Skip to main content

tv   Worldwide Exchange  CNBC  August 11, 2015 4:00am-5:01am EDT

4:00 am
a very warm welcome to you. this is "worldwide exchange." i'm wilfred frost. >> good day to everyone. i'm seema mody and here are your headlines from around the world. white smoke in athens. greece reaches a bailout deal with over a week to spare, but the country's creditors are still left to iron out the final details. currency curveball. china devalues the yuan in a bid to boost the flagging economy. the surprise move sending shares in europe's auto and luxury stocks lower in early trade. easy as abc. google creates a new umbrella company, alphabet, in order to simplify its structure. sundar pichai ceo of the new
4:01 am
search business. and prudential prepares to deliver first-half earnings in about 15 minutes. profits are expected to surge by 10%, but investors eye the challenges ahead. welcome to the show. let's get straight to european markets, which were indeed quite strong yesterday. a slew of earnings and oil prices recovering by a couple of percent allowed equity markets to perform relatively well, better in europe than in the u.s., but positive across the board. now, today we are down 0.6% for the broader stoxx 600 as you can see, a correction from yesterday's positivity and more of a continuation of how august as a whole has kicked off. ftse 100 down 0.6%, germany and france down a little bit more than that. athens is in positive territory and seema will tell you why. >> absolutely. let's take a look at that top
4:02 am
story. greece and its international creditors have agreed to a deal on bailout terms following long negotiations. finance ministry sources telling cnbc that a number of minor issues still need to be ironed out, but it is expected the funds will be available to greece by august 20th to allow the country to meet an ecb payment due on that date. julia chatterley, who follows the greece story very closely, joining us around the desk. from looking at market reaction, you would think perhaps markets would be higher, but at this point, we're lower. does that perhaps mean that that greece deal is already priced into stocks? >> it could do, seema. we have been expecting this. it is, though, quicker, i think, than perhaps some had imagined. the sense over the last few days has been that we were working towards this point. i think the other thing to remember is we've only had this confirmed by the greeks at this stage, so we want to wait and hear what the europeans say later on today. and of course, if we can then get this deal agreed with the troika, there's a lot of other questions. the first thing, it has to be signed off in greece's
4:03 am
parliament. there's apparently 30-odd, maybe more, prior actions, reform measures that need to be implemented in parliament before they can get their hands on the cash. the euro group have got to sign off on it. i think from that element, what we've heard from the germans, the deputy finance minister was talking this morning, a bit of a seed change from previous days, saying look, we want a proper agreement, we don't need to rush this. then they're saying they're cautiously welcoming the deal. so, that's a positive sign. we still don't know about the imf's involvement or the ultimate surface targets this year. as much as it's good to get a deal in, to get money in so they can make that august 20th bond payment to the ecb, there's far broader questions about just how accurate and right this deal is for greece, and of course, what happens going forwards with regards to write-downs, never mind the political situation. but at least for now, it seems at this stage that we have at least reached a deal earlier than anticipated for greece, which is a bit of a miracle. >> a step in the right direction at this point, but of course, still questions remain. for now, julia chatterley, thank you so much.
4:04 am
let's look at currency markets. >> indeed. we've seen equity markets for most of europe declining because of this deal, and it hasn't really had an effect on currency markets either. the euro dollar just above flat today. we have crossed back above 1.10 late yesterday, at 1.1034. but in general, the last few weeks have been relatively muted for the euro/dollar pair. we've got a slight increase in the dollar against the yen. sterling is basically flat. the one big mover that we're looking at here is the aussie dollar, off 0.8%, off the back of the decision by the chinese to allow the rnb to devaluate by around 2%. of course, relative to moves we've seen in the euro and the yen, it's a very small move, 2%. so, they have deserted their usually strong starts of not letting it devalue just to allow a small move. will that be enough to allow exports to recover? of course, the fallen exports we saw over the weekend, the catalyst to see them dessert
4:05 am
their traditional stance on keeping the currency steady. let's look at bond rates. what are they doing today? the ten-year in the u.s. just below 2.2% and the ten-year in germany below 2.7. those have been steady the last couple days, those two safe havens. looking at italy, 1.8%. so, again, not much of a move in the peripheral yield spreads, despite the deal we've seen out of greece. joining us down the line is anthony o'brien, co-head of european rate strategy at morgan stanley. he joins us now. gom you. thanks very much for joining us. let's get straight to this greek deal and explore whether that changes your preference between safe havens in europe and the peripherals in europe. >> i mean, obviously, you know, the news that we heard is a positive for the market and it takes the probability of that down somewhat. as julia was saying, there
4:06 am
still, a lot of things need to be ironed out, it needs to be ratified by european parliament or some european parliaments. but you knoef, tw, the belief i market is it's pretty much a done deal and we're looking at other things right now. you know, the italian government bond market, which was a little weaker this morning has bounced back a bit, but you know, spreads versus bunds have remained pretty much flat for the past month or so. and you know, this is very much our line of thinking, you know, that we are expecting more sort of flatness rather than some sort of compression between periphery and bunds for the time being. >> anthony, let's digress and talk a little bit more about bonds in europe more generally. your recent note said that there's a long way still to go until we get back to normality, and you should still be long duration, despite the historical standards very low yields. is that right, you still want to be long duration? >> well, for the short term,
