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tv   Street Signs  CNBC  January 18, 2017 4:00am-5:01am EST

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welcome to "street signs" live from the world economic forum in davos. i'm julia chatterley. >> i'm louisa bojesen. your headlines this morning -- >> european leaders cautiously welcome the clarity of theresa may's hard brexit plan, but spain's economy minister tells cnbc brexit will provide an opportunity for his capital. >> you'd like to take some of those bankers, if they're going
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to leave the uk. >> we believe that we offer opportunities in that area. the ceo of novartis strikes a bullish tone undwith healthca under president-elect trump. >> this president-elect is about creating jobs in the u.s., this is a place we can build and grow. some policies that could reignite the economy in the u.s. would be good for this industry. the boss of deutsche borse seems optimistic that they will get the green light from regulators soon after the exchange's biggest shareholder throws its weight behind the tie-up. >> we are right now in the middle of the brussels deliberations. it's a strong sort of competition analysis. everyone who is approving or not this transaction wants to look at the facts. they want to wait until the outcome of brussels is secure.
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and will donald trump usher in a new era of protectionism? we will talk about the globalization backlash with the director general of the world trade organization. >> we have a jammed packed show once again today. first, reaction from theresa may. yesterday sterling trading lower after posting its biggest one-day gain in more than two decades. the pound rallied following theresa may's brexit speech where she promised to walk away from negotiations if britain doesn't get a good deal from brussels. they promised a parliamentary vote on brexit. we've been speaking to davos partipa
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participants about their reaction to her speech. >> people are concerned about what it will be all about, how it will be executed. that means a lot of customers -- the project is not off, but delaying it until we see what we do in infrastructure, we are exposed to capex. >> the main point and the main element of discussion over the next months is how we will servserv links. i hope that, you know, common sense will prevail. >> in times of political uncertainty, where the future is, you know, unknowable, we must ensure the institutional design to link london to europe and vice versa. this bridge between britain and the eu is becoming more, not
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less important. >> good morning. i read so much commentary on why the market was relatively optimistic about what we heard from theresa may, whether it was the prospect of a parliamentary vote. whether it's the fact she just provided a bit of clarity here. i'd argue it was well telegraphed, positioning in the market and sterling is so short now that actually you get a bit of buy the rumor sell the fact or in reverse going on there. what do you think? >> i think it definitely was a bit of everything. on top of that, maybe the clarity that she showed us that they are looking at britain leaving the customs union bit. so she knows the difference in terms of where to focus the energy on, and still keep britain alive via some trade doors that she wants to keep open elsewhere. definitely interesting with all of the moves we saw in the markets yesterday. the sterling move, the ftse move to the down side. speaking of the ftse, let's
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catch up with our european equity markets this morning. looking at a flat picture across the board in europe, the stocxx 600 lower at the moment. janet yellen is speaking today and tomorrow. that will be a big deal. also a whole bunch of big companies reporting stateside as well. earnings trickling in. city, goldman sachs, u.s. banco bancorp. ftse and xetra dax a couple points higher. cac 40 and ftse mib pulling off a bit. big stories in europe. shares in pearson tumbling after the company issued a profit warning in the face of slumping sales in the u.s. the company no longer expects to reach operating profit goal for 2018. pearson also indicated that it's looking to exit its 47% stake in the publisher random house.
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the pound is continuing to bolster b bolster burberry's fortunes as sales leapt 40% in the third quarter. it helped comparable retail sales grow by 3%. the luxury group plans to change its ceo in july and the profit outlook as well. and asml higher by 4.5%, having reported forecasts topping full-year net sales and gross profits. the chipmaker says it expects the healthy demand for memory chips in the fourth quarter to continue into the start of this year. and novozymes posting fourth quarter sales which beat estimates and it announced as well a share buyback program up to 2 billion danish krona. but they also published plans to cut 198 jobs as it reallocates resources to capitalize on high-growth opportunities. a lot going on in the markets.
