tv Street Signs CNBC September 13, 2019 4:00am-5:00am EDT
dennis murphy: it's an ending that neither side had hoped for. a family saga with so much love, and so much loss. is an imperfect conclusion. [music playing] it is friday i'm joumanna bercetche >> i'm julianna tatelbaum. these are your headlines european stocks rise after a stimulus package with better terms for loans. >> president trump said he would consider an interim trade agreement with china bonds guru sees a 75% chance
of recession before the next election the french finance minister doubles down on his proposition for facebook's libra >> there are conditions, we should refuse the development of libra. what i'm saying behind that is the security of customers, the stability of finance within the eu good morning happy friday it is officially the day after the big bazooka out of the ecb let me take you to the market price action in the banking sector in equity space, most of what you see is actually more positive
the dax in germany is up cac is up, italian index is up .4. we'll discuss these at length in the program. at one point, we did see the bank index dip as much as 2% overall, the appetite for risk taking has come back this morning after a positive hand over from asian indices wall street there .6, .7% there away from regard highs he c equities in the u.s. continue to gain. talking about the banks today performing well. up by 1.3% basic resources as well. autos and sectors that are
sensitive to the exports and trade narrative. with reports of potential between the two sides. all sectors are doing quite well defenses, and food and beverages down media down let me take you to banks you can see this morning, we are seeing a positive reaction namely out of the german banks deutsche is up, commerce is up b&p 1.8% those are particular as well because of the tiering mechanism the ecb announced where six times the minimum reserve will be at 0% rather than the new deposit rate this is a positive for banks that have a lot of excess cash those appear to be the core
banks. here are some of those doing well we've seen a big bounce for italian banks too. these don't have a lot of excess liquidity. in addition to the other measures that were announced by the ecb, finally seeing a bid back it was a bit of a rebound to the august lows. that is the picture for banks. we had a lot of action as well for the fixed income you can imagine, they cut the interest rate with this tiering system there was a lot of confusion on the front. 10-year yields as well initially when the announcement came out, the bund rallied about 10 basis points. later on by the end of the session were trading about four
basis points higher. y you can see that trades very heavy. bunds are coming off here at minus 50 going in, i believe we were trading about minus 56 we are a good deal higher already. 10-year italy was down 18 basis points, today coming off a little as well guild being dragged along for the right and the 10-year coming under pressure with the bund a lot of action going on as the market digests some of the impact >> thank you for running us through the detail let me detail what we heard from the ecb yesterday. they have provided a raft of stimulus measures to help prop up lagging eurozone's growth
the central bank cut the rates and announced a 20 billion euro per month bond program that will run as long as necessary they rolled out a tiered system to exclude those deposits and confirming plans to run cheap loans under the program. in his press conference, draghi defended the move. >> the appropriateness because some think this is appropriate only for the risk of inflation others think the interest rates are so low that it doesn't need the front. the majority believe that action was warranted. >> now the new stimulus package isn't being received well in german newspapers.
bild is running a headline, quote, so count drag law running things dry >> i feel like they weren't watching us. we explained the tiering system. they need to switch on cnbc. president trump reacted on twitter saying the central bank is, quote, trying and succeeding to weaken the euro against the dollar and returned to criticism of the fed accusing them of sitting on potential interest rate cuts. steve mnuchin told cnbc he was concerned about rates in europe. >> clearly europe has slowed down significantly, i think negative rates in europe are
concerning for them. one, it is very hard for banks to make money in negative interest rates if banks can't make money, it is hard to have a good economy. i wouldn't be surprised if a lot of people start selling bonds and foreign rates which would have the impact of narrowing those spreads. >> the comments on the ecb moves. more today on street signs the chief economist and portfolio manager at william blare. neville, i'll start with you a lot of anger against mario draghi it feels as though they really did everything they would have possibly done with their
available instruments. what is your take away >> i think they did as much as they could to stimulate the economy. the decision to improve the attractiveness of targeting the finance operation because really through the banking system that can still havea positive impact the fact that they didn't go as deep in the negative rates they only cut 10 basis points instead of 10. it is that negative front-end rate that is the problem as far as german servers are concerned, it is negative zero draghi did a good job. that's where you'll get stronger growth from. >> just to go back to one of the points the fact that the german newspapers this morning are still running headlines critical
of the ecb there seems to be an error here. they haven't got the point across well enough that this protects german banks. >> at the end of the day, you've still got a negative rate. the deposit rates most saving banks are going to be minus .5%. the reason the rates are so low and the reason the ecb are doing the qb is because of the mix because they are so miss aligned. you've got a tight policy. the eurozone as a whole is off you've got the ecb with rates. >> tom, what is your take? is this package positive for
growth net net for the euro area >> yes it is positive with respect to if it's a big bazooka or not if it would happen five or 10 years ago, you would think it was rather large we've gotten used to more aggressive and rapid central bank responses to bank growth. it is estimavident that we needd more >> that is an interesting take i was reading research suggesting in comparison to draghi's whatever it takes speech, the message seems to be whatever we can.
