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

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good morning, everybody. welcome to this special edition of "street signs." renzi's referendum, we're live from london and rome. i'm louisa bojesen. >> and i'm caroline roth. these are your headlines. >> reporter: prime minister renzi said to resign after the constitutional form is rejected. investors shrug off the result taking the ftse higher awaiting
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next steps. and reports suggest that bnbs will meet with investment banks to review the $5 billion cash call today. and italy's five-star movement is saying they are ready to form a government in the wake of the vote. they claim that democracy has won. but the populist wave breaks in austria as voters reject the far right candidate handing victory to the other candidate in the election runoff. good morning, everyone. we'll look at the points out of the eurozone, 53.8 versus a forecast of 54.1. slightly lower than expected. the numbers is up from the
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previous month. i should also point out that the italian sector saw the momentum out of france and germany. all the worries about the eurozone and economy are not valid if you look at the services sector entirely. solely. >> you say that, but we are also seeing uncertain any the u.k. new car sales to individual consumers falling for the eighth month in a row. compensated by a rise in business demand. so we are seeing a delayed reaction, maybe, to the political uncertainty, the election uncertainties as well. not really a delayed reaction when it comes to the markets out there. we initially saw a little bit of a lower open. the italian banks were down substantially, initially, after this referendum result here in the early morning trade. but now we have reversed and are higher by 1.5% on the stoxx 600 opening in negative territory. we are seeing a swift recovery
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taking place this morning. the ftse is outperforming by 1.5%. the xetra dax is up, too. we'll glance at the banks from early morning trade. a number of them trading in positive territory. bnbs is higher and sao paulo is higher bearing in mind how much they are worth per share. nevertheless, you're saying a lot of the italian referendum result was already baked in with a no result. >> and worth noting that last week the ftse in italy rallied 3.5% and still is the worst performing european market. let's get to the story, matteo renzi said he'll resign. nearly 60% of voters rejected his proposal. renzi this afternoon will meet
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with his cabinet one last time before tendering his resignation. speaking in the early hours of the night, the outgoing prime minister says he takes full responsibility for the defeat and that he leaves with no regrets. >> translator: it's clear that my experience in government ends here. tomorrow afternoon i'll meet with my government and thank my colleagues for this extraordinary adventure, tight-knit and solid team and go to hand in my resignation. let's go out to julia covering this story for us live from rome. julia, not an entirely unexpected outcome for this referendum, but what is the reaction on the ground? >> reporter: not unexpected at all, caroline. it was just a case of whether or not we could believe the polls that you quite rightly pointed out a resounding definite rejection of prime minister renzi and what he was trying to achieve here. the best way to express this is
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the image captured by the press here. this is a left-leaning paper. as you can see there, it's saying the battle of renzi for the constitutional change, no! you can see renzi with his head in his hands. obviously, he said as well he was going to resign and will do that today, as you mentioned, too. i want to show you this, it's a little cartoon image, but i think it captures as well the challenges that renzi and his party face given the overwhelming rejection in the clubbing together of the other political leaders to oust him here. this has renzi tied up in knots. now they say we have one or two knots to sort out here, which is the understatement of the year. the market reaction is interesting, we were questioning on friday to what extent this was already priced. and i think what we have to say today is we don't know what is going to happen now. renzi is going to submit his resignation to the president. the president could reject it,
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in which case renzi stays the head of the party for the short-term. we have to see confidence votes in him. but given the negative sentiment against him, i think it will be a tough one. then we have to find out who is then going to run the party and run this interim government. so as far as the market is concerned, i think we'll be in wait-and-see mode who ultimately steps in. and any headlines on the bank and interim. >> julia, thank you very much. julia chutney joining us from rome. we'll cross back out to julia in the next half hour. richard kelly is joining us from tdc securities. good morning and welcome. and we have robert o' daly here as well. are we supposed to look at stocks and bonds in the reaction as how worried investors are with regards to this no result? >> i guess yes and no.