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it doesn't end there. >> absolutely doesn't. we'll kick off the show in davos, talking addidas. their new ceo promised made conquering the u.s. market his top priority. addidas reporting strong u.s. sales growth in recent quarters but lagging behind nike in terms of market share. the ceo of addidas joins us now. conquering the u.s. market, one of your top priorities here. how concerned, how optimistic are you by the prospect of a united states run by president-elect donald trump and what will it mean for the u.s. consumer? >> for our business in the u.s., i'm extremely optimistic. we grew more than 30% in the first nine months. i don't think the new president will do anything to prevent our growth. consumers will demand our products. through the conversion into much more digital market environment.
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actually this stage, i'm very, very optimistic when it comes to the u.s. we have a great ride ahead of us. >> what about the prospect of an import tax? what would that mean for your business? >> you need to look upon it in the concept of the overall industry. the industry is similarly constructed. it will have the same impact on everybody. i don't think for us it will have any particular impact. if an import duty will come, it will hurt the entire industry. i believe mr. trump is a businessman, and it's not in his interest to punish consumers for buying the right products in the u.s. markets. >> what does that mean? he won't do the import tax? >> i don't think so. it's important as a ceo you deal with problems as they arise. not through rhetoric. right now we're assuming the market will continue as it is. >> so you think we're still getting a campaigning donald trump? >> i think we'll deal with it when it gets here.
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if you ask me is that one of my concerns, it's not at this stage. >> do you think he'll cut corporation tax? this is another promise he has ma made. >> i think it's something i hope he will do it will have a huge impact on the u.s. economy if u.s. corporations could get money back in the u.s. that is now sitting outside the u.s. >> do you think he's being protectionist? we spent a lot of time talking about donald trump being protectionist, and xi jinping coming in here saying he will be a globalization promoter here. if you look at what's going on in the world, when these trade deals were signed a long time ago, the u.s. had 60%, 70% of world gdp, now they have 20%. now some are saying there's an asymmetry now, these kinds of tariffs would bring symmetry. would you agree with that? >> i don't know the details of
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that it's in every country's interest to try to get the best possible ideas, but back to the core of it, we've been in a pre-election or election time and we're getting to a presidential time. i think you'll see what's coming in the presidential time. what's striking is that yesterday the president of china gave a brilliant speech, but also gave a brilliant speech in the absence of western leaders actually here in davos. that was, for me, one of the most striking experiences in my ten years of davos, the absence of western leaders and how the chinese captured that space. >> that an embarrassment that western leaders stayed away? shouldn't they be here and go, maybe we have some things wrong. we have a reality check this year, but we have to focus on fixing it. >> i think europe will get its act together, but you don't do that by being absent. i've seen some things the first
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few days, the absence of the west, and the dominance of the east. and the true impact of digitalization on society and on businesses like addidas. >> and on jobs. do you think when xi jinping talks about globalization, he really means it? the reality back home is very different. he's a long way to go. do you believe they're going to make those bets? >> i think overtime they will, but you need to put it in the context of the chinese economy. the chinese economy is growing 6%, 6.5%, but going from a manufacturing economy to a service-based economy. i do think he believes that. we still benefit as a company greatly from the chinese market.
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>> you mentioned a speech that was made yesterday, a policy expert for donald trump, he was changing up and giving a softer appeal to some comments that donald trump made. if i contrast what we had from donald trump an what we got from xi jinping, is china winning the pr battle at this moment? if we look at what could come over the next 12 months in terms of a rhetoric war over trade? >> if you look at the bigger context and realize there's more than two countries in the world, china is filling the gap right now in davos that is not being filled by the absence of western leaders across the board. uk, france, germany, italy are not very present here. >> i wanted to ask you quickly will the company as well, before we run out of time. we mentioned nike as we introduced you, and the challenge you got attacking them. you also have under armour.
