tv Street Signs CNBC December 5, 2019 4:00am-5:00am EST
editioofn "dateline." i'm natalie morales. thanks for watching. good morning and welcome to "street signs. i'm joumanna bercetche >> and i'm willem marx here are some headlines. >> our top story, oil prices cooling off. top ministers meeting to discuss a potential deepening of cuts. >> investors eagerly await the setting of the aramco ipo making it the world's biggest public
offering >> a possible sale on the slopes eyeing a take over and other luxury targets get a boost among the consolidation. >> turbulence ahead. shares of skand avian airlines are lower. saying they expect a rough year to come. >> we are forecasting a rather challenging year for 2020 where the outlook is designed at 3% to 5% of course, there is more work to be done. it is a busy day if you are an oil trader. opec numbers will meet to decide whether they should take fresh action to support prices reuter has reported a deeper
supply cut is the main scenario up for discussion. it would represent some 400,000 barrels a day. saying there was not yet a consensus. he would prefer to roll existing supply cuts over to the end of next year. our colleague joins us outside of that meeting. what else did he say about the cuts extending >> reporter: good morning from vienna where top oil producers are meeting to discuss the potential deepening of the opec cut deal this is some what of a surprise. coming into the meeting, the initial consensus was we would see a roll over of the deal. however, insert the iraqi oil minister who broke ranks here telling cnbc that we need to see an initial 400,000 barrels to
stabilize the oil price coming into 2020. he spoke with cnbc elaborating on that talk take a listen to part of what he had to say >> i don't say i doubt that. i say there will be options by some others will support it what was the final target, it is too hard to say. it is very much dependent on a number of factors. one, the interest of individual countries. especially producers whether those who would like to see stability or prices and others want to maintain their share. at the end of the day, there is additional cuts. the contribution come from the big producers.
>> if the deal is extended either to june 2020 or perhaps out to the end, what would be the global oil impact. >> it would be extended to the middle of the year that would be studied in the first quarter. it would not be that effective the glut, the increase in the commercial would continue. there for, we don't see significant change but if tomorrow, opec plus decide to roll over the 1.2 until the end of the year. we believe, i believe based on the analysis that it will be more significant >> iraq's oil minister speaking
exclusively to cnbc yesterday. a couple of other things to look out for. i had a conversation with rbc capital who is a deeply sourced opec analyst who says this is a very live meeting. that call for additional 400,000 barrels on the market didn't come directly from iraq. her sources say it came directly from saudi arabia. this will be interesting concerning the deeper cuts but on the issue of compliance as well this has been a sticking point for a number of opec producers compliance was less than 100% in october and likely less than 100% in november and as a result, they'll be focusing on ensuring those latter members like iraq and nigeria do more. expect to hear more on the issue
of compliance and have this deal extended to june or the end of 2020 and also expect perhaps deeper production cuts as well one other factor is the impact of the aramco ipo. this has been a really big focus, news flow that has been capturing the attention of many. some say perhaps there is some pressuring on compliance and production cuts. we are likely to get more clarity on the pricing later on today. that will weigh on the minds of these ministers when they meet in a room behind me today and tomorrow back to you. >> dan, i want to bring another important player that is russia the russian energy meter last friday sent the market into a bit of a tailspin suggesting he would think the extension would
happen closer to the spring next year rather than this upcoming meeting. you look at the levels they've been producing above the caps since august how likely is it really that russia play in to the sight of four further production companies. >> excellent question. clearly, there is going to be contention in the room remember, the saudi, russia relationship is critical it is unlikely to result in a long-term fracturing this is an issue of contention the saudis will see the cuts being deepened and giving a sugar pop. their own budget meets higher oil prices to achieve what they have at the same time, russian companies have suggested that they would not like to reduce
their own output further and perhaps deepen output. in this climate, russia doesn't necessarily need to reduce output its economy and exporters can do very well with oil in the $60 to $65 u.s. dollar range. you could contend that are you shalla russia could put that to the side they suggest that could very well be the case this meeting is live the outcome is uncertain what happens in the next 24 hours could have the potential to move the market in significant way. a lot to look out for, particularly this issue of who is going to emerge victorious on what side of the deal will fall.
