tv Street Signs CNBC October 17, 2018 4:00am-5:00am EDT
welcome to "street signs." i'm joumanna bercetche these are your headlines roche helps the swiss market outperform on a day of green after the swiss pharma giant's sales beat expectations in the third quarter. netflix shares surge after subscriber growth crushes third quarter estimates as reed hastings talks about television being about sports. president trump says he is giving saudi arabia the benefit
of the doubt in the jamal khashoggi case. and nordea under allegations that they broke money laundering roles. we'll speak to the man behind the complaint in a few moments good morning as ever, let's check in on how markets are doing. all the three u.s. majors closed up more than 2% higher in yesterday's trading, and positive sentiment in the asian session as well. the nikkei up 1.5% the hang seng slightly in the green. asian equities are very much trading in the green we have a similar dynamic playing out in europe. stoxx 600 up about 0.4%. let's talk about sectors we had plenty of earnings
hitting the wires this morning apologies, let's look at the european individual indices. ftse 100 up 1.5% all eyes will be on how the discussions go at the eu simmitt. theresa may will be giving a speech this evening. and the broader picture for other equities is positive xetra dax teetering around the flat line. generally more green on the screens than in the last couple of sessions. switching to sectors, we have technology the main performing sector up 2.7% on the back of the strong netflix beat we had in the u.s. session yesterday. also in europe in morning. asml posted strong earnings as well that's helping lift all of that sector financial services also up at the top, 0.8%.
underperforming, autos yesterday we were talking about the audi and the other issues arising in emissions scandals. that sector down 0.9%. food and beverages declining this week as well on the back of danone roche posted stronger than expected third quarter results sales rose 7% for the period as revenue from new drugs like its ms therapy offset the copies and danone shares are down after third quarter sales growth slowed by a 20% fall in chinese early life nutrition products. the french group also got hit by a consumer boycott in morocco. but danone saw a strong performance in its water business thanks to warm weather
in europe. president trump appears to have given saudi arabia the benefit of the doubt over the disappearance of journalist jamal khashoggi. in an interview with the associated press, the u.s. president compared the case to recent allegations against supreme court justice brett kavanaugh saying here we go again with you're guilty until proven innocent. in another interview with fox business, trump said turkey and saudi arabia are investigating the case and that they'll start seeing answers >> depends important the king or the crown prince knew about it in my opinion. number one, what happened, and whether they knew about it if they knew about it, that would be bad if they didn't know about it, bad things can happen. >> secretary of state mike pompeo said the kingdom is committed to a full investigation into khashoggi's disappearance following a meeting with saudi king salman and the crown prince pompeo is now in turkey where he
is prepared to meet president erdogan as investigators widen their search hadley, just walk us through pompeo's 24 hours s is in saudi arabia >> what we've seen over the last 24 hours is secretary pompeo arriving in riyadh yesterday he met with the king briefly, he had dinner with mohammad bin salman and not much came out of those meetings they seemed to stick to the script saying this was an ongoing investigation. but let's listen in to what mr. pompeo had to say just ahead of his departure earlier today for turkey >> they told me they would conduct a thorough, complete, transparent investigation. they made a commitment to hold anyone connected to any wrongdoing that may be found accountable for that, whether they are a senior officer, official they promised accountability for each of those persons who they determine as a result of their
investigation deserves accountability >> including a member of the royal family >> they made no exceptions they were clear. >> the secretary of state essentially saying the saudis promised accountability in the investigation even if it goes to the top. it's quite interesting when we look closer at what's been happening inside the beltway you had some strong words yesterday. senator lindsey graham saying he would be carrying the water for saudi arabia for a long time on capitol hill and that he lost faith in the crown prince, all of this reaching an echo chamber when we look at what will happen here in the next few days over whether or not they'll go ahead with this future investment initiative, this davos in the desert more and more ceos dropping out. christine lagarde deciding also not to come. she earlier said she goes to places with political issues all the time, and that wouldn't hold
her back now she came to a decision not to attend. the market here today trading flat can you get from saudi arabia concessions when it comes to a lot of these sticky points like yem yemen, like what is happening with qatar you have to look more broadly and say this is the future of the saudi relationship with the united states, how much is that worth to the united states we're hearing so much on capitol hill from congressional members. a lot of pushback. they're using this as a stick to beat back the trump administration the trump administration tied themselves so closely to saudi arabia making them the first stop on the international trip a lot of different stories within the story we'll be bringing you all of the
latest live. >> hadley, thanks for that >> shares in norder a down after allegations that the bank broke anti-money laundering rules. it comes after documents were received from hermitage capital management calling for a probe into suspected money laundering. a spokesman for the authority says a formal investigation has not been opened yet. in an e-mail statement to cnbc, nordea said it is aware of the report and that it is working closely with the relevant authorities. bill browder, founder and ceo of hermitage capital management joins us on set. so, nordea is the latest bank to be dragged into this money laundering scandal we heard it from danske bank it's been ongoing there for a couple years there nordea is the latest name to be added to the mix you filed a report saying
