year term, which ends at the end of january of 2018. and it is fully my intention to serve out that term. a team of rivals. nbc news reports donald trump is considering long-time critic mitt romney for a cabinet position. welcome back to "street signs." a look at u.s. futures as we head towards the u.s. trading session. we did close at or around near record highs for the session. three-month highs for the s&p 500. two month high for the nasdaq adding some 0.7. you can see a bit of softness here for the futures, down 31 points or so for the dow. let me give you a look at the european market session so far this morning over the last half
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hour. we've traded further to the down side. the ftse 100 off 0.6%. the key underperformer, the italian market down 1.7%. a quick focus on the italian banks as we get closer to that italian referendum and real concerns that mario renzi is actually -- sorry, mateo renzi will lose this referendum and what will that mean for italy and some decisions that the ecb takes. a quick look at the foreign exchange markets. the dollar trading at 13 1/2-year highs, that's the dollar index. the euro hitting 11-month lows. 106.02 the level there. dollar/yen higher by 0.5%. to give you a look at that donald trump trade, we have the dollar higher by the mexican peso despite that rate hike in yesterday's trading session of
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50 basis points. that rate higher by 1%. >> we've had market repositioning, political repositioning after the election. alex guntz is with us. as a fund manager, initially after the election, and indeed now as well, what are your clients wanting to know? what are the thoughts? are they looking to trade out of earlier investment or staying put? >> clearly a huge element of uncertainty in the markets. we saw this after brexit, see it again after trump. the important thing is to keep everything in perspective. there's always going to be a short-term reaction. i think what's happening at the moment is investors are willing to give trump the benefit of the doubt. and many people we engage with want to know what will happen when things actually settle down. >> yeah. you could argue there's a short-term trade, more tactical trade and a more longer term investment. exactly.
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our focus is keeping our eyes on the fundamentals. if you take a step back, what we saw with brexit and trump is that the pollsters got it wrong. what that says to you looking forward is that, okay, you mentioned the italian referendum coming up. a lot of big elections next year, there will be noise and volatility. when it comes to stock picks and where we focus on the funds we manage, it's trying to gauge the longer-term picture and disassociate one's self, step back from the noise. we had technology stocks having a bit of a torrid time after the le election results. saw rotation into the financials and materials, that reversed the remember sure in technology. did you see it as an opportunity to buy? >> absolutely. we've been a big fan of technology businesses for a long time. other main focus is on identifying future trends. things that will grow in importance regardless of what's happening to gdp, regulation,
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and government intervention. i think what you saw with a lot of the technology stocks was less a questioning of the fundamentals, and more investors saying this is a good source of where we can take profit, and actually put it into the shorter term areas like infrastructure plays, financials which is not the area we're trying to focus on. if you take a business like amazon, we think that's a really good opportunity. it's down something like 10% from the highs, a week today is black friday. last year sales were up 35% year on year. even just moving on from that sort of little data point, the story about online retail, cloud storage remains to our mind very, very much intact. >> we look at the last earnings they provided. we saw 52% of amazon customers are prime. that conversion rate slowing. as you point out, the web services are an interesting area. i think it's 55% growth there. even that over the last several quarters is slowing. i wonder whether we come to expect too much of amazon.
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>> i think it's important to keep in context this idea of the law of large numbers. actually i would contend that it's quite remarkable. amazon this year will do something like $122 billion of revenues. that figure is about 5% higher than where the street was looking this year. if you look at forecasts for next year, for 2017, you're looking at 20% plus revenue growth. any business of that size growing at that rate is growing comfortably into its multiple. i suppose the other way of thinking about it, look at the runway ahead. think about online retail. less than 15% of all goods purchased in the u.s. are done online. if you go to europe or emerging markets, that figure is lower. >> china. >> a friend of mine was saying her husband had a meltdown because they were in a store, he was trying to pay with cash. they wouldn't take cash. they only take cards. you highlight mastercard.
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>> it's the same story as with amazon in the sense there's a huge future trend, a huge runway. even if you take a market like the u.s. it's only about 50% of all transactions by volume done on credit cards or noncash payments. so that suggests huge possibility and potential. globally it's about 80% of all transactions are still done using cash. the great thing about mastercard, people think mastercard as being a piece of plastic in one's wallet, but it's the rails, i.t. infrastructure that allows payment to happen. it's all about trying to make payment as seamless as possible. whether that's pairing your device, putting new apps on there, chat box, mastercard is showing huge progress in terms of innovation. >> wouldn't you want to invest in the companies that do the immediate pay? >> near field communication. a lot of that technology, even
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if your tapping your card, the way that payment goes out of your bank account and into tfl on the underground in london, that channel is still basically controlled by mastercard. >> what about burberry? these latest results significantly flatted by the exchange rate benefits they got from weaker sterling. why do you like this one? >> berberry is interesting. on one side, it's about digital innovation. they were clear leaders there. earlier than many of their luxury peers, in terms of taking their business online, trying to make the experience totally s m seamless between the online and offline world. they built up a database of 9 million customers, they know their profiles. they can sell to them effectively. the interesting thing, why it's a stock we highlight for 2017, you have a new chief executive starting next year, new finance director as well. there's a lot of scope.
