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tv   Street Signs  CNBC  July 12, 2019 4:00am-5:00am EDT

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second quarter earnings are below expectations. >> the custom's authority says it faces a flurry of challenges. >> the biggest listing of the
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year increases after reports that budweiser will delay sending it lower. >> and shares plummet to their lowest level on record after it reveals it's in talks with china over a 750 million pound rescue plan it comes by so quickly every single month the decision, they say their output agreement does not change the output of an oversupplies market that is according to the international energy agency. so in it's latest report the iea says supply exceeded demand in the first half of 2019 and that rebalancing in the oil market has begun to slow. as ever, let's bring in nei
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neil atkinson. and just reading the major take away from the report is that essentially oil supply the first half of the year has exceeded demand you say that that number is 900,000 barrels. so despite opec's best efforts we still have the supply-demand mismatch >> we do that's a mismatch that's actually grown as new data has come in. and through the rest of 2019 we'll see how the demand issue plays out but as we move into 2020 the outlook is also for considerable oversupply because we're getting big growth from the united states and some other countries. so farce the issue of rebalancing is concerned, as we
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say in the lead article, it's still somewhere off. >> go back to opec they just announced another nine months of production cuts extending into the first quarter of next year a bit longer than some people anticipated but to your point, as long as u.s. production continues to shoot upward, the opec essentially are captive to what the u.s. do on that front >> we'll have to wait and see if that does turn out to be accurate but between now and the end of the first quarter when the agreement expires an off lot can happen on both sides of the balance. not just on the supply side but on the demand side but certainly taking the snapshot from today here in the middle of july then yes the fundamentals do look challenging to them but we should also bear in mind that
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for various factors, the actual price of oil today in the market is the mid 60s that's not a difficult situation. obviously from the point of view of consumers we'd not like to see them rise significantly higher but mid 60s at the moment is a comfortable position for them but as you say, the future is challenging. >> if they're comfortable, they're not so concerned from what you're saying about the idea that expanding supply in the u.s. will impact the ability of opec to support prices in the future. >> i'm not suggesting that they're comfortable or unconcerned. all i'm pointing out is that the situation today in terms of the actual price of oil today is perhaps a little more comfortable than might have been expected part of that of course is to some extent reflecting tensions
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in the middle east gulf. and we'll see what the data shows us. >> we have seen alleged harassment by patrol boats in the gulf we heard the white house or at least the future chair of the joint chiefs of staff talk about building a coalition to protect tanker traffic in that part of the world. if things deteriorate significantly what will that mean for traffic in that part of the world and what will that mean for supply? >> well, what we have seen so far is that despite the incidents with the tankers in the gulf and the shooting down of the drone recently, relatively normal operations are continuing in the region
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there's been of course an increase in insurance costs for shippers, not just for oil tankers of course but all the other trade that goes on and at the moment, we are not seeing an impact on physical supplies of oil. were that to change, of course, because of the importance of the straight to which a very large proportion of the world flows that clearly would have a major impact on supply and in-turn a major impact on pricing but we're not there yet. we are still seeing relatively normal operations as far as the movement of oil is concerned. >> it's not being reflected in the price as far as that's concerned. i want to ask you about the demand outlook looking at your report today you do see a pick up in demand in the second half of this year even though you have downgraded your demand estimates for the first half of the year on back of weakness coming from italy, india, saudi arabia and russia
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what gives you confidence that demand is going to pick up in the second half of this year >> well, on the assumption that trade tensions don't worsen and there is some kind of resolution we do see the prospect of a more positive economic outlook toward the end of the year and also the important factor that we should point out is that in the second half of 2019, if oil prices, current prices were to stay roughly where they are, they would be in the region of 10% or so lower than what we saw last year so that would have some kind of impact that's one of them but if the environment does not deteriorate further in the rest of the year on the economic front then there
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is better economic performers and better performers for oil demand in the second half of the year and in 2020 the expectations from the major institutions are behind gdp growth next year than 2019. >> one final question, the word that you used there was of course assumption. much of our world is predicated on assumptions and yet we're seeing lower manufacturing output figures recently but going into next year, do you really have confidence about that increased demand because of this economic growth that you just talked about there? >> for the time being until the facts change then that remains our view but of course we see new data the whole time we see speculation about various changes that can take place to interest rates for example so i think, yes, we acknowledge that there are risks to a forecast there's always risks and we'll