millions of dollars have flown through 365 nor deya dea accouns where are you getting your information from >> the reason for the investigation is that my lawyer in russia was murdered after uncovering a 230 million d$230 n russian government scheme. we've looked for where the money went that he was killed over we have a number of different law enforcement agencies around the world who opened investigations and in this particular case, there was a french law enforcement investigation into money laundering and a lithuanian money laundering investigation. from the case files in those investigations, we've looked at the nordea transactions and discovered these huge numbers, 1$175 million worth of suspicios transactions, which emanated from the case, or were connected
to the case that went through nor deya ban nordea bank. >> you also asked the danish prosecutor to look into nordea back then they declined. why do you think this time will be different >> they shouldn't have declined back then. if they had started looking they might have stopped various things going on. they were asleep at the wheel. at this point it would be devastating and shocking for the integrity of denmark and various other countries if they ignored this complaint part of our daily operations to review customer activity. we cannot comment on individual customers, but in any cases where there are suspicious activities we report it to the authorities to take forward what do you think the response should be out of the authorities and nordea bank? >> at this point, nordea bank is
on the back foot this long list of transactions is there did they report them as suspicious we don't know. at this point the bank itself should be investigated it should be investigated with great fearlessness by the prosecuting authorities. >> are you suggesting sanctions against banks and people who commit these types of activities should be more onerous than currently what is at play? >> at the moment it's a joke what's going on in terms of money laundering enforcement in denmark for sure, and we'll see in these other countries these countries have allowed and created a permissive environment where danske bank for sure and now we'll find out what the authorities find out about nordea bank. there could be more. >> i want to turn our discussion to the other big topic that we've been talking about a lot that's that of the disappearance and the death of the saudi journalist, jamal khashoggi. in your view, if it comes to
light and it surfaces that authorities at a high level in saudi arabia were aware or behind his disappearance or death, the investigation is still ongoing, in that case do you think the act should be invoked by the u.s.? >> the matnitski act was created for this circumstance. it's to sanction people who are involved in killings of journalists, whistle-blowers jamal khashoggi was a journalist he was critic of the saudi regime he went to the embassy if reports are to be believed he was murdered in the most grisly way by 15 assassins sent there by saudi arabia. if this is true, this is exactly what the magnitsky act is for,
for these people who ordered it. >> do you think the appetite is there as far as the u.s. president is concerned we heard from president trump yesterday, he said again, this is another case of being guilty until proven innocent. he had the analogy of justice kavanaugh. there seems to be a disconnect between what the congress wants to do and the president and his willingness to give saudi arabia the benefit of the doubt here. >> i don't think president trump or the saudi regime are in control of the story the story is the most grisly and shocking story i've heard in years. and public opinion will drive the outcome of this story. public opinion is that there is a premeditated murder of a journalist, of a "washington post" journalist whose body was chopped up and according to reports that i read last night, he was screaming in agony for seven minutes while he was being chopped up this is the most horrifying
story i've heard if there are not the most grave sanctions, then everybody involved will lose credibility in this story >> we were also talking a lot about how many notable investors and banks have pulled out of this saudi conference set to take place in a couple weeks time what role do you think the investment community should play in countering and fighting back against human rights violations, anti-money laundering violations as well. we've seen a bit of an impact in the way the shares have been traded we've seen a bit of an impact in the saudi stock market nothing major. do you think the time is to change the power and give more power to the investment community in the sense that they can apply pressure at a diplomatic level if the governments are not going to do it themselves? >> the investment community will never do anything on their own volition investors are governed by greed and fear if the penalties for doing business with bad guys are high enough, that will create the fear not to do business with
them people all the time are chasing russian oligarchs, banks were chasing russian oligarchs to make them as clients, then these oligarchs get sanctioned, then the banks are in the middle of this mess. so they're in fear of doing business with oligarchs. >> bill browder, thank you very muc much >> we'll come back after this break and talk about netflix with their huge earnings beat yesterday. stay with us notebooks let your workforce go anywhere. it orchestration by cdw makes sure your data stays close at hand. with the hp elitebook x360, and its innovative security features, including multi-factor authentication, hp sure view integrated privacy screen, and sure start self healing bios, preconfigured by the experts at cdw, so your defenses go wherever you go. secured productivity by hp.
