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tv   Worldwide Exchange  CNBC  September 20, 2017 5:00am-6:00am EDT

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the death toll rises in central mexico following a powerful 7.1 magnitude earthquake the latest on the recovery efforts straight ahead bracing for maria, puerto rico on high alert as a powerful category 4 hurricane takes aim. and countdown to the fed wall street will be watching washington as the strat bacentrk makes its decision on interest rates. it's wednesday, september 20, 2017 "worldwide exchange" begins right now.
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good morning a warm welcome to "worldwide exchange" on cnbc. i'm wilfred frost. sara eisen is off today. a quick check in on the futures market they are pointing higher, albeit only slightly by 20 points or so for the dow. the nasdaq and the s&p fractionally positive. this comes off a day when we had a trifecta of record closes. the gains were small the dow up 2%, the s&p and nasdaq up 0.1% fair to say markets pausing for breath a bit ahead of that fed decision much more on the markets in a moment first breaking news out of mexico the death toll continues to rise following the 7.1 earthquake more than 200 people are dead, including 22 children who were killed when an elementary school collapsed. mexico's president says more
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than half of the nation's capital is without power this comes less than two weeks after a magnitude 8.1 quake hit the country killing 100 people we'll follow this story and bring you the latest when we get it the other big story this morning, hurricane maria is holding as a category 5 storm as it nears puerto rico steve mclaughlin has the latest on the storm's track good morning to you. >> good morning. we got official word within the last couple minutes, we're down to category 4 with winds of 155. you can see that storm is batteribatte battering viequez. the official landfall doesn't happen until the center of that eye touches land it missed st. croix, and it's missing viequez. it will not miss puerto rico about 50 miles from san juan
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so in about five hours it will be over san juan let's look at rainfall totals. we're talking about on average 15 inches plus indications there there could be a couple spots with 18 to 24 inches of rain as we talk about what happens next, maria will try to move up the coast between these two areas of high pressure the bottom line is that five days down the road the storm will go somewhere in there the latest computer models suggest it will hug the coast and be offshore of new york city and boston lots of time for the forecast track to change. so this may get close to the united states, maybe not make landfalls, but there will be some effects from florida up to boston in the northeast we could be talking about another round of storm surge, rip currents and dangerous surf landfall, puerto rico a few hours away as a strong category
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4. >> steve, you said time still for the track to change. what about the strength? you said it's been downgraded to 4 from 5 could it go back up to 5 again >> could go back up to 5 when it hits the gulf stream, that river of warm water off the southeastern united states more than likely, if it hits some islands t will create friction and knock it down if that storm misses the bahamas and turks and caicos t could hold at category 4 or 3. if it hits the islands, i think it gets knocked down to 2. as it gets closer to new york, colder water, harder for that storm to remain as strong as it is now >> all right thanks for that update let's look at global markets. futures just flat or slightly higher stateside looking around the world, slight gains for most of the bigger markets in asia. slight losses for the smaller
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markets. nothing too meaningful japan pausing for breath after an extraordinary run it is higher today, but not meaningfully a look at european markets they were just positive yesterday. today you would say they're slightly down. germany and france are a bit higher the uk is lower. we did get some data out of the uk, including good retail sales out of the uk. let's look at broader markets. other asset classes. first up, ten-year treasury note, all eyes on that ahead of the fed meeting. it moved significantly higher in the last two, three weeks, up to 2.23% from the lows of 2.05% of course i'm sure it will be moving around today asnnounces d
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decision oil prices did lose a percent or so yesterday they're bouncing back a percent or so today. holing around the $50 a barrel level which is encouraging dollar board for you, that did slip yesterday down a third of a percent. quite a lot of weakness today. the pound jumping because of uk retail sales, rather than expectations of fed dollar weakness the tlar down aboutdollar down % the euro flat yesterday, up around half a percent. 0.6%, to 1318. the fed decision on interest rates due in less than nine hours. that will be followed by janet yellen's news conference joining me on the cnbc news line, guy adami. good morning >> you're flying solo. i would have came in and co-piloted with you. you should have called me
