tv Street Signs CNBC July 10, 2017 4:00am-5:00am EDT
energy contract has not been destruck ted by the boycott. >> there's no interruption at all. we have flow of gas and oil going all the way to our client, no interruption. >> and in another cnbc ex-clues if, ermotti says investors are looking for sustained period of calm before they take out money from cash reserves >> geopolitical front is, you know, quite a warning in respect to what's going on almost every day, so investors are really fundamentally touched by all those, and need to see prolonged and stable pattern going
forward. there are a lot of green tiles today on this screen european markets off to a positive start this week stock europe 600 is tracking up over a third of 1% today seen some gains from friday when we had solid job numbers let's look at what's happening in individual european indexes it is around a third percent the italian ftse up by a half% so far today let's look at what sectors drive the gains this morning we see real estate is in the lead almost up by just over six-tenths percent on the other hand, most of the sectors are in the green still
ceo of uvx says the swiss banking giant will begin to narrow down options with bricks it related moves by end of the summer or early part of fourth quarter. carlin spoke about the outlook for europe, asked if they moved past the populous wave which dominated politics much of this year. >> i would say people want to give another chance to europe. that's my reading of the story more in need of change has been somehow limited, if you look at france, macron in itself is a change, it is not a populous but a change i think in france people were able to find a solution that was not extreme. now, macron needs to fulfill
expectations they're extremely high in that sense i think europe needs to think about is construct. is europe as we know it today the right europe for the future. >> do you think it is? >> i don't personally think it is the right construct, but maybe i am bias because of swiss bank round and also looking at the u.s. today is almost unthinkable to have a different europe. but i believe more further europe with a common finance policy and fiscal policy, common defense policy, common foreign policy is the only euro can succeed truly. i don't think that europe as a huge potential, in the current construct is very difficult to succeed. >> one of the big changes we'll see in next two years is brexit and bumpy negotiations we're facing at this point we don't know
whether we see hard or soft brexit how do you prepare for that as you have a major presence in london, and you said in the past you have to relocate some jobs to main land europe. how do you prepare for this new reality with more uncertainty with brexit talks. >> as we speak, we narrow down number is of options available when things started, we have different -- brexit started well before the vote because as we knew that there was vote coming, we started to have contingency planning on what to do, how to position our legal entities in the continent to address potential positive vote on brexit we are narrowing down the options. we do believe by end of summer, early part of q4 we need to further narrow down the option and start to implement some of the moves, which will indicate
maybe necessity to move people and also to reshape our legal entity construct to be able to serve clients. >> do you think frankfurt is the location of choice or -- >> i think frankfurt is a location of choice there are different other locations that could come into consideration. i think about amsterdam, madrid, in different shape or forms. things that at the end of the day as we speak we are narrowing down really the options. as i say by the end of the summer, early part of q4 we're going to make a decision >> that was an exclusive interview with ceo of ubs. head to cnbc.com for the full conversation. let's talk about u.s. treasuries which were boosted by better than expected nonfarm payroll numbers for june last
friday 222,000 jobs were added to the u.s. economy well ahead of 174,000. employers added more hours, average earnings rose 2.5% year on year, shy of estimates. i am joined by the chief investment officer at dalton thank you for joining us. >> good morning. >> let's start talking about bonds fixed income what you're seeing there, my understanding you have a statement trade for various developed markets. >> we have been negative on fixing government debt for quite some time. during second quarter we have seen flattening taking place, and during last two weeks of the quarter synchronized hawkish tone by central banks outside the u.s. which led to higher yields toward end of the quarter. as we see now, fundamentally or
macro economically there's quite divergence between long term yields currently offering investors value versus fundamentals and inflation expectations. >> let me pick up on that 4% that you mentioned last time it came a little out -- back in 2013 emerging markets didn't cope well with the situation. are they going to fair better this time around >> this is a different scenario, so compared back to 2013 we see currently strong fundamentals, not only in the developed markets but also in emerging markets as the dollar weakens and remains in that range that we currently see, and macro kmim development foster growth, expect the short term or short
duration names to perform good and that should offer investors -- >> broaden this out and talk equity always some reaction in equity markets in the spike in bond deals. we have seen more resilient stay in equity. are they on track to regain recent highs or see a summer cool down? >> absolutely. equities are set for a good second half. particularly particular regions in the european area if you look again, european stocks are quite cheap relative to the u.s., amidst growth on double digit, all of the economic indicators point to expansion. then as you see after the recent slump, european equities are 3, 4% or 4, 5%. looks like there's quite an up side for the second half.