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wait and see how the rest of 2019 plays out you're right to raise the issue of course but we'll see what happens. >> thank you for your time the head of the oil industry at the iea. >> all right so let's talk about how markets are appearing this morning you can see the picture behind me is relatively positive and this after another record session yesterday. we had the dow breaking through the psychological level of 27,000 s&p closing 1 point below 3,000. nasdaq high as well as we start and head into the beginning of earnings season there. all eyes will be on the numbers that come out in the next couple of weeks but overall the mood is positive today you can see that the majors in europe are trading with the green. the relative performer up .4 and then we have the u.k. index up about .3 again, some more positive price action there from the home builders we talked about that yesterday but i want to draw your attention, you can see the germanindex is the relative
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underperformer, really treading on water here and that's mainly because of weakness in the auto sector i want to talk about that. let's talk about it as a whole you can see one name in particular stands out here we are down 1% on the session. we were actually down about 3% just an hour ago and the market opened and guiding investors and in two weeks their third profit warning in a year the market is not taking it so well but in the last hour or so we have recovered. you can see that as a whole, autos in general have bounced in the last hour so the market is
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not that surprised but this is the picture for this morning. it's one of the reasons why in general it's underperforming versus other industries in europe this morning. i also want to draw your attention to another major mover today. you can see the shares are down 37%. so the shares have fallen to the lowest on record after a 750 million pound rejection. it will involve an ownership reshuffle of thomas cook's airline business with taking a controlling stake and a minority interest in the latter and the proposal also sees a significant part of the equities while existing shareholders would have theirs and that creates existing
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shareholders will have theirs. this is why we're seeing the extreme reaction down 36% huge record lows for thomas cook 65% lower. the growing company will not price it's hong kong ipo by friday as previously planned that's according to two reports citing sources we have reached out for comment and we'll keep you updated on this story but on that news, on those reports yet to be confirmed, stock is trading down 1.8% and it's a reflection of the environment that so many of these ipos are getting pulled. and they have also confirmed the timing of the ipo so perhaps the reflection of the market uncertainty out there. >> shares reversed on the early losses this morning after the german colleague issued it's second profit warning in almost
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three weeks. the company says it now expects to post a second quarter loss. provisions are set to rise by a billion euros. earnings from the mercedes benz division will fall >> what has changed since the company issued it's most recent profit warning >> that's very interesting timing there getting the second warning in three weeks from diamler that's never happened before it's their assessment when it comes to the issue and the most
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recent one has changed so they're really upon them and this will probably bring them a lot of problems going forward. we know from volkswagen how long it took them to tackle that crisis and it seems that diamler is in the midst of it currently. so let me run you through that 1 billion from the air bags but also, that i think is also very interesting is that they're saying in general they see a very slower ramp up than previously expected. that's kind of the description of they're not getting their models to the market and what they are offering to consume it and that is something analysts have been saying for sometime now is that daimler is just very slow with coming up with new models which are attractive to also a very green oriented
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audience or customer base. in other words they're electrifying their fleet and bring some electrified models to the markets actually and plus that, they also see in general a growth in the automotive space which is also nothing really new. looking at where we stand in terms of economic growth they're just not doing so great as they were doing previously and on top of that they have just woken up very late to a change in demand consumers want less emissions and then we have this co2 problem. the second quarter will be a
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loss and they're also saying that it will be significantly below last years which is of course also a disappointment for the stock. but looking at the share price, a lot has been baked in the share price already as the expectations for daimler were revised downward after the second profit warning at the end of the 24th of june already. so that is why we still see that with that, back to you. >> indeed, as you mentioned, right now the stock has recovered. we're only trading down abo about .4%. as a whole the context is still positive but i want to go back to daimler specifically because looking at a note by the auto analyst evercore group and they published this a couple of weeks back on the first profit warning and they said they're an endless array of one time effects.