4:07 am
we're tactically long would be the best way of describing, because you know, general excess returns have been positive in august. we had a decent index extension at the end of july. and you know, there is very little supply over the next few weeks. more medium to longer terms, we do believe that yields have some way to push higher. we do think that, you know, in investors' eyes, the eurozone, the economy, we should do, you know, better next year, inflation should return towards where the ecb's target is, and therefore, you know, qe will not be extended beyond september. so, you know, more of the medium-longer term, we do believe it's more of a bearish market for european fixed income, but august is generally a favorable month and we're tactically long at the moment. >> would you be a buyer of peripheral debt with this greece news of a deal coming together? is this the time to buy perhaps the spanish or italian ten-year? >> well, as i say, for the
4:08 am
markets, they've pretty much priced in the greek news. we're generally more positive on spain rather than italy. spanish has got its own political, you know, sort of problems, which investors have to get their head around coming into the general election there. but you know, as more medium term, spain looks, you know, the economy we think is -- even though the italian economy is improving, spain is, you know, doing better at the moment and we believe once the political uncertainties are out of the way that some of this spanish underperformance which we've seen over the past few months should start out-performing a little bit in the future. >> anthony, as we get closer to rate hikes in the u.s., do you think that hike is already priced into euro/dollar, or on the day that we see a tiny 25 basis points move, do we see the currency pair go nuts again? >> i think, you know, there's obviously the time -- there are two aspects here, the timing of the first rate hike and the duration or the magnitude of any
4:09 am
hiking cycle. and i think we're kind of moving away from the, you know, it's all about the timing of the first rate hike to, well, actually, it's all about how high rates will go. and even though economic data we're expecting to be a little bit better, you know, the payrolls data we saw on friday was in line. you know, although that can change the timing of the first rate hike and it might be moving towards, you know, september, certainly the probability seems to be pushing towards september, you know, it is more about the magnitude of the rate hike and cycle. and i think euro/dollar will be sort of more keen to see what the next move is from the fed, rather than the first move. so, you know, i don't know whether we should get so carried away with the timing. as i say, it's all about how far they will have to go in the future, rather than is it a september-december thing. >> anthony, thank you so much for joining us. much appreciated. anthony o'brien, co-head of european rate strategy at morgan stanley. now to another top story. the chinese yuan is headed for
4:10 am
its biggest one-day drop after the pboc devalued the currency in the wake of poor recent economic data. let's get more on this story with sri jegarajah live from singapo singapore. >> hi, seema. the effect of this surprise devaluation by almost 2% off the yuan was that shanghai composite mainland equities pretty much flat at the settlement. what happened here was that the importers, their dollar costs go up, of course, like the airlines for fuel. so, they were quite badly sold off today. but the exporters, the trading companies, the textile manufacturers and those exporters, that sector did quite well. some of those names going limit up by about 10%. the net effect was equilibrium at the close for the shanghai composite. but the real action was in the currency space, and it really added to the weakness in the asian fx sphere, because it was already under pressure because of fed normalization, stronger dollar, the high rates environment as well as we creep
4:11 am
closer towards normalization, the september lift-off. and then you had this double whammy from the chinese. so, we saw the ringate, the ruper at lows, the singapore dollar at five-year lows against the greenback as well. so, the big question is really whether this devaluation is going to be a one-off or whether this is going to be more of a longer-term strategy. we're still yet to really answer that question. this is where we stand right now. back to you now. >> okay, sri, thank you very much for that. let's look at luxury and auto stocks in europe, because they too are under pressure from the yuan devaluatiodevaluation. china an sportsnet export market for these sectors. weak auto sales adding to the pain with july figures falling over 7% on the year. that's the biggest drop in 2 1/2 years, as you can see. we're looking around 2% to 3% of declines across those names in europe today. and coming up on "worldwide
4:12 am
exchange," "a" is for awesome. larry page hails new company alphabet, which has just absorbed google. all the details on this major restructuring, coming up. plus, we reveal the secrets of shake shack's success after a sizzling second quarter, sending shares surging after hours. and prudential is expected to ring in its new boss with bumper profits. those numbers hitting the wires in just a few minutes' time. don't go away. you're watching "worldwide exchange." more and more, data is visual. in fact, the number of mris has increased by ten percent a year. and a radiologist might view a thousand images to find one tiny abnormality in shape, contrast or movement. because it's so challenging, a research project is teaching ibm watson to see. in the future, it could help clinicians spot key patterns quickly and precisely. ibm watson is working to make healthcare smarter every day.