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>> let's talk about the fed decision very well telegraphed that they'll reduce the glance sheet. of course no expectations of a rate hike today. what's the chance of a surprise? >> i don't think there are any chances of surprises they've done a masterful job of speaking to the markets which is what they attempted to do all along. i'll say this. i think whittling down the balance sheet is a big deal. i don't think the market is taking it as seriously as it should i will say what the market is saying, being we're trading at all-time highs, maybe the fed is moving at a time where the market believes we can pass the baton from monetary stimulus to fiscal stimulus. i think the market is giving the trump administration a break saying this is happening at exactly the right time
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that's what you're seeing right now. i do believe that the whittling down of the fed's balance sheet is more of a -- is more of a potential head wind than the market is giving it credit for if we're switching from monetary stimulus to fiscal stimulus what does that mean for your sector selection? >> i will tell you this. this is something we talked about for a long time. i think people have been banging this drum, i'm not alone, i'm not early. i think banks are extraordinarily interesting. not because they have a tremendous tailwind behind them. what you're seeing is the market saying, look, in 20072008, banks trading at 2.5, 3 times tangible book was crazy much too high. the market is also saying banks trading below tangible book is too low. i think there's an adjustment going on i think many of these banks are
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headed towards 1.7, 1.8 times tangible book. for names like a goldman sachs, that gets you close to a $300 stock. with city still being probably the cheapest of them all if you look over the last couple weeks, citibank traded extraordinarily well >> final comment in terms of the u.s. dollar, both what the dollar means for equity markets, but where do you think it will go for the rest of the year? a lot of weakness year to date a bit of a bounce recently if all we get is balance sheet tightening, does that keep the dollar week for the rest of the year. >> it's a great question the short answer is yes. it's counter untietive,induetiv. i think the dollar should be stronger but remember you have a trump administration and a president outwardly and openly spoke about the importance for a weaker dollar because we have been -- i'm paraphrasing, but he says we've been hamstrung.
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so the mantra from this country for decades has been a strong dollar policy, you have an administration that at least outwardly says a weaker dollar is in our best interest. i will tell you this, it's not in our citizen's best interest, but that's another story thank you very much for joining us >> thank you >> you can see complete coverage of today's fed decision on "power lunch" at 2:00 p.m. eastern time. still to come a round up of the biggest stock movers, including fedex. the shipping giant seeing the effects of hurricane harvey showing up in results. more to come yore wchu'ating cnbc, first in business your joints...
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good morning welcome back to "worldwide exchange." fedex earnings missing the mark. a cyberattack on its tnt express unit earlier this year cut profits by a third hurricane harvey also impacting operations as a result, fedex is loerg profit forecasts. adobe's earnings beat forecasts. it created several new items for
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its cloud. shares of bed bath & beyond are tumbling today the latest results missed forecasts. the company also cutting its full-year outlook. that's down 14%. microsoft is raising its quarterly dividend by more than 7% to 42 cents a share that brings the dividend yield to 4.2%. hugh johnston has been named to join the board johnston is leaving twitter's board to join microsoft. to replace him they have named going google's cfo diageo sales have been hit because of the later chinese new year diageo slipped 2% or so in london trade still ahead, elizabeth
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warren versus wells fargo. senator taking her fight against the bank to jim cramer's "mad money" last night. we'll bring you some of her comments when "worldwide exchange" returns. every year we take a girl's trip.
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remember nashville? kimchi bbq. kimchi bbq. amazing honky tonk??