>> let me bring up one more point, volatility. we have seen a bit of recovery, however still at very low levels do you see more to pick up ahead? >> it was the favorite theme among investors, everyone was buying vix and trying to market time there's several reasons why it remained at low levels and has nothing to do with risk attitude, more of the role of etfs, role of central banks. role of systemic trading taking place on a daily basis i think going forward market time is very difficult to find the actual spikes in volatility, but going forward for those investors don't feel comfortable with directional trade should start looking at the market and look at strategies and ideas to mitigate that risk. >> we are nearly out oftime.
let me get your call on your favorite asset class. >> favorite asset class are the european equities on the bond market that's the best buy for investors going forward. >> terrific. thank you very much indeed the chief investment officer from dolfen joining us now. norsk hydro is giving the business value of over 2.5 billion euros. it was formed in 2013 as a 50/50 joint venture between the two firms. they will now be fully integrated giving the norwegian firm an exclusive foot hold in the market and finished products carillion plujed in early trade. the company issued profit warning and suspended dividends. the ceo announced his
resignation in the face of these difficulties the company attributed weak performance first half of 2017 to problems with some of its contracts. meanwhile, air france shares a six and a half year high after 8% annual increase in passenge travel during the month of june. the carrier says growth was very strong in long haul flights to north america and budget company. we would love to hear from you. why not e-mail the show. the address is street signs europe at cnbc.com, or get us on twitter. coming up in the show shortly, as the uk and u.s. seek to de-escalate the qatar dispute, we speak to the bank
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combined with the most wifi hotspots. it's a new kind of network. xfinity mobile. wajts to lead an open he can cut with rising output couple months after the deal expires. they spoke to the russian news agency as the world petroleum congress opens in istanbul opec and other producers agreed to cut until end of march, 2018 to bring down oil and support weak oil prices. oil prices are moving in an interesting way, currently down, but did open the session up. let's get out to steve at the world petroleum congress in istanbul steve, this is far from your first rodeo when it comes to
oily vents how is sentiment on the ground compared to prior conferences you attended. >> look, i'll go back to 2014. i have been to one or two since then to be fair. 2014 was the last world petroleum congress in rushsia, there i was. price was $108 a barrel. look at the screen completely different backdrop in three years, and they are under enormous pressure, international companies on the stage, and the nocs, especially the nocs. not only do they have to get costs down like the iocs, they have to balance budgets, country like saudi arabia, for instance, has 70% of government revenues coming from oil and gas at the moment you can see how important it is for these countries who have basically a balance sheet that doesn't match up until around 80, $85 a barrel
huge pressure for them as well back to kazakhstan comments. what a red herring it is, they were only asked to cut 20,000 barrels out of 1.8 million but what it does, it underlines pressure that all members are under. all of them who spent vast amounts of money on projects to grow capacity over next year thought it would be $100 a barrel plus. when they had delays and cost overruns and have projects, they're desperate to recoup money. kazakhstan, how much do you think they spend on cash again it is well over $50 billion. it is years late and they're desperate to grow production you can see where little old kazakhstan, only asked to do 20,000 barrels a day less why they're under pressure, not keeping to it first half of the year anyway. same pressure they're feeling that everyone else is feeling, and the fact that the strategy
isn't necessarily working. you gave up market share and now producing over a half million barrels extra than when this came into force start of the year, the likes of nigerianess and libyans who grew production by a half million barrels a day. add shell to nigeria and libya and 1.8 million barrels off the table comes about .8 off the table, therein lies a source of tension. next point coming forward, july 24, key date for everyone's diary. that's when we get the jmmc. the russians will be there, saudis there, question of whether they decide to tweak the opec strategy. >> watching the oil crisis with fascination, it is on a bit of a turnaround what exactly is happening, is it on the back of the saudi iran or is something driving that directional change from opening
to trading lower >> i don't think so. only nasa -- this is a company that is part of the country, part of vision 2030, and looking to ipo at some stage between a trillion and 2 trillion market value. what has he said going to invest a lot of money plus he said there's a trillion dollar gap in production level in terms of investment over last years since the oil provides dropped. i believe they're desperate for more news hoping to hear something out of key ministers in is tan bell and turning around acquisitions. they were thinking opec would get priced at 55, 60, now production commitment is wavering from kazakhstan that's just the mood music.
