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tv   Street Signs  CNBC  October 15, 2018 4:00am-5:00am EDT

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welcome to "street sign"s. live from outside west ministers, brussels, rome and munich i'm joanna versace. >> oil stocks among the oil spots in green in a jittery market open in europe as energy markets rise on increasing tensions with saudi arabia and major international powers. >> reporter: still no deal brittain and the e.u. failing so far to overcome the final brexit hurdles. now this despite a weekend of
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diplomatic meetings. this as michelle bernier says the key problem is the irish border. a big defeat in the bavarian election the greens make significant in roads. >> reporter: and it's deadline day here in rome where the italian government must submit the draft budget they tell mario draghi that the central bank does not exist to save italy. >> the answer to the last is no. it's really clear why that's the case the ecb has one program which is called omt which was created during the crisis of 2012.
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our roche is waking up to a number of political developments and flash points but also some good news. >> yes, exactly. >> steve is outside westminster as brexit talks have hit crunch time sylvia is in brussels and willem is in rome as the italian government plans to deliver its fiscal plans to the e.u. let's start here in brittain as they have pressed pause on brexit talks brexit secretary rodnick with his counterpart michelle bernier in brussels said there was more to do. we are still weaker down .2. $131.30 roughly on the trade let's get out to steve in westminster for more
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steve, we thought it would be a busy day on the ground we seem to have stalled. where are we at? suggestions were we're 80% there. doesn't seem like that this morning. >> reporter: no. we're always 80 or percent there. you speak to juncker, we're 80 or percent there it's the final 10 or 15% which has proved the biggest sticking point. there are skeptics who told us years ago that this would be the issue. years ago we were asking the question i remember speaking to leon fox a long, long time ago, at least 12 months ago with you and jeff and said what about the irish issue. there's a customs partnership solution the europeans haven't thought of any of that. they've kept a hard line going about the need for a fiscal border if, indeed, they can't spin off the n.i. in terms of
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the jurisdiction jeremy hunt, the u.n. secretary, appreciates this is one of the sticking points. we've been hearing some comments let's hear from him and we'll carry on the conversation. >> theresa may made it clear she would not sign you were to indefinite agreement so we have to have a manifesto. >> reporter: now regardless of what you think about mrs. may, if you're the hardest brexiteer, you have to admire the fact that this prime minister has tried to do something almost impossible, and that is try to basically sayings s saciate everyone
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plus her own cabinet, you have the knives out left, right, center many people could quit tomorrow at the meeting so mrs. may is trying very hard to saciete all of these people there are concerns about what will happen in scotland if you were to have a different jurisdiction in northern ireland. it almost is an impossible task. it possibly is an impossible task mrs. may is trying to get the final 15%. it's impossible to see how they can bridge the gap one, the europeans are saying you can be in a customs union. the whole of the united kingdom during this transition period up to the end of 2021 but we can't let a bit of you there that won't saciete the hard brexiteers we won't give you a definite
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period for when you'll be out of this customs union they want a definite time frame for the end of the transition period or shortly after that when a trade deal is negotiated, that's another deal completely why do they want it? because they believe in the brave new world that they will be able to go forth and have these free trade deals with the rest of the world. that may be the case if they see themselves too tightly aligned, then they see that as an impossibility that's why they want definitive time to be out of a customs union. >> spelling out for us, it's not an easy task, almost impossible as you say. >> we have some comments from germany's dihk saying chaos can only be avoided if the british government and parliament find solutions for
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orderly brexit they're saying brexit is disorderly and the impact on companies that will be felt. another voice this time from germany calling for some form of a break through. i think many companies on both sides of the channel are feeling the pressure. >> since most people want to avoid a hard brexit with the exception of the dup saying the deal proposed by theresa may is worse than a no deal situation that is the one lone voice this morning that seems to be preferring the concept of a no deal brexit versus a checqers deal the e.u. chief negotiator michelle bernier says he will be briefing people. sylvia is in brussels. we thought there would be a break through. we know dominic raab was sent to