>> always exciting these opec meetings already we saw a jump in oil yesterday up 4%. one of the biggest in the last couple of months i want to bring you some commentary we have from the iranian oil minister saying they need to consult with opec colleagues and then they can make a decision presumably that is in response to a question about what they are thinking going into this opec meeting that meeting will be taking place in the next couple of hours or so. so certainly, we'll be watching out for flashes when they come out. >> the co-ceo of ejf capital you are looking at opportunities on both sides of the atlantic but primarily in the u.s when you look at the u.s. consumer that has been so key to the resilience over the last 12
months, how do you factor in your higher energy prices to your thinking? >> first of all, it is great to be with you. thank you for having me. the consumer is incredibly strong it is 70% of the economy you look at black friday, you had $7.4 billion of sales. then cyber monday had $9.2 billion so the consumer is incredibly strong we focus on financials when we think about energy, we think about how it impacts the market and the banking system. what we look at is how does that really impact the u.s. economy that is some what protected. not immune from discussions going on and oil prices but what does it do for the u.s. consumer and the banking system we really focus on the small banks. we think there is a lot of
strength there the last quarter, the community banks had incredibly strong performance, net operating increases and loan growth over last year. even though we think energy will be $60 to $65 range in 2020, we think that is a stabilizing influence. even though the economy is slowing, we think the consumer is going to bring the u.s. economy strongly into 2020 >> let's bring in the director for oil market in his london office thank you for joining us, spencer. what in your view are the price parameters that will keep these opec plus members and their allies happy when it comes to their own domestic economies and spending plans
>> hi, good morning. thanks for having me it is different for each different country. so it depends on what percentage of oil expert makes up their economy. their planned level of planning and spending the $60 a barrel is significant threshold. ideally, saudi arabia needs a number higher than that. russia, they are okay with a number reasonably lower. midto low 50s. it is different for each country. i think there is a mental threshold of $60 a barrel. >> is there a price floor? you talk across the board there, you rightly point out all their different priorities and requirements is there a price floor that would force them to take more drastic action than just rolling these cuts over?
>> yes, i think that is $60 a barrel the view of your ihs market is that if they were to sustain the current level of cuts, that wouldn't be enough to stop the price from dropping down to the many i had to high 50s we see significant more production coming on stream faster than the supply is growing. >> i want to bring it back to supply/demand balance. our colleague dan murphy sat down with the oil minister who suggested you may need to see an extra 400,000 barrels a day taken off the market in your view, how much cuts are necessary to bring back into balance? >> good question it is a complicated question
interesting that iraq is calling for deeper cuts when they are one of the countries definitely not complying with what is promised already but that's the politics of opec. our view is that the oil market will have an excess production of around about a million barrels a day next year. it built into that is the opec cuts being actually not point out rather than the current 1.2. effectively, to bring the oil market right back into balance, they would need actual realized cuts of 1.8 million barrels per day. that is an increase of 600,000, not 6 million from where we are now. they might be able to get a way with a little less cuts and keep the price above $60 a barrel if they stay at 1.2, the price
will drop below $60. >> to your point, iraq is one of those countries that hasn't been complying with the cuts. looking back, compliance has been mostly by saudi arabia. do you expect they'll continue to shoulder the large cuts especially the aramco deal is coming to the market, expected to price today there is pressure to keep the price floored but equal pressure to keep the oil revenue coming in >> there is. saudi arabia is in the hot seat but has been for many, many years. since the cuts were started on 2016, they've continued to bear the brunt of those cuts and it is inevitable that they will have to do so. they are contributing around
about a third. i think what, yes, they are taking the greatest amount of pain but they have the greatest again probably from maintaining the price. they see it is critically important to keep the opec plus alliance together. that means they have to contribute a bit more than promised in order to get anything out in terms of cuts, so far i think they will continue >> certainly something to watch out for when we get the meeting results shortly. thank you for your time, sir that was spencer walsh the director of oil markets. and thank you very much as well. you are staying with us the next 45 minutes, the co-ceo of ejf capital. >> to bring you some data out of the uk we watch these numbers
relatively frequency we are looking at new car registration numbers for the uk year on year for november, they are down 1.3%. a lot less than last month in october was negative 6.7%. clearly the demand for auto registrations in the uk not picking up just yet. coming up, looking to the slopes as the luxury sector prepares for more consolidation. more after this break. (vo) the flock blindly falls into formation. flying south for the winter. they never stray from their predetermined path. but this season, a more thrilling journey is calling. defy the laws of human nature.