i think they have another go to the down side. >> thank you for bringing us the views and latest news from istanbul. moving slightly to the middle east, the qatari government establish a committee for claims from individuals that lost business in the current blockade the countries leading the blockade made their own demands for alleged political interference u.s. secretary of state rex tillerson will also travel to kuwait today to help mediate the dispute. we have cnbc dylan marks, you have been there best part of a week now, seems there's a lot of developments but not necessarily so much progress >> i think a fair assessment presumably spending the rest of
the week in the region, hoping to see progress with that mediation. we heard from uk foreign secretary doesn't expect violent escalation of the situation. we heard from saudis, egyptians, bahrainis they would take appropriate action in the future, meeting at some undetermined date, presumably next couple weeks. qataris on the front foot. the attorney general saying they would allow for individuals and institutions to bring damage claims for losses to revenue during this on-going blockade. i had a chance to sit down with the central bank governor here i asked him about one of the major allegations about terrorism financing. when it comes to investigating flows of funds through the kingdom. listen to what he said >> very good unique system
we have law established against these kind of terrorists we have our own law which also create a unit inside the central bank to review all that activity in the banking we have compliance in the banking system we have also maybe the only country as the charities law which regulate them. and also publicly have to audit them, so we have all in the last years, we have all the systems on and we have a good, unique system compliance also in that charity side we have compliant on banking
side and also two committees, all of them working together we establish and work with imf to establish laws and also audit and review >> final question is what are the challenges for qatar when it comes to responding to demands you received. >> we were comfortable. >> how do you resolve this issue. they made these accusations, qatar says we're not guilty of these things. >> i am saying we are not guilty. >> how do you resolve that.
>> if somebody wants to review, we are ready for review. however, we have open books, we have open account, our banking and other institution was conducting this, they are open and audit by international companies. and also reviewed by the imf and also reviewed and also we have evaluation, we have assistant to review and see our system -- we think we are better. and we are open to see. >> pretty remarkable offer from the qatar ee central bank governor saying the country would open its accounts for outsiders to review and audit to look for evidence of terrorism financing, they claim there's
none of it there this means the response we are waiting for is from the bahrain east and saudis as to how they will proceed we heard from state department in washington they expect this to dragon for weeks, months, perhaps even to intensify. >> dylan, thank you very much for bringing us the absolute latest on the ground we unfortunately have to take a quick break. while we're out, check out world markets live our blog runs throughout the european trading day
welcome back to "street signs," i am gemma acton on the move, european stocks head higher, following solid gains in asia, strong u.s. jobs numbers. but i didn't mean it president donald trump proposes and plays down creation of u.s., russian cyber security unit after finally meeting his russian counter part, vladimir putin, at the g20. qatar ee central bank
governor tells cnbc that they have enough funds to with stand the boycott, willing to show its finances are clean. >> we have open books and we are really transparencies of these >> and in another cnbc exclusive, the ceo of ubs, ermotti says some weak players in the european bank sector need to be addressed as he says bailout of italy failing lenders was necessary. >> it was almost inevitable politically speaking and socially speaking was not acceptable in my point of view >> let's take a look how u.s. futures look this morning. they have taken a lead from europe, they're looking to open
up the s&p 500 around 4.87, and dow joins strongers year at 22.866 for the implied open. take ago cue from europe, which is seen most indexes across the board opening higher, doing particularly well, ftse up around two-thirds percent. let's look at the currency markets. we're seeing the euro track marginally higher against u.s. dollar, up by less than one tenth% it is really the usd against the yen making the most move, up around a quarter percent flashing colors with regards to the pound and dollar not a lot going on there let's get back, look at the interview with sergio ermotti, despite volatility remaining