welcome back to "street signs. pearson shares are popping after raising its adjusted earnings per share guidance off the back of a one-off tax benefit pearson says it is on track to deliver profit growth in 2018 but it did report a slowdown in underlying revenue amid pressure from its u.s. higher education business speaking exclusively to cnbc earlier this morning, the ceo
broke down the company's latest results. >> q3 is the big quarter so the great news is we're on track. we're confident now that we're going to see underlying profits grow this year that's the first time in some years that we managed to do that there's a lot still to do, we had seven successive quarters where we performed in line or are ahead of expectations. like we say, lots still to do, but the recovery we've been working so hard on is taking shape. cost savings and higher prices have lifted akzonobel's profits in the third quarter but they missed sales. this was due to rising input prices with the warning that raw inflation will continue through 2018 terry vanlacker said he is focused on targets >> i think the best way is to
deliver on the promises we made. we have the 15 by '20, we outlined a bridge to get from 2017 to 2020 and as we go through those steps and deliver on them, i do believe we get into a much better and a much more balanced conversation with our shareholders as the ceo is following up on what we promised to do. >> netflix shares rose 15% in extended trade after the streaming giant beat the street with its third quarter earnings, drawing a line under the disappointment of q2 the company enjoyed record subscriber growth raising its customer base to 137 million worldwide. elizabeth joins me around the desk with more one thing we talked about yesterday was the subscriber growth number. the expectation was 5 million. we got 7 million huge beat. >> that's right.
that's why we're seeing the big move in the stock today. after last quarter there was a disappointment in subscriber numbers. a lot of analysts and the company had sort of tempered ek expectations for yesterday's report and came in way above and they are now looking for 9 million additional subscribers in the fourth quarter of this year what are some other positives? >> eps came in strong, earnings of 89 cents a share. estimates were 68. the revenues were in line. the overall message from management in the earnings call and release is that they are confident they have a strong enough lineup in original programming. they are confident they will deliver what consumers want. all of the investments they're making will pay off. >> all right let's flesh this out more with the founder of degroot
consulting last july they missed, and that led to a massive re-rating from the street many analysts revised downward their price target for netflix do you think analyst also have to change their forecasts again? >> yes, i think there will be a retracement. the stock was weak through q3. sentiment was poor yesterday could be a line in the sand we could be more risk-on now >> even though the stock is up 16%, you think there's more room to run from here >> i think there is. i think the international story is the one that investors will look at. if you look at the additions that we discussed rite now, you will see the bulk of the additions were outside of the u.s. that's a big part of the netflix story going forward. that's where analysts will hone valuations >> and you own netflix stock >> no netflix stock under our ownership. i can tell you that. >> one other factor you pointed out was the beat in the
operating margin that came in at 12% versus 10.5% it seems interesting in this environment of increasing competition they're also able to increase margins as well what do you point that back to >> that's a bit of a funny in q4 you will see particular gins track back a bit. this is a phase-in benefit probably shouldn't be extrapolated too much into the performance trends the big point to make is the bigger the subscriber base the easier it is to amortize programming costs. >> it seems like a big theme from the management of netflix is the focus on competition and how the market in the u.s. is increasingly concentrated, which is one reason they're focusing on the international market is there that same competition abroad >> great question. it's a u.s. thing. in europe and asia subscription
on demand is lower than in the states the states is a maturing market. outside of the states it's a land grab opportunity. that's what these guys will focus on so they will go down the local content route in europe and asia >> why are penetration levels outside of the u.s. so low in is it just with infrastructure, speed of streaming, things like that >> absolutely. infrastructure is not like it is in the states. over in the uk we will have 5 go g shortly. we're getting used to cord cutting now. it's been a buzzword in the united states for three, five years. outside we're getting familiar that we're spending too much on pay tv, maybe now is the time to go to the cheaper option >> and they're spending a lot on