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right behind me you see the ftse 100 in the uk is down about 0.3% partially explained by the big bounce of the sperling pound trading at 1.31 this morning right at the bottom, property funds today with m&g announcing the closure of their 2.5 billion pound property overnight the dax in germany down about 0.3% factory earnings coming in negative 5.5%. d domestic numbers negative 3.2% that was back to weak manufacturing activity weighing on the dax this morning. cac in france up 0.3%.
we'll talk about what is happening in the luxury space. we'll look at the political developments today an important day for protests. the biggest strikes expected in years of potential pension reform put forward by the french president emmanuel macron. no terms of sectors, you can see at the top, we have retail, utilities doing well not shown here but we have luxury stocks performing well. montclair up about 10% on the open of talks of the potential take over. we'll talk about that in a moment we have chemicals down about half a percentage point. travel down. ryanair with a business mall
outlook. they've been impacted by the delivery of the boeing and skand knavian air is struggling. auto is down about 0.1%. we were talking about the auto sales numbers. one of the shares we are watching is the ski wear maker moncler. kuchy owner kering held talks with the company discussions are in a preliminary stage and they declined to comment. if you look at the luxury sector, there has been a positive reaction from all rivals richmont is up clearly the discussion about further consolidation and m&a is
having a beneficial impact our colleague joins us with more detail so kering is not commenting just yet. what might make sense about the potential tie up >> they have been relying on gucci heavily. it is about 50% of their revenue. there is a slow down for that brand so they are trying to diversify. balenciaga and moncler makes sense. it is an italian brand it is the consolidation we've seen with lvmh and tiffany withstand alone brands like
berrbury >> within gucci, they have their own ski wear they are already producing why venture into moncler what is the value there? it is not like in lvmh and ti tiffany where they are branching into a new sector. >> the luxury ski wear is expanding fast especially in the u.s. market. as you say, it is a sector that is doing well. they want to develop moncler has a single offer this puffer jacket is very recognizable a good or bad thing.
the one type of product brand makes them also a very one off brand. the collaborations, they've been doing very well. doing collaborations with new designers. they stand out a bit compared to other luxury groups. >> thank you for breaking it down for us. very big day for luxury stocks i want to bring you some news as well there is the euro group taking place place. they say they have reached an agreement in prince spal on the package of esm reform. the treaty will not be signed until the first quarter of 2020. there was some expectation that this signed treaty could get put in motion today. there is a lot of resistance
fromitaly and the new elements put in there italian government said it would put italian bonds on the back and add a disadvantage something to watch out for they are expecting that new treaty to be signed in the first quarter of next year coming up on street signs, we'll head back to vienna. more in a few moments.
making it the biggest public offering >> and moncler shares surge. and getting a boost amid this cat walk consolidation >> turbulence ahead. the swedish company misses full year targets and the ceo says he expects a rough year to come >> we are forecasting a rough year for 2020. the outlook is designed at 3% to 5% of course, there is more work to be done. welcome back to the program, huawei has launched a legal challenge against the u.s. federal communications commission after it moved to block access to the subsidy
program. they say the action is unlawful. they suggest that u.s. authorities have, quote, tried to spread fear about the company. beijing reports filed this report >> huawei believes the designation as a security risk is unfair. the commissions ruling voted last month that huawei and its rivals were threats to the u.s. and were under pressure to assist with intelligence gathering. huawei says the ftc doesn't have the evidence and this is what the chief legal officer said today. >> when passing this decision, the fcc did not offer huawei to
possess or verify the facts. they publicly labor our company as a national security threat. the fcc's order violates the constitution and we have no choice but to seek legal remedy. >> the fcc decision bars u.s. customers from rural areas from tapping an $8.5 million fund to buy chinese gear the carriers are provided to remove equipment from existing networks the petition is the latest strategy for more aggressively used legal means in addition to the ramped up er campaign. the case could cast a shadow over the already strained u.s./china trade negotiations. both sides have said they want to keep these things separate
issues >> another angel to consider on the joongoing trade war. bringing in our guest, in our last segment, you were talking about the optimism you were talking about for the u.s. some what immune to these head winds. speaking of the trade war, there has been a deterioration and sentiment that seems less likely that we all get the phase one deal those tariffs will perhaps be more impactful when it comes to the u.s. consumer. it is targeting a whole new wave of tariffs you were talking about the strength of the u.s. consumer. how will these december 15 tariffs affect your view of
subsequent the u.s. economy in 2020 >> certainly it will have an impact you have to look at the trade war and the positioning of trump in the political lens. trump is heading into an election year. you have the hawk and the treasury secretary, mnuchin view and maybe the jared kushner view which is more dovish they want to look tough because the election will be decided by six or seven states, many of them in the midwest, which are very strong on being difficult to china, run a hard deal and look tough then you have the dovish view that, look, you want to show that president is a transactional president and show that he's the deal maker that is part of his selling
point. the real question is, is trump trying to wait until next year to cut a deal or trying to cut something before the end of the year >> we would think it is small odds anything gets done before december 15. he will try to declare victory this president is very good at declaring victory. he will try to do that because that plays to some of his strengths. congress is not being helpful. you have the hong kong human rights and democracy act that the president is kind of forced to sign. now you have yesterday, the house passed the uighur -- >> the sanctions on those detention camps. >> right >> president trump talked about not doing this until after the election you always have to take what he says with a pinch of salt.