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burberry is a great business, but still so much more that can be done there. i would highlight shutting down stores, returning beauty to a licensing model, taking cost out of the business. bear in mind, this company has a healthy balance sheet. it has 500 million sterling of cash on the balance sheet. they're buying back shares. to wrap it up, there are multiple drivers ahead. >> you look at this business, wholesale revenue down 14%. licensing revenue down 54%. there's a number of reasons -- you mentioned beauty, too. that's an area that should be a growth business for them. it isn't at this moment. and it looks expensive. >> i would contend, the valuation is very reasonable given the prospects ahead, particularly what we care about as cash. cash is a more transparent metric than anything else. that cash gives burberry flexible. i think people are in little doubt of the iconic value of the
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brand. very few luxury brands speak to the british heritage that burberry does. there are a lot of positive things there. christopher bailey is a great designer, him moving away from an operational role back into design. having some very proven hands, the ceo used to work at celine, did a great job with geovinchy. so i think there's a lot of potential here no doubt. >> what level did you go long at? >> sorry, we've been invested in burberry since the beginning of 2015. >> we'll come back to this one with you when we see the change. >> absolutely. president-elect donald trump took to twitter to announce u.s. automaker ford would not be moving production from its plant in kentucky to mexico.
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working hard to keep ford in kentucky, however ford said repeatedly it has no plans to close any plans in the u.s. moving the plant abroad would breach the current terms with workers which does not expire until 2019. >> so it starts. he's claiming something that doesn't hold. they weren't going to move any way. japanese prime minister shinzo abe met with trump in new york for 90 minutes. following the meeting, abe told reporters he believed trump to be a trustworthy leader. keeping in mind also that the u.s. has 50,000 troops in japan. the president-elect has now made three official appointments to his cabinet. naming michael flynn as national security adviser, flynn served as the head of the defense inge intelligence agency and served
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in both afghanistan and iraq. he has drawn criticism for appearing alongside vladimir putin at a moscow gala, for refusing to rejected the use of waterboarding and for comments made about islam, very offensive comments. >> former republican presidential candidate mitt romney may be under consideration for secretary of state in president-elect donald trump's cabinet. the former massachusetts governor was an outspoken critic of trump throughout the campaign. tracie potts joins us from washington. didn't he call him a fraud and a phony, tracetrace? do you think they can work together? >> they play have may have to. they have a meeting on sunday. some names coming out of this to sit down with donald trump are surprising. perhaps none more surprising than mitt romney popping up as
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possible secretary of state. three other names on that short list so far. again, nothing official. while that's happening in new york, mike pence, the vice president elect is here on capitol hill. essentially trying to get both republicans and especially democrats behind their first 100 days agenda we saw him with nancy pelosi, for now the minority leader on the house. they are talking about areas where they may be ability to cooperate, one big one is infrastructure, fixing roads and bridges in the united states that is believed to create jobs. >> when looking at these potential cabinet members. steve bannon on one side, general flynn on the same side one could argue, having tweeted earlier this year that the fear of muslims is rational. would it make sense for trump to have somebody like mitt romney in the mix to balance out what some might see as a very, very,
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very, very far-right cabinet? >> what he's going to need to get his agenda across here on capitol hill is unity within the republican party. there's still republicans who are not sold on donald trump. so bringing in people who have opposed him in the past, we've seen quite a few of those headed up to new york. people who have different views could help to do that. >> can i ask you a quick question about ford, where trump suggested that he convinced the ford boss to keep jobs in america, the ford boss saying this was already the plan to 2019. does that reflect badly on donald trump here or do we just continue to skip over these things? >> ford also did say in a statement that they're encouraged by what they think are going to be policies by the trump administration that encourage u.s. competitiveness. so, certainly there seems to be some indication -- they say they have been engaging with the new congress, any engaged with trump
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and his campaign. so certainly some indication there that they are encouraged by what he's talking about doing. >> great to chat to you. tracie potts, nbc news. that's the consistent message isn't it? if we look through everything we hear, whether it's world leaders or corporates, they are all saying they're comforted by speaking to him. i don't think we should disregard this. >> no. no. no. i was thinking more about this is the post-truth phrase that has shown up as the word of the year. >> welcome to politics. >> facts don't matter, but it's all about emotion. >> facts do matter. >> apparently not with the ford story. >> yeah. that's the question we asked. that's an interesting one. yes. at least some people will comforted by what they're hearing by donald trump relative to what we got before the election. coming up on "street signs," you can't have your cake and eat
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it. germany's finance minister warns the uk again that it can't cherry pick the terms of its brexit deal. we'll have that and more from the euro finance week in frankfurt. .