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i can't believe you got us tickets. i did. i didn't pay for anything. you never do. send me what i owe. i've got it. i mean, you did find money to buy those boots. are you serious? is that why you don't like them? those boots could make a unicorn cry. yeah, tears of joy. the bank of america mobile banking app. the fast, secure and simple way to send money. welcome back to "worldwide exchange." elizabeth warren joining jim cramer last night on "mad money. the two covered a wide range of topics, including wells fargo fake bank account scandal and the massive data breach at
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equifax. >> here's the deal about stealing your social security, they have my social security, my birth date, where i live, they can sit on this data for a long time we're all revved up about it now. we shut down our credit and watch very carefully for what, a month, three months, six months, maybe a year boy, those key data will still be out there for stealing our identity next year, and five years from now, ten years from now and 20 years from now. this is a massive fraud on the american consumer. >> jim asked senator warren about the wells fargo fake bank account scandal. here's what she said >> this is a company that from the very top has made it clear, deficiency no accountability
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here, this is not about serving consumers. this is all about quarter by quarter by quarter how to juice the reported profits, that that's what mattered at wells fargo. >> the senator stepped up her calls for the fed to take action against the wells fargo board. >> this is fed's chance to step up and say whether you cheat consumer when you open fake accounts and force insurance on them they don't need and charge them money they don't owe, the we in the federal reserve are going to say, those who are in charge and are responsible are gone >> senator warren on "mad money. for context, since the april board meeting just three of 15 wells fargo board members have left with just one new addition. let's discuss further on the cnbc news line is gerard cassidy.
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good morning to you. thank you very much for joining me >> you're very welcome >> let's discuss what she's calling for there in terms of more changes at wells fargo. would you like to see -- would the market like to see more changes to the board and possibly to the executive team >> i think what the market is expecting and management is doing is making changes throughout the organization in the way they market new products to their customers it will take time for other changes maybe to the board level. i'm not convinced that the market is demanding that happen now. they do need to see the changes and practices which tim sloan, the current ceo is implementing and working diligently to do >> the share price of wells fargo in the year and a bit more than a year since the scandal broke is underperformed the bkx by about 25%, 30%. significant under-performance
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relative to the rest of the index already. is the share price impact of this whole scandal already fully priced in? is there upside to come as and when they do announce more changes and these things are behind them? >> i think what the under-performance is suggesting in our view is that the culture of this organization has been changed. as we know, wells fargo for many years, 5, 10, 20 years was an outstanding stock to own part of the reason was they had strong top line revenue growth that's changed now because of the scandal. they're putting in new policies. what the market or what the stock is telling us is there's slower growth ahead for this company versus their prior history. >> let's talk about the fed meeting. we're not expecting a rate hike today. we're expecting balance sheet normalization. is that good for banks or not nearly as good as a rate hike? >> the rate hike would be better
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for near-term profitability. as you pointed out there's the unwind announcement coming today. the fed is expected to announce a plan to reduce their balance sheet over the next three to four years by $2 trillion. what will be interesting is it will make the deposits more valuable for the banks in the last ten years, the system has been flooded with deposits we anticipate bank mergers and acquisitions are likely to pick up later in 2018 and '19 because deposits will be more challenging to grow, and therefore acquiring banks to grow your deposits which is what we did or the banks did before the crisis will now re-emerge. >> some people talked about a possible funding short fall for some of the banks, is that something you're concerned about? if so, which names >> i think you're definitely going to see the banks with what we refer to as loan to deposit
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ratios of 100% have more funding challenges when you look at the big banks, the loan to deposit issue ros are ratios are below that. when you have a loan to deposit iss ratio of 100% or more, you can't afford to let the loans leave. and we are seeing that in some community banks, new york community bank has a high loan to deposit ratio, they are forced to pay up for deposits, for jpmorgan and bank of america that's not the case. >> of the top six banks, your top pick >> we want to own bank of america, as the economy expands, should this country get a tax overhaul and reform, bank of america will be a direct beneficiary. >> great to speak to you thank you very much for joining us >> you're very welcome
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senate republicans reaching a budget deal that would allow tax cuts over the next decade. exact details are not immediately known. sources say the senate budget committee could hold a vote on the measure as earl live as ny week senators failed to reach a bipartisan deal to repair obamacare. the president has a busy day ahead in new york with major meetings on his agenda tracie potts joining us with the details. good morning >> today at the united nations, the president is meeting with the leaders of jordan, great britain, also with several african nations and with the palestinians he had the support of israel's prime minister during his speech today he speaks with the other side, just a couple of days ago the president said he still thinks that there is hope for middle east peace between those two. likely emphasized today is what we heard in his speech, where
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the president talked about all nations paying their fair share into the united nations. and not one big country like the united states pulling the train, so to speak. and we could hear more reaction from the president's speech, talking about sovereignty nks th and that every country should put itself first and that direct threat to kim jong-un and north korea. >> tracie potts live for us in washington. still to come, a round up of the global markets plus can taylor swift shake off her latest lyrics lawsuit? why a big chunk of her royalties may be at stake. stay tuned, you're watching "worldwide exchange" on cnbc
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hurricane maria downgraded to a category 4 storm as it closes in on puerto rico we have the latest on the storm's path. the fed in focus stocks sitting at record highs as investors await a big rate decision from the federal reserve. and a ballpark record, how mlb history was made last night. it's wednesday, september 20, 2017, you're watching "worldwide exchange" on cnbc. good morning very warm welcome to "worldwide exchange" on cnbc. i'm wilfred frost, sara eisen is off today. let's check the global market picture.