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that's in the foreign markets, but under armour came to the german market sponsoring a well-known football team and got lots of coverage. how do you fight under armour coming into the german market? you need to put it into the context of the bigger picture. we are five times bigger and that under armour. >> for now. >> we have the highest growth rate in the industry. we believe strongly in the products we have. our brand has, and the growth we're getting in the u.s. that we have a good life, long term. >> so you're saying bring it on. >> we're ready to fight. >> thank you very much. great comments as well. back to you. >> thank you very much, julia. how cold is it today? we're checking in on the temperature. colder or warmer than yesterday? >> yeah. minus -- minus 8? 18. wow. i think i prefer 8. >> you still, julia, have people
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writing in thinking you're standing in front of a back drop. that's actually just a fake set. but it's not. i promise you. it's not. >> fake condensation coming out of my mouth as well. a smoke machine. >> exactly. everything freezes. >> it's pretty cold. >> any way, we'll come back, loads more from the team there. the crew, not just here during this show but throughout the day. we have davos specials galore. by all means get involved. e-mail the show, streetsignseurope@cnbc. you can also find all of us on twitter. tweet us directly, i'm @louisabojesen. you with find the girls on the ground in davos, too. coming up, the director general of the wto joins us to talk all things trade from davos.
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welcome back to davos.
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we've been talking china the last two days nonstop. the highlight here is xi jinping's speech. yesterday he defended globalization in his speech, telling delegates there are no winners from a trade war and globalization should not be blamed for the world's problems. xi's speech broadly welcomed by delegates, sweden's prime minister said she was aiming to fill the global leadership vacuum and doing it with some success. we've been asking business and political leaders at the world economic forum for their outlook on global trade this year. >> we and all of us were surprised by the fact that global trade has not grown nearly as much as one would expect five years ago. before the financial crisis, global trade was growing 8%, 9%, 10% a year. now we're down to 2% probably in
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2016. we expect 2.5%, 3% this year. >> the approach of the news by this government is clear. we think that free trade is vital. one of the reasons why the growth rate in europe is like this. >> so now we're joined by director general of the wto, roberto azevedo. thank you very much for joining us this morning. china seemed to make a great statement, president xi yesterday making a great statement about defending globalization. as far as they're concerned, they have a long way to go, haven't they? >> globalization and trade are critical for the development of the world, for inclusiveness, for the creation of jobs. that's a concern for any big player. china's the largest trader in the world. so they want to be sure that trade continues.
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observing the rules would avoid a situation where we have a domino effect where somebody takes a disruptive measure, somebody else follows with a retaliatory action. a multilateral based conversation is important. >> is china playing fair at this moment? >> everybody has sins. everybody has actions, measures, policies. some difficult areas somewhere else. wto members keep blaming each other for this and that. i think that's part of the game. everybody has their own instinct to protect here and there. >> that's a diplomatic way of saying yes. i heard a rumor that part of the problem with the wto is the voting structure. that is because you have a high concentration of commodity exporters that rely on china, and don't want to be too
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stringent in dealing when china is not playing fair. how do you respond to that? >> it's not only about commodities. it's not only about china. i think the concern we have today is the sentiment against global issues against trade because it's foreign or whatever it is. it's a reluctant to look inward, to look at the problems you have in your own domestic territory. >> does that limit your power? >> on the contrary. >> is that a viable argument for why the wto doesn't work effectively? >> on the contrary. it emphasizes the role of the multilateral system. the big difference that we have now compared to what happened in the '30s, now we have rules. back then you didn't. so back then it was unilateral actions, people defending their own territories and their own economies. what happened was that the domino effect of those measures
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wiped out two-thirds of trade. two-thirds. that's huge. if that happened today, it would be a catastrophe. today there's rules. >> when the trade deals were being signed, many decades ago actually, the united states represented 60%, 70% of world gdp. today it's just over 20%. actually they've been slow in terms of addressing policy like border taxes. v.a.t. has sprung up around the world. the united states has done nothing about it. so there's an asymmetry now as far as the united states is concerned. these are the countries allowed to drop corporate tax rates, the united states ends up with high corporate tax rates and no border controls. is this unfair to them at the moment? this is what donald trump talks about. >> we have to be mindful of the
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impact trade has. one thing that has not been discussed is unemployment. trade is responsible for two job losses out of ten. the other eight are not lost because of trade. they are lost because of new technologies. innovation. higher productivity. the united states itself has today the largest slice it ever had in terms of manufactured products in the world. but the loss of jobs is still there. not because of trade, not because of cheap imports, but because of higher productivity. how do you deal with this? how do you deal with this new technology? how do you deal with this new revolution in the labor market? that's the question. >> i couldn't agree more with you. i'm also asking you the same question again, is the current system to blame in your view? >> the system is horizontal. it applies to everybody.