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brussels a lot of conflicting reports came out from various media sources yesterday. we found out that talks had broken down. further discussions were pulled off. it doesn't seem like we're going to get anything out of the e.u. summit wednesday or thursday what is the best case scenario here what can we hope for out of this summit >> reporter: hello well, let me tell you that this morning brussels is surprisingly quiet after all the activity that we saw yesterday evening. however, there might be some reaction later today when foreign affairs ministers gather in brussels. we know that jeremy hunt from u.k. there be and he's reportedly going to ask for a deal as soon as possible to ensure that the incorporation over security matters. the big moment is really wednesday when the european leaders gather here in brussels,
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and it's going to be up to them to decide what to do next. it's really unpredictable at this stage to know what they will decide, but because we didn't have a break through over the irish backstop, it seems unlikely they will call for an emergency summit let me remind you that we're five months away from brexit day. we don't have a deal over that irish back stop yet so time is running out. let's see what european leaders will say on wednesday. of course, all is dependent on that meeting back to you in the studio. >> all right thanks for bringing us that and the latest from brussels let's also check in on how markets are doing this morning this comes after a week of volatility they're in correction territory. here are the european markets as well 600 not excluded from that in line with the sort of nose dive in risk sentiment overnight, we're seeing a
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similar theme play out in europe stoxx europe 600 is already down let's take a look at where leadership is coming from as far as the individual voess are concerned. it's interesting, we're seeing a bit of a change of sentiment for the italian index. that's the only one trading in the green ahead of the all important budget signoff as our colleen willem has been pointing out. 2.4% budget will get passed through the italian parliament next step will be how europe responds to that ftse 100 trading through the 7,000 level, they're rallying a tenth of a percentage point. german index also down .10 of a
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percentage point again on some of the news that has come out vis-a-vis the bavarian elections. csu losing ground. moving on to sectors right at the top we have telecoms and oil and gas oil and gas seeing a bit of a bounce this after wti posted the worst week last week it was down 4% on the week that was the worst week since may. the developments in saudi arabia and tensions with the international community has helped given as the spot price gets a boost right at the bottom we have financial services down 3/4 of a percentage point again, trade is here i want to talk about saudi assets as well as i mentioned, we've seen a bit of a bounce in the sector.
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crude is trading 81 again. we've reached 84 at the highs. came down 4% up half a percentage point .2% for crude. saudi arabia is on to something. this is the currency pegged. they have hundreds of billions of dollars reserved. it looks today investors are getting jittery. we're trading a little bit weaker for the saudi real. this is the weakest bubble we've seen in more than 18 months or so finally the saudi index after a big decline yesterday was down about 4 or 5%. it's seeing a bit of a boost this morning up about 1.6% as the market looks perhaps to the de-escalation of the tensions between saudi arabia and the international community. that is the picture for the stock market this morning. >> i want to come back to brexit
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the foreign minister is saying he hopes reason will prevail the comments are out there from the chamber of commerce and calling for an orderly deal around brexit and for that to happen quickly let's get out to steve in westminster where we start out the week and we don't have a deal. >> reporter: it looks like we're not going to get one just yet. who knows if this is a bit of a charade so mrs. may can say we pluck victory out of the jaws of defeat some people never thought we were going to get a deal one is georgina wright you've said the last week or so, no way are we going to get a deal you started doubting yourself this week as you saw the headlines. why, good morning to you, did you feel we weren't going to get a deal all along >> so little time to really come up and finalize those outstanding issues so about a week and a half ago
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michelle bernier said we've completed around 80% that's still 20% that needs to be resolved including the irish border then, of course, in addition to that you need a political declaration about the future relationship there was no way in a week -- taking reasonable progress, november could be live for two reasons. one, because the europeans need to say what we're going to do with no deal or they can say, yes, we've made no progress. >> i think the prime minister wanted to go to brussels this week and say, look, we've actually almost finalized a deal this is great. when we meet next time we can talk about the future. between now and that special brexit in december, we still have a few weeks who knows, if they've achieved this much progress in a week, maybe they will be able to finalize it in time. >> is it really just down to an
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official is it as simple as that, the brexiteers would accept that until we have a free trade deal. is that it >> if it were that simple maybe we would know which way we were going. the problem is, no, there's no kind of agreement on what is -- well, particularly the irish border but also the future what would the u.k. want as its relationship with the e.u. does it want close alignment and integration. >> which u.k. are you talking? >> exactly exactly. >> there inlin lies the issue. >> exactly that's what we hear from brussels and british negotiators. i was going to say to you, thankfully we have clear political party lines from both the -- no, we don't, do we therein lies another issue we heard david davis going on