your view is that there is still more flexibility and creativity. effectively no limit to what the banks can do >> they were running out of road to do more for several years with respect to monetary and fiscal it was skued to the policy across the eurozone. one doesn't influence the other. deciding the central bank is independent. the president of the ecb can call on governments to do more as we see in the united states, the government can ask central banks to do more but for the most part they'll do what they would have done anyway the policy rate, nobody thought it could really be negative years ago.
it can be. we've learned that it could go more negative. the asset purchase program of $20 million a month. that was 60. i'm not sure there is an upper limit there. i know bond yields are already negative the direction in which central banks can keep moving haven't closed off yet >> another comment i read was, we'll do whatever it takes for as long as it takes. why do you think they need to open end it? >> i think to show determination. i think that was one of the biggest innovations. that the ecb will carry on buying 20,000 of assets a month. given that core inflation has not budged from 1% for the last
5 or 6 years, that's a strong commitment >> that is exactly what bank of japan has done and they haven't succeeded. >> a good point. the ecb is now very similar to the bank of japan. the eurozone isn't in deflags. the problems aren't as acute yet. fiscal policy is still an instrument that should be used and used effectively you can fix bridges in europe and build bridges before you start building bridges to nowhere. >> thank you eurozone leaders have reacted to the call. european commissioner told cnbc
that eu should look at improving fiscal policy to help the block in fiscal times. today, draghi made it clear, now it the time for fiscal policy to take charge. are they going to do anything differently? >> reporter: that's really the big question here. the elephant in the room as the finance ministers gather here to try and find out what they are going to do about this policy. i asked earlier, what is going to get germany to spend more to vest more? let's take a listen to what he had to say about that? >> i spoke about slow down in economy, germany is one of the countries where the slow down is most pronounced.
from that point, we think indeed it is a very appropriate moment to look at how the fiscal stimulus >> one of the things finance is discussing is really how to update rules and allow countries to spend more perhaps but as you know the rules state that countries cannot have a deficit higher than 3% or higher than 6% of their gdp i asked if there is any willingness or compromise when it comes to these numbers. whether these will increase to allow for further spending we have to say they did not show any willingness to changing those numbers. the discussion here is how to
make those rules similar what do they mean about how to make these rules simpler i have to say in the short term or the most important thing is how these finance ministers are going to spend money in that regard, it is really important to see budgets for 2020, which are due next month let's wait for those plans to find out whether these have heard to president draghi yesterday. >> thank you for outlining where things stand on the front. we'll take a short break coming up on "street signs," saying the government is exploring ultralong bond one day after saying the u.s. should refinance its debt load. more after the break
open to an interimle pact. this comes after reports discussing that they would accept a partial deal. as chinese firms reportedly made their biggest u.s. soybean purchase since june. steve mnuchin said they are seriously considering bonds to help with the debt >> this is something i have talked about over the last two years and very seriously considering. we are looking at issuing a 50-year bond, we think there is some demand for it that is something we'll very seriously consider for next year there is some technology issues we need to make sure we have in place, market issues we would do this in a way that
if there is demand, it would meet it would expand the u.s.'s borrowing capabilities our job is not to market timed rates but it is attractive to extend and derisk the u.s. treasury borrowing we are looking at extending the average to derisk this for the u.s. people. >> the u.s. budget deficit has topped $1 trillion for the first time in seven years. the short fall is the result of an august budget deficit of over $214 billion a 75% chance of a recession before the next presidential election according to bond guru. a warning of an incoming crisis in the corporate bond market he highlighted concerns over falling indices and u.s./china