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the system perceived to be fair to someone is unfair to someone else. that's the beauty of negotiations at the multilateral level. you try to strike a balance. the balance is never perfect for anyone. >> what happens if donald trump turns around and says i will leave the wto. i will sign a trade deal with the uk. i will take canada with me. i'll sign a trade deal with mexico. what then? >> trade deals are perfectly available. >> steps away from the wto, because he threatened this. >> i think the wto today more than ever is important. i think that the notion that you can live in a world today without global rules, without multilateral rules, it's a disaster. >> is it a valid threat to step away? >> i have not heard that threat. >> if he did threaten you -- >> if -- that's a big if. >> of course. >> it did not happen yet. i will not speculate on what's going to happen. let's see what the trade policy is. you have to give them credit that they will think about it
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and take measures that are consistent with the u.s. interests. we have to wait for that. at this point we would be speculating on that. >> thank you very much. some quite tough questions there. we have to wait and see. the director general of the world trade organization. coming up after the break, we'll speak to the next group of ceos, talking about brexit, getting market reaction, and ultimately what is this going to mean for the city going forward. back to you. >> thank you for now. we do need to take a little bit of a break, short break. while we're on the break, check out world markets live, it's our blog. keeps you up to date with all kinds of things happening. we'll be back. find us on twitter, streetsignseurope@cnbc and @louisabojesen.
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welcome back to "street signs" live from the world economic forum in davos. i'm julia chatterley. >> i'm louisa bojesen. your headlines this still relatively early hour -- >> european leaders cautiously welcome the clarity of theresa may's hard brexit plan, but spain's economy minister tells cnbc brexit will provide an opportunity for his capital.
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>> you'd like to take some of those bankers, if they're going to leave the uk. >> we believe that we offer opportunities in that area. >> he's a businessman. addidas' ceo saying donald trump will do the right thing for american consumers. >> if an import duty will come, it will hurt the entire industry. i believe mr. trump is a businessman. i don't think it's in his interest to punish countries. the ceo of novartis strikes a bullish tone with healthcare policy under donald trump despite the president-elect's resr recent attacks on drug prices. >> this president-elect is about creating jobs in the u.s., this is a place we can build and grow. some policies that could reignite the economy in the u.s. would be good for this industry. it would be good for american jobs. >> the new head of the wto
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weighs in to the globalization debate sparked by trump's protectionist stance. >> the notion that you can live in a world today without global rules, without multilateral rules, it's a disaster. good morning. midmorning. midmorning. we're looking at our european equities, still slightly mixed. a bit more green than the past hour. u.s. futures, how we're setting ourselves up for the u.s. markets coming on tap in five hours, but the implied open on the right-hand side of your screen, higher between 5 and 20 points. big points taking place today. you have janet yellen speaking, the fed chair today and tomorrow, and a whole slew of earnings out before the bell. citi group, goldman sachs, u.s.
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bancorp, after the bell, netflix. just glancing at some of the data that's just hitting our wires. uk unemployment data right now, describing the uk unemployment level edging down a bit. the december account minus 10.1, we were looking at a figure higher than that. these are the fast the growth figures seen since december of 2015. in november alone, 2.8% to the upside year on year. uk job vacancies, 748,000 in the three months to december. which is slightly down from what we saw in the three months to november. julia? >> thank you very much. everybody welcoming it seems the
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clarity from theresa may and her speech on brexit yesterday. that includes the biggest business association. we spoke to carolyn ferber to get their view on the speech. >> the decision has been taken for the uk to leave the single market. that means all eyes from a business point of view will be on the kind of negotiation we have and the kind of new free trade deal we have. i think there will be a welcoming by business of the commitment to a new all-encompassing free trade arrangement. >> the eu officials have taken a hard line. she's taking a hard line. they'll meet somewhere in the middle. these are negotiating positions. >> the reality is they'll meet in the middle. the result will be a good one for the uk and the rest of the european unions. >> the ultimate outcome that will be best for the uk and europe and for the united states will be to maximize, to have as much connection between the uk