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again. perhaps another mps writing to express no confidence. somewhere in the region of 42 or 44, not the 48 that would trigger a leadership conference. there are 50 to 80 eig mps if they wanted to push they could, couldn't they >> they could, absolutely. we still have some time. so i think the prime minister is really going to be with her cabinet concentrating on trying to finalize a deal i think until we've reached that point let's not be talking about leadership contests. everything is up for grabs in this brexit negotiation. >> i've read all of your notes the last bit says if you think this is complicated, you wait until we get into a trade deal negotiation. you wait until we get to that bit. is it going to be harder >> i think so, yeah. then you have all these member states that are going to be like, this is what we would like from the u.k. market then you're thinking this is what we'd like, what we won't
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want it's not as simple as exiting. then coming back to the table and saying, what would we like post marriage? >> oh, goodness me, the divorce agreement. georgina, thank you very much. it's stopped raining for you two big take aways one, she thought it was impractical we would get this deal by the early part of the week the second point, can you imagine what the trade negotiations will look sfliek. >> thank you very much, steve. nkts bring on the next couple of years. coming up on the show, italy moves closer to approving a budget as the ecb mario draghi brings in more stay tuned for the interview stay tuned for the interview after this break.
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take your razor, yup. up and down, never side to side, shaquem, you got it? come on stay focused. hard work baby, it gonna pay off.
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the italian government needs to submit its 2019 budget to brussels by the end of today the populus coalition plans to raise the deficit target to 2.4% of gdp potentially putting them
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on a collision course with the european commission. let's get out to willem marx in rome we need this to be approved by cabinet and then we have the ratings agency reaction. talk us through these key issues >> reporter: right so the challenge today is getting a majority in a cabinet meeting that will start around 5:00 p.m before that it seems some of the senior ministers will be meeting with juncker, the prime minister, to go over the details ahead of the full meeting. i've asked the economy minister about this what happened will happen you need a majority of the cabinet and then very probably it will be sent on to brussels and the european commission. if they don't make the midnight reaction when it k5i78 to the economic
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forecasts, the government was about a week late. we've had some quite strong language over the course of the last few weeks as you well know around the european commission's action what we expect is within a week of this budget being submitted we will get an informal response another week they will submit a more formal written response if they have questions or concerns about excessive spending plans at that point the italians will have to get it passed by the end of the year. >> willem, thank you very much for that joining us is carlos cottarelli. former italian prime minister joining us from milan. welcome. nice to have you on board. prime minister conti says he
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expects europe will soften its stance is it as simple as that? europe needs to be enlightened on economic expansion? >> it seems to me clear that this budget, the targets are not in line with the european rules. the government is trying to explain this is due to the fact that there is a need to support economic activity more but the european union crusade in italy is still growing at the end of the day, however, what matters is i believe more markets, financial markets, those that buy italian government paper believe rather than what the european commission says or does not say. >> talking about italian government paper, we know they own 1/5 of the ecb outstanding
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we know they're about to wind down the quantitative easing program. they will not be buying dtps next year. how much of an impact do you think that's going to have ofn n the italian bond market. given that you're an expert, are there any level of interest rates where you think debt servicing becomes unsustainable? >> let's keep one thing in mind. the ecb will stop buying government paper but we've maintained the government paper that is acquired over the last few years. it doesn't mean that we would be sold on the market when qe start the spread was already known. tp did not decline any longer. i do not expect the end of qe
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will cause a major problem for the italian government market. what i'm concerned is something else i'm concerned that italy gets into a sanction. at that point they start rising and the stress should rise from the current level. i don't expect this to happen immediately because i don't expect their session immediately. >> professor, the market is very much focused on whether we're going to get something that's market friendly today. you did make some interesting comments you said the government has to deliver something but they can count on issues like immigration so they don't have to deliver it immediately in the economic area there was some news out on the weekend particularly interesting on the immigration front this was from salvini. he came up with a proposal to force what he called little ethnic shops to close by 9:00