trade tensions with us here around the table, our guests i want to kick off with you, tom. in terms of the price action with the euro yesterday with that ecb statement, it was trading about 110.22 now 110.82 it is already higher is that the right reaction >> maybe president trump wants to recall his tweet. i don't know about that. relative policy that is the driver here. they are both doing the same thing easing the fed has got more room. still more room for the ecb. the fed has more room to cut it may do more with the eyes of the market that is not a euro negative if
we see another 25 basis points out. who knows what else after that >> we got some data yesterday around the time the ecb was going on and the inflation data. the core upside reaching the strongest face of inflation since 2008 they prefer the core price index. nevertheless, how does that factor into what we should be expecting? >> within the u.s. manufacturing growth, a lot has slowed consumption spending is holding up relatively well 75% probability, if that's priced off bond deals, that would have gone down in the last couple of weeks. i think the out look is for slow
growth expectations that the fed look at do justify. there is obviously the central bank's ability to ease there was some concern with the new tiering mechanism. a good chunk of reserves is going to be remun rated. if you get to some average between the two of them, we may end up in a situation where they cut. that is one of the reasons the two year didn't react very well.
is that a consideration. >> what we were expecting for tiering, we were expecting them to allow 10 times. it wasn't as generous as it could have been. there is more of the marginal excess reserves at the rate of minus .5%. for italian banks, it is an absolute windfall. they'll find they have nothing it's the marginal deposit rates that will be minus dout 5% probably the key issue was the fact that draghi didn't cut as much he signaled toward the end that
ecb wasn't minded to cut any further. he was pricing in another one or two rate cuts. the fact that fed still has plenty of clear water between itself and zero means ultimately in terms of that rate, it will start to pivot more in favor of a stronger euro. >> we saw that sell off. how do you play that from here do you think we've seen the bottom >> i don't think the ecb was happening. markets reacted to softening of trade rhetoric that helped lift equities and didn't do great things for bonds. most of eurozone 10-year yields are below zero the ecb is going to be buying assets that don't make money for
them i don't think that was atthe start of durable rise of bond deals. we should have been for at least a decade now the reaction is september. part is just giving an extremely strong rally in august and responding to global developments as far as softening in the trade situation that is not necessarily long lasting. >> right you don't hold onto the steepenner here? >> no. >> thank you neville hill and tom. thank you for your time. what would be the likely outcome
. >> welcome back to "street signs. i'm joumanna bercetche >> and i'm julianna tatelbaum. the ecb releases a big stimulus package to help deal with negative rates >> president trump says he would consider an interim trade agreement with china in another sign of thawing relations. >> and saying he sees a 75% chance of recession before the next presidential election >> opec plus relies on members to fall into line. telling cnbc exclusively that donald trump's tweets have no impact on his price impact >> we see the prices go up but
then return. there for, these are not fundamental factors. fundamental factors do not lie in words but actions >> let's take a look at where things stand the day following the ecb meeting where mario draghi delivered the bazooka markets were waiting for we are seeing green across the board. in italy, the ftse up about half a percent. yesterday, as joumanna highlighted, we saw some major movement in the banks yesterday initially rallying on the news and plunging in the middle of that ecb press conference and now today bouncing back as they piece through what all of this means and what the new announcement would mean in terms
of mitigating the impact that is the picture of equities. the euro, very important in reaction currently trading around 110-82. before the ecb kicked off, it dropped yesterday after the statement during the press conference recovering now and up about 0.2% another one, the pound strengthening significantly versus a dollar this morning just under the 124 mark. so decent sized moves. looking at the u.s. futures. it was a strong day for wall street advancing and the dow posting at seven. positive session all of that on the back of softening trade rhetoric now looking at more gains for wall street for the day.