content, about $8 billion a yea on programming huge amount of money and yet almost nothing on sports do you think that's going to be a big target area of growth for them >> frankly, no, i don't. coming back to elizabeth's point earlier, reed hastings yesterday pointed out that sport is not their bag. news is not their bag. original content is their bag. sport and news will probably reside with the likes of a fox going forward. n netflix is about original first run programming. >> a lot of people look at this as a bellwether. is netflix a good indicator of what's to come >> i think it is a pretty good indicator. specifically on the international front and you could see well ads or subs growth from all of the relevant f.a.n.g. names in terms of what they're doing outside of the states that will give us a new dimension of the growth potential. netflix is the smallest of the
f.a.n.g. names we have to remember that does that make them a likely acquisition target >> for sure. on a 12-month, 18-month view, yes. >> rather than developing their own infrastructure, they can go out and buy the companies? >> possibly. the numbers tell you that netflix is an attractive asset 137 million subs it would take microsoft years to recreate that so in the scheme of things, netflix is a biddable target >> so putting it altogether, you're still optimistic on the back of the trajectory of the direction of netflix >> yes these guys are owning the household at a time when consumers are willing to spay more on ent taertainment but inn ala cart business, not in a bundling way >> all right thank you very much. also coming up on the show,
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welcome to "street signs." i'm joumanna bercetche these are your headlines roche helps the swiss market outperform on a day of green after the swiss pharma giant's sales beat expectations in the third quarter. netflix shares surge after subscriber growth crushes third quarter estimates as reed hastings talks about television will be in news and sports president trump says he is giving saudi arabia the benefit of the doubt in the jamal khashoggi case. and nordea under allegations that the danish bank broke anti-money laundering rules. they say it's impossible to sweep the claims under the carpet
>> they were asleep at the wheel. at this point it would be devastating and shocking for the integrity of denmark and various other countries if they ignored this complaint the information is very stark. >> we are just getting uk inflation numbers crossing here. so running through them. we had the cpi number come in at 2.5% year-on-year. pretty much in line with expectations still a bit of a drop from the last month 2% weaker from the previous number we have the core cpi, the c cpi x energy food, alcohol, tobacco at 1.9% year-on-year, slightly weaker than the forecast of 2% rpi at 0% month on month, 3.3%
year-on-year softer than the expectation of 3.5% gilts are rising on the back of this you can see a weakness transpiring in cable remember, we did have strong average hourly earnings come out of the uk yesterday. this is just a mixed bag if you think of it from a wage perspective, we're looking at wage growth of 3.1%, and with an inflation rate of 2.5%, that's positive real wage growth transpiring in the uk. so the numbers between yesterday and today on the margin are more positive than this knee jerk reaction is implying let's switch on and talk about cable, it is trading on the back foot we have the eu summit to watch out later as well. euro is coming off a bit euro is in a very tight range here
1 1.14 1.16 yesterday we saw a relief rally, but today again trading a bit on the backfoot let's talk about european markets. i talked about the italian relief rally today is not so much the case. trading softer 15 points lower as far as the equity is concerned. xetra dax has really nose-dived in the past half hour. we are trading a third of a percentage point weaker after much stronger sessions for u.s. equities and asian equities overnight. so it seems to be some company stories playing out there. and cac 40, you can see, is the one also trading in the green. ftse 100 trading up a quarter percentage point on a day when the currency is weaker that makes sense switching to u.s. futures. i was talking about the fact that allmr majors ended the day up dow about 45 points weaker nasdaq about 50 points higher.