4:13 am
4:14 am
4:15 am
and welcome back to the show. you are watching "worldwide exchange" here on tuesday. we are looking at european equities lower, despite that news of a greek deal slowly coming together. in the meantime, we're looking at our earnings, or waiting for earnings from prudential, which right now is trading at 1,483, down just by around 1.5%. of course, prudential ringing in its new boss with a double-digit rise in operating profits. that, of course, is the expectation. >> let's bring in those results. they just hit the wires. we're looking at operating profit of 1.881 billion. that's up 17%. let's have a look through some of these other ones. interim dividend is 12.31 pence per share. and lots of numbers coming
4:16 am
through. let's have a look. so, it has recovered, the share price, off the back of the initial numbers by about 0.75%, down north 0.6%. let's look at other numbers. key things to look out for, like the relations to the department of labor in the states and, indeed, the headline sales number, which haven't quite hit the wires yet. let's look. pretax profit $2.08 billion, revenue overall of $25.3 billion. >> other divisions within prudential to keep an eye on, of course, the uk life ifrs operating profit at 436 million pounds, up 19%. also, m&g ifrs operating profit at $251 million, up about 11%. another one to watch out for, of course, is jackson life, ifrs operating profit also up about 11%. >> so, catherine, immediate reaction from the share price, of course, is slightly positive. what are the key themes you're going to be looking out for
4:17 am
today and in the months ahead, of course? >> wilfred, i think, of course, this is a stock which has been a market darling, particularly, kind of the pick among the european insurers over the past few years because of that exposure to the u.s. and to asia and relatively low exposure to the eurozone, but that now seems to be undergoing something of a reversal as it isn't quite as exposed to the eurozone recovery as some investors might want. and of course, we've got those new department of labor regulations coming in in the u.s., which could restrict some of its sales. we saw axa earlier this month warning that that could bring sales down by as much as 30%. so, if we see anything from prudential today on just what their estimates are of how that's going to affect their business, that will be extremely interesting. and of course, we're all waiting to hear from the new executive and just what his plans are for the business. >> absolutely. we will continue to bring you more on that once the chief executive starts to speak. at the moment, though, catherine, thank you very much. we're looking at prudential
4:18 am
shares down 0.6% on the day but they have recovered by about 1% ahead of those results. they were down 1.6%. let's have a look at other top stocks in european trade today. shares of circo are trading higher after the outsourcing firm for investors was better than expected for revenue in the first half. the uk company recovering from a series of contract scandals but said trading was better than anticipated. as you can see, it's up the best part of 2.5%. adeco shares lower after q-2 profit missed expectations. however, they maintain its 2015 outlook, saying it expects a boost in growth from france. but overall, as you can see, that's down sharply, down 3.2%. now, gam has made a bet on the property market by picking up london-based renshaw bay's real estate finance business. the swiss finance manager also reported first-half part of the year results, which saw commission decline. that stock off sharply, down
4:19 am
4.9%. do stay with us here on "worldwide exchange," because joining us on the phone is alexander friedman, ceo of gam holdings, joining us now. good morning to you, alexander. it's great to have you with us. >> good morning. >> off the back of these earnings. clearly, the share price reaction has been negative. let's talk about the acquisition, the real estate finance business from renshaw. talk us through your rationale for wanting exposure to european commercial property at the moment. >> yeah, thanks very much for having me. i mean, renshaw bay has a terrific real estate finance business, and this is an area that is quite interesting, given the kind of low-yield environment we're in. private market real estate debt is an asset class that makes a lot of sense for institutional investors. it's one we don't currently offer and it's in great demand for many of our clients. when it was clear to us this was potentially an option, we jumped on it because we think they're a terrific group. >> alexander, as we get closer to rates going up, of course, in
4:20 am
the u.s. likely first ahead of europe, but how's that going to affect this business? >> yeah, i mean, look at the overall environment. you talked about the devaluation of the chinese currency today. i mean, we have a very gradual normalization path ahead of us in the united states and largely an accommodative rest of the world, ex-uk. so, i think if you look at kind of overall european environment, which is the area this group operates in, it's still going to be a low-yield environment for a while, and an environment where this kind of an asset class should do quite well. >> why are you making a bet on the real estate market now here, you know, midway into 2015, alexander? and second question, how do you see this acquisition ultimately helping improve your bottom line? >> yeah, i mean, our business is actually quite strong and stable. you mentioned that our share price is off a bit today. that's largely the result of what happened with the swiss franc appreciation. our net new money growth was significant, over $6 billion total. in terms of is this the right
4:21 am
timing, if you're investing over the long term, as we are, this is an asset class we want to be in. we think the kind of environment across europe is quite heterogenius, so you have to separate out ireland and uk and germany and other areas where they operate, so it's not just one story overall. from our perspective, this is also important because it's long-term committed capital, which for an asset manager, it's nice to balance out kind of use its money, which is more liquid, moves in and out. so, for us, we think it's an attractive thing to do. it's accretive from day one and an important area to get into. >> let's talk about your results as well. how are you finding the current environment? of course, still a lot of economic headwinds facing your business. >> yeah, no doubt. you know, if you're an investment management firm as we are, it comes down to really two things. they have good performance and funds and kind of a good business mix. our funds are doing great. we have over 80% of our funds out-performing and our performance fees last year are