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we talked about those, the air bags and mercedes recalled but they said that specifically those raise questions of accountability and protest and also management and i want to pick up on the last point about management a new cfo came to daimler a couple of months ago this is the third profit warning this year and the second in a couple of weeks. what does that tell you about the messaging that they're putting out to the market here >> well, they are lowering the expectations for whatever comes next in order to outperform the expectations so that's one perspective and the other one would be actually not very positive for the new management saying well it took them quite sometime to come to grips with their new job
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having said that, things can also change. it can go down very sharply and abruptly especially because the uncertainty is so high out there. we have seen that with other corporates now as well there can be an enormous profit warning coming out of it because the market is deteriorating so much there's so much depending on exports so they're just playing on the royal economy on less uncertainty. with that, back to you >> coming up, new data shows chinese trade with the u s. declined in the first half. what this could mean for talks
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welcome back to the program. chinese total trade with the
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united states fell by 9% in the first half of this year. for the month of june, imports fell 7.3% which is more than expected exports were down 1.3% on a dollar basis the country's customs authority said the external environment was still context and that chinese trade faces a flurry of challenges we have someone here to explain what the challenges are. thank you for being with us. >> i apologize. >> this is not just of course about china and this is about the u.s. as well what is going on here. what does this mean for policy in beijing do you think? >> well, i think when you look a little bit deeper into the numbers while overall trade between the united states and china, what you'll find is that imports into china from the united states fell much more than exports did so you could argue that maybe the united states at this stage
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is actually suffering more from the trade war and here this is important to get follow through they made this commitment and they haven't come through. >> but would you say, just the g-20, most recently, in essence it's a little bit unbalanced to what you're saying to your point that china buys more agricultural goods but in return they don't have any being applied plus the resumption of u.s.companies being able to deal on a non-national security item so would you say if you had to tip the balance, china got
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more out of the discussions than the u.s. >> that's undoubtedly the case. >> that was very, very happy news to hear you say that. i want to ask you though, the psychology of president trump and the impact that has on the u.s. administration's behavior is relevant here, isn't it when it comes to the imposition of tariffs looking back over the last 12 months you have seen them be put in place or be threatened and then be taken away and then be postponed and i'm just wondering in terms of what's going on in his mind and what that means for investors, what do you expect over the next few months in terms of margins being squeezed >> i don't think that they're going to find a resolution very quickly. the trouble with all of this coming back to your point about psychology is that i call it
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trumpian uncertainty most economies thinking about the trade battle were starting from the point that it's in both side's interest to bring it to a resolution but that's not exactly what we have seen. what you say is right in that tariffs have been threatened and delayed but in the end they have been imposed in the end the u.s. administration did raise tariffs on 200 billion to 25%. that only happened in june this is very new so the impact of all of this is yet to come. so i think it is very difficult because as you say, the starting point, this is in both sides interest to conclude this hasn't really helped in resolving this because it isn't apparently run first and foremost on this is in our national interest. there's a whole lot of face saving involved and there is of course, as you know, president trump deems himself to be a
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master negotiator and he believes this strategy of applying maximum pressure on china is actually going to work. i have some doubts that this is going to work. china has a perception of itself as having historically been very much a country that has faced aggressors i don't want to go as far as calling it a victim mentality but there's a perception that china has other nations coming after them and that makes the discussions very difficult. >> to your point, investors need to start thinking about this from a structural perspective and not just one time impact looking at the numbers, one thing that stuck out to me is china imports were down 27% from the first half of the year so the psychological damage is done they are importing that from the u.s. how should investors be thinking about this over a more medium term horizon when you think about investment opportunities and where you want to be
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going back to markets, markets are at an all time high now. they seem to be brushing off all of the concerns. how can you play it if you really do have serious concerns about the future of the relationship between the u.s. and china from an economic perspective? >> there is a great disconnect between what equity markets are saying and who bond markets are saying they're rallying as if everything is fine in the world. they are at a very, very low level. the -- i think the real damage is going to be a medium term one. the damage from the trade war at this stage i don't believe is really first and foremost to be found in the trade data, some. it's to be found in the industrial production numbers but where i think there's the real damage being done is at this level of uncertainty. the uncertainty is not just
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about that but the uncertainty about the whole structure of global supply chains and global production has forward because e our potential growth tomorrow is going to be lower. >> uncertainty, that's a word that chairman powell used many, many times in the last 48 hours. thank you very much for taking the time to chat to us globalchief economist thank yo
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welcome back to street signs. >> these are your headlines. >> daimler shares reverse most of their early losses despite another profit warning as the firm says second quarter earnings will be, quote, significantly below expectations >> chinese trade with the u.s. 9% in the first half as it faces a flurry of challenges. >> doubts about the biggest listing of the year increase after reports that budweiser will delay the pricing of its hong kong ipo sending stocks lower. >> and it will plummet after it's in talks with china over a 750 million pound rescue plan.