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p.m. do you think we are trying to get this budget through under the radar? >> furthermore, the government is delivering something. the deficit has been raised from 1.3 this year to 2.4 next year there are major goals towards the implementation of the electoral provinces. there is the pension reform. there is the international citizens -- the minimum guaranteed income. there are actuals in the economic field this will raise -- this unfortunately is -- has caused an increase in the spread and this raised no doubt the economy. that's why it would be helpful for the government to deliver other areas because the economy may not be doing very well in the future immigration is certainly a very certain part of the government
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this government is perceived to have achieved something that was not perceived before, mainly the halt in the immigration floor from africa. >> thank you very much for joining us coming up on the shore, plenty more on politics. this time german politics. bavarian voters deliver a xtotli imuchven ni ne t closer. start listening today to the world's largest selection of audiobooks on audible. and now, get more. for just $14.95 a month, you'll get a credit a month good for any audiobook, plus two audible originals exclusive titles you can't find anywhere else. if you don't like a book, you can exchange it any time, no questions asked. automatically roll your credits
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welcome to "street sign"s. if you're just joining us i'm karen cho. a choppy trade in oil stocks as energy prices rise on increasing tensions with saudi arabia and major international powers. still no deal. brittain and the e.u. fail to overcome the final hurdle in brexit negotiations despite a series of diplomatic meetings over the weekend as michelle bernier says the irish border
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remains a sticking point. german chancellor angela merkel's party has a loss in the election. >> time to hand in the papers. rome has until the end of the day to hand in its budget plan to brussels as the ecb president mario draghi says the central bank is not here to save italy. >> the answer to the last is no but it is pretty clear why that's the case. the ecb has one program which is called omt which was created during the crisis of 2012. all right. let's check in on how european markets are fairing this morning. we had asian equities trade in the red overnight. again, they're bucking the trend that we saw versus u.s. equities towards the close last week.
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i should tell you that as a whole though u.s. stock markets had their worst week since march of last week again, a similar theme was playing out in europe this morning. ftse 100 is firmly in the red. it was teetering around the slack line earlier on in the session but you can see now it's through 7,000 level about 20 points weaker or 30 percentage points weaker as some of those political concerns start to weigh in on the index. xetra dax also down .4 of a percent. kaka rant down .6% and then ftse mib the italian index, it's interesting that today france and germany are leading the declines and not the italian index for a change as you can see, the picture for europe on the first trading day of the week is pretty negative let's switch andtalk about foreign exchange here as well. we're seeing some reaction getting played out from the
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political side into these cross currency periods starting with euro again trading a little bit on the back here. i was talking about this earlier. actually, over the last month or so we've seen the euro trade on a very tight range of 1.14, 1.16 we're not really bucking that trend in the last 24 hours or so pretty stable if i should say. but then switching to cable, we are seeing some declines there this i think is the case of buy the rumor, sell the fact, or other way around heading into this weekend there was expectation on friday that we would see some form of a break through in the discussions which had to be decided between the u.k. and brussels. we know that is not the case and it's very unlikely we're not going to see any announcement coming up on the leader summit on wednesday and thursday. we're seeing a bit of a knee jerk reaction trading on the back foot again. we're seeing the yen and the european dollar trading stronger this is in line with the risk
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off sense. it is a down day for equities and you would expect to see yen performing in that environment let's take a quick look at u.s. futures. i talked about the positive session we had on friday with major indices posting a rebound. nasdaq led the way higher on friday up more than 2% the best day for tech since march. today again in line with asia, in line with europe, we're seeing a dip in sentiment. dow looks to open up 175 points weaker nasdaq 75 points weaker. that rebound that we saw on friday looks to be short lived >> thank you angela merkel's key coalition has lost its majority in the bavarian state parliament the sister party leans to the left and right the efd was quite key in the weekend as they entered the assembly and the greens took second place overall it was the csu's worst showing in more than 60 years. we are also chasing comments and