4:22 am
almost at record, so our performance is excellent. our net new money is actually good. we face a unique headwind in the swiss franc. without that, our operating results would be up 5%. so, you have to look through the headline of what is reported and you have to understand the business dynamics. ours are actually doing great. >> alex, final question quickly. you're staring at a 4.9% decline in the share price this morning. the market clearly not warming too much to this acquisition. try and reassure people quickly that it's the right move. >> yeah, i mean, this acquisition i don't think is driving the share price. it's a short-term reaction. you have to look through that as aine investor. the acquisition makes a ton of sense from where we sit because it's a logical asset class to be in, a tuck-in acquisition from our perspective, so accretive, but it's not in any way a large acquisition from our perspective. and again, in a low-yield environment, real estate finance is one of the best places you can be. it's a libor plus-a type of profile, which, believe me, is a
4:23 am
good return in these days for fixed income type stuff. >> okay, alexander. thanks very much for joining us, appreciate it. alexander friedman, ceo of gam. will it be as easy as abc? google has announced a new corporate structure creating a company called alphabet. tech reporter jon fortt has all the details. >> google will continue to exist as a subsidiary of alphabet called google inc., and there will be a new ceo of google inc., sundar pichai, who has been a chief operating officer and will be ceo of alphabet. larry page and sergei are not going anywhere, continuing to operate the holding company of alphabet. eric schmidt, the executive chairman of google, will now be executive chairman of alphabet. now, what will fall within google and what will fall within alphabet? well, most of the revenue and profit-producing businesses that now exist within google are going to be a part of google inc. that includes youtube, which is being run by youtube's ceo susan
4:24 am
wajiski. she will serve in that role but report up to sundar pichai. a number of other things will not be a part of google, they'll be part of alphabet, including google x, the research and development arm that's doing things like drones and self-driving cars. that will not be a part of google inc. also, calico, the life sciences project where google is trying to break ground in those areas, those will now be part of alphabet. also, google fiber, initiatives like that that are not part of the internet businesses of google will be part of alphabet. but nexus, the hardware business that isn't exactly internet-related, that's connected to android, that will continue to be a part of google. >> the analyst community is weighing in on google's change to alphabet. colin sebastian at baird says it's incrementally positive, improving accountability as investors view google's speculative businesses such as
4:25 am
the self-driving car as a distraction. he has a $720 price target. tripp chowdhry at global equities says google has given a wake-up call to other tech companies. and yusef says this is a key step towards greater transparency. and others expect better focus and execution, but they maintain a hold rating. google class "c" shares rising 6% in after-hours trade, as you can see in german trade today. they're up the best part of 5%. so, big surprise, an interesting move, seema, the google change increasing, i suppose, the focus and expertise. and when you think of all the other areas they're in as the analyst community's clearly focused on, it seems like a sensible, rational move. >> it will definitely provide more transparency and that's what management said yesterday when they made the surprise change, of course. and now allowing the company to still make those risky bets, as
4:26 am
they said as well, in drones and health care, at the same time focusing on their core strategy and core growth product, which is search engine optimization. i just wonder as a shareholder, do you want to make sure you have exposure to both fields, search engine optimization as well as the new investments such as drones and health care? that will of course be the big question, because this change means you have two separate companies in a way. we have alphabet, which is focused on the new, cooler areas of investment, then your primary google, which is focused on chrome and search. so, we will see what this means for the shareholder and how they react to this change. >> but it's a management change, not in terms of exposure. if you own alphabet, you still own the same entity, it's just underneath the management structure has changed. >> organizational, not just management. >> indeed, but in terms of the shareholders, it will still be, the google part will still be fully owned by alphabet and that's just what you'll have exposure to in the share price. interestingly, it is still the same sort of five or so people at the top in the helm, so even if you're changing this structure, will it still be led very much by larry page, by the
4:27 am
founders, by eric schmidt, or will other people start having much more of a say? we'll have to see. >> i think it will be different because you will have these leaders, these leaders, of course, founders as well, sergei and larry, focused more on the new areas of investment, where now you have a rising star of silicon valley, sundar pichai, who went to stanford, got an mba at wharton, has been leading chrome for many years, now the ceo of google, continuing to be focused on internet search optimization. >> we want you to get in touch with us. is it a good move by google? worldwi worldwid or @cnbcwex is the twitter handle. still to come, recession in russia. we look at the flagging economy as lower oil prices take hold. don't go away.