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>> let's take a look at how european markets are fairing this morning again we're on the heels of new report highs yesterday we had the dow breaking through to 7,000 and s&p just shy of 3,000. fresh highs for the nasdaq and that's translated into positive momentum for asian equities and this morning european equities as well. so we have xetra dax the relative underperformer here and as we mentioned, they're one of the names dragging down the german index let's switch and talk about it and it's the weaker green back and that's had an impact on some of those pairs and we'll look at them in a little while it's that of a little bit of
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weakness per dollar. we can see all of this yet again pointed to open up in the green. the ppi inflation data coming up this afternoon. >> just to bring you updates from daimler and mercedes benz, mercedes benz sales for the month of june have fallen 3.7% in europe it was 3.5%. it was 3.7% in the asia pacific and unchanged in the united states of course people watching closely. daimler stock will be looking at the numbers and getting more pessimistic. some of the new suv models will help matters in the third quarter of this year well, deutsche bank received it's sweeping restructuring program. the bank now has a more balanced risk reward profile after it
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slashed jobs at its investment bank deutsche may win more regulatory support and that will possibly result in lower environments the lender announced the overhaul plans happy to bring in the senior director of financial institutions that joins us now thank you for being with us, patrick. as a rating agency you look at the present and you tried to help investors figure out the future what do you know about deutsche bank's present circumstances and what does that say about the bank's future direction. >> well, you know, deutsche bank has been struggling for quite a long time in terms of profitability. they are struggled to improve the profitability but clearly they have been struggling. they have retained strong franchises in a variety of core products they want now to focus
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on and, you know, as you just mentioned, the plan that has just been announced is a sweeping one it's one of the largest in the history of the bank and we flagged earlier this year. this week. it's one of the main challenges that we see in terms of the plan and it would be executing. it would be how it will be received by the clients and there will be some attrition there's no doubt about that. but one of the key questions is to which extent the bank will be able to control it clearly execution is one of the key topics here. the plan is whether it's physically possible for them to make these changes and then whether they can actually do this with the current management team is the management team relevant to this discussion, do you think? >> oh, absolutely. i mean, very much the management team and we have seen quite
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significant rotation in terms of management in the past few weeks and there's been very significant changes announced at the end of last week one of the key questions again is execution and execution is not down to single individuals and how the management team works as a team and our understanding is that it has been a plan which has been in the making for about six months i understand that is it on an approach which is quite important so gain engagement at all the levels of the bank and not just the top management level. >> the conception out there that deutsche bank are completely overhauling it's investment bank but actually if you look at what your proposing, the investment
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bank is to be pretty large at the risk of weighted assets. it's still going to be 30% of group. it's a sizable portion of due she ba -- deutsche bank and is expected to do so in the future. how much is underpinned by what they can manage to achieve from a return on equity perspective >> well, they announced some targets which are quite ambitious. and that's why we're emphasizing so much and the quality in the place of it. i agree that it would have been made really significant which is logical taking into account the fact that the bank hasn't given up on its global ambitions especially as far as core products are concerned, where the banking states are strong
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and again having said that, the bank has managed to retain a very good franchise in some key products like ficc despite the crisis it has gone through so yes, it would remain significant in terms of business, in terms of revenue contribution but you shouldn't underestimate the fact that the bank is committed to make significant progress in corporate banking, if that's something they have been working on for quite a long time already. >> right what's your take on their situation? they said that they do not intend to go for a capital increase when they announce the restructuring plans. is that likely to be true? >> well, it remains to be seen i'm repeating myself but it very much depends on the execution.