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the result itself was pretty much priced in. it would have been a shock if yes won and it changes the probabilities now. what you need is government support in the italian banking sector. those odds are probably higher now which could be a positive for markets. and maybe the ecb gets into the market a little better as well. >> is it positive for the italian banks if the leadership knows they have to push on to see it stablize? >> it's a bigger risk because you have political log-jam. nothing can really get done. we have u-credit trying to raise a deal. the risks are higher now, but in the longterm what we ultimately needed is more government support and to get around the eu's bailing restrictions. so in a sort of perverse situation, you have made things better. >> robert, we're used to political instability in italy. this is a country that has had
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64 governments in the last 70 years. we have seen more government instability over the next year or so, that wouldn't be new, that would be more of the same. why be worried? >> yeah, definitely there's an aspect to this that you can say maintains the status quo so we have a bilateral system that we had before the referendum. however, i think that there is uncertainty because of the populist life sometime movement. renzi's party is upset by the results. the size of the no victory is quite significant. and the other aspect is that it disposes any further political institutional reform for, i would say ten years. for the last major constitutional reform attempt
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was back in 2006. >> it is interesting, we were listening to the rivals at the finance minister's meeting in brussels. do you agree or disagree, because the markets are muddling the two? >> i think there is a risk of them becoming intertwined, particularly because of the lifestyle movement. and the lifestyle movement will get a boost. and the movement has said if they get into power, which i don't think will happen again, it's just that i think all the other parties will band together to try to keep this going on. but they have said that they will put membership views to the referendum. and as referendums go, the outcome can be uncertain. >> blue the devil is in the detail. because now you have a new prime
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minister coming in who is focused on the electoral law essentially, you're talking a five-star movement, but in essence the bous in seats go to a winning coalition as opposed to one particular party. they are pricing it more to a coalition party, but it wouldn't dp gain the power that a lot of people initially thought it might. >> it will probably move to more of a representation type of system. and that will allow other parties to prevent the lifestyle party from becoming stronger. >> you look at the separate chapter called banks, public services, all valid regards when it comes to italy, but do we need to worry that the interim prime minister will be so focused on the electoral law and
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the political changes we could risk stagnation or see italy having to go through a really difficult time from the economic standpoint? >> we already have stagnation. that's part of the issue and the big difference between this and something like brexit. this was a vote for the status q quo. we are not getting any better. the issue when looking at this where a third of the loans are non-performing, it is something that needs to be addressed and is holding back the reform and the rest of the banks. if the markets deteriorate, they now in italy don't necessarily have the ability to move as rapidly against it as they should. and one of the solutions they wanted to use isn't potentially available now, because if you're going to try to bail in that bank, two-thirds of those investors are retail investors, which will just fuel the populist anger. so there's no easy solution domestically to this issue. >> robert, this is another warning shot for brussels. is there anything the brussels
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establishment can do to stop this wave of political populism in europe? >> it's a very difficult question. i suppose they could, you know, less austerity, less focus on austerity. prior to the referendum, there was a spat between renzi and brussels over not having 1.5% gdp difference in their budget plans for 2017. i think that that contributes to populist pause. >> robert, thank you so much. robert o'daly. i just want to bring you comments coming from the ecb board member from austria. he says italy's problems can be solved. and he says, on the whole, markets have react ed positivel.
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i think there are a lot of people who disagree with him on that. >> and he's also talking about how yesterday's us a trian presidential election result is a format in brussels. they are going, at least austria, we didn't see a loss of power there. they must be saying that. >> this is not the most systemic country, if you will. this is not the most important election. it was just a president's vote, not even the chancellor vote. the president has to have a largely ceremonial role. >> in terms of europe, this is what we're hearing. interesting, we have not seen that much of a move in the euro/dollar. >> at one point it was down 1%. now it's trended some of the losses down 1%. why do you think it was not that big of a move? >> well, a lot of it was already baked in. we have seen the euro moving lower since early november or late october. the euro has been moving lower now, and we have not seen a
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massive knee-jerk reaction in the euro. initially we did, but not a huge massive move on the back of the italian referendum move. e-mail the show, the at dress is streetsignseurope@cnbc.com. we are also available directly. still coming up on the show, nothing left in the tank. more political resignations. we'll have the latest on the shock resignation of new zealand's prime minister after this short break. we'll be back in two.