low. vix index falling by 20% year to date caught up with the ceo, and asked him how long the long period of relative calm in stock and bond trading is impacting his bank performance >> right now there's no activity at all, we're not discussing volatility, it is environment. of course we do see for the last five, six months personal individual clients being more active and constructive about markets than investors, which are highly correlated to volatility of financial markets. you have correlation one across many asset classes in terms of volatility i see a little bit of stag nation of business and volatility and change in policies may help to give momentum to the business
turning to another global bank, investors pulled $26.7 billion from goldman, sachs asset management mutual funds so far this year, according to data from morning star financial times report says outflows represent more than half the asset firm strategy globally also makes goldman the hardest-hit fund manager around the world in 2017. meantime, small hedge funds can turn a profit, expand less than $100 million in assets under management new survey from trade body from alternative management association shows the average break even point is $86 million. i am lucky enough to be joined by jack engle, ceo of the alternative management association, or ama known to everyone thank you for joining us >> good morning. >> tell us what you found in the survey my understanding is that other surveys in recent years pointed
to a much higher break even point for hedge funds to flourish. >> yeah, we were puzzled by some of the other reports out there, which suggested you needed minimum of 250, $300 million to successfully manage a hedge fund operation in 2017. that didn't quite stack up with a number of managers we saw, particularly amongst our members but were smaller than that size. decided to conduct a survey of broad range of managers. very good set of responses back. they responded $86 million on average was break even rate. >> what do you need to succeed, do you need a star name, do you need to have a niche offering? who are the ones winning and why. >> i think the time where people came out of investment banks, could set up a hedge fund and be successful out of the gate from the get go are gone, a star name
comes out of existing hedge fund manager who is already well known perhaps to a set of investors. for those that don't have it, it is a lot more difficult, need to source additional capital in addition to their own money, a lot of people look to certain early stage anchor investors to achieve that, but they're hard to come by. >> broaden that conversation to hedge fund industry more broadly. i was reading weekend papers and struck by some figures that they pulled in 140 billion pounds in the first half with regards to ets, killing its total for the entire 2016. the passive threat doesn't seem to be going anywhere. >> i think that's right. the passive investments are pulling in a lot of money at the moment, actually where we are in the alternatives with active
management, hedge funds in particular, the investor inflow is positive. but there are positives, seen a lot of pension plans with more capital, large allocation to hedge funds. it is not either or situation. >> tell us about performance so far this year. had a better showing >> yes, we now had five consecutive quarters of positive returns coming from the hedge fund industry. year to date ventures that the industry on average is up 4.5% over 12 months, over 10% generally speaking i think the health and of the hedge fund industry is stronger and more consistent than we may have said this time last year. >> bright outlook for rest of the year pick up key themes you expect to play out
>>. >> people are looking for when is the turning markets, we saw back end of last month bonds take a tumble. everyone is waiting for that term that's an environment that plays well into hedge funds. doing well despite low volatility from ubs. i think the increased volatility will be better returns. >> jack, i don't know how, somehow i made it this far without mentioning brexit. i feel almost obliged to bring it up. what effect is this having on hedge fund industry, many based in london. >> london has outside share, 80% of total assets. clearly it matters and matters in three main ways one, a lot of stock working at hedge funds, eu member states
outside the uk, give them confidence to continue to work there, attract in new talent secondly, people want to have access to european investors working hard to get better understanding of that. and thirdly, a lot of funds that are managed that are new domicile funds, usage funds managed by hedge fund managers, how much are they allowed to manage from an operation in the uk as opposed to operations outside. those are concerns for those trying to get greater certainty. >> let me finish with one question on europe as investment opportunity. one thing i am struck by is enthusiasm for activist opportunities in europe in the last year. >> there are more activist
opportunities or activists in the united states or activists beginning to look at europe, seen some examples, what i think is positive about it, not confrontational activism, seems to work well in europe is constructive activism and recent examples we have seen are very much that. >> thank you very much for joining us, talking us through what's ahead for hedge funds and bha we have seen turning to france where the finance minister says tech giants should pay their fair share of taxes speaking at an economic gathering, said europe should defend its own interests against facebook, amazon, and google he insisted macron's tax cuts will be seen soon. need to go reduce public