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and europe and between the uk and the united states. that will be something we don't know until the end of the negotiation. >> i'm glad to say we're joined by the next group ceo, michael spencer. thank you very much for joining us. what's your reaction to theresa may's speech? >> i think she made a very good speech. constructive speech. now we -- she's laying out the framework of what the united kingdom hopes to achieve in brexit negotiations with europe. i think it was a good opening positioning. >> it was well telegraphed that she was going to suggest that a hard brexit, a removal from the single market was an option. yet the market seemed to react positively. can we argue at this stage the bad news as far as the uk exit and the price? >> i think a departure from the single market was a certainty given her position on
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immigration. that's one of the key reasons for the brexit vote. her desire to move away from the court of justice. i'm unsurprised by her statement. but it provides clarity, the beginning of a framework and she puts other context into it which is very important. of course the uk wants to achieve a good deal in negotiations, and a fair deal. but it also suits europe to achieve a good deal. there is no point at all in the uk's departure from the european union resulting effectively in some localized trade war between the united kingdom and the rest of europe. >> she was actually sounding far more positive about the eu in general and what we've seen is a war of words between policymakers, the eu institutions, some other sort of -- those responsible for brexit. do you think this is the beginning of a step down perhaps in the rhetoric? that would help, too. >> yes. both parties have a vested
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interest in achieving a successful outcome. this should not be a bitter divorce, if i dare use that word. it would be a pity if it turned out like that. it would be a loss for both parties on a considerable scale. and she made that point effectively, appropriately, diplomatically and very well. >> we've got brexit, we've got donald trump, we've got divergent monetary policy. does this mean more volatility, more volumes in 2017 in your view? >> i think so. we now -- donald trump has got a different policy and perspective. he's already said he is likely to move back on some of the regulatory changes that were implemented over the past half dozen years or so. a good thing in some cases. dodd-frank in my opinion started off as a good idea. became appallingly overengineered, overcomplicated. it would be a good thing for the
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marketplace, financial stability as a whole. we will see more volatility in financial markets. >> you say that smiling. how long does it take him to take back some of that regulation on banks? if i look at the policy measures he's talking about here. it's overwhelming. how quickly can he get to that, do you think? >> we will see. i think trump will be bold and pretty strong. i'm -- a lot of his rhetoric he will not deliver on. i hope some of the financial reforms he will deliver on. >> you think president trump will be didn't from the campaigning donald trump? >> i think he will be. i think the british have an old phrase, it will be more george orr rather than more war war. he will use rhetoric about, for example, taking an aggressive tone with china on trade and so forth. that's more to remind his trading partners that he's seeking a more balanced and fair relationship. >> symmetry is the word i have
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heard used. i like it. i want to ask quickly about your business. i've seen a number of analysts optimistic that you could surprise in terms of cost cutting. profit margins lift from the 30% level to the 40% over time. do you see that as a possibility? >> we do we are coming out of a deal that took a year and a half to complete. had to maintain a fairly heavy struck while we completed that deal and will lighten up on some structures going forward. we will be a leaner machine in a year's time than today. >> thank you very much for speaking with us. the ceo of next group, michael spencer. we will talk to huw van steenis, and where does the dollar go from here. and what about the banks, both here and in the united states. >> lots to cover off there. we'll see you shortly, julia. in the meantime, saudi arabia is
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reportedly ready to shelve over $13 billion in government projects due to increasing fiscal pressure. the total value of the projects in the kingdom this year is expected to be around 27 billion, it could rise to 32 billion if the mecca metro project is confirmed. hadley joins us now from davos as well. hadley, you've been talking to people about what's going on in saudi. >> we have. we spoke earlier today with saudi arabia's fips minister. it was his first big interview since becoming finance minister. i said what is the challenge coming forward? he said he is optimistic and the imf is optimistic that they can cut the budget deficit. i also had a chance to speak with his royal highness. i asked him about his relationship with the united states and i asked him will donald trump make all the difference? >> we've been friends with the
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united states for a long time. we've had our ups and downs. we've had our disagreements. but we always stuck together on the important issues. in the middle east the important issues, in my view, are peace and prosperity. this is a message that mr. trump has been promoting, what he wants to do for america is to have peace and prosper pity. our foreign minister put it succinctly yesterday when he said mr. trump's stand on re-evaluating the relationship with iran is an issue we hopefully will find room for agreement with mr. trump on. because iran is a disruptive element in the middle east.