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he admitted he was disappointed by the result. >> translator: it is not a good day for us, the christian social union. it is a result which we can't satisfy. this is one side on the other side the bavarian voters gave us a clear mandate to build a new government for bavaria and we will assume this responsibility. >> let's get out to annettea with more from munich. there is a view that not much is getting done because there is in fighting doesn't feel like things got better after the bavarian election. >> reporter: no, you are completely right when it comes to that. i think the in fighting which we have seen over the last month in german politics will most likely stay around and will continue. what that bavarian election has to deal with now is a clear weakening of angela merkel's cdu, her sister party's csu. they are used to having strong
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support from the bavarian base that's why they play such a self-confident role in berlin on the federal level. this, to be fair, is over now. they have lost a tremendous amount of voters to the greens and also to the populus party afd. talking about the greens, they are the clear winner here. there's also a new star on the horizon for that party we spoke with her yesterday. at that i can a listen of what she said about why her party made such a big win when it came to attracting voters here in bavaria. >> it shows that you can win elections if you are clear, if you are strong and if you are pro european if you are going the other way around, voters will not vote for you anymore. and i hope, i really hope that all democratic parties heighten their strong voice for democracy
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and for pro european view back again because i'm 100% convinced that you will need europe united and not bavaria or germany first. >> reporter: if you look at politics from a wide perspective, it will be also -- it's more like a generational shift. angela merkel there around for so many years, what is needed is fresh blood also on the federal level and i think that's what we're going to see step by step. clearly angela merkel will be around for a time, for the foreseeable future, but her position has clearly weakened. in two weeks' time we have another regional election in the federal state where frankfurt is based as well or located if angela merkel's party there will have another poor showing, that will clearly weaken her
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standing even further and the critics will get louder and louder inside a party which was known for being very loyal to the chancellor the weaker she gets, the less stable is the government not having talked about the social democrats which had a record low showing here in bavaria and will most likely also be very weak in the upcoming elections so bottom line is german politics stays interesting government is still intact but under more pressure because there are new forces coming up like the greens which we have seen here and bavaria. back to you. >> thank you very much, annetta. victor york has joined us. nice to have you on board with us. >> thank you very much. >> we've been looking at quite a challenging market for the past few sections and what jumped out for investors is bonds didn't provide a safe harbor. but now if you look at the
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german build which was a typical safe haven, the yield started to form a little bit. what do you make of bonds and the ability to diversify into that trade when you do have a market selloff on the equities side >> i think what's going on right now feels very similar to what happened at the start of the year where you have the range market for bonds and suddenly you break through fairly sharply, higher. it takes the market by surprise and people are forced to start contemplating life with higher interest rates you're left with the stock doing really well in recent years with really low rates in my space that is high yield bonds which had a bit of an epic selloff and etfs last week i think we have to get used to this it's not so much that interest rates per se are too high. they're probably putting it into an economic context, you know, almost 200 basis points or so
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lower than where in the past they've had a negative impact on credit markets, but it is that we know that central banks have programmed their purchases such that liquidity is gradually going to be declining and that, i think, is the main issue and the reason why we should expect this. >> what does that mean for your asset class though you are a credit investor and as you mentioned we saw record outflows at the high yield bond market in the u.s. last week in an environment where the u.s. treasury yield is close to 3% now. we've got the ten year almost at 3.5% or heading in that direction. so if you are an investor given what you said about dwindling liquidity and not being rewarded enough from a credit premium perspective, why would you buy high yield bonds why would you just not buy u.s. treasuries >> i'm not sure you're supposed to buy high yield bonds but what it means if you look at the last time this happened in 2014 and
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2015 when the fed was tapering, what we ended up with was an environment where gradually banks were tightening lending standards, gradually capital markets were narrowing the window on credit availability for lower rated companies and i think that's the environment that we're heading into. and so what it means is that at the very lower rate the price of getting things wrong there will gradually be higher. you will need to have a lot of good credit analysts, good market for credit analysts >> what about the nature of the outflows you called it on high yield. how orderly was the process? every time we discuss market selling in the etf space there is a question whether it could hold liquidity it will be quite dangerous if you're engaged in etfs