4:28 am
4:29 am
4:30 am
white smoke in athens. greece reaches a bailout deal with over a week to spare, but the country's creditors are still left to iron out the final details. currency curveball. china devalues the yuan in a bid to boost the country's flagging economy. the surprise move sending shares in europe's auto and luxury stocks lower in early trade. shares in prudential recover from earlier lows as ventura post a 15% rise in operating profit and raises its dividend,
4:31 am
declaring its strategy as the right one. easy as abc? google creates a new umbrella company, alphabet, in order to simplify its structure. sundar pichai stepping in as new ceo of the search engine business. stocks around the world reacting to that devaluation plan from the pboc, specifically the exporters weighing here on european equities. the xetra dax down around 90 points as auto stocks move to the down side. the ftse 100 right now down around 32 points, and we're looking at the french and italian markets also trading lower, although italian markets basically flat. in the meantime, let's look at commodities. yesterday it was really interesting, we saw gold rally to its highest level since june of 2015. so, a rebound in gold prices. some of that having to do with the weaker u.s. dollar. and here, again, we are looking at gold up around $8 in today's trade. brent crude, interesting enough, slightly higher on the day,
4:32 am
while wti crude hugging the flat line. let's have a quick look at bonds. not too much movement over the course of the last couple of trading days, just below 2.2% for the u.s. ten-year and below zero.7% for the german ten-year. we did see a little bit of a recovery in places like italy and spain off the back of the greek deal but nothing too significant. a quick look at forex as well. the euro/dollar hasn't moved too much off the back of that deal. we are back above 1.10. we crossed that late yesterday, so a little recovery in the euro over the last two days, but small moves as august would dictate. now, we have had almost a 1% decline in the aussie/dollar off the back of that chinese decision to allow its currency to devalue by a couple of percent. now, i want to bring some flashes out of the german financial regulator, saying that they plan to conclude their investigation into forex manipulation by the end of 2016. they're saying that german banks woke up late to the scale of the
4:33 am
problem and the extent of the problem is nothing to be "relaxed" about. so, of course, that investigation by bafin, the german financial regulator ongoing and due to be concluded by the end of next year. moving on, russia has fallen even deeper into recession as the economy contracted 4.6% in the second quarter. the decline was greater than expected and represents an acceleration in the trajectory of russia's negative growth . in the first quarter, gdp fell 2.2%. with more about the forecast for russia, christopher granville. christopher, thank you so much for joining us here on "worldwide exchange." >> thank you for having me. >> i'm sure russia keeping you very busy this summer. >> well, there's never a dull moment. your images in the background showed russia in winter, a snow-bound kremlin, which is perhaps an apt symbol for the state of the economy, although there is a heat wave this week in moscow and central european russia. >> i am sure. >> the thing about these economic indicators, it was a bit backward-looking. the recession has almost
4:34 am
certainly russia bottomed out in the second quarter or transitioning into the third, so that very alarming number, minus 4.6% year-on-year decline in output. if you look behind it, you see that in june, most of the indicators are turning. so, the rate of decline is slowing, especially in real wages, industrial output, real disposable incomes, fixed asset investment. so, the corner has been turned, but that's nothing much to celebrate. we're due to tank down another 20%. >> we're revisiting oil prices, of course, similar to where we were at the back end of last year. is the pressure on russia as high as it was nine months ago? >> well, i think that my other point would be no. so, not only is the economy bottoming out, but the alarmingly sort of sharp falls in oil with the ruble exchange rate falling behind, in fact, just complete a round-trip. as you say, we're to where we were the beginning of the year. so, the real brunt of this shock has already been felt by russia,
4:35 am
and this deep recession is simply the logical effect of what happened last winter, really. >> well, i was just going to say, ongoing difficulties appear to have left russian policymakers really struggling to balance these simultaneous goals when it comes to suppressing inflation and kick-starting growth. what do you think is their number one goal right now? >> i think it's to drive inflation down, because although policymakers the world over juggle with this dilemma, the sequence in most countries and i would argue most especially in russia today is to get inflation down first. first and foremost, because that will result in a recovery of real incomes and a recovery in consumption. that's the best, most reliable way to get growth kick-started. but more importantly, only by getting long-term, medium-low inflation rates -- 4% is the russian central bank's medium-term target -- is there any chance of meeting russia's longer and deeper growth challenge, which is investment and less inflation. it's low, you won't get a lot of
4:36 am
investment confidence. a lot of conditions have to be met, but that's the first one. >> over the last 12 months, has the central bank gained in credibility in your eyes or lacked credibility? >> in my personal eyes, it's gained enormously. i think that the central bank under the leadership of elvira has done an outstanding job in this crisis and they've also deepened a long-term strategy to move to a credible inflation targeting regime. now, that's an unfashionable view. whenever there's a crisis, it's always easy and credible to disparage central bankers, and god knows if you or i, wilfred, being in their shoes, that's the thing of it. it's easy to make mistakes and not claiming they've got everything right -- >> you would have done a stellar job, i have no doubt. >> still, and it's a great team and the russian central bank, that i think is something which investors are pretty much aware of. and you can see that in the local currency fixed income market, where yields continue to compress.
