tv Street Signs CNBC January 16, 2020 4:00am-5:00am EST
"dateneli." i'm craig melvin. thank you for watching. good morning welcome to "street signs." i'm joumanna bercetche >> and i'm julianna tatelbaum. these are your headlines >> president trump hails the g biggest deal ever seen focus swiftly turns to existing tariffs and the second stage of the deal >> i'm leaving them on because otherwise we have no cards to negotiate with and negative yoesh ating with leo is very tough. they will all come off as soon as we finish phase two
>> shares tumble as the education company announces the departure of the cfo and also leaving, telling cnbc, there are good reasons for the change >> he's at a different and earlier stage of his career. there are good and personal reasons why he's made the decision he has. >> british recruiter hayes citing tough market conditions renault's chairman says there is a strong desire to make the automaker's partnership with nissan work and there is no stress to appoint a new ceo in the near term. >> welcome to the show a lot to get through
let's start with the monthly oil report to bring you some of the headlines there. global oil demand rose by 955,000 barrels per day year-on year to 101 million barrels in october. keeping oil demand growth for 1.2 million barrels a day on higher trade growth. no change on the oil demand front. global oil supply fell in december due to saudi cuts and seasonal decline of biofuels some interesting commentary around the geopolitical tension, iea also saying the oil market has a trong tension with non-production rise and large stocks >> on the geopolitical front, they make note that major threat
to oil supplies appears to have receded. the key here is what joumanna mentioned around the strong cushion around the geopolitical tension. that was reflected in the way oil markets reacted. we saw the initial reaction. oil prices have come straight back down. >> let's get out to the head of oil industry markets division who can bring us a little more color. let's start with the geopolitical side of things. initially, we saw a big spike of oil at the beginning of this year a lot of that risk premium has been taken out it seems like when we see one of these geopolitical events, the lasting impact is very short lived. what do you point that out to? >> we point out in the report that we have rising production
from various countries in the world, we have very high stocks in oacd countries and in china and the government held strategic stocks which are available for use in an emergency. in saudi arabia, when we did have an opportunity disruption, the market was able to be the first responder and ensure that supplies were maintained in recent events in iraq, there were no actual physical inter rupgss then again, there was the policy of the market that kept prices under control. as you suggested, the price flight we did see was very short lived indeed >> you mentioned iraq here, the interesting thing is that they have emerged as a major producer in the last couple of years, producing 4 million barrels a
day. the situation has highlighted the importance of the production when it comes to overall opec production, overall oil production do you think the market again here is being some what complacent about the supply in iraq if there were another round of geopolitical tensions >> i don't think the market has been explain ant as such the question is that they are inherently unpredictable we cannot know what will happen at the moment. we seem to be in a period of calm that is welcome to everybody iraq is important because over the next few years, subject to law and order being maintained and political stability. we are expecting to see iraq increase production capacity that will be important in the longer term, oil demand and the rate of growth will start to
fall back. oil demand will grow we'll meet the supply to meet that the recent events we have seen, perhaps highlighted if we didn't know already that iraq is a very important country. the production has expanded dramatically it is a big supplier to europe and the united states. >> neil, i take your points there certainly. let's shift gears away from the middle east to the u.s. as part of that phase one trade deal yesterday. china has agreed to buy $52 million in additional energy purchases from the u.s let's assume beijing fulfilled that promise what does it mean for u.s. producers to become many much more reliant on china as a key customer >> the united states has already become a major exporter of oil
and indeed natural gas we are expecting that to grow in years to come because production is likely to continue to grow. we can argue about how fast the rate of growth may be but the u.s. is a major player on global markets. that's welcome on the ground for the following reasons. firstly, more diversity into the global marketplace that is good for everybody. it is good for china because china has been seeking to die vesify the source of energy supplies over the years. so subject to the agreement being ratified and brought into operation, it is good for china that they have the option to buy u.s. supplies. it is good for u.s. producers as well because they have another market that they can tap into and grow on the basis that good relations should be maintained, it will be regarded as a good sign of
producers in china >> what do you make of those targets, china have pledged to buy almost an extra $50 billion worth of energy products from the united states. in 2017, they only bought $3 million in the u.s are these feasible in your view? >> i haven't drilled down to the full detail so far that is highly possible bigger numbers can be achieved. that depends on the price of oil and the actual volumes of oil, the type of oil that will be made available there are the type of issues there is a major expansion of trade in energy in the u.s. and china. as i said early on, it is good for the global market because it brings more diversity into the