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its expansion into syria, iraq, yemen and lebanon for many years is upsetting the whole social clarity and the whole social peace in the middle east. so, having mr. trump work with us on meeting this challenge is going to be an important issue with the american foreign policy setup. >> his royal highness mentioning iran. a few years ago everybody was talking about how they could get into that country, start investing and exciting it was that iran was opening up. i argue that this year is the year of saudi arabia. you have the finance minister, the oil minister, the ceo of aramco, the saudi central bank government and the head of the public investment fund, a huge saudi presence here. a lot of meetings going on.
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optimism from the folks we've been speaking to. a big question is whether that will translate into good news for the economy and whether or not this aramco ipo will be as successful as they're hoping for. >> following on from that point, the ceo of addidas also talking about this is the year he's seen the least u.s. presence. so that void being filled by the middle east and asia. hadley, thank you very much. great to see you. how are relations between saudi arabia and the u.s. going to change under trump's administration? head to cnbc.com. there's more on there about these issues. later on today we'll talk to the monetary policy -- we'll be talking monetary policy with the governor of the bank of japan, haruhiko kuroda. lots more out of davos.
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>> china is planning to fill the leadership vacuum left by the united states. that's the consensus view here from both political and business leaders that we've been talking to in davos. >> it's great news to listen to the chinese president, talking about how positive is globalization. it's something we could not expect a few years ago. in the bigger context, there's more than two countries in the world. china is filling the gap in davos that is not being filled by western leaders. all the uk, france, germany,
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italy, they are not very present here. china is filling that gap at this stage, which i don't think is in the interest of the west. >> globalization and trade are critical for the development of the world, for inclusiveness, for the creation of jobs. that's a concern for any big player. china is the largest trader in the world. they want to be sure that trade continu continues. observing the rules, the multilateral rules would avoid a situation where we have a domino effect. >> later today we talk monetary policy with the governor of the bank of japan, haruhiko kuroda. and we'll hear from germany's defense minister, ursul ursula von der leyen. now deutsche bank ceo jon cryer expects the bank to see a negative impact of $1.2 billion on its pretax profit for the fourth quarter due to the civil
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penalty agreement the u.s. department of justice. germany's largest lender has finalized the 7.2 billion settlement over the sale of mortgage backed securities leading up to the final crisis. in a memo to employees, cryan said it was too early to draw a line under all matters. i'm joined by the global head of strategy at schroeders. great to have you on the show. >> nice to see you. >> we heard that cryan said this issue is not over. i don't want to talk about deutsche bank specifically, but i want to make a contrast between what we're hearing from the european banks, the optimism on the u.s. banks, and you share that optimism. >> certainly. >> meeting the u.s. bank leaders, there's huge optimism about the relation trade. first and foremost, it's the bump to growth. an improvement of interest rates. interest rate rises could add 15% to 30% to bank stocks earnings in the states. the stock is up 30. something is going on. the second is the enthusiasm may
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be the high peak regulation is behind us. dividends can restart, buybacks can increase, and the greater confidence that investors can come back. >> you don't think regulations will be pulled back? you think it stays steady? >> i think it will be watered down. the reason for that, we need banks to fuel economic growth. in europe, it's anemic. the european central bank, as you know, i felt negative rates were a dangerous policy. they're paying banks, they offered banks 1.6 trillion, less than 5% has been taken up. that speaks to the difficulty of the european banks. there is recalibration, but we'll look around, is it work g working? let's try to improve what's not. >> you said the u.s. banks rallied 30%, there's something else going on. what happens if growth doesn't surprise on the upside in the united states? we don't get the 75 basis
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points, what kind of down side are we looking at? >> two things. so, coming back to regulation, the uncertainty premium placed on bank stocks, you didn't know what you would get back in dividends and buy backs. in 2017, the key story is regulation burdens ease, and people can look back and say it's a one-time book value stock at least, if not higher. u.s. banks are trading 1 opin.4s book. rate rises are the other critical thing happening. and the other story is u.s. banks keep on trumping european. >> i want to stick with the u.s. for a few moments more. what does all this mean for growth in the united states? give me a ballpark. best case/worst case growth for the united states this year and what does that mean for the dollar? >> my view is bumping 3 1/2 to 4%. bumping up at the higher end of that, this year an next year. there's a lot of up certainty.