>> opec plus members have agreed to remove 400,000 barrels of oil from the market per day. the cuts will come primarily from iraq and nigeria. two countries that have not fully complied with the outcome curve so far they'll meet again in december let's look at the oil complex. we have brent and wti trading a little softer. brent is about half a percentage point weaker wti down about .4 as well. the worst performing sector in u.s. this year so energy still under a lot of pressure due to extra production as well as the geopolitical concerns as well and the trade war. in an exclusive interview, russian minister said a new
approach is needed >> translator: taking into account the market is more or less stabilized and the opec plus is implementing decisions at the highest levels. >> what about president trump? we've seen via tweet moving the oil price. how does the president factor into your planning >> translator: we are looking at all the factors that one way or another affect prices. in particular for us, it is a balance of supply or demand. in my view, these are not fu fundamental factors. fundamental factors lie not in statements but actions >> when you take a step back and
look at this within a historical contest, the relationship you had with saudi arabia and russia was a relationship no one thought possible do you see a similar relationship possible with the united states? >> translator: first of all, sooner or later, any boom ends that is just historic. we'll see what happens with shale oil. with regard to my relationship with ali, i consider him to be a professional he's done a great deal to establish collaborations and improve relations between our countries, saudi arabia and russia a great deal has been done with relations to his efforts and to stabilize the markets.
developing the relations for energy with the united states. i am in contact with him we are always ready to complete dialogue but the ball isn't in our court. >> why is that >> translator: that is not a question for me. >> what is happening between nigerians and iraqis that is tough. how did you get them to the table? >> translator: you know, there was some serious talks and discussions within the committee. we all together came to the conclusion that voluntary quotas we took upon ourselves as countries could be implemented or consolidated. it was the only way to maintain results. >> what is considering you the most when you look at the energy picture today? >> translator: if you mean the
balance of supply and demand, i'm concerned about the short term the increases. if we are talking about energy as a whole, what worries me primarily is in order to meet energy demands, humankind needs to put in a great deal of investment we need stable rules of the game that won't be changed once decisions will be made we know what we are talking about. we need to work out a common unified approach toward stable investment in energy it is global cfo council time every quarter cnbc asks financial officers at some of the largest companies in the world to take part in our survey i want to give you highlights. more than half of ceos say the
brexit is most likely scenario a majority believed an agreement would be struck. so massive change there. in another part, nearly 70% said the federal reserve will cut rates one more time this year. that is compared to previous quarters when all those quizzed expected the central bank to hold or hike rates also showing more than a third of respond enters think the u.s. trade policy is the biggest external risk factor demand in china are also top concerns >> 62 members of the council >> we have one of the members from the cfo council on the line now. alexey, ceo of the steel company in russia.
thank you for speaking with us today. i wanted to pick up on my colleague's comments on the trade war and the response we have had about one-third of the respond enters think u.s. trade policy is the biggest external risk factor facing their business do you ascribe to that as well >> yes, i do >> you run a steel business. can you give us a live more color about how the overall trade war has impacted your business when it comes to kpletition, cost and impact an overall volumes. >> i think it comes from the weakening demands. it was quite significant trade element on one hand. it has to do with all the confidence and strength of the economy. that will play a negative role
in steel demand going forward. >> when you hear comments out of the u.s. president saying they are potentially looking for an interim trade deal with china, does that give you comfort there may be a resolution in sight and you can start to focus on other matters going forward? >> we prefer to see the action until that, we still remain concerned. >> i know you don't export a huge amount to china but china is the largest global steel player crucial to trade flows in the broader industry, i'm wondering your take of how committed they appear to be and being more disciplined in terms of production >> we have seen they have a great delie there.