marketplace. we'll have to see how the deal plays out. before i came on when president trump was talking about the phase two deal, there is still plenty of mileage left until we get to a finalized set of arrangements between u.s. and china. >> january 1 marked the major change, the new imo rules coming into effect. this is a complex set of new marine regulations what are the early signs telling you about how the industry is coping so far? >> well we've done a lot of work on this over several years, not just in recent times the signs are that so far, port authorities, ship owners and operators and refiners are generally with some exceptions managed to meet the challenges of the new regulations pretty well we haven't seen explosive
increases of prices around the globe. there are some examples of some price. we've always known if you shift to a higher quality fuel, it will cost morning. however, the price environment, overall, that we are seeing in oil currently is perhaps more benign than some thought maybe two or three years ago the industry is aided in making this change that the overall price is more benign we've seen the demand for other types of diesel. that marine gas is a big part of this picture other sources is lower than we first thought. that has helped ease the transition there are other reports of having one or two bottlenecks. so far, the transition seems to have gone perhaps as well as
could be expected. it is something we have to keep an eye on, of course >> keep an eye on it, thank you for joining us head of oil and market division iea. let's flush out the trade deal more broadly china will buy an additional amount of goods. president trump and chinese vice premier liu he signed the deal in return, the u.s. has agreed to roll back some of the tariffs it has imposed on china since washington triggered the trade tensions back in 2018. the president hailed the agreement with china as one of the biggest deals in the world by far >> nobody has ever seen anything like it. this is the biggest deal there is anywhere in the world by far. that's good. we are doing another big one next week. this is the biggest deal anyone has ever seen.
>> china's vice premier lee iu called the deal a win/win. >> translator: this is a mutually exclusive and win-win agreement. if is in the interest of the producers, consumers and investors in both countries. >> china's state-owned newspapers harolded the phase one deal and called on both sides to cherish what they have achieved focus turns to the second phase of negotiations and the impact of t ongoing tariffs. the deal should encourage beijing and washington to swiftly move towards phase two time will tell how swiftly they can move to phase two. let's bring in our policy analyst. great to have you on the show. i know you've been watching the
story extremely closely the last couple of years. question on the final targets. we finally have numbers. they seem to be ambitious. you heard the question i asked about the $50 billion additional purchases on energy side of thing. they pledged to purchase $77 billion. it seems quite lofty i guess the question is if they can meet those targets and what will happen if they don't? how much of the enforcement mechanism do you see that gives you some comfort that china will actually abide by the terms of this agreement provided yesterday? >> so that $200 billion figure requires china to increase imports by around 6% year-on-year for two years from 2018 given the fact that that number increased at an average range at about 10% between 2007 and 2017.
we think this number is feasible and something that china will want to do to keep that phase one in tact. going into the enforcement mechanisms, the final chapter of the phase one deal cover bilateral evaluation and enforcement. the only thing they have if things fall apart is more meetings to take place there is no punitive agreements in place ultimately, all of these chapters regarding ip p protection, technology transfers. >> any noncompliance means either party can go back to imposing extra tariffs we have a stand still now. if one party disagrees, they can just withdraw. that doesn't seem very air tight. >> right
this is the problem with doing bilateral trade negotiations where you don't have an independent body monitoring the disputes the thing i find interesting is u.s. and japan imposed the new wto rules. perhaps this is recognize that multilateralism is helpful to influence trade rules. >> those are really important questions. the questions whether this deal will hold is the central issue let's assume it does hold and we do see follow through from china. what does this mean for china's other relationships? other suppliers with whom they've built up relationships with >> those trade war winners, brazil, australia, they now become the trade war losers. purchases from brazil, for
example soybeans specifically and also argentina, will now be shifted back to the u.s. one strange thing we saw as a result of the tariffs and the trade war was some u.s. soybeans were being shipped via brazil to china. we might see the opposite happening where brazilian soybeans may be shipped via u.s. >> in terms of phase two, yesterday president trump, dangling the potential win there, the prospects of what could come from phase two. that it could mean opening up china to u.s. businesses and touting the opportunity that could come from u.s. companies what does that tell us we can expect through the next leg of negotiations >> i think it is clear that the