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especially on the face of it and how costly the measures will be. but, we have clearly said that the new floor which has been announced of 2.5% is still commiserate with the bbb rating that we have from the bank, but that assumes, again, that if it reaches that level, it will not be for a very long time. so we really expect them to bounce back from that level soon and in the past, the way the bank has tackled it was always based on significant share ratings and injections we believe this time its different in terms of if you don't rely on significant
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injections it's a signal that you're probably a bit more commented to implemented the restructu restructuring. >> now boris johnson promised to stand up for british diplomats he stepped down after the leak of a confidential memo in which he criticized the trump administration members of the conservative party have in-turn criticized johnson for a failure to support him publicly johnson now says that diplomat careers should not be used as quote, political footballs the former mayor of london told conservative party members at a leadership election event that strong ties between the u.k. and the u.s. remain crucial. >> there are reasons, though the thinking is the single most
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important strategic fact of the 20th century i think people in this audience tonight would expect the prime minister of the united kingdom and want to have a close working relationship with whoever is in the white house. >> now at the same event, jeremy hunt said he is glad that the chief negotiator will not be the new president of the european commission he said he was optimistic and the prospect for a new brexit deal under her leadership. >> i think there's a possibility for a really positive relationship with her and that's what i would seek to do as a prime minister i don't think this is going to be easy. but i don't think it's impossible either. and i have said before that there is a deal to be done there. if we get the tone right in the way that we deal with them
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because they are in many ways, they have misunderstood us as much as we misunderstood them. so i think if we get this right we can find a way through it. >> back on the other side of the atlantic, president trump has slammed cryptocurrencies in a series of tweets and insisted they are based on thin air he says facebook's libra will have little standing and said they should be subject to financial regulations if it wants to, quote, become a bank >> president trump joining in this chorus of criticism of facebook's new cryptocurrency called libra it seemed to stem from the fact that it's unregulated and facebook is trying to become it's own financial institution this isn't the first time that we heard of this concern yesterday in fed chairman powell's testimony this was
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raised by lawmakers as well and fed chairman powell responded with concern about the cryptocurrency, take a listen. >> it moves quickly into the question these things become, is the block chain going to be so private that it becomes a vehicle for somehow evading money laundering rules and that kind of thing. there's a balance to be struck there. in addition, the very potential scale of this. and it means it can be systemically important i think the company has acknowledged that. that means, i would echo what you quoted and that means this should be subject to the highest level. the highest eck peckations in terms of privacy. >> this product needs to be rock solid before launches and
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essentially there's so many questions and concerns about who is going to regulate libra that people from all ends are weighing in now. >> so libra is the new kid on the block but bitcoin has been around quite a few years so when we hear the reaction and we hear what regulations and congressman are saying about libra, what distinction are they drawing that they have already looked at over several years. >> it's a really important point and facebook made this very clear last month it said this is a stable coin so what it means is its backed by a basket of currencies like the dollar and other currencies and what that would essentially mean in practice is that it's less volatile in pricing than something like bitcoin the central of bitcoin is that it's not backed and doesn't have the backing of a central bank. so there's a lot of questions between those two. certainly facebook is trying to push this idea that it's a more
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mainstream product and it would work with regulators in order to make it something more accessible while many out there say bitcoin is the real hardcore version of a crypto currency we would want to adopt. >> many have signed on to work with libra so it's not just going to go away. >> we'll definitely have more discussions. thanks for joining us today to talk about president trump's tweets about cryptocurrency overnight. >> serena williams smashes her way to another wimbledon final highlights coming up next.