a bit of a mismatch between what is going on in the tech sector and the broader composite dow. the eu's chief brexit negotiator is reportedly open to adding another year to the existing 20-month transition period in return michel barnier would look for a two tier back stop for northern ireland brexit talks were paused on sunday after both sides failed to secure a deal on the irish border uk trade secretary liam fox has reportedly said that the uk needs a longer transition period in order to break the current impasse. fox's suggestion would allow more time for a trade deal between the uk and the eu to be concluded. according to "the times" this would avoid a need for a backstop for northern ireland. theresa may is expected to get a frosty reception this evening at a dinner this proposal to add an extra
year to the transition period may be one way to deal with the irish backstop buys everyone more time. is that where these discussions are headed, longer transition period >> that will be up to both sides to agree on. the question of who puts the idea forward is also contentious. i'm joined by a member of the conservative party and a member of the european parliament what is the most, do you think, that theresa may can hope to achieve by the end of dinner this evening >> i think she went as far as any british prime minister could with the proposal that she made in salzburg. no one could have -- she may have gone too far. no one could have gone further to accommodate what the eu was asking for if any other country was offering this canada, japan, any other nation said we will accept your standards unilaterally, they would have grabbed it you have to wonder if there is any interest in striking a deal at all >> i have to ask about the
northern irish backstop. that seems to be a contentious issue for both sides, finding an agreement on that. is there any way -- and from the british perspective it's about the permanence of this is there a way, do you think, this can be fudged in the sense that legal language can give the commission the feeling of permanence that it wants to make it a workable insurance policy, but the british government will go back to parliament and say don't worry, this is a temporary measure? >> that's been the approach so far and it hasn't worked the problem is not with the terms of the back stop or the time limit, the problem is the fact of having one you can't conduct negotiations on the basis that one side has guaranteed in advance that if there is no deal it will make painful concessions in order to accept an outcome that the other side regards as perfectly okay the moment you accept that, it stops being a back stop and becomes a front stop why would there be further
talks? i don't see how this deal can go through if it contains that unilateral concession. >> you talk about term nanpermae there. what about a uk-wide customs union. a backstop to the backstop that's something you said you're against. a lot of members of your party are not fans of this how do you sell this to not only the parliament but also the british public based on the fact that theresa may repeatedly said brexit means brexit and brexit means leaving the customs union? >> staying in the customs union wouldn't mean just no brexit it would be something much worse than that. something much worse than staying or leaving if you're in the customs union, you're in the eu's trade and tariff regime. brussels is getting 100% control of your trade policy with 0% input. you're saying the uk home market would be offered to eu trade negotiations as a bauble to dangle in their talks with
japanese or american or whoever else wholly for the benefit of the 27 with no benefits to the uk whether you vote remain or leave that's surely the worst of all worlds it's extraordinary we're come t contemplating this >> how do they maintain leverage then going into trade negotiations after march 29th? >> we need to drop our sunk cost stubbornness, we need to reset and do something different one option would be to offer a comprehensive free trade agreement and the technical collusions that will allow a border in islareland to be invisible. another is if the eu doesn't want to play ball would be to say let's put trade to one side and let's talk about just doing those minimal things that all neighboring countries do, getting those deals that you get with an unfriendly country like
russia but just pushing ahead would be the worst conceivable outcome. there's no chance of it getting through parliament and rightly so it would be better -- any other option would be better than this norway, canada, switzerland, risking a second referendum, no-deal, they would all be better >> you mentioned getting this through parliament, that's back in westminster i don't want to add complexity to a hideously difficult subject, but is there any word you get from fellow meps that the parliament in brussels will have issues with any of the deals that might be negotiated >> they will have issues, they'll beat their chests and then do as they're told by national leaders they have always done so without exception all the time i've been here the reason is in almost every country the party leaders pretty much hand pick who stands next time so if they want to be on the list next summer, and the treaty
