tv Street Signs CNBC August 27, 2019 4:00am-5:00am EDT
welcome to street signs. these are your headlines european equity markets struggle to gain traction despite trade break through after president trump says china wants to resume negotiations >> the art of the deal president trump strikes an unapologetic tone here at g-7. calling president xi one day his enemy and the next day his dear
friend is not inconsistent with his tone and style and trade policy. >> it's the way i negotiate. it's done well for moefr te ovee years. >> the ftse bucks amid the downturn as they reportedly drop a key red line in it's negotiations and iran's president says there will be no change to the status quo unless u.s. sanctions are lifted after president trump signals he's open to meeting all right. good morning behind me in europe, we have the majors all to end the session in positive territory and now the dow up 42% since the election
and if you remember the president did actually tweet a couple of days ago you should judge me on the stock market performance since the he ex- we did see rebounds in names like apple that was a name very much in focus after it went to a whole new level. and indeed the president did mention 24 hours agatha china indeed called up the u.s. and were looking to reestablish dialogue so that was the picture for asian and u.s. markets europe not so pretty you can see a little bit more red on the board stoxx 600 down .3 already. yesterday we had a bank holiday in the u.s. but trading with a little bit of a negative bias.
we're down about .5% about 35 points lower today. some of the names dragging down the u.k. index, bat, hsbc as well some of the names we're watching out for. down .2% we had the second quarter gdp with the second reading again today and it came out at negative .1% so confirming that the german economy did contract in the second quarter and then the one spot of green is the italian index. the ftse mib is up today and this is a political story we have investor optimism about the talks taking place between the party and the five star movement consultations are continuing the two sides are continuing their negotiations today but crucially it looks as they though have stopped their
resistant to the prime minister being reinstated so we're expecting to hear an announcement in a couple of days on a personal note i'll be flying there this afternoon and taking a look at that. italy is there defenses out performing, real estate up .6 of a percent. trading around 3 or 4 tenths today. again on the same story that we're looking at between the u.s. and china so that's giving a bit of a boost to the energy sector and also up in the green and then on the down side we have media down side and construction and material down .5 as well
>> signaling a deal with china is on the way. speaking at the g-7 summit in france, trump believes china sincerely wants an agreement but added he's not sure they have a choice now steve joins us with more it was about 24 hours ago when we heard these comments from president trump. it has given a bit of a lift to u.s. equity markets and asian equity markets what more can you tell us about how the day progressed yesterday. i find it quite incredible that people can move such a large amount of asset classes from defenses and risk on and vice versa. and indeed his comments because if you look at what he said not over the last 24 hours or 42 hours or 72 hours plus, we have
seen extreme moves, one, do u.s. companies have to pull back all of their operations from china china is off brand and we think we're in a better position than we have been at any stage in the negotiation. the chinese want to speak to us as well about a deal so the commentary from the president about what is extensively not a lot of news flow between the chinese and u.s. delegations and here on one side between his counter parts he's quite extreme and the way the markets move is quite extraordinary but as ever the president has been robust about his stance he's accused of having second thoughts stephanie grisham said no he's having second thoughts because he wasn't being tough enough as well but anyway, we moved a long way so just listen to the president's defense of his
strategy and what the president should have done past and other what other political candidates for his job just wouldn't be able to do. >> i have people say just make a deal make a deal. they don't have the guts and they don't have the wisdom to know that you can't continue to go on where a country is taking 500 billion, not million, 500 billion with a b out every single year. $500 billion you can't do that. somebody had to do this. it should have been done by president obama. it should have been done -- and biden, sleepy joe. it should have been done by other people it should have been done by bush it should have been done by clinton. double bush. it should have been done i'm doing it >> i think it's very important to point out as well, these comments, this commentary could have been done at washington or on a golf course somewhere twitter as well but the fact that it's here at the g-7 underlines the fact that he's