politics around it is driven by the politics no coincidence the signing took place the voting took plaat the the voting of the impeach process. >> thank you so much for joining us and giving us your views. >> also coming up, trade tensions may be easing between u.s. and china but the u.s. still faces a few with the eu over french plans for the digital tax. we'll be right back. ♪ when you look at the world, what do you see? ♪
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in asia, reaction was mixed. definitely a case of buy the rumor, sell the fact when it comes to u.s. and asian market in europe, the picture is a lot more mixed definitely a positive start to the session. we are bedding led by the moves. some companies focused on driving the performance today. certainly, there is a relief going on in the markets here now that this phase one deal has been officially signed whether or not everything will be implemented is a big question the time being, we can see the big tension between u.s. and china has been deescalated stoxx 600 up about 0.3%. let's take tout individual voices the ftse 100 trading slightly down almost 0.1%
close to the flat line here, we have pearson, the education company down about 10%, really dragging down the ftse after news that the cfo will also be leaving in addition to the ceo who is retiring this year that is one of the names in the ftse 100 we have been looking at oil companies and basic resource companies are doing well dax doing well we are seeing a bounce in cyclicals, technicals as well as the tech names as well no surprise there. cac nicely here, up about 0.3% we are seeing a rebound in luxury names on the down side, we have some media and telco names dragging ftse mib up 0.6% in early
trading. switching to the sectors you can see, as i mentioned, a lot of the cyclicals are performing well. chemicals are up 0.06% the fact that phase one deal has been signed as been a huge dampener and a big push down of global trade volumes quite a lot. oil and gas are taking a breather basic resources are up travel and leisure down 0.6% media also down about 0.5% again auto is back in focus, down 0.03% despite european auto sales growing.
look at the foreign exchange not a lot of movement in euro trading around 1.1160. also very sustain the pound, we have trading slightly higher up at 1.3060. some relief coming into the safe haven currencies so dollar is trading firmer again the yen, just shy of the 110 mark here. as the market breaths a sigh of relief thank you. let's push on and highlight a couple of stories starting with pearson. shares tumbled after they said they expect the 2019 operating profit to come in below estimates. blaming the dip on the weak perform o performance on the u.s. higher education unit
>> the challenge is that we have still 25% of our sales in the u.s. college publishing business, which is going through a much starker and, to give you a stunning statistic 10 years ago in 2010, we were selling 21 million college textbooks a year last year, we sold less than 4 million. >> hayes issued a profit warning. the ceo said australia's wildfires, strikes in france and uk election constituted to a 4% fall in net fees german chancellor will reportedly meet with conservative lawmakers today to try to resolve decisions over huawei backing an internal proposal that could effectively shut the chinese tech giant out
merkel faces pressure from the u.s. and domestically that could affect the 5g roll out in washington, aiming to sooth tensions the two sides remain locked in a dispute. france's plans for the digital levee. now charlotte joins us around the desk it feels as though concern is swirling now that phase one is out of the way president trump and the administration may turn their attention to europe. are we seeing signs of this happening? >> that's right. president macron said that the eyes of the trump administration will dip back to europe of course the digital tax has beend their own digital
tax. last summer, they said this was a disdiscriminatory measure the u.s. putting tariffs on french goods and leather goods and meeting with mr. lighthizer this afternoon. france and the u.s. said they have a two-week negotiation about one week into negotiations to the sideline. mr. hogan's visit is important there is an eu approach. there is a new commission in
place in order to get the whole block behind them. this new commission on the side saying they are open to look at the eu wide digital tax again. so not just a france/u.s. conversation but a broader eu conversation >> how important is it for french businesses they avoid these tariffs with the u.s it is a small number, 2.4 billion. compare that to germany where there is a real threat of auto tariff up to 25% that would actually hit them a lot more than a $2.4 billion tariff on french businesses. >> yes you have the champagne and wine industry that has been attacked.
so that is 25% on wine and champaign could be impacted. leather companies, lvmh do 25% of their revenue from the u.s. that would be a direct impact. the wine industry in the u.s. saying it would cost theirjobs she has different voices there and talking about the impact for the auto tariffs and not in the u.s. market. german companies are very scared of this. that is a big point of leverage in the u.s. in those talks with the eu germany and all of europe is
concerned about further impact >> both sides want to avoid. >> charlotte, thank you for breaking it down for us. >> stay with us. activist investors are increasingly looking to sweep in on m&a deals and looking at the activist space in ju aew mes.st f i tell truecar my zip and which car i want and truecar shows the range of prices people in my area actually paid for the same car so i know if i'm getting a great price. this is how car buying was always meant to be. this is truecar.