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we don't know the infrastructure spends, the tax plans, the import tax. i was meeting with two politicians before coming on air, they don't know either. a lot of uncertainty, but what is really striking meeting the american ceos here is how optimistic they are if that holds for three to six months, it's infectious. it becomes self propagating. that's why i remain optimistic. the dollar probably continues to grind higher. i think on the whole the dollar moves higher. >> do you worry about complacency? we talk about the consensus view in davos, everybody believes the campaigning donald trump will not be president trump. is there complacency here? >> i agree we should trade the exact way of the davos consensus. the takeaway last year was i was hearing in ing in committees l
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that they wanted to do away with cash. and i was waving the flag. when you invest in the emerging market, you worry about political risk, if you understand that risk premium you can find great companies and make money. >> talk to me about europe briefly. i know how you feel about negative rates. i read you said you believe negative rates will remain in europe for two to three years. give me your view on what that means for europe at this stage. in particular on a relative basis. the ecb is trying to underwrite the system. their funding system is not being taken up. the good news is confidence on european growth and a pick up in inflation means long-term rates are rising. for the financial system that's a positive. before you can get negative rates, the ecb needs to taper. at a minimum that starts next
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year. it's much more likely that negative rates are with us until 2019. so investors are sitting -- i speak to a lot of clients. they're thinking how do i invest with this quirky back drop. they're committing money to markets, real assets, fixed income, they don't want to put the money in the bank. >> top trades for 2017? >> we have such a variety of views across the house. there's an element of u.s. financials that offer great values. but i come back to some wonderful companies, and what's striking here is while there is political uncertainty, some companies continue to i vest. i'm focused on long-term investing. for me there are great companies i have met here. >> black swan? >> oh, i think it has to be the risk around globalization or the risk coming from the eurozone, and to what extent -- it's possible that more populists in the short term could be positive. let's think about italy. italy is a country i watch with
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huge interest. >> the banks? >> the good, the bad, the ugly. there's a mixed bag. the top end of the european banks have been stress tested to take huge shocks, have gotten on top of their problems. the challenge is we have an uneven picture where some banks are dealing with a few issues they should have dealt with. >> hugh, great to chat with you. back to you. >> julia, thank you. we'll see you throughout the day. before we go, trump's inauguration is only days away. we have been speaking to global business and political leaders about what to expect from the u.s. president-elect. >> this president-elect is all about creating jobs in the u.s. this is a place where we can build and grow. some of the policies that could reignite the economy in the u.s. would be good for this industry.
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it couwould be good for america jobs. if the aca is repealed, something will ensure these americans have access to the innovative medicines that we're able to launch. >> i don't think the new president will do anything to suspend growth. consumers will demand our growth. also through the conversion and much more digital market environment. >> i think trump is going to be pretty bold, pretty strong. a lot of his rhetoric is more george orr rather than more war. he will use rhetoric about, for example, taking an aggressive tone on china about trade, that's more to remind his trading partners that he is seeking a more balanced and fair relationship. >> so u.s. markets set to start trading in 4 1/2 hours time.
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the implied open pointing to the upside at the moment. yesterday we saw the s&p 500 and the dow closing a bit lower. retailers having rallied on trump's hesitation on his cross border tax plans. big banks trading down quite a bit. they're worried that they might not be getting the tax break they were hoping for. morgan stanley and goldman sachs lower by 3 1/2% yesterday. keep your eyes on these banks today. before the bell you have a bunch of them reporting results, citi, goldman sachs, u.s. bank corps, that's it for me in london. good-bye for now. >> i'm julia chatterley. ed go good-bye from me as well.
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good morning. market alert. global investors try to make sense of donald trump's greenback comments. is strong dollar policy a thing of the past? earnings central. goldman sachs and citigroup set to roll out quarterly results today. and the trump transition. we're talking trade as the president-elect picks for commerce secretary heads to capitol hill. it's january 18, 2017, "worldwide exchange" begins right now. ♪

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