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futures are pointing just a little bit higher. the dow up by 18 points in the premarket. the s&p is fractionally higher the nasdaq is lore after trifecta of record closes. the dow was up 0.2%. the nasdaq and s&p up 0.1% so i think it's fair to say markets just pausing for breath a bit ahead of the fed meeting we'll have much more on the markets in just a moment first to the breaking news out of mexic the death toll continues to rise following yesterday's 7.1 magnitude earthquake more than 200 people are dead including at least 22 children who were killed when an elementary school collapsed. mexico's president says more than half of the nation's capital is without power yesterday's disaster comes less than two weeks after a magnitude 8.1 quake hit the country killing almost 100 people. we'll continue to follow this breaking news and bring you the latest as we get it. switching focus to hurricane
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maria. it's been downgraded to a category 4 storm but remains dangerous with maximum sustained winds of 155 miles per hour. it's expected to make landfall in the u.s. territory within a couple of hours. authorities warn puerto ricans to evacuate or die as the storm approached joining me is steve mclaughlin steve what is the latest in terms of -- it's just been downgraded still on course to make landfall coming soon. >> so, remember irma had winds of 185, but irma went north of the island, so it never made a direct hit this is literally over the next couple of hours going to be right on top of puerto rico. eyewall is battering viequez, but it hasn't made official landfall that's maybe two hours away that could be over san juan in four hours. >> far the devastation has been focused on similar caribbean islands as were hit by irma. >> the difference is the track with irma was further to the north. so we talked about st. martin,
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whereas i think the biggest island we talked about yesterday was dominica and last night was st. croix. now it is definitely puerto rico good news for dominican republic, the storm might go north of them this storm could be on the east coast of the united states by next week >> the united states was hit recently in texas, florida now we're looking at boston and new york >> looks like maria wants to go east of the bahamas and go close to cape hatteras, north carolina it's a perfect spot for nor nor'easters and hurricanes to get their act together if you live from north carolina up to boston, prepare for a storm, maybe not a direct landfall, but just off shore next wednesday, thursday,
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friday >> what's next we have gone from harvey to maria. is there anything else brewing out there? >> was a tropical system yesterday right behind maria it looks like it's not strong enough to form into anything and wants to crawl up to the north behind that we don't see anything for the first time in a while. that's good news but it is only september 20th we still have until november 30th, until the end of hurricane season we just had three 100-year historic storms in a three-week period of time, harvey, irma and now this >> steve, thank you very much. >> all right >> we look forward to more coverage throughout the day on cnbc. let's look at the markets. asian tlad for you is slightly positive for the main markets, slightly negative for the smaller markets. japan pausing for breath after an outstanding run over the last six trading sessions up more than 5%. largely in light of a weaker
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japanese yen let's look at the picture in europe we had some decent data out of europe early today we saw some better uk retail sales. also some slightly better than expected german ppi. in general slight gains for the main three markets germany, france and uk slight declines elsewhere. ten-year treasury note which has moved higher in the last two, three weeks ahead of this fed meeting also as risk sentiment improved, 2.22 is the yield this morning. 2:00 p.m. we get the fed decision, all eyes on that asset class as that comes out. oil prices slipped about a percent or so yesterday. they're bouncing back by a percent or so today. just above that $50 a barrel level. dollar board, decent weakness out there today. nothing too ro noupronounced
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the pound gaining about 0.4% in light of those better uk retail sales data gold prices for you, it was flat yesterday. up about 0.6% today at 1,318 let's talk a bit more about markets and today's fed meeting. paul donovan joins us, global economist from ubs wealth management good morning to you. thank you very much for joining us in terms of the fed meeting, i guess things have been fairlyeg potential surprises you're looking out for today? >> as far as quantitative policy is concerned, it's unlikely we'll get a surprise the fed -- the existing tightening of quantitative toll pi they a policy we know that will be telegraphed for the future where the potential for interest is going to be is around the