acting on his own here there's no g-7 backing for what he says and no presidential backing for what he has been trying to do on a lot of initiatives and of course he's famously takingen away the communique in order to take away the source of dissension that we saw last year. issues that should have been a no brainer such as rich western powers want to put out fires in the amazon forest has turned into an international incident on so many fronts. the spokesperson said look, why don't you spend that 20 million dollars that you offered on reforesting europe how can you tell us in brazil how to put out forest fires? this is their words. an avoidable fire of course eluding to the tragic fire we
saw at notre dame earlier in the year very contentious issues the amazon rain forest turned into as well but he took it to another level when he basically endorsed social media following of his which seemingly mocked the president of france's wife compared with the president of brazil's wife as well. he made this response not only on behalf of the france and the g-7-on-behalf of how brazilian women might feel about it. >> what can i say? it's sad it's sad first of all for him and brazilians i think brazilian women are ashamed to read that about the president. i think that brazilians are a great people and they're a bit ashamed of such behavior they expect their presidents to behave well with other people. and as i have lots of respect and friendship for the brazilian people, i hope they rapidly have a president that's up to the
task. >> the style of these things is you try to find stuff to put into final comments that you ca agree on you look for externalities we saw it with concerns about libra which is part of my coverage not so long ago we're seeing it about the amazon and issues such as iran but i'm afraid you have to give them a very low score back to you. >> as ever, steve, it's tough to come up with concrete actions at the g-7 summits. but for more on trade, i want to bring in the chief economist for capital economics. the world has been very much gripped by the trade war between the u.s. and china let's not forget europe. europe are very much at the heart of this as well. one of the reasons why some of
the european sectors got hit is because of anticipation of potential paris coming on to europe as well from the u.s. but we did get some mildly encouraging comments over the weekend saying that he does see prospects. how much of a relief does that give to europe especially coming at a time when there's a lot of noise about the weakness of the data >> you have to take any particular comment by president trump with a huge pinch of salt. i don't think that's a big relief the problem german exporters are having is not because of direct tariffs or fierce of tariffs it's exports that are nearly half of gdp so four times exposes the united states for example and it's exposed in the auto sector and machinery and
equipment so they're particularly cyclical and also worried about a no deal brexit. >> so even when we do see a thawing of relations between china and the u.s., the damage is done when you think about global trade volumes and because of that europe is at the heart of it. france is holding up quite well. they're more insulated from global trade we have a problem of italy, the biggest problem in euro zone and to have the european power house and germany which we saw in the data released today is a major issue. >> so we had the second quarter contraction minus 0.1% for gdp and looking at the recent numbers yesterday, pmi is pointing to q-3 as well.
or are we on a sustained downturn in germany. >> we're now in the middle of a sustained slow down about to turn into a ecession plus it's worse and worse. >> there's a lot of pressure mounting from the international community and also some voices within germany as well on the government to do something if they do go down the route of bringing income tax cuts from 2021 to 2020, how much of an impact is that actually going to make not just for the german economy but the broader euro zone economy as a whole people seem to wave this wand of german fiscal stimulus as the cure for all of europe's issues
but it doesn't feel like it's going to be sufficient, does it? >> germany accounts for around a third of euro zone gdp so any fiscal stimulus you need to divide it by three to see the impact on the euro zone as a whole. i don't think it will be a substantial one. they're moving in that direction. there's a debate going on but we heard this morning that the leader of the cdu which is still by far the most important of the major parties was addimently opposed to any change to their physic fiscal rules. >> we just had the minutes that indicated more broad support for monetary policy easing >> they cut the deposit rate further. they're also going to announce to help the banks out and make this less painful and of course they're launched in september.