is coming before them, difficult to see them defying their party leaders and turning them into liars after a deal had been struck >> we'll leave it there. thank you very much for your time that was daniel hammon around 4:00 p.m. today we'll talk to wilbur ross. of course trade between the u.s., the eu and the uk will be a major subject in that interview. back to you. >> excellent looking forward to that. cnbc's sylilvia maro caughtp with alexander stubb in brussels she asked what can be done to move negotiations forward. >> every negotiation needs a crisis the longer and the deeper the crisis the better the end result it's like any type of negotiation. you need to show the other side you've given everything you got. at the end of the day you fine a
result usually these things have a tendency to take a while i wouldn't bank on getting a deal this week >> you have been in the finnish government for eight years as prime minister, then as finance minister what advice would you give to theresa may right now? >> good luck is all i say to theresa may. to be quite honest, i do think she probably has the toughest pm job in the world, in the sense she has to negotiate a package which she knows in her heart of hearts is not a good deal for the united kingdom and for europe, and on top of that she has her own barking at her ankles from morning to night my only advice is hang in there, good luck, i feel for you. >> do you think the brexit process will trigger a general election in the uk >> that's up for the brits to decide themselves. i might be married to a brit, but i have nothing to do with the electoral system in the united kingdom
i always said that i'm sure the european side will find a compromise and a negotiation solution but the only thing that at the end of the day can derail brexit is probably a decision by the conservative party, a decision in parliament or a new referendum so the ball i would still say is in the court of the united kingdom. they have to decide what they do >> how relevant will brexit continue to be to european policymaking even after the transition period? >> it will be relevant as i would say forever. the united kingdom is not really leaving europe as such it's leaving the european union. our ties are obviously very close. we are in a simbee iosis. leaving the european union is like leaving internet or being against internet it's easier to influence it,
rather than just say no. that's a decision the uk has to make >> that was the vice president of the european investment bank speaking to silvia and wishing theresa may good luck today. french president emanuel macron made a rare television address last night in the wake of his cabinet reshuffle his government has been rocked by the resignation of three senior ministers in recent weeks with the president's approval ratings dropping to their lowest since he took office in 2017 macron used the address to acknowledge criticism of his leadership style but vowed there would be no change in policy >> translator: today there are no change in the course of our politics what you can be sure of is that there is a will for action that hasn't lost any intensity. that this will is even stronger today. >> in corporate news, asml reported slightly better than expected third quarter profit citing strong demand for memory
and logic chips. the dutch firm added growth momentum will continue next year asml shares are surging on the update, lending a boost to fellow chipmakers and to the broader tech sector as a whole. shares in asos spiked after full-year profit surged 28% beating expectations the boost in sales was driven by strong growth across the uk and internationally. the online fashion retailer maintained its full-year guidance for 2019 as it described his business po r. tea huge. market heavy weights may be shunning the investment conference but the football world is not deterred from going to saudi arabia. more details next. to make sure t we get there safely, and that we leave that scene safely and go home at night,
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meeting with king salman and the crown prince is he now in turkey where he will meet president erdogan. brazil and argentina's soccer players were a long way from home to play a match in saudi arabia there are more sporting veepts events on the way. adam, why were they playing football in saudi arabia this benefited saudi arabia against the asian world cup in 2019, they did this to hold a trophy and have a presentation over it, not entirely sure as you can see there the world's most expensive player, neymar, was involved in the match as was several premier league starts
including roberto firmino and coutinho of barcelona as well. so high-profile sporting event in saudi arabia is supposedly showing this progressive attitude >> the timing is interesting here we're seeing human diplomatic outrage being played out many international companies and people have pulled out of this international conference, and the sports world seems to be not impacted >> at the moment, yes. in terms of sports entertainment, we talked yesterday about the wwe monitoring the situation, because they're supposed to have an event there on november 2nd the second of a multimillion ten-year deal that the wwe signed with the kingdom of saudi arabia there have been american senators and politicians voicing concerns over this saying the wwe should act, that is also joining in with the fact that the trump administration has
ties also within the wwe linda mcmahon, the wife of vince mcmahon, is involved in the small business administration within the trump administration. trump himself was in the wwe hall of fame not many people remember that. >> that was that clip that went viral. >> shaved his head he shaved vince mcmahon's head after a war of world there's several sporting events that are due to take place over the course of next year. golf, tennis, boxing, more football in the next year. it will be interesting to see how they react >> adam, we'll keep an eye on that thank you very much for that china could be heading for a debt iceberg with titanic credit risks. a new report from s&p global rating says unreported government debt used to finance infrastructure projects could amount to 5.$5.78 trillion