4:37 am
basically, investors think that inflation will continue to come down. obviously in a deep recession, that's not such a big ask, but the central bank's policy is helping, and that bet on the local currency bonds, despite the oil price fall, despite the ruble backing up, is a good one. >> let's bring this back to the markets. given the renewed drop in oil prices and the challenges that the russian central bank is facing, at one point, we should point out, the russian stock market was the best performing emerging market, just about two months ago. that, of course, has changed. would you be a buyer of russian stocks here, just given valuation alone? >> i think this tantrum we're seeing globally, in global emerging markets over the imminent u.s. interest rate hike, which is transmitting itself to russia through the oil price with china, of course, another strong contributor, that whole scenario i think will be a question of sell on the rumor, buy on the news. once the fed has done its stuff next month, if the market expectations are borne out, i
4:38 am
think high beta-type markets like russia, which has suffered more, will be in that much better place to bounce back. >> all right, we'll leave it there. christopher granville, thank you so much for joining us on "worldwide exchange," managing director at trusted sources. now, moving on to earnings, shake shack has served up a set of impressive second-quarter results. morgan brennan breaking down the numbers. >> shares of shake shack soaring on monday after the closing bell with the company posting a tasty beat on the top and bottom lines. but the standout number, same-shack sales, or the company's same-store sales growth was 12.9%. that was much higher than anticipated. the fast casual burger chain opened three domestic company-operated restaurants last quarter and two internationally. and on "the call," ceo randy grudy saying the company's on track to expand restaurants faster than originally anticipated. >> development conditions remain favorable for shake shack. and as a result, our team has been able to increase our pace of openings to exceed our originally stated guidance of at
4:39 am
least ten new domestic company-operated shacks in 2015. we are confident that we will now open 12 new domestic company-operated shacks in 2015. >> management also noting the development plan through 2016 looks "strong" with plans to open at least a dozen stores in the u.s. annually next year as well. and shake shack also raising full-year revenue guidance and hiking same-store sales growth to mid to high single digits for 2015. but for all the upbeat numbers in a separate release, shake shack announcing a 4 million share secondary offering as well, though the company will not see any proceeds from that sale. overall, investors seem very pleased with shake shack's third quarterly report as a public company. shares climbed more than 8% following the results in after hours. back over to you. kraft heinz reports second-quarter results, first since the two food companies merged in a $50 billion deal last month. revenue fell at both companies. sales dropping nearly 5% at kraft due to weak demand for its
4:40 am
beverages, which include kool-aid and capri sun and a result of fewer promotions than last year. sales fell 4% at heinz, mostly because of the strong dollar. let's look at share price action, down around about 2% in after-hours and down a similar amount in german trade today. uk retail spending took a hit in july with the british retail consortium blaming the soggy figures on wet weather raining off barbecues. spending grew by 2.2%, down on the nearly 3% rise recorded in the month of june. now, food sales dropped unexpectedly with wetter weather than 2014 impacting all fresco dining. try to say that three times, wetter weather. >> wetter weather. >> wetter weather. >> we've already had enough stumbles this morning to try that as well. meanwhile it brings a whole new meaning to the phrase rocket launch. let us take a look at this story. oh, gosh, who wrote that? >> love that. >> anyway, i apologize for even reading it. now, let's keep going. astronauts at the international
4:41 am
space station have taken a bite into the first ever space-grown lettuce. scientists developed the red romaine leaves to allow astronauts to grow their own food, making possible human missions to further-flung areas of the solar system, such as mars. the iss team tried it raw before adding olive oil and balsamic vinegar to the lettuce. their verdict -- tastes awesome! they say. or should that be out of this world? >> i am not all that impressed. i mean, once they are actually able to grow carrots and maybe radish and make a steak up there, that's when i'll be impressed, but just lettuce, big deal. >> one small step, you know? >> okay, fine. >> at a time. come on. >> i guess you're right. i guess you're right. all right, let's switch gears here. california's pebble beach is set to play host to some of the world's finest cars and most serious collectors this weekend. so, what are the motors to watch out for? robert frank has the details. >> classic cars have also been the top collectible investment over the past year and the past ten years, but the biggest test
4:42 am
for the market will be starting thursday at the auctions at the pebble beach concours delegance. 141 cars are expected to sell for $1 million or more. just by way of comparison, in 2010, just 36 cars sold for $1 million or more. there are over 128 vintage ferraris selling, so we'll see whether there's really demand for all those ferraris. among the most expensive, this 1956 ferrari 250 gtcompetizione, sold for between $15 to $20 million. they also have a 250 lm. this is beautiful and could fetch $22 million. a ferrari ridden by the pope. and now, the mcclaren f1-lm, with the price topping 12 million bucks. we could also see the most expensive porsche ever sold, 1982 956.