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what did you make of the selloff on high yields >> yeah. so i think the issue here is obviously that the etf market has thoroughly grown and become a much more important place for high yield markets to transact risk i think the fact that it happens against the back drop where it had outflow from mutual funds for quite some time and actually where the liquidity buffers, the cash available in mutual funds have come down to what are certainly quite low levels suggests that there probably wasn't that much of a buffer for investors when the outflow started to happen. >> how was the supply looking for europe the main reason why they had done well in the past up until the last few months is the net supply aspect, the sense that there wasn't a lot of issuance and the ecu were buying
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corporate paper. now we know they're slowly stepping away from that market so the one hinging factor or determinant of trajectory is really what happens with that corporate issuance what is the pipeline looking like >> yeah. i mean, interesting focus. this is clearly on everyone's mind what happened after the ecb. i think people shouldn't worry so much about this so as you say, first of all, supply think of the very moderate certainly over the next few quarters and why is that well, first of all, there are huge uncertainties about trade conflict, about market volatility, about politics these are the things where corporates tend to take a step back and put their investment plans on hold. i don't think we're going to see a ton of new issuance over the next few quarters. and then the ecb so the thing about the ecb is what they've achieved as they've built up their bond portfolio over the last few years is that
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they've been pushing european funds away from the european fix t ed income market we estimate a trillion euros they're currently sitting in offshore markets mostly the u.s. dollar in emerging markets and a few other markets and so forth we think there is a significant potential for those funds ultimately to start moving back towards europe and what's interesting right now is that for the first time in maybe two years the euro denominated corporate bond market yields more than the equivalent in u.s. dollar corporate bond markets. >> fx adjusted >> fx adjusted, absolutely >> stay with us. we'll continue the conversation shortly. victor, head of global strategy. in other news, spanish oil and gas company cepsa has
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postponed the ipo. the firm has cited market conditions as the reason behind the move cepsa's owner says, quote, the company will consider returning to the market when conditions are favorable. and electrolux says it cannot rule out the material impact on the north american business from the sears collapse they draw about 10% of its u.s. appliance revenue from sears which declared bankruptcy this morning. coming up on the show, saudi shares in focus as riyadh deals with an escalating diplomatic issue of the disappearance of a journal list live in riyadh after the break
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♪ lean on me, when you're not strong ♪ ♪ and i'll be your friend ♪ ♪ i'll help you carry on ♪ ♪ lean on me.
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you're watching "street signs. the italian government needs to submit the 2019 budget to brussels by the end of today the populus coalition plans to raise next year's budget deficit target to 2.4% of gdp potentially putting rome on a collision course with the european commission. speaking to cnbc in bali,
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european central bank president mario draghi denied the ecb would step in. >> the answer to the last is no. and it's really clear why that's the case the ecb has one program which is called omt, which was created during the crisis of 2012, and this program says basically that this is designed to addressee veer distortions and in the -- basically it's designed to assure the safeguard of the monitoring but it does require straight and effective condition at conditionality attached to a program and it goes on on what sort of program this will be so there is -- but the rest is -- as i say, i'm confident an agreement will be found. >> ecb president mario draghi
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saying they will not provide the ultimate back stop for the italian market joining us is victor and we were just talking about the amount of dry powder that exists off shore, 1 trillion euros worth. you said you could potentially see that money coming back into the couldn't nent ntinent inves. how are you thinking about the italian markets here are you thinking that this cheapening will provide a good buying opportunity >> yeah. we're bullish on italian corporate debt and especially debt from the financial sector and there are three arguments here first, it's a market that's very over sold. if you look at the outflows and the selling that's been taking place on the last week or so, that's just a tiny bit of selling that's been going on in italy for a year
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if you look at investor's position, very light they will be 400 points under exposed to italy northwestern investors hardly have anything at all what's interesting is it's very easy to feel like everyone needs to become a political expert to italy and you're glued to the cnbc screens -- >> hopefully >> stop it right there >> if you scratch the surface just a little bit, underneath here is a fairly rare deleveraging story going on in italian banks. so italian banks are doing today what spanish banks did five years ago, what european banks did maybe three, four years ago, meaning they are gradually moving their funding to much more stable deposits away from the wholesale funding market and they are finally addressing their mpl books. >> that's true, but it comes at a price.