spending to bring the deficit in line with eu rules he said the timing of reduction was not decided, could happen at the same time as covering increase in the deficit. we are sent all over as financial journalists, i was lucky enough to make it to south of france this weekend just passed where i spoke to russ mcginnis, asked him thoughts on newly elected french president >> macron's victory sent out a powerful signal, there are alternatives to simplistic populism macron was elected on a clear agenda, pro-european and pro-reform powerful signal. and election victory confirmed by significant parliamentary victory which gives the president and his government legitimacy to enact reforms that france and europe need. >> expectations now have been
raised very, very high is it possible that he will disappoint, no matter what he does from this point, even if he managed to enact several reforms, that the populous is hoping for too much? >> i think they're showing clear signals where their priorities are, and they're concentrating priorities on things that are hugely important the main one is reform of labor law. they're the message the government sent out they're determined to arrive at results which reduces some of the constraints to increasin employment and exploiting france's opportunities to default. >> that's the reform as french business leader you would be focused on >> wholeheartedly, very much so. important for our companies an important for our suppliers, important for our subcontractors >> risk treating them as second class citizens
the european parliament believe brexit negotiation called on uk prime minister to improve her offer, warning elevator paid oh any deal that doesn't meet expectations. the u.s. breaks on world leaders with climate change after a crucial g20 summit. hats off to the president, tries to help a u.s. marine state side get the latest as another political storm takes hold
donald trump junior met with kremlin linked lawyer after being promised damaging information on hillary clinton following a "new york times" report on the meeting, trump junior said the lawyer had no meaningful information and the discussion was quickly changed to focus on politics concerns unrelated to clinton this as president trump looks to twitter to provide details of his meeting with russia's vladimir putin at the g20 in hamburg. nbc kelly o'donnell has the latest for us. >> reporter: still in the brass. president trump's new relationship with vladimir putin face to face at the g20. laid out in a first person account on twitter i strongly pressed president putin twice about russian meddling in our election, he vehemently denied it i've already given my opinion. a more pointed recap by the chief of staff. >> the president absolutely did not believe the denial of president putin.
>> reporter: president trump wants to move beyond the election interference controversy and partner with russia over a bold idea that's growing skepticism and derigs. putin and i discussed forge an i am pen trabl cyber security unit so that election hacking and other things will be guarded dubious senator john mccain. >> i am sure that vladimir putin could be of enormous assistance in that effort since he is doing the hacking. >> reporter: the treasury secretary says it makes sense. >> this is about having capabilities to make sure we both fight cyber together which i think is a very significant accomplishment for president trump. >> senator marco rubio's reaction is cutting, tweeting partnering with putin on a cyber security unit is akin to partnering with assad on a chemical weapons unit, claiming a diplomatic achievement on syria, the president tweeted about working with putin and assad ally to establish a
partial cease-fire senator graham says he is not seeing him clearly. >> he has a blind spot, to forgive and forget regarding cyber attacks is to empower putin, that's exactly what he's doing. >> reporter: the white house playing down newly revealed june 2016 meeting at trump tower after trump clinched the nomination the president's son, son-in-law, and campaign chairman met with a russian lawyer with kremlin connections. natalia veselnitskaya lobbied against a 2012 american law that sanctioned russian officials over human rights abuses, in protest, putin ended american adoptions of russian children. >> there's a meeting about russian adoption and after about 20 minutes, the meeting ended and that was the end of it >> that was nbc's kelly o'donnell. the president backtracked on the russian cyber security proposal. he tweeted the fact that