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hi everybody. welcome back. you're still watching "street signs" on cnbc. during a join press conference with president obama, angela merkel defuderefused to specify whether she would be running for a fourth term. german media reports she could make the announcement as early as sunday. >> when it comes to brexit, there is "no ala cart menu, only
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the whole menu or none." that's what wolfgang schauble told the finance times newspaper. he argued the uk cannot expect a special deal on migration if it wants to remain part of the eu common market. we've heard that before. mario draghi struck a dovish tone during his speech in frankfurt. he outlined how inflation needed to be self sustaining before accommodative policies could be unwound. he detailed his rational for continuing easing policies. >> the recovery remains highly reliant on a constellation of financing conditions that in turn depend on continued monetary support. >> the ecb president also cautioned against complacency over the strength of the recovery. >> we remain committed to preserving the very substantial degree of monetary accommodation which is necessary to secure a sustained convergence of
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inflation towards a level below, but close to 2% over the medium term. we cannot yet drop our guard. >> now, at the same time, turning to the banks, he described the tough trading conditions for lenders across the continent. >> even though the you're rov area banking system is today more resilient, it's profitability remains a challenge. one that is weighing on bank share prices and raising the cost banks face when raising equity. it has, in fact, been a negative gap between euro area banks return on equity and their cost of equity since the 2008 financial crisis. while the level of bank equity prices is not per se a matter for topolicymakers, in so far address it raises financing
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costs for banks, it could hold back the recovery. >> a lot going on in your neck of the woods. you have a dovish tone struck from draghi, schauble taking a hard line on brexit, and speculation about merkel and this fourth turn. >> we have so many topics here at the euro finance week, especially on friday when everybody is coming into town. schauble speaking at 3:00, draghi comments, which you were just talking about, and just now, mr. wideman is starting to speak about his idea of monetary policy. let me recap the latest of what mario draghi was saying. for him, he was quite dovish, quite optimistic that -- not optimistic, he was concentrating
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on the fact that despite the recovery we're seeing in the eurozone, this recovery is so contingent on the monetary policy the ecb has in place we cannot talk about a self-sustained economic recovery. having said that, he addressed as well this year is the first time that european gdp has reached pre-crisis financial crisis levels. it took the economy so many years, 7 1/2 years to recover from that shock. on another note, the big thing is people are talking about brachial plexus, the whole development would mean for frankfurt, and whether a lot of other bankers are coming, financial institutions are coming with their headquarters. yesterday i also spoke to the economy minister of that region of hesson, where we are located
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now, about what he thinks brexit will mean for frankfurt. take a listen. >> oh, there's a lot of interest in frankfurt as a financial center because we are a major financial center. not as big as london. london will stay one of the globally most important financial centers, but it's likely that it's not inside the european union anymore. and of course everyone who is making business with the remaining eu 27 and doing this business out of london, of course is now having questions about the future, thinking about possible alternatives. frankfurt is quite good in this discussion. we are in the middle of europe, in the middle of the biggest economy of the european union. we have good infrastructure. people who know the business, and we have received quite a
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number of people in the last weeks. who are looking around europe, at the end also looking at frankfurt. >> let's concentrate on recent developments what you're hearing from the people you're talking to. are they already making concrete plans to move people to frankfurt? >> yes, every major company has a brexit team. every major company is looking for alternatives. of course they're not starting to move now, but they're thinkin thinking what alternatives there are. they're looking to paris, dublin, to frankfurt, to other cities. i'm sure that within the next month the decision process will begin. we know that the british government said that they'll
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trigger article 50 of the lisbon treaty in march. but -- and then the two-year period starts. but, of course, if you're a company, you cannot wait for two years to make a decision because you have to make the decision now to be sure that in two years you're ready to act. >> so, of course it's not only about jobs, it's also about the real estate mark and what this means for the german and frankfurt real estate market. back to you. >> thank you very much. to the fed, a rate hike will come relatively soon according to janet yellen. steve liesman has the details. >> reporter: janet yellen cast aside downs she could resign under the new president saying she would complete her term. >> i was confirmed by the senate to a four-year term, which ends at the end of january of 2018.
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it'sintention to serve out that term. >> reporter: her comments were the first since the campaign in which trump criticized her. she also spoke out against the president-elect's plans to scrap dodd-frank saying she did not want the clock turned back on improvements to financial regulation since the fim crisis. janet yellen cautioned against plans by trump to enact massive tax cuts and huge spending programs that could ramp up the deficit. >> such a package could have inflationary consequences that the fed would be -- have to take into account and devising policy. >> reporter: that could mean faster rate hikes from the fed but janet yellen believes the economy is already near full
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employment and doesn't require stimulus. the fed could be headed with a confrontation with the new president if he slams on the gas pedal with fiscal policy and the fed thinks it has to hit the brakes. janet yellen gave her strongest comments that the fed was set to hike in december. she said a rate hike could be appropriate relatively soon and warned of dangers of not hiking fast enough, saying that could encourage excessive risk taking. >> the weekend upon us. that's it for today's show. i'm louisa bojesen. >> i'm julia chatterley. "worldwide exchange" is up next. have a great weekend.
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good morning. investor s poring record amount of money into stocks following the election. sales force soars. the cloud company posted better than expected results, and sets an ambitious $10 billion goal. and could mitt romney, one of the president-elect's biggest critics become secretary of state? it's friday, november 18, 2018. "worldwide exchange" begins right now. very good

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