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new zealand's prime minister has announced his sharp resignation saying the time is right to leave politics. john key has been in power since 2008 and is backing joe english
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to take his place. he said he's got nothing left in the take. how are the asians faring, do they have anything left in the tank? >> not a whole lot because the broader regional markets were affected by the italy news and the resignation of prime minister matteo renzi. but the resignation of john key was very much a surprise. and the new zealand stock market was down on the italy news. after john key made his announcement, it ended the session lower by 3/4 of a percent. john key said he needed to spend more time with his family. and moodys said this will not affect the sovereign credit profile. in fact, fiscal consolidation has been very effective and gdp has been broadbased. qp in new zealand was running at
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3.6%. we have central banks in focus here in the asia pacific region. we have rba meeting tomorrow and the asx 200 down. the nifty turned positive as they look ahead to the rbi meeting on wednesday with many citizens hoping that the rbi will cut interest rates in order to alleviate some of the short-term pain that many citizens have been feeling with the demonitization drive. we'll look at the hang seng. after a two-year delay, mainland investors can pick from 400 listed hong kong stocks and international investors to pick from 900 or so. those are mostly tech-related or health care-related. the new economy, new china stocks. but there was much more activity going in the direction of hong
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kong with much more interest in hong kong stocks today. that's a look at how things are sit right now on this asia pacific region on this busy monday. thank you very much. francois hollande says that the vote could be another source of uncertainty and the bank will closely monitor the circumstances. he added he was confident in the eurozone and euro currency. richard kelly is joining us from td securities. i want to come back to the italian banks briefly because a lot of people are saying they think they have to do a recapitalization, all of it. others say they look cheap at the moment and long-term they believe italy will have banks in the future if you look at the long-term. the ecb is here stepping up
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support in more than one way if need be. and it would be at the place to invest. do you think it's too early to get into these penny stocks? >> across the banking sector, you're looking at 15%, which is about consistent with where the economy is. if you were getting some sort of growth or seeing traction from ecb policies into there, you would be seeing the banking sector catch up. there's been a lot of focus on the fact that the european financials have rallied over the last few months while the italian financials haven't. there's a lot of uncertainty and a clear measure how much uncertainty is there. that gap has to be made up once italy puts into place the proper policies. >> what about the shift to the right as well? how much of a consequence will that have on trade and markets? are we going to see pulling back in terms of investing? or will the trump trade continue? >> i think the issue is sort of
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protectionist trades are the same as free trades, in that it takes a long time to see any of the drags and whatnot going through there. so the issue is, if you're a domestically-oriented economy, you tend to do better off in the short-term. but anything beyond that is a long-term trade to put in place in the market. >> i just want to jump in here with comments coming from the eu. full confidence in italian authorities is being said and he's cost that short-term measures can be made for greece. everyone is very much talking about the shocked resignation by mr. renzi. i want to come back to you, richard, what does it mean for your the euro investors right now? >> when you look at just trading here, the euro, in spite of what
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could be a shock that scared foreign investors away really had a difficult time trading further on this. when you look to the ecb, they are much closer to tapering than not and trying to get out of qe than not. even if it takes 12 to 18 months, it is difficult to find an argument to be an extremely short require owe from the level here. it is much easier to see the slow gradual rise. >> is the market ready for tapering? you say they are probably going to do it. most people in the markets wouldn't think that the ecb has the courage to do that, even though inflation is rising to what, 0.6%. even though growth is improving. even though many of the fundamentals are on the right trajectory. they would think that the ecb pulling the trigger now would be too premature. >> it is very simplistic. but if we strip the political uncertainty out and say, where is the eurozone and the economy itself? it's ready for tapering and not in the position that it continues to need 80 billion a month for buying.