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signals of was they might do with interest rates at the december meeting is there the prospect of a rate hike in december how much will yellen signal that at the conference? what about the surprises in the rest of her term in terms of rate hikes what do you expect what do you think the market expects between now and february >> well, i think we should be seeing another rate hike at the end of the year. if you look over the course of the last 12 months, real fed funds have been coming down as u.s. inflation has been slowly ticking up the pressure is on inflation as we look ahead over the next 18 months. those are perhaps tilted slightly to the upside i think another quarter point in december would be prudent. i don't think the fed is going to necessarily rush to tighten beyond that. i don't think they'll go on an
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accelerated monetary tightening. they want to establish the quantitative tightening and move once more on rates the bigger question is not what happens over the remainder of yellen's term, but what happens to the independence of the federal reserve as an institution. we've got four vacancies on the fed now out of the 12 voting members. and with yellen potentially not being replaced you could end up with a fifth vacancy. there's a serious question about the future direction of the fed under a far more trump-influenced fomc. >> would it be easy for the next set of leaders of the fed to change the direction, maybe not of the interest rates, but easy to change direction of this fed balance sheet tightening >> no, it is easier to change the interest rates than the balance sheet. i think this is one possible
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reason why the fed is precommitting to the balance sheet. it's an insurance against an attack on fed independence by putting in place a multiple quarter strategy of tightening, of getting that agreed possibly unanimously today, of getting markets to price that in, though a new fed chair could come in and change that. it's less likely they would if it is something the markets expect >> let's talk about the picture around the rest of the world and what it means for various dollar pairings we've seen a weak dollar all year, but they are likely to confirm today they are the first central bank to begin meaningfully on that tightening path does that mean we need to see a bit of dollar strength on the other side of this whether it's against the euro, the yen or sterling? slightly different case for
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sterling >> i'm not sure it means we see a reversal of the dollar's weakness >> there's lots of factors going into the currency. one is that the u.s. dollar is not driven by the states, but international willingness to buy and hold u.s. assets the u.s. needs to borrow 2$2.7 billion every day just to stay afloat international investors are more reluctant to lend the united states money at the moment is the fed moderately tweaking quantitative policy at a pace which yellen described as like watching paint dry, will that lead international investors to say now we'll pour into the dollar i don't think so could we see a pause in the dollar's weakness? yes, absolutely. ecb president draghi is being dragged kicking and screaming in the direction of a pod rat timoe
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policy of tightening the language will exhibit reluctance, the bank of japan with the general election coming up, certainly questions about the boj'sindependence, they will continue with their money printing operations, so i think we see the dollar range bound for the next few months. but i don't see the dollar significantly boosted by what is a widely expected event. >> just a quick final side question he made a speech this side of the pond recently. is mark carney a possible successor to janet yellen? his name is not mentioned often. >> he's not, no. he's canadian, whilst the bank of england is prepared to appoint foreigners, the federal reserve requires you to be a u.s. citizen to run the fed. >> it an outright rule or a general rule of thumb?
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>> it's an outright rule the only reason stanley fischer as vice chair was able to be vice chair, he holds duel sal citizenship of israel and the united states. >> i didn't know that don't miss complete coverage of the fed decision, 2:00 p.m. eastern time fedex earnings missing the mark a cyberattack on its tnt express unit earlier this year cut profits by a third hurricane harvey also impacting operations adobe's earnings beat forecasts. it created several new items for its creatie creative cloud shares of bed bath & beyond are tumbling today the latest results missed forecasts as online sales were not enough the company also cutting its full-year outlook.