president putin and i discussed a cyber security unit doesn't mean i think it can happen it can't meantime, world leaders make a break with the u.s. over climate change included unusual paragraph explaining how the u.s. differs on environmental policy. german chancellor angela merkel deplores that american decision to withdraw from the paris climate deal, commitment of other g20 countries is irreversible we have this report from hamburg. >> reporter: the summit in hamburg was clearly a mixed bag for angela merkel. on one side she was criticized for the wild clashes on the street in hamburg. also didn't reach agreement on climate. they reached a joint communique everybody could say, but still 19 against the united states we got a far reaching agreement on trade and also lesser
likelihood of trade war between the united states and europe, and we also got a road map so to say for the steele conflict for this year. bottom line, talks remain difficult as angela merkel was saying between the states and europe when it comes to trade, but there's a little more hope in the negotiations. >> speaking to cnbc at the g20, mexican foreign minister sounded upbeat on u.s. mexican relations and future of nafta. >> everything went well, it was a working meeting. obviously it is a complex relationship with many, many issues, and it was a productive meeting. the issue of the world was not discussed, was not part of the conversation. >> are you afraid of the nafta,
the trade agreement. what are your plans here. >> nafta was a big part of the conversation later today, and the agreement of both is to pursue negotiation negotiation will start august 16 and we expect to have a meaningful, constructive modernization of the agreement that's good for the three nations, protect mexican interests and think there's room to make it a better agreement for the three nations. back to angela merkel who says leaders from the world leading economies need to hold to aggressive deadlines to address global steel overcapacity fines or tariffs if no actions are taken. g20 leaders agreed to have a forum in august, put out a report with possible solutions in november. i am joined by the commodities strategist at etf securities to discuss it further good morning thank you for joining us this situation is rumbling for
awhile would you give us a recap and tell us whether you think the u.s. has legitimate claim here >> the u.s. are unhappy with the overcapacity in global steel trump administration in particular, powered by supporting the steel industry and helping revive jobs is trump's time to deliver on that. the only way the trump administration has sought solution is to say it is against national defense, against the country's national defense issues that's going to be something that's very difficult to prove they're going to use an obscure 1962 law to say the steel industry is very important for defense sector, try to restrict imports. i don't think that will fly with any other country if they go ahead with that, that's why the g20 communique was important in
reiterating that they're going to take substantial measures to reduce the excess capacity, having a concrete deadline by november to come up with actual policies will serve to that need. >> are we going to see a trade war ultimately >> if the u.s. goes alone and implements trade restrictions on the back of this 1962 law, then i think so the last time the u.s. imposed restrictions on steel back in 2002, they were reversed in 2003 because they were in contradiction of wto commitments. but the eu already stated if restrictions come into play, they're likely to restrict imports of u.s. whiskey. >> unfortunately running against the end of the program before you leave us, i would like your thoughts on gold that's one precious metal been punished in recent months. >> that's right.
gold is coming under pressure as the interest rate is increasing, gold has in verse relationship to real interest rates we believe inflation in the u.s. will remain elevated and revise about 2% therefore the real interest rate in the u.s. despite interest rates increasing will remain subdued. so gold prices have opportunity to rise. but gold remains very good hedge towards event risk and key events like escalation of tension in the middle east or between the u.s. and north korea, gold has potential to spike upwards should these events come to the fore. >> thank you so much for your time and thoughts. before we leave, let's look
at how u.s. futures are looking. well, they are still up, tracking the lead from european indexes, open for the s&p 500 and nasdaq with the highest open, 21.03. i'm going to leave you and toss you to our friends in the states that's it for today's show "worldwide exchange" is up next. the future isn't silver suits and houses on mars,
it's right now. think about it. we can push buttons and make cars appear out of thin air. find love anywhere. he's cute. and buy things from, well, everywhere. how? because our phones have evolved. so isn't it time our networks did too? introducing america's largest, most reliable 4g lte combined with the most wifi hotspots. it's a new kind of network. xfinity mobile.
good morning back to business investors back for a short week with a packed agenda what to watch ahead. and amazon prime day, kicking off the deals tonight. this will be the biggest one yet. >> first glimpse of model 3. photos of the lowest price factory powered vehicle. it is monday, july 10th, 2017. "worldwide exchange" begins right now. ♪ >>