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later in politics, when is it appropriate to message that? when is it more inappropriate to run at this pace than gradually in the market. we saw squeezing because of what qe is taking out of the system. so because of the political uncertainty, they will probably try to buy as much time as possible. it's probably close to a coin flip whether they punt that to march versus a small extension to june. but i think people in the market that are looking for the ecb to cart launch an extension of $80 billion through the end of 2017, i just don't think the ecb is there. >> i still disagree and think we have seen a muted reaction in italy. a massive reaction on trump from the beginning of the member where we traded a lot lower, but the actual reaction to italy seems like it is priced in to me, even though a lot of people are saying we could be heading to parody. >> there are a lot of steps to go on to get to the downside scenario. you need the italian banking sector to collapse. that gets aggressive liquidity
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support. you need m5s to get powers and referendums. that's a two to three-year process. >> are we going to hear a lot from the ecb this week with details? >> i think you will hear the operational details take place to make that sound as dubbish as possible. i think they will leave things open. that's the issue, will the market read it as open-ended so we have relief that the ecb is here relieving us? that will come down to how draghi messages it. >> richard kelly joining us from td securities. we need to take a short break. check out world markets live while we are on our break. our blog that runs throughout the entire european trading day. we are all on twitter. and we'll see you just after the break.
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welcome to this special edition of "street signs." renzi's referendum, i'm caroline roth. >> i'm louisa bojesen. these are your headlines this morning. >> reporter: investors and italians vote no. prime minister renzi set to resign after a whopping 60% of italians reject his efforts of constitutional reform. the markets shrug off the results sending the ftse soaring
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as we watch this make news. banking stocks are staging a dramatic comeback, but reports say that bnbs will review the future of the $5 billion cash call today. and italy's five-star movement is set to form a government in the wake of the vote saying democracy has won. and breaks in austria. voters rejecting the far-right candidate handing victory to a pro-european environmentalist in the election runoff. hi, everybody. welcome back. we got more data hitting our wires. we are talking about the strength of the eurozone. we are looking at the markets, eurozone november pmi is 53.9. that is the highest we have seen since december. so we are growing at the quickest pace this year during the month of november. the firms are also coming through to raise their prices faster than we have seen over
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the past five years according to this set of data. the final composite outlook prices are 56.5, that's the highest since august of 2011. and by and large, they are benefiting from the weaker euro. that's definitely having an impact, too. >> the u.k. data, november services pmi came in at 54.2 versus a forecast of 54 -- came in at 53.2 versus a forecast of 54. there you go. sterling very dollar 1.2725 unchanged on the way. we'll look at the markets, the u.s. futures look like this after we had a fairly flat end to the week last week. the s&p 500 is up ten points. the nasdaq is higher 26 points. so a positive tone across the european session, that might also translate into u.s. trade. and we'll come back to europe
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because initially we saw that knee-jerk reaction, the sell-off right after the start of the trading session in response to the referendum outcome in italy. the ftse mid was down by 2% to 3%. now it's staged quite a remarkable turnaround up by 0.2%. the cac 40 higher by 1.3%. wow. look at the xetra dax in germany that is up 1.63%. now investors see this as a buying opportunity. in terms of the currency markets, we saw a decline in the euro/dollar when we first got the results of the referendum and renzi's resignation. it was down 1% at a two-year low. but now we are only down by .24% at 1.0643. and here's what is happening in the bond markets. we are seeing quite a lot of selling, specifically in the italian pain we are the yield spiking by six or seven basis
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points. at one point it was above the 2% threshold, but now just below that. well, the italian prime minister matteo renzi is resigning after a crushing defeat in the italian referen m referendum. more than 60% turned down his referendum. the five-star movement said it's ready to govern following renzi's resignation. they have called for immediate elections after declaring that democracy has won on a blog. he added five-star will begin to form a cabinet team next week. that movement campaigned heavily against the referendum for months if you remember. julia is joining us once again from rome. julia, we were talking to our guests about whether or not this is a surprise. it really isn't a surprise, is it? we were an tips paticipating th