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that's down 14%. mark walter considering stretching down as ceo of guggenheim he is considering forming a holding company that would house one of the insurance assets which includes a stake in the dodgers. representatives from the firm are denying the reports this all comes a difficult year for the firm the journal says guggenheim has been dealing with regulatory scrutiny from the s.e.c. and employee partners. kb home is apologizing after offensive comments that were released the company's chief made those comments this past weekend to kathy griffin and her boyfriend. griffin's boyfriend called los angeles police to complain about noise from his house mez ger ca mezger called griffin and her boyfriend. here's the sound that was released an published on
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huffington post's website. >> go [ bleep ] yourself serious seriously? you call on my grandkids at 9:00 you're not even the [ bleep ] owner. your son [ bleep ] who donald trump kind of put the heat on. now you're calling the cops [ bleep ] you. [ bleep ] kathy. you're not our [ bleep ] neighbor you're the [ bleep ] [ bleep ]. >> a lot of bleeped out words there. in a statement kb homes says mr. mezger regrets losing his temper and apologizes for the language he used. huffington post reached out to kb home's board but no comment landon dowdy joins us with what has the internet buzzing this morning. >> good morning. late night is getting political. jimmy kimmel is calling out senator bill cassidy the late-night host said cassidy
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is a liar attacking the republican's latest attempt to repeal obamacare in may, cassidy said he would support any future bills that no child would be denied healthcare because the family could not afford it now kimmel says cassidy was not honest and urged politics to shut the new bill down, pleading with the american people to see the truth. >> don't take my word for it here are just some of the organizations that oppose this graham cassidy bill. the american cancer society. the american diabetes association. american heart association american lung association. the arthritis foundation cystic fibrosis. a.l.s. association march of dimes children's hospital of l.a basically any group you have given money to thinks this is a bad idea do you trust them or do you trust him? stop using my name, okay i don't want my name on it
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there's a new jimmal test for you. it's called the lie detector test you're welcome to stop by the studio and take it any time. >> this is a personal issue close to his heart with his son. but switching gears, taylor swift back in the news, she's being hit with a lawsuit over her megahit "shake it off. two song writers filing a suit against the pop star over a leer wick similarity. the pair claim the song lifts heavily off the song "players going to play. they claim 20% of salt lake it off is their work and they are entitled to the profits. swift's representatives have said this is ridiculous and nothing more than a money grab they do not have a case. >> i have to say, if this was from a song in 2001, it's taken them some time to notice the overlap. 20% as well? listen, i have not read all the lyr lyrics >> this is a phrase we're going to use
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players going to play, haters going hate >> how often do you use those phrases? quite often. >> the all bum was obum was out. going after a lot of money here, though >> it reminds me how good that album was compared to the new one. >> 1989 was awesome. moving on to sports, the record books were rewritten last night in major league baseball alex gordon of the royals hit this home run against the blue jays it was the 5694th home run hit in the makers this season. that breaks the season record set in 2000. with more than a week of games left in the regular season, the final total projected to top 6100 home runs wow. still to come, must reads coming up. plus the big takeaway from president trump's u.n. speech yesterday.
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why his comments may signal a rebranding later today on the half time report, live and exclusive, an interview with bill ackman that's at noon stay tuned to cnbc opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities.
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cme group: how the world advances.
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their leadership is instinctive. they're experts in things you haven't heard of - researchers of technologies that one day, you will. some call them the best of the best. some call them veterans. we call them our team. welcome back at this year's delivering alpha contest, blackstone's steve schwartzman explained why he thinks geopolitical events pose the biggest risk to stocks
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>> whether it's north korea, trade, there are a number of issues that people don't want to focus on because the outcome would be really bad and those are the things i think about. if you want to hear more, the full interview was just posted today head over to and all sorts of outstanding bits of content on that website. time for the must-reads. here are three stories you will want to read before you head into the office. the first one, "wall street journal's" editorial board writing a piece titled all mr. comey's wiretaps the article argues the importance of congress the ins and outs of how the election may have been meddled with and then the risk of a new economic nonorder, dynamics
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gaining traction in the economy. and the "washington post" article, a deep drive into president trump's u.n. address yesterday. the title the most surprising thing about trump's u.n. speech, despite the various criticism about how strong president trump was wording threats to north korea and iran he said overall he felt there was a positive tone in it. he said after a miserable nine months, trump is sick of losing. he wants to win and he evidently has realized he can't do so with a collection of right wing outliers as his only allies. the u.n. speech struck me as the international version of his rebranding that particular line points towards what he was saying about the u.n., about collaboration, that's what he felt was positive surprise in that speech from president trump. we are waiting on the federal reserve's latest policy decision interest rates expected to stay
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steady, but how will the central bank uind nwits balance sheet? we'll discuss that straight ahead.