from that per spec is tiff, we see that consolidation and investment to that industry to increase in the support and demand which we see from china steel. from that perspective, that remains one of the key areas >> looking at the area a little closer to home for you back in july, you said you expected to see some deceleration in steel demand in russia is that still the case >> yes generally. we see we think we'll see the elements of that
>> i want to bring you back to another matter i believe this is the second lowest dollar yield. we've achieved very favorable conditions those enacted everywhere including by those revealed yesterday. >> definitely, where we are very happy with the results those are a very favorable time. on top of that, the companies fundamentals which are also very strong together, that brought the result >> perfect thank you for taking the time to speak with us this morning
we've made it pretty far now without mentioning brexit but the time has now come. a group called lead by donkeys has projected an image of boris johnson holding a sign that says criminal or liar prompting accusations he lied to the queen. johnson denies allegations and says it up to the supreme court to rule after the english high court said the suspension was legal. >> the british judiciary is one of the great loyals. i'm not going to quarrel or criticize the judges clearly, there are two different
legal views. the supreme court will have to adjudicate that is proper to get on and do that >> issuing higher profit after the chain saw a rise in customers. saying it continues to perform well brexit supporter and chairman said a no deal would prove beneficial for the uk. >> what people call no deal enables the uk to adopt free trade. if you don't sign a deal and sign your right as way with the eu, you can eliminate a lot of tariffs. the eu is headed in the wrong direction with five unelected presidents and core of any democratic control i'm so surprised it isn't seen
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. welcome back to "street signs. i want to bring you some breaking news out of italy the italian tax police are conducting searches according to a probe according to some water way viaducts looking into the investigation of the collapsed genoa bridge. shares are down, selling off on the back of this new
a developing story we'll keep an eye and bring you the latest >> interesting it has recovered 30% given that this happened a year ago the stock has covered a lot of ground french finance minister has again expressed his option to the development of the facebook libra in the eu saying the block needs to establish a framework on digital currencies. >> i'm deeply convinced that we should refuse the development of libra within the eu. we should also think about the best way of reducing the cost of international transactions we should think about possibilities of delays of financial transactions within
the eu offer without this is my second proposition to think about the question of digital currencies or maybe thinking about the possibility of having a public digital currency we should think about it within the margin of the next meeting in october in washington an update on stories next week. reportedly prepared to release a bid. after the unexpected offer to release response from share holders and analyst. >> hong kong exchanges clearing to sweeten terms reporting that the exchange operator is open to considering a higher element of cash as the
$32 billion pound deal is made up largely of hong kong ex shares lse board is expected to meet in the coming days to discuss this bid. this comes as the uk authorities look at the deal closely as the exchange is a critically important part of the british financial system investors have yet to warm up as shares in hong kong exchange trading fractionally hire making it the worst performing blue chip in trade. three attempts at a combined lse in deutsche, the bid for the australia asx collapsed. they would have created the world's biggest exchange but that was blocked
hong kong x will have to convince the london rival to drop the refinitiv take over a reaction of the initial bid is not uncommon we should expect to see charles lee sweeten the deal that's the latest from hong kong back to you. in the u.s., democratic contenders took the stage in texas for another round of debate with health care a key topic. we have more >> reporter: for the first time in this primary, a single debate in a single night. >> taking shots at the man they want to replace. >> so president trump, you spent the last two years full time trying to sow hate and division between us >> we have a guy there literally
running our country like a game show >> the three front runners on the stage together for the first time dominating the early discussion on universal health care. >> how are we going to pay for it >> others chime in back and forth >> are you forgetting what you just said. >> dissolves into a free for all. >> this reminds everybody what they cannot stand in washington. >> spirited dialogue on race relations and other issues >> hell yes, we are going to take your ak 47s and other weapons. >> candidates taking a longer time hoping that will give them
traction on the campaign trail jay gray, nbc news houston >> it is me. all right. let's take a look at u.s. futures before we head out this is the picture for the friday session for u.s. futures. s&p down, nasdaq seen opening in the green. a positive end of the week for european equities as well one day after digesting the ecb announcement also in the u.s., watch out for retail sales and university of michigan controversy >> that's it for us. "worldwide exchange" is coming up next. the rich, hydrating cream is formulated with vitamin b3 and peptides to plump skin cells, brighten, and visibly smooth wrinkles. in fact, just 1 jar has the hydrating power
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it is 5:00 at cnbc your five at 5:00 is all about eight. find new reasons to love stocks. staving off recession. president trump announced a new round of, quote, very substantial middle class tax cuts coming as soon as next year the art of the interim deal. open for a short-term agreement with china as bigger issues get hammered out we work at wework. what could be the most
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