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vote. >> reporter: we were anticipating the no vote according to the polls. but given what we have seen from brexit and donald trump, there's skepticism about whether or not the polls were right. so you had to be a bit cautious here, but the market certainly has put the ftse under pressure. euro is down 20% coming into this. the banking index, we know that was also under water. the stock exchange ceo was here last week saying there were colossal shorts on stocks. so i think seeing a bit of a muted response makes sense because yes, we've got the no vote. yes, prime minister renzi in the small hours of this morning saying look, he's going to step down today. now we have to wait and see what happens next. and that's the critical point. renzi's going to go to the president today and hand him his resignation. the question, is does the president accept it or reject it? if he rejects it, we need a confidence vote in particlement. but given the overwhelming negativity of other leaders of the parties here who voted against trying to oust renzi, it
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is tough to see him passing that. ultimately if they don't see that resignation accepted and it's rejected at this point. then we focus on who will replace renzi. everything i've heard from the government and the foreign minister was that little would change for this government. they would try to maintain some element of stability as soon as they can. but that is just going to take some time and some negotiations, discussions behind the scenes. so it is just a case of waiting to see which way well and how quickly they can form a temporary government here. >> julia, fast-forward to the next round of general elections. maybe february 2018, what happens if the five-star movement comes into power? because they have said they want to exit the eurozone and they want to stay part of the eu. that is a very muddled response to the eurozone's problems. >> this is a critical question. i'm glad you asked it.
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people weren't voting no to oust renzi but they were afraid the s constitutional reform could lower government in the future. what we are going to hear in the next few days is the constitutional court ruling that they don't believe the current electoral government works. and every party here has an incentive to change the laws to make it tougher for the five-star movement. they would have to win by some kind of landslide in the future. if we hold elections here next year or in 2018 depending on how long the interim government, if we get it last, so actually this referendum result makes it more difficult for the five-star, not easier. and i think this is very important. and as you pointed out, yes, they have talked about holding a referendum on euro membership. but that is illegal under the current constitution. and everything that we have seen over the past months and this referendum just shows you how difficult it is to change the constitution here. so i think that is a pretty
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remote tale risk at this point, though we should be talking about it just to say it's a possibility. but i think what we're most likely to see here is some kind of temporary government in the interim. >> yujulia, thank you so much. we are hearing more from the finance minister's meeting in brussels. he spoke to his italian counterpart and italy urgently needs a functioning government. and he said we should be relaxed on italy. and there's no reason for a cris crisis. this is according to mr. schaeuble. that would be the case, louisa, if a new care-taker government comes in minus renzi. that seems to be the major premise in the market right now. that the care-taker government can continue what renzi has been doing but he won't be a part of
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it. >> yes. and also the whole switch between the economic strength or lack of strength in italy and the focus of politics in this new electoral low. it will be interesting how they manage to do both at once. italy is not exactly strong right now looking at economic data. leaders from across europe have welcomed the pro-european green party that beat the leader of the far-right party. french president hollande thanked the australian people for choosing openness while the vice chancellor said the result was a, quote, clear victory for reason against right-wing populism. and louisa, something i pointed out before on the show is that the president's role is a largely ceremonial role. yet at the same time it sends a message to the rest of the world they are not choosing someone's president who is on the far-right spectrum of the political scene.
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>> and it would have been the first time for that. this would have sent a shifting signal to the rest of the world with regards to europe's political leanings as well. i still think the margin of victory is super important. if you look how much each of these are at, almost half of the population still sides with a far-right president. >> and i think you make a very important point. if they went to the pollsters today, the free dam party would get 35% of the vote. that's in a parliamentary election. with that, they would have a seat in government and be part of government.