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♪ we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley.
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welcome back to "worldwide exchange." futures at this hour essentially flat the dow slightly higher. the nasdaq slightly lower. joining us is jurian timmer let's talk fed expectations. the markets taking a breathchl morning. what would be a possible surprise verses what people are expecting today? >> the main thing i'm focused on are the dots we know there won't be a rate hike the odds of a december hike are 50%. my guess is that we won't hear much about the direction to whether the fed will or will not hike in december we also know they will likely announce the beginning of their balance sheet reduction by capping the reinvestment of 10
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billion, and after three months that resets automatically higher that's all in the markets. i doubt there will be any surprise on that i doubt we'll see any visibility on december. but i think the big thing to watch is the dot plot. since 2013 or whenever the dots became a thing, the median dot has been coming down every quarter with the exception of last december, right after the presidential election because the dots have always been too high, the market, see yacht fvi fund futures curve has been lower. that's been the tendency for the dots to converge towards the market today we have a large disconnect the fed funds market is expecting less than two more hikes over the next two years. the dot plot implies, it's only an implication, but implies seven more hikes that's big delta of five hikes
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how the dot plot either comes down or actually remains up, i think that will kind of drive the markets really in the next couple of weeks. if the dot plot doesn't come down, if the fed stays more hawkish, the bond market has a little repricing to do >> terms of that repricing, are we seeing a change in level or also in shape of the yield curve? what do you expect probably the curve would steepen. if the number of hikes priced in by the money market, by the fed funds curve goes from 2 to 4 or 3, that implies a steeper forward curve on the short end and the long end, if the ten-year, which just a week and a half ago was at 2.05% f that goes to 2.50, that would cause a slight steepening. >> will we expect the dollar now to start to strengthen and rebound from 2017's weakness
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>> if the fed leans more hawkish with its dots and/or as more guidance towards december, which the last part i don't really expect, then that would be a positive colldollar story, but b only at the margin chances are it's not going to be a dramatic change. it just may be that the dots don't come down as much as the market maybe is pricing in i don't expect major fireworks from the dollar or even from the bond market, but i do think that is the development we need to be watching for >> just about 20 seconds left does it matter to you who replaces janet yellen? or do you think either way it's going to be someone committed to loose policy >> we don't know, of course. we have potentially four vacancies opening up with the most recent retirement obviously if the current chair stays on that would be good news
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for the market it would suggest continuity. >> thank you very much for joining us that's it for "worldwide exchange." "squawk box" is next d this. d this. cd's, baseball cards... your old magic set? and this wrestling ticket... which you still owe me for. seriously? $25? i didn't even want to go. ahhh, your diary. "mom says it's totally natural..." $25 is nothing. abracadabra, bro. the bank of america mobile banking app. the fast, secure and simple way to send money.
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good morning breaking news, hurricane maria downgraded puerto rico still expecting catastrophic damage. we have an update on the path straight ahead. and new this morning, the death toll rising in central mexico following a powerful 77.1 magnitude earthquake a live report from mexico city. and the fed is in focus. the central bank set to issue its latest decision on interest rates. we'll tell you what to expect, it is wednesday, september 20, 2017, new york being taken over by ugma, we'll talk about that
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"squawk box" starts right now. live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin, yo is out today. joining us is the business editor of axiot, dan primack a lot of things to talk about a lot related to politics and washington let's look at u.s. equity futures. yesterday all three of the major averages were higher once again. it was a trifecta of record closes the dow, s&p and the nasdaq all ending the day in record territory. you can see this morning there are green arrows once again. it looks like the dow futures are indicated up by over 1


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