you talk about the tension inside the white house what about the differences between him as the republican candidate and some of the democratic candidates. we are 11 months away now from that election. how different do you think these discussions would be if there is a democrat in the white house? >> that is an excellent question that is some what misunderstood here it is viewed as trump being difficult with china but he has changed the narrative in the united states the democrats are actually very supportive on being tough with china. >> hence these bills getting passed >> absolutely. even if trump would lose the election right now, you would say it is his to lose. if a democrat won whether it be warren or biden, they'll take a
strong stance because organized labor is strong against china. they'll be successful in those midwestern states. ohio, wisconsin, michigan, pennsylvania that's where the election is being decided in 2020 and most likely in 2024 >> what does that mean for the fed. you could argue that the reason the fed was more active is because it was hurt and hasn't recovered. manufacturing is on the decline in the u.s they adjust through this midcycle adjustment. how does this midcycle look and how do you think that changes with a democratic president? >> also an excellent question. the fed, we believe next year will most likely take no action. jay powell the chairman has pretty much messaged there is not another cut unless there is
some event that would require it how would that change under a democratic administration or new president? i mean, look, the fed really wants to be data dependent it did get a little bullied by the market not so much trump but by the market growth in the united states -- this year, it will be 2.1% next year, 1.8 is the consensus. in the first half, it is expected to be lower than that that is the argument the fed would more likely be cut as opposed to be pushing the rate up >> we'll leave it there for now and come back to you neil wilson is the co-ceo of ejf capital. the conference will be kicking off soon reuters has reported that a deeper supply cut is the main
scenario up for discussion that would represent up to 400,000 barrels a day. some comments from the nigeria minister saying his country has hit 100% compliance to these cuts he's saying he will meet with his saudi counter part to discuss further cuts we'll go to vienna where that meeting will take place today 0. dan, the fact that nigerians are in line with their counterparts will be seen as opec working together and encourage other members to consider a further cut. >> that is right hello again, you can see behind me, there is more and more people arriving for the start of this meeting you can see some television lights, the black mercedes vans carrying support usual ministers arrive in the
black s-class mercedes cars. we have heard now more from ministers including the likes of the nigerian minister. that will be a major focus in the building behind me compliance has been significant issue. the saudis would like to see compliance to nigeria and iraq but also saudi arabia itself has been shouldering the majority of the burden for this production cut too. the question now is will they or won't they so far, the talk is yes, we'll see some kind of deepening of the cut. that is still really up in the air. the iraqi oil minister weighing in on cnbc yesterday saying he does believe the 400,000 barrel cut is necessary to stabilize
the market early this morning, i spoke with rbc capital watcher, she said that doesn't necessarily come from the iraqis. it is coming from the saudis that means, yes, the idea is firming up that we'll see an additional cut that will be interesting to watch. the other thing to watch out for is the first expectation coming into the meeting that was for the extension of the deal analysts are still split on this issue. the question whether we'll see that deal extended out to june of 2020 or in a best case until the end of 2020. a lot to look at as we come into this meeting in vienna when we look at oil prices already. looking for a sugar pop to help along the aramco ipo
prices are up 4% on top of the deal extension and deeper cuts we have seen oil prices perhaps coming into the meeting and looking for their next catalyst as well. back to you. >> get yourself in somewhere warm shares of scandinavian airlines shot lower. the firm predicted growth will continue to slow further in 2020 it blamed increased fuel costs, some strike actions and weaker swedish and norwegian currencies coming up, france braces for major delays as strikes are planned. 'lgi you more details after this break
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division and tension on display. president trump returned to washington without participating in the final press conference as had been scheduled we have this report on the days events >> reporter: tonight, other world leaders were holding closing press conferences. president trump was leaving abruptly canceling and surprising his own staff >> no reason to have press conference we've had about eight of them. i can't imagine you'd have anymore questions. >> the move came after stunning video of others mocking him. canadian prime minister met with the president can be heard venting about someone's tardiness. the president took aim at trudeau when asked about the