and china has cut their u.s. treasury holdings to the lowest level in 18 months. but many analysts say the ongoing trend is not that significant. the amount of u.s. government debt that beijing owns fell to 1.165 trillion in august according to data from the treasury department. china is the biggest owner of u.s. treasuries. president trump has launched another attack on the fed, describing the central bank as my biggest threat. last week trump said the federal reserve was going loco and suggested it was to blame for a market selloff trump lashed out at the fed's monetary policy. >> my biggest threat is the fed. because the fed is raising rates too fast it's independent i don't speak to them, but i'm not happy with what he's doing it's going too fast. you looked at the last inflation numbers, they're very low. >> speaking of the fed, the
federal reserve is set to release minutes from its latest policy meeting later today with investors eager about clues about a fourth interest rate hike this year kenneth matheny joins me on the line sir, what are you looking for in the minutes today? >> i think there will be a review of the strong economic data we already heard about that. there's probably likely to be mention about the discussion of the operating framework for the fed, whether or not it will continue to control short-term interest rates in the same fashion used since the financial crisis or revert to another method i suspect they'll agree to a continuation of the current method >> do you think that will have a likely market impact >> no, i don't think it will have major market impact because i don't think they'll make much of a change. and i don't think there will be any brand-new news in the
minutes today with respect to that issue >> now, in your notes, i see you're forecasting an extra hike in december which is pretty much what the market is calling for another three hikes in 2019. another one in 2020, taking the terminal rate to 3.25. that's above the neutral rate at this point in time do you not think that with the softer inflation numbers we've had of late, averaging around 2%, there's a risk of the fed overtightening >> i think there is a small risk of the fed overtightening. but the greater risk over the next 6 to 12 months is overheating and overshooting on the inflation target and that's going to have a more determinative impact on fed rate decisions over that horizon. >> how closely do you think the fed will be looking at some stock market turbulence we've had over the past week or so and the impact that could have on financial stability effects? >> they'll note it, but they'll
look through it. that's kind of the second order issue at this point. the declines in equities, certainly in the u.s., they have been small some of that was reversed yesterday. i don't think it's going to have impact at all on their decisions. >> just before we started talking i was referring to some comments the president has made. he said that the biggest threat he what is the federal reserve which is interesting given the litany of potential things he could have raised concern about. the fed on vougsly is continuing along this path. do you think they can continue unscathed politically given how vocal the president is about every action they take >> that's a great question very difficult to answer if the criticism is more or less confined to the president and is not echoed widely by other politicians, other members of the administration, congress, then i think the fed will come through unscathed. but this is playing in dangerous
ground it is not helpful for politicians and the white house in particular to be criticizing the independent fed. and i think the big point here to note is that good policy trumps political pressure. the fed is an inherently independent and apolitical institution, but this is uncomfortable ground for sure. >> just if anything, sir, what do you think would be the number one reason for the fed to stand pat and not to continue along that tightening path that you spelled out? >> there would have to be a marked increase in the sense of financial risks to the downside. that would probably be the single biggest reason that they might not tighten in december. but i think the odds of a rate hike in december are very, very high close to 100%. >> all right thank you for sharing your
views. that was ken matheny also stay tuned for an exclusive interview steve liesman is doing with gary cohn that's coming up later today as well before we head out, a quick look at u.s. futures we had a stronger session across the three makers yesterday all of them north of 2% higher on the session today it's mixed dow about 60 points lower. nasdaq 50 points higher. we had those bumper netflix earnings that's it for today's show i'm joumanna bercetche "worldwide exchange" is coming up nt.ex place, the xfinity xfi gateway.
it is 5:00 a.m. on cnbc global headquarters. here's your five at 5 cluc:00. wall street looking for a mixed open right now after its best day since march. netflix shares soaring as they top expectations in subscribers. president trump calling the fed his biggest threat we'll dig in on his comments ahead. youtube suffering a major outage and then lottery fever even i have it it's the mega million jackpot