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and that, in a way, if if you're concerned about bleach from the politicians, that is scary. he will have to try to address the forms and increase the pace of reforms and fight against the far-right reach. >> i'm super happy to hear their opinions, maybe one is wrong, but it is interesting because i'm assuming 50% of people watching would vote for a far-right leader or whether to leave the european union. but we are going to be looking at this long-term. get your e-mails through. we're both on twitter as well, it would be really good to hear from you if you are in the camp
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voting for the far right. moodys said the outlook for china's banking system is negative. while the ratings agency expects government support to the remain strong. support for smaller banks will become more selective. and moodys says they will watch the numbers. did china ask us if it was okay to tax our products? according to the wto, the u.s. has tariffs between 2.5 and 2.9% on chinese goods. so that is his means of diplomacy. that's twitter. >> it is twitter. meanwhile, the u.s. vice president-elect mike pence called the taiwanese president
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saying it was a courtesy call. the first since america broke formal diplomatic relations with taiwan in 1979 and has sparked outrage from china. jennifer johnson has the latest from washington. >> reporter: as donald trump works on his cabinet picks at trump tower, his team depended the controversial phone call with taiwan's president. >> all he did was receive a phone call. he's aware of what our nation's policy is. >> reporter: the call angered china's president. the u.s. broke formal relations with taiwan four decades ago as part of the recognition of china. but mike pence says it was simply a courtesy call. >> she reached out to the president-elect and he took the call from the democratically democratically-elected leader of taiwan. it's more than 50 phone calls the president-elect has taken. >> reporter: after celebrating carrier's decision to leave a thousand jobs in indiana and not take them to mexico, trump took to twitter on sunday promising a 35% tax on businesses that leave
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but then try to sell their goods back here. trump says please be forewarned prior to making an extensive mistake. the green party candidate jill stein's character is still strong. >> we are saying we will not be intimidated or frightened by having to jump through all the legal hoops. we say, what is donald trump frightened of? >> reporter: jill stein will make an announcement in front of trump tower today. meantime, we have exand the ed meetings with the former mayor of new york, kellyanne conway says more men were under consideration for the post.
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john bolton, jon huntsman, rex tillerson and joe manchin. mr. tillerson will meet at trump tower on tuesday. and we are 4 1/2 hours away from the markets opening in the states. we'll look at the u.s. futures to see what is happening in the trading. it's wide open on the right-hand side of the screen. dow jones is being call ed one f the biggest to watch. you're watching "street signs."
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welcome back to the show. the italian prime minister matteo renzi announced he'll resign after the crushing defeat in the constitutional
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referendum. nearly 60% of voters rejected his proposed reforms with a turnout of more than 65%. one of the highest for a referendum in italy. we'll get more reaction from the continent, nancy is in brussels. what have the finance ministers been saying there? >> reporter: well, caroline, it's been a large show of support for the italian government. the message we have been hearing from finance ministers entering their regular meeting in brussels is they are confident the italian government will have a smooth transition of power. and they have been reassured so far by the market response this morning. a lot of discussion here that this is an italian issue, not an eu issue. that may come to the surprise of many looking at this as yet another indictment on a leak in brussels in the aftermath of brexit, especially when you look at the rhetoric we have been hearing from the five-star movement in italy attacking precisely that. the eu project, they are saying they want to take that control. so i had a chance to speak to
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the eurogroup president and asking him if this concerned him as we get close to big elections next year in france, germany and the netherlands. take a listen to what he had to say. >> everyone who is sure about the outcome of the elections in germany and france will probably be wrong. it's very hard to predict. the only thing we know is that they focus much more on the move than some years ago. and, of course, they are in critical fluxuation. we are coming out of deep crisis that has affected the lives of many and they express that concern at election time. so i think for us as politicians it is about showing prospective again. showing there's a way forward, a socially and economically positive way forward. >> you worked quite closely with the finance minister that has