video noting he had criticized canada for not contributing more >> he's two-faced. trudeau is a nice guy. the truth is that, i called him out on the fact that he's not paying 2%. i guess he's not very happy about it >> later, mr. trump appeared to compliment himself on that remark on comments caught on video. trudeau down played the comments >> last night, i make a point of the delay. it was notable i've had a number of good conversations with the president over the course of this day and yesterday. >> for president trump, the trip was aimed at turning the page at least temporarily away from the
impeachment inquiry but instead sparking new controversy on the world stage. president trump defended his relationships tweeting he got along with them and there is only deep respect. he returned to the white house late wednesday night >> let's bring back neil wilson the co-ceo of ejf. there were multiple press conferences yesterday and the day before by the u.s. president. is there anything for you that stood out that would materially affect the way you are planning to put your money. >> my observation as an american and watching that video. it plays into his hands. it points out that he is tough and he's demanding that 2% whether it is realistic or not he wants to look tough
we are focused on the consumer if we are going to invest in a market where do you look. for our perspective, if you are looking at the financial space, we are looking at consumer credit we would say mortgages are a particularly interesting area. after the crisis died. they created the consumer finance production bureau. one of the candidates. one of her child essentially from a regulatory perspective and created a market for qualified mortgages. that really backstops the fannie mae, freddie mack and ginnie mae, both parties agree that that footprint of having the government backstop mortgages
should be receded and played out. the private mortgage market should grow into that. we are viewing nonqualified mortgages, those not secured citigroup said we had $15 billion of non-gsc sek youred mortgages. not unlike here in london where you had 15 million jobs created and only 10 million units. you have a consumer doing well 3.6% unemployment. 50-year low. you have a strong consumer as evidenced on black friday, cyber
monday looking at rates being low that's what we view as a way to play a tough situation where the market is ripped and the consumer credit is strong. >> i want to unpack that a little bit we spent in of 2019 talking about the possibility of a u.s. recession. you remember the yield curve is back up. surely if you are investing in those areas, that must be a huge risk for you especially given how late we are in the cycle that >> that is the argument on the other side the fed acted quickly with three rate cuts. usually that effect takes six months we do not believe in 2020 there will be a recession. you pointed out the pmi for
manufacturing is at 48 that's the fourth month in a row it is under 50 it is in recession as to consumer spend 70% plus will be an interesting place to play. the fact that government wants the gse to have less of a footprint. that will be true. we think in the consumer strength that really bodes well for consumer credit. >> okay. we'll leave it there the co-ceo of ejf capital. do not miss cnbc's exclusive interview with joe biden the former price president is currently leading the democratic polls. that is happening later tonight. french computers are braced for wide-spread delays ahead of a strike of public sector
workers that will hold much of the country's transit system they want to stop the government from the major pension reforms with us to talk about the strikes. almost 25 years ago, they tried to do the same thing that unleashed a couple of weeks of massive demonstration and then he backed down. do we have any signal that these strikes will be different and how the government likely will respond? >> it is the pandora box of politics always a tricky one. macron is taking on the challenge. he's carrying on with the program. all in consultation, the government is coming after this again and again talking to the unions the strike today is that the indefinite and preemtiff strike.
all we know is that the macron government was to put the one centralized system for train workers, paris transport workers, they have all the differences and they tried to put it under one centralized system there are concerns of violence there is about 6,000 police in the street the public is in support of the strike about 55% say they are in favor. sf th if this carries on over two months like we saw in 1995, will macron stick to the agenda or change his agenda? >> quickly, do we have a sense do we know what this means financially for these individuals? does it work longer or they get less money >> the general system is 62
years, compared to the paris transport is retiring at 52 to 57 with the last six months for selection of this pension. that all comes from the part of the money. they want to correct these differences. the pension at the moment is balanced they want to tackle it now >> sounds very complex thank you. quick look at u.s. futures yesterday, we bucked the losing trend with the indices closing in the green looks like another positive session for the u.s. that is it for "street signs" today. i'm joumanna bercetche >> and i'm willem marx
it is 5:00 a.m. at cnbc of the here is your five at 5:00. going for two stocks trying to make a come back on upbeat trade news but can futures hold? >> taking it to the courts huawei unveiling a new legal challenge against the u.s. black list we are live with reaction there. >> m&a under fire. a new bill from elizabeth warren that could target years of multimillion dollar megamergers. an