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you're not always achieving the sale of those distressed assets because of the market environment. and the other point is you haven't mentioned the clear and present danger on the back of the budget, what does it mean for the corp rates clearly there's some sort of effect. >> the bad news is already priced in? do you think the bad news is already priced in where the bonds are trading? >> if you look at italian financial bonds they're trading 100 basis points wider so clearly that accounts for something in the price we would say one, quite possibly two rating downgrades. we think we're definitely going to get one the other issue is -- >> so what are you saying, corporate spending, if there is a downgrade to italy, the corporates could also see some movement on their pricing or is it factored in >> as in if we get a downgrade with a stable outlook, my guess is that the market will rally
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quite hard on the basis of something like that. but i think -- this was eluded to by an earlier interview that you guys were doing today where much of the focus was on does the italian economy hold up here i think that is actually more important than the rating agencies or the spreads alone. as long as the italian economy continues to grow, the banks are able to generate profits and organic capital, which they can use to curb shoon some of the negative impact from lower prices of their b to b holdings as long as the economy continues to grow the italian budget will generate fiscal revenues so i think a lot really depends on how well the economy holds up over the next few quarters. >> as you say coming back to your main points, the market is over sold. positions are very, very light
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you could be the hero going to this market. what do you think is going to be the catalyst for the skeptics out there, not yourself but others, to actually agree to start buying into this market again? >> so in credit markets the big buying opportunities are never pretty there is a saying that goes something like buy to the sound of gunshots. i don't think it's going to be quite that, but the reality is that when you're dealing with very cheap valuations, the hurdle for what is a positive catalyst i think also is correspondingly lower. so the scenario i see is one where basically the political headlines are stable there is some constructive engagement between italy and the ec where the economy, the economic standard points up and where the banks aren't issuing so much paper so, therefore,th
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bond market isn't forced to absorb that. that to me is good. >> thank you >> victor, thank you very much for joining us on the show today. global head of credit strategy from bnp. shares in saudi arabia's main index have opened higher after falling 7% yesterday it was sparked by fears of the speculation over saudi journalist jamal khashoggi let's get an update on the last 24 hours from hadley. >> reporter: that speculation has had an impact on markets here in the last 24 hours. yesterday we saw the saudi market drop as much as 7% in the early trade. -- what this means for energy markets as well, oil prices were trading higher than 1%
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we're just ahead of the davos in the desert the second bun to be held here in riyadh. a lot of big names have decided it's time to drop out. that includes the ceo as well as jamie dimon. they've decided not to make the trip it's had an impact not just on global markets but we're seeing some impact on soft bank which closed over 7% down over the day. a lot of speculation what this means going forward. the message from saudi arabia is pretty clear, guys, and they refuse to be bullied. that is all for the show today. "worldwide excng is mihae"cong up next. >> extravaganza. >> have a good day >> thanks for watching, guys tht we get there safely, and that we leave that scene safely and go home at night, is train. and we train all the time in the fire service.
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it's 5:00 a.m. cnbc global headquarters here's your five at 5. sears officially filing for chapter 11 bankruptcy protect n protection in the markets, it's a sea of red across the globe as volatility spills into a new week and international pressure mounting on sawudi arabia following the disappearance of a saudi journalist we're live in riyadh with those details. brexit negotiations hitting a major roadblock following a weekend of high level talks. we are heading to london live for the


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