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been named as one of the potential successors to the italian government. would would that be encouraging to you? >> as i said, we'll have to wait and see the steps that we are taking in the certain weeks and months. it's not up to me or the european politicians to say anything about that. italy is a strong democracy to make its own decisions. >> do you see the ecb taking steps to secure financial stability? >> so far the markets have reacted quite calmly. so here again, it's too early to say if this is a market reaction, it doesn't seem to require any emergency steps. >> reporter: overall, they are striking a confident tone and going to great lengths to be
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sure no parallels are drawn between the brexit vote and the italian referendum. they want to make it very clear, they see this as a domestic issue. remember, though, this meeting was originally drafted to be about greece. they are talking about a second bailout for greece and a lot of optimism from athens. they will get a sign-off on short-term debt relief. yet we have heard disagreement from that coming from the german finance minister into the weekend. i had a chance to speak to the eu economic commissioner who sounded more confident to expect that to come through, and i asked him whether or not if the sheer headlines and concerns around italy will increase momentum for that. expect more developments on that coming out this afternoon, but here, the finance ministers are sounding rather optimistic of what they say is too early to tell about the situation in italy going forward. italian bank unicredit entered exclusive negotiations regarding the sale of pioneer.
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unicredit is looking to sell the group to strengthen the balance sheet as part of the strategic plan announced next week. previous reports said amundi offered more than 3 billion euros for pioneer. shares of the swiss biotech giant actelion are in the news again playing down speculation that the pharmaceutical company will bid on actelion. and talking about the outlook for m&a. why the 20% fall? is it down to politics, market volatility? what exactly are you seeing?
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>> good morning, first of all. we feel that this has been a pretty good year for m&a. the 2016 year was a huge anomaly. 2016 was the best year for m&a. we are forecasting 2016 will be the third best every year. and what i think is extraordinary is that we always talk about the correlation between confidence and m&a. 2016 has been a terrible year in terms of confidence. we started with hard or soft crash landing in china. what has happened to interest rates, brexit, trump, geopolitical terror im. and the fact that in the midst of all that we ended up with the third best year for m&a makes me feel good about this kind of market. it makes me feel that it is safe, there's longevity to this market. because it is void by very strong fundamentals in terms of companies wanting to support the still weak signs with activity. and also the sources and cost of
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funding is very low. >> the cost of funding is absolutely key, but it is going to rise you should the fed 25's price points for december. we could be looking at two or three more hikes for next year. does that mean that the group rises. >> i think we are feeling more confident about the recovery and businesses. so i think that rate increases means stronger economy, means more confidence. the other thing you pointed out, if rates increase by 25 to 50 bits, it is a small all-time low almost for levels in capital. >> that is super interesting that chinese m&a has been a story where you point out from china to europe and the u.s. as well. do you think that is going to
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continue? >> i think we have to be cautio cautious. 2007 has been the second best ever year for m&a prior to 2015. in 2007 there was approximately 30 billion in volatility from china. last year we saw 100 billion. this year we have seen over 200 billion. so there has been a real dramatic crescendo in economic activity. given everything that is happening around the world in terms of increasing regulatory of transactions and in terms of this, we could be watching this grow or sustaining. >> in reality, companies might have been sitting on cash for quite a while and given that we
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still are seeing a lot of uncertainties and a lot of companies are cheap that they pounce. >> i think you have to get along with the program. at some point in time, you have to say, listen, i just have to go on with they program, with my corporate strategy. at some point in time you get yo your. thank you very much. the co-head there from jpmorgan. >> i'm caroline roth. >> i'm louisa bojesen. "worldwide exchange" is up next. we'll see you the same time, same place tomorrow. bye for now.
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good morning, renzi resigns following referendum defeat. the fallout coming up. and donald trump takes to twitter to threaten firms that move overseas. plus, we'll tell you what he had to say about china late last night. and apple's auto ambition. the tech giant getting into the race to develop a self-driving car. "worldwide exchange" begins right now. good morning and a very warm

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