on more qe, it's possible that that will not happen in september. but be delayed until october because there's a lot of details that need to be agreed it's not so clear. >> is there anything that would dovishly surprise the market >> it's possible the market would be surprised if it was over two years. if they preannounce that the one positive surprise i think they're quite likely to do but not until october is announce corporate bonds rather than sovereign bonds that makes more sense given where the yield curve is. >> why does that make more sense
though what makes you think all of a sudden this is going to unleash animal spirits that will boost spending >> i didn't say it would unleash animal spirits it would bring down creditspreads a bit further and have a marginal positive impact. now indonesia president says the location of the country's new capital will be there and the current capital jakarta is one of the world's fastest growing cities and it's home to 10 million people however the city suffers from overcrowding and pollution and it's sinking and have markets been bringing you down? well perhaps it's time to look at the bright side of life
a new u.s. study suggests positive people are more likely to live longer researchers at boston university found that optimists find it easier to control their emotions and protect themselves from the impact of stress there you go an optimistic end to our first segment. if you want to get involved, follow us on twitter and tweet us or tweet me directly and tell me how optimistic and how happy you are today. also coming up later, the clock is ticking in italy where political parties are trying to form a coalition government. the latest developments are coming up in a few moments
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spending and central bank easing scandinavian airlines posted slightly better than expected profit as they helped offset decline in capacity. the carrier warned it will be challenging to reach a positive pretax result for the whole year and speaking to cnbc, he detailed the issues facing the company. we continue to see some head winds. we see signs of many of a slow down in the economy and there's a strong correlation between the gdp and demand for services. so we understand that we need to continue to drive our agenda and increase the pace in order to secure that we can deliver a
sustainable return with maybe more head winds in the macro environment. >> boris johnson refused to rule out suspending parliament in a bid to push through a no deal brexit johnson was pressed several times amid reports he consulted the attorney general over the legality of such a move it's what everybody wants. they want this thing done. they want it over. you talk to our friends as i have done the last few weeks and they're very enthusiastic about getting on with the future they regard it as an old argument they want to talk about the new partnership that we're going to
build. we need a new way of thinking about it but we have to come out in october 31st. >> in the last half an hour italy's five star said it will not reconvene walks unless the party publicly commits to a new government lead by the prime minister now both sides appear to be edging closer to an agreement to form a coalition last night after party heads held talks with conte he will be quote optimistic a deal could be found. he has given both sides until tomorrow to reach an agreement let's bring in andrew and talk this through in more detail
>> do you think all the news is priced in at this point? >> it's difficult to see it rallying much further. i think buy a bit of time and see them get through in october for 2020 that's the main immediate risk for the markets. given the backdrop as well with very, very low bond yields everywhere there are reasons for optimism in terms of the markets themselves the economy though i don't think has changed that much. >> well, the thing is, when you think about italian politics, the narrative has been twofold one is the economy and the other is the relationship with brussels so at least the market perception of a 5-star alliance is that it will be friendlier to brussels but as you say not clear the impact that it's going
to have on the economy what type of measures would you like to see announced out of this potential government? >> i think we need to see unfortunately, a commitment to continue strategy. or changes to the citizens income and infrastructure spending if we see them also sitting down and negotiating with brussels over a longer term approach to try to raise italy's structure growth rate that would also help. >> do you think a government like this comprised of parties who in the past have refused to work with one another and now all of a sudden opportunistically deciding to go into government together and let's not forget they were in government for many years and
that did have a positive impact on growth what prospect is there for this future government to actually enact reforms >> the first question is how long will they last as a government the average life expectancy is just over one year anyway. so that would be the starting point and they have been trading insults. so it would not be surprising if it fell apart next year. and if there were early elections they would miss ut
thank you for taking the time to chat with us andrew cunningham. also coming up, our relations with iran about to turn a corner president trump says there's a good chance of a meeting after that surprise appearance more when they come back. >> i think iran wants to get that situation straightened out? is that based on fact or based on gut that's gut but they want to get this situation straightened out.
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tone saying that calling president xi his enemy one day and his friend the next is his style. >> it's the way i negotiate. it's done well for me over the years and it's doing even better for the country. >> the ftsi mib holds on to gains and any future pd coalition suspending further talks until it publicly commits to the condition. >> and iran's president says there will be no change to the status quo unless u.s. sanctions are lifted after president trump signals his open to a eeting you also have the dax trading
weak as well we have the german second quarter gdp confirm that minus 0.1% we'll talk more about that shortly but definitely the numbers haven't been helping there. ftse mib still trading positive on optimism around the talks between pd and 5-star so despite all the optics in stock markets, we're seeing a bid overnight, again very close to breaking through the 105 handle and certainly getting comments out of the finance ministry there on the strength of the yen and then 12243 on the day versus the u.s. dollar about
a quarter of a percentage point. in u.s. futures, i talked about the better close yesterday with all the majors closing up 1% today we have a little negativity on the board. seen opening up in the red but only slightly so, down about 46 points weaker. >> well, the iranian president says there will be no change to the status quo unless the u.s. lifts sanctions. his comments come a day after president trump said he is open to meeting his counter part, quote, if the circumstances are correct. rouhani says they're ready to hold talks only if washington ends, quote, all illegal, unjust and unfair sanctions it sounds as though the ball is very much in president trump's court now. >> you're a great student of the region as well i think basically you have two
very different opinions about what the other side needs to do in order to start talks, in order to take away perhaps some of the tension in the region and while the iranians are saying we're not going to change our position and we're not going to change our position on ballistic assets as well, the u.s. is saying these need to be part of any, as you were saying, thawing of tension in order to get the talks going again as well. the very important point as well that needs to be made and he'll have a view on this as well, it's not just about the u.s. versus iran. there are a whole host of regional players who it's key to be involved in any dialogue as well because a lot of the u.s. foreign policy in the region is being driven in coordination with the likes of traditional allies the israelis plus newer allies such as saudi arabia and the uae as well. so there's a whole coalition of interests on one side that need to be considered plus you need to consider the whole cpoa and
russia and china were not here as well. when you consider the countries i have mentioned it gets very complicat complicated. he met with the iranian foreign minister only two days before in paris. but listen in about his rational. >> i decided to invite as friends. minister zarif i informed president trump that it was my idea not to involve the united states not to say this is on behalf of you but to say as friends i think it would be a good idea to
ask him to try to negotiate something. president trump was informed each minute about the solution -- the situation, i'm sorry. and the idea for me was in case of important move and appropriate solutions perhaps to have meetings between ministers not at president trump's level because president trump's level so this is a french initiative but made by clear information before. >> he's been looking for a win for the g-7. we talked about earlier how he didn't get wins on the environment or win on amazonian
rain forest fire coordinated action and that one spectacularly fired back at the french as well you have to remember this is so complicated and it's not just about the united states and iran and again as our next guest will be talking about as well, the regional players, the vested interest, the suni versus shia debate going on across palestine to lebanon to yemen as well and a cold war sometimes and hot war as well is very complicated. add into that the fact that the russians like the idea of warm water in syria and elsewhere america wants russia back in the g-7 but the other powers don't want them there so there's that added complication as well plus the fact that the chinese are part of the un security counsel but of course we must not forget this is about two of the biggest oil players in the
world. it's very, very complicated. so did he do the right thing in trying to get things going was it perhaps niave to expe-- e to expect it from the americans? >> a nudge in the right direction. thank you for your commentary over the last couple of days i want to ask you what your impression is of inviting him to attend the g-7 not as a formal attendee but on the sidelines and he says that he had had run it beforehand but was this a diplomatic coup or blunder in
your view? >> i don't think it was either i don't think you should look at this event just in that context. this was the next logical step in a long-term effort conducted by the french with the support of britain and germany to reverse the cycle of deterioration and in the prospect for the survival of this vital international agreement, the nuclear deal with iran so there wasn't something set up that didn't work this was getting zarif back to continue the dialogue and to refine it to a point where he could take a package back to his
boss, the supreme leader of iran and also to his president, president rouhani to see if there is scope for an agreement. >> we have heard from mr. rouhani overnight and he said the only way they'll stop scaling back on their nuclear commitments is if the u.s. lifts u.s. sanctions so it seems to me that europe is just a bystander in this discussion what effective leverage does europe and macron have over iran >> very little leverage. this is about finding an area of mutual interest and defining it in such a way that iran has the challenge to the nuclear agreement. they waited a year before responding to the totally unjustified united states rejection and withdrawal from the deal
they started to escalate pressure and that's against u.s. interests and also against european interests so it's right to use diplomacy to try to restore the status quo ante to get the united states to make a concession which enables iran in-turn to return to its full implementation of the nuclear agreement. so there's time at hand and willing partners in europe to try to narrow the gaps between the united states and iran and i wish them every success. >> well, let's also talk about
iran and it's own tactics over the last couple of months. it's almost as though it feels embold embolden how do you think they think about this in the context of them actually feeling embolden to do these things. >> the united states has been provoking iran to with draw from the nuclear agreement in order to destroy the nuclear agreement and start a different negotiation with a different set of objectives. secretary of state pompeo layed them out they require iran to surrender all of it's interests in the middle east to change the nature of its regime and so on and so
forth. it's not surprising that iran should have retaliated in accordance with it's long-term policy which is if the gulf can't be used freely to export oil then why should anybody export oil in security from that area everybody has known that is iranian policy and the measures that probably iran took against four tankers with no loss of life were meant to be a stark reminder to saudi arabia, the uae and the united states of that basic policy by iran.
and we have seen europe step up with the support of russia and china to try to reverse the damaging consequences of the u.s. withdrawal from the new agreement. >> you were the former u.k. ambassador to iran i want to ask you where u.k. is in all of this and perhaps in the biggest of the u.k. dilemma is what happened a few weeks ago. the question really for boris johnson and this government is who side are they on are they taking more of a european approachto these discussions or the hard line approach that the u.s. is espousing? >> the european approach policy have not changed in the last month since the u.k. prime
minister changed and that is because it's a fundamental u.k. security interest to maintain and force the iran nuclear agreement. thank you for taking the time to speak with us today. former u.k. ambassador to iran now hong kong's chief executive says she is confident that the government can handle the current political crisis speaking publicly for the first time since the weekend's protests, lam acknowledged that it was becoming more serious but maintains that her government was in control and coming up in a few moments, it's confirmed, the german economy contracted in the second quarter. we'll cross live to frankfurt to discuss how trade tensions are
germany's economy contracted the economy shrunk by 0.1% exports fell by more than imports during the period. can you give us more color on the detailed break down? >> yes, it's quite traumatic when it comes to exports it's the largest decline in exports in six years and that's clearly weighing on the german economy it comes from household consumption but also state
consumption is up and we already have a certain degree of fiscal stimulus the german government would argue. there's also not like -- it's not a traumatic picture, the german economy is actually showing the second quarter formation is still going well. investments are up the only sector which is going slow is the construction sector but also the perspective that it was very strong already in the first quarter. so this has slowed down where as the overall picture when it comes to capital formation is still positive and that should be an interesting one also for the ecb because wages are up on average 3% in the second quarter just for germany which could mean
that we're building up some inflationary pressure here from the labor market but let me bring you also more commentary on whether the second quarter weakness now will mean that the german government would come up with some fiscal stimulus because the labor market is still doing well ange angela merkel made it clear she is only willing to abollish that approach if there was a material depreciation in the labor market we don't see that yet. labor market is still very strong close to record lows when it comes to the employment ratios and we still have a lot when it comes to labor those that are hoping that the german government will support
the economy. there's not so much they can do by spending more if the labor markets show really signs of weakness, then there will be measures, i'm sure that has happened during the last recession as well. but just to say the economy is such the german government will not step in. at least that's the latest what we're hearing from berlin, back to you thank you for bringing us that well, serena williams breezed past her old rival maria sharapova in 59 minutes.
people call this a rivalry but 20 to serena isn't really a rivalry is it? >> no. 15 years since sharapova faced victory against serena williams. 6-1, 6-1, the score line just 59 minutes as you say but the strangest thing about this was the fact that it was in the first round of the u.s. open just a couple of years ago you'd say this would be quarterfinals, semifinals, finals worthy of a grand slam but this was very early on sharapova, she has dropped to 87 in the world she had a history of recent injuries and returned to that doping band in 2017. she was no match in front of 24,000 fans including famous faces in the crowd as well to see serena as she chases that 24th record equaling grand slam which eluded her so far. she returned to the tour after becoming a mother. she has had injuries this year
as well. a huge test in front of her to see if she can last two weeks to be champion here again but it's a long road considering last year she wasn't too happy at the end of the final against naomi osaka and that umpire isn't going to be officiating in her matches this year as well. considering the role reversal of putting the mind set of serena williams, how would she feel if she had been on a 19 match, 15 year losing streak against the same opponent? >> gosh. i never thought about it like that but she keeps coming out and fighting and finding different ways to stay in the match. >> it's facing an opponent that at her stature is extremely difficult in the first round of a slam with coming in with the fact that i haven't played that
much but those are the situations that i have to keep putting myself in and coming out of them. >> so we talked about the 6-1, 6-1 win. obviously a big win for serena one year ago there was the big controversial interaction between serena williams and the umpi umpire, what is the latest on that now >> a very well respected umpire on the tour isn't going to officiate in any of serena williams matches during this u.s. open even she was asked about this in her post match news conference after that she said what do you think about that and she said i don't even know who that is. so clearly something festering underneath there serena williams has her opinions on that situation. but yes, carlos ramos isn't going to officiate. >> djokovic is the favorite.
>> yes over two weeks of a grand slam he was facing match points at wimbledon and overcame that. he's still looking to close the gap. he could end up one step closer to rafa nadal and roger federer. but it's always fun to watch >> thanks for breaking it down for us a quick look at u.s. futures before we head out today we have all three majors pointing to open up in the red slightly below the flat line but still nothing too momentous. worldwide exchange is coming up right after this stay with us ♪ think you need to pay prestige prices for better skin results? try olay regenerist. the rich, hydrating cream is formulated with vitamin b3 and peptides to plump skin cells, brighten, and visibly smooth wrinkles.
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