welcome back to "street signs. i'm julianna tatelbaum >> and i'm joumanna bercetche. these are your headlines president trump hails the biggest deal ever seen as u.s. and china sign the phase one trade agreement and focus swiftly turns to existing tariffs and the second stage of the deal >> i'm leaving them on because otherwise we have no cards to negotiate with and negotiating with leo is very tough they will all come off as soon as we finish phase two >> u.s.-iran, tensions are still a threat to oil supplies a surge in no opec production
means they can weather geopolitical production for now. >> we are expecting iraq to increase capacity. that will be important in the longer term. oil demand and the rate of growth may fall back oil demand may start to grow >> pearson shares tumble as the education company gives profit guidance below estimate and announces the departure of the cfo. there are good reasons for the change >> quorom is at a different stage of his career and there are good reasons he's made the decision he has. renault's chairman says there is a strong desire to make the nissan partnership work and that there is no stress to appoint a new ceo in the near
term >> european markets have been open about one and a half hours, investors reacting to that signing. yesterday, between beijing and washington we are seeing green across the board here but the move is fairly modest. we were just waiting to see if they would sign on the dotted line and they have italy outperforming this morning. up about half a percentage point. dax up 15 basis points ftse 100 trading down about 0.2% looking at the pound, very strong between the ftse 100 and the sterling we are seeing a bounce in sterling back above the 1.30 mark that no doubt coinciding with the drop in the ftse 100 we are seeing strength in the
dollar versus the yen and in the 110 mark the euro flat for the day against the dollar around 111.5. u.s. stocks advanced yesterday utilities, health care and more looking at a triple digit rise at the open for the dow. >> u.s. stocks anticipated then. let's talk about autos growing for the fourth straight month after demand of premier vehicles higher taxes spurred a sharp increase in buying including the netherlands and sweden renault's chairman has played down concerns over the french carmaker's alliance with nissan saying he believes the
partnership will succeed adding that the board will meet at the end of the month to discuss joint projects but they did not discuss further details. global share holder activist fell back in 2019. they say they will be strong in continental europe as they focus on industrial technology, power and energy the leading activist accounting for more than 10% of global campaigns just looking at the report, we saw a dip in overall activism for the year in 2019. it appears the focus is moving away from the u.s. to asia >> that's right. when there was a pull back overall, there was a pull back in global numbers about 16%
down overall in europe, that was down that is misleading the uk numbers were down materially they were down almost 40% versus last year and 30% versus the past few years those uk numbers are really what was driving the production in europe continental europe was up another year even in the uk, it was a specific area of activism. that is u.s.-based activists that pulled back activity. that accounts for all of the production >> no doubt now, do you expect we'll see the u.s. players get involved in 2020 in the uk >> for a number of reasons, the uk remains the top for the activist share holder friendly approach the globalized share holder
place makes it a good place for investors to really speak up and see changes. i don't think that will change we'll see this pull back as we go forward >> i was speaking to a japanese analyst yesterday. in japan in april, they are introducing new foreign fdi restrictions so any foreign stake holder has to declare above a 1% threshold rather than 10% threshold. i understand this is to thwart the activism what does that mean for your sector how much of a head wind does that represent >> you are right it is happening in japan and europe as well many europeans are thinking about how regulations -- and in
the u.s. as well how regulations can be put in place to increase transparency between share holders, companies and the public markets having said that, the share holder activism we see today is really about value creation. what is happening is not that activists are finding loopholes, that the overall share holder base is becoming accustom to supporting that activism to think about this year alone. this year, there were 43 new first-time activists for the first time, they are speaking up, pressing against companies. it is very clear that activism is a behavior, not an investment class. >> a good point you make that activism is really now about
value creation i was speaking to a ceo of a large dax company who said his biggest fear is waking up one day and seeing an activist share holder has taken a 1% stake in his company. that tells me, it is a driving force to get ahead of an activist getting involved and ignite these changes on their own. is the threat of activism in europe driving improved share holder returns >> the threat is very real and companies. management teams and boards increasingly audit, do we have an activism plan this kind of concern is driving a lot of companies to be prepared ahead of time some of that comes in the form of thinking about what to do on day one. more importantly where we work with companies not behind the scenes but the stuff that makes
headlines, we'll get them ready not what should we communicate on day one but what should we communicate now to be ahead of the campaign, so maybe it never comes. >> we spoke last in the summer, you mentioned the approach with less atient, more