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welcome back to the show some wimbledon updates williams easily won 6-1, 6-2 halep won in straight sets saturday's match will see
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williams go for her record equalitying 24th grand slam titles playing in her first wimbledon final and then for then today's matches include key match ups in the finals while nadal will take on roger federer. amazing match. i'm very excited about 3:00 p.m. >> i'm going to get less excited. >> england did reach it's first cricket world cup final in 27 years with a decisive 8 wicket, i think we can call it a thrashing of australia it reduced the defending champion to 223 all out and then an equally impressive batting display saw england reach the total with the loss of only two wickets. england will now face new
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zealand in sunday's final just a couple of miles from where we're sitting. >> that's a great 48 hours in sports coming up formula one agreed to hold british grand prix until 2024. adam is at silverstone with a special guest. >> here i am at the home of the british grand prix and you're right, the british grand prix has be has been secured at silverstone until 2024 it's been here for a huge amount of years i am very pleased to say that i'm joined by mclaren's zach brown that has given us very privileged time ahead of what is a huge race weekend for you. mclaren having most of the right thing. >> it's still a long way to go we had a good winter
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all the men and women at mclaren have done a good job and we're just about at the halfway mark sitting 4th in the championship which i think is about as much as we could hope for at this point but still a lot of racing to go so we need to make sure that we continue to stay strong. we already discussed that best of the rest tag when you have the big three teams out in front. how proud are you of what your team are doing bearing in mind that you know what you're up against. given where we have been the last few years, i'm very proud of the great work everyone on the team is doing. we have won 20 championships so 4th is not where we want to be long-term but it's certainly progress when you're on this road to recovery, you're not going to go where you were last year 6th in the championship overnight. it's going to be about
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incremental games and keep their head down and keep their head focused. >> it's the driver line-up that you have landon norris they have been working together well and seem to have a very good relationship. how pleased are you with whether they work together they get along well and most importantly they're very fast. our partners enjoy them and they're media friendly so they're the complete package if you like and you know, we're head down, we're very focused. the silly season is starting now. some drivers are going to move around and there's some teams that one strong driver and one that's weaker and we want to let everyone know that we're focused and we have our plan our drivers are off limits so just happy to get that out of
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the way. >> the very reason why we're here at silverstone, the home of the british grand prix and that's going to be it's home until 2024 what was your reaction to that and how pleased are you that that's now settled and put to bed? >> it's great news the british grand prix with the italian grand prix and monaco, that's some of the most historical venues important to formula one. i think silverstone is huge with the fans hundreds of thousands of people and i was confident that it was going to come together these things when they come up for renewal there's always a bit of a negotiation but it's a great announcement and exactly where we need to be racing in england. >> next season, though, is going to be a new grand prix, a returning grand prix in the netherlands as well. the calendar is very congested how do you see the calendar maybe expanding, keeping it at the 20 or so races that you have at the moment. what works for you
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>> you know, first of all, we'll make anything work at the end of the day. i like where we are now. 21 grand prixs it's a lot of travel and wear and tear on the team and also keeping that exclusivity our work has which is so great that being said, if 22nd race was in a really good market, new york, miami, you know, it's hard not to grow the sport and find new fans so i think the demand for more grand prixs is there. we just need to find the right balance between exclusivity and travel logistics and we can tighten up how we move around the world and if we do that, that might allow for another grand prix or two without stressing the system because we do lots of air miles. >> thank you very much thank you for joining us you have a very busy race weekend because it's practice one and two today and a very exciting race weekend in prospect of course louis hamilton going
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for a record six british grand prix win back to you. >> excellent thank you for bringing us that interview and it's getting a little bit lower in trading earlier but the stock has since recovered. that's the one stock in europe overall it's better for trading today. let's take a quick look at u.s. futures and yesterday the president tweeted about the dow breaking through 27,000. looks like we'll stay above that today. the dow is seen opening up about 80 points higher s&p about 8 points higher. firmly through 3,000 now so lots more records and that is it for today's show >> have a great weekend. worldwide exchange is coming up in a few moments time. (client's voice) remember that degree you got in taxation?
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>> it's 5:00 a.m. at cnbc global headquaters and 4:00 a.m. in new orleans. here is your 5 at 5. our top story back to the gulf where tropical storm barry is bearing down on the bayou. we're live next. refiners in the gulf slash production more than 53% of the region's output is now off line as barry barrels closer to the coast and a record setting week on wall street about to get sweeter because futures pointing toward records this morning after the dow closed above 27,000 for the first time ever. bashing bitcoin, president trump


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