4:43 am
they won the 24-hour le mans and could hit $9 million. the koenigsegg used in "fast & furious," could top $12 million. and the americans are coming up fast. this 1970 plymouth hemi cuda convertible could be one of the most expensive american cars ever sold. it could hit 3 million bucks. robert frank, cnbc. >> i'm going to be really boring on this, seema. i don't get it. if i wanted to spend money on a car, i want it to be modern, efficient, with all the added extras. collectible car? doesn't do it for me. >> because you can only look at it. you're not really going to be riding it that often or driving it -- >> i presume these enthusiasts -- i hope they drive well as well. i hope they're not just to look at. >> they're also a collector's item, so you have to be careful and not take them out to the country every weekend. >> you're probably not going to, like, jazz it around late at night really fast, but they're definitely still operational, though, aren't they? they'd better be, otherwise it's
4:44 am
more stupid. >> operational, but i think you have to be careful and not use them on a regular basis, perhaps. >> just so you know for christmas, i love a range rover. >> i'll write they down. >> all the extras, probably like a dark red. >> good, good. keep the wish list going, all right? still to come on "worldwide exchange," in the face of escalating violence, can turkey's leading parties come together to form a coalition? we bring you the latest on the political situation in the country. that's coming up.
4:45 am
4:46 am
4:47 am
let's get you caught up on the prudential story. prudential posting a 17% jump in the first half operating profit, this as prudential's asia boss says it sees strong growth in agency, banking distribution, strong sales also to mainland china. it also says that the china stock market volatility has not had much impact on its business. of course, that was one of the concerns for analysts out there ahead of prudential reporting results. prudential's ceo says it's confident of delivering strong and profitable growth and has put in a request for lifting of the trading halt. as you can see, it has been lifted. we're looking at prudential shares higher by around 0.3%. the united states has led 29 air strikes in iraq and syria, targeting islamic state positions. the u.s. and its allies, including turkey, destroyed an
4:48 am
explosives factory and other strategic isis operations in the mission, this after nine people were killed and numerous others injured in a wave of attacks across istanbul on monday. the leaders of turkey's ruling ak party in the main opposition republican peoples party will make a final decision this week on whether to form a coalition government. this according to reuters. the first round of talks ended without conclusion. parties have until the 23rd of august to agree to a working coalition. otherwise, president tayyip erdogan could call a new election. joining us down the line a country risk analyst. thank you for joining us. let's talk a bit about turkey. of course, we've had that round of violent attacks over the weekend and yesterday. do you think that has a direct relationship with the fact that we haven't got a strong ruling government right now? >> i think there's definitely an inherent current connection between the intensification of fighting in turkey and the
4:49 am
situation on the political scene. it might be the case that the ruling party, the akp, is calculating that with its renewed defensive against the pkk and the islamic state, for that matter. it stands to increase its votes in a potential snap election, which would be likely to come later this year. >> and let's talk about whether we will see a snap election. of course, we've been in limbo since the seventh of june elections. do you think we're close to reaching a coalition or would you say the most likely outcome now is another round of elections? >> it has been quite a while since the conclusion of the general election in early june this year, and we have seen insignificant progress until this point. and we assessed that, provided president erdogan's tendency to exert his informal influence over the government, it's
4:50 am
unlikely that he would prefer a coalition option and probably uses his clout over the ruling party to push for a snap election, which would be likely to come in november 2015. >> do you think the recent escalation of fighting, not just what we saw yesterday or the violence yesterday, but the fighting between the government and the separatist group pkk has been impacting investors' sentiment on the ground? >> by all means, definitely. one of the biggest problems for turkey is that it has a chronic current account deficit. and this renders the economy vulnerable to political instability as well as violent events in the country. and we have seen the impact of this in the volatility of the lira in recent weeks. and with the potential renewed elections near, this is likely to increase. >> speaking of the economy, we've seen a sharp slowdown in growth. i mean, back in 2012, turkey was growing at around 7% to 8%. here in 2015 at 2.5%.
4:51 am
ege what else do you think needs to happen to turn around the economy? does it just come down to government reform? >> i mean, one of the key factors is definitely turkey needs to increase its domestic saving rates. and this will depend upon structural reforms, which will be costly in the shorter term for economic outlook. and this will require longer-term government stability, a government that can bite the bullet, so to speak, in shorter term. of course, we can't discount the global dynamics, namely, the federal reserve's intention to taper this year and the impact this is having on emerging market economies. >> and ege, do you think overall that snap elections would be bad for the economy? i mean, potentially, that would be the case in the short term, but if it did, in fact, lead to no need for a coalition in the future, will it be something that markets would welcome in due course? >> in the shorter term, they would welcome it, because it would bring them back to the
4:52 am
comfort zone of having the akp as the single ruling party. however, in recent years, we saw that this unchallenged dominance of the ruling party in the turkish political scene came at the cost of things such as central bank independence. the government was exerting a lot of pressure on monetary policy as well as other private-sector regulatory bodies, which was coming at the cost of investor confidence in the turkish economy. >> ege, just to round things up, what's your view on mr. erdogan? is his power waning? is his time up, given the fact that he failed in june to get that overall majority? much harder, of course, for him to exert pressure as president on the government if he hasn't got a ruling majority. >> everything will depend on whether we see a snap election, and if this is the case, whether or not the akp will be able to regain its majority. if we see that the government
4:53 am
goes ahead with the renewed election and they, in fact, lose once again to get the majority, we might even see a fragmentation of the akp, and this would probably signify an irreversible end to erdogan's power in the country. >> ege, thanks so much for joining us, country risk analyst at ihs. switching focus to japan. japan has restarted one of its nuclear reactors for the first time since the fukushima nuclear disaster in 2011. our nikkei correspondent is joining us live. makiko ustuda. >> the sendai power plant was reacted today for first time in four years. it was the first time to go back online under a set of new, more stringent regulations put in place following a series of meltdowns at the fukushima plant, which were triggered by the massive earthquake and tsunami. the plant was chosen partly because the area thought to be
4:54 am
less prone to be hit by a major earthquake. but still, its safety remains to be a major concern and dozens of protesters gathered in front of the plant opposing the restart. the plant is currently on a test run, and if all goes smoothly, it will start supplying power commercially in early september. reactivating the nuclear plants has been one of the top priorities of the abe administration as japan has been relying on imported fossil fuel for its energy at a huge cost. and a total of 25 plants have applied for reactivation and only 5 have passed the new safety regulations so far. whether they will be put back online depends on how the sendai plan performs, and all eyes are watching how it runs. and that's all from the nikkei. back to you. >> makiko, thank you so much. we have a flash here. we're just learning that the indian government has introduced the goods and services tax bill to the upper house of parliament. the big question now will be, will the upper house of parliament pass this gst bill, which of course, is something that the finance minister of india has been working on ever
4:55 am
since coming to power in 2014. of course, there's been a lot of speculation if this gst tax would come together. it seems as one of the ways india's trying to liberalize their tax system, and here you go, introducing the gst bill to the upper house of parliament. the big question is, will it be passed? we're looking at the s&p sensex slightly lower in today's trade. moving on, the sendai power plant operated by kyushu electric power located in southern japan was reactivated today for the first time in two years. it was the first to go back online under a set of new, more stringent regulations put in place following a series of meltdowns at the fukushima plant triggered by the massive earthquake and tsunami four years ago. of course, that was the story that our nikkei correspondent brought us. moving on, we're going to talk more about -- >> it's been a mixed month for hedge funds. cnbc's kate kelly explains which managers have made gains and which have lost ground. >> there was a huge disparity in hedge fund performance this past month, even among some of the flagship names in the business. some major players in the stock
4:56 am
market were really killing it, impressive in a year where the s&p is up only a couple percentage points and the average hedge fund is almost totally flat. citadel's equities fund was one example. although it's a momentum type of shop, its holdings can be hard to decipher at any given time. a snapshot of its recent long filings suggest that major positions like amazon and dollar general helped drive returns, pushing it up 3% for the month and 14% through the year overall through july. pershing square is also doing great, gaining 7% in july. no doubt helped in part by its new position in mond lees and finishing up the month up 10% overall. the private hedge fund run by steve cohen had a flat month but a great year overall, up 11% at last check. other funds, though, are having a rough go of it. david einhorn, one of the most respected stock-pickers out there, saw a reversal of 6% in july, bringing his fund, greenlight capital, down 9% for the year overall. at least in part, it seems, on
4:57 am
long positions in energy like consol and sun edison. also worth mention, andy hall's astonvet capital, although not primarily an investment fund, the commodity shop lost nearly 17% in july, bringing its year-to-date losses to 15%. for good or ill, however, hall remains bullish on oil, saying repeatedly, including in his early august letter, that low oil prices will be the cure for low oil prices. back to you. all right, here's what's coming up on "worldwide exchange." ebay keeping the competition at bay. we're going to talk about the online marketplace's new content strategy that's designed to win over younger shoppers. that's coming up next.
4:58 am
4:59 am
i hate cleaning the gutters. have you touched the stuff? it's evil. and ladders. sfx: [screams] they have all those warnings on 'em. might as well say... 'you're gonna die, jeff.' you hired someone to clean the gutters. not just someone. angie's list helped me find a highly rated service provider to do the work at a fair price. ♪ everyone can shop, but members get more with reviews, live customer support, and better pricing. come see what the new angie's list can do for you.
5:00 am
welcome to the second hour of "worldwide exchange," everyone. i'm seema mody. >> and i'm wilfred frost. here are your headlines from around the world. currency curveball. china devalues the yuan in a bid to boost the country's flagging economy, but the surprise move sending some of europe's luxury and auto blue chips lower. greece reaches a tentative bailout deal, but the agreement fails to lift sentiment in stock markets. the dow and s&p also pointed to a lower open, despite yesterday's energy-led rally on wall street. easy as abc. google creates a new umbrella company, alphabet, in order to simplify its structure, sending shares in the


info Stream Only

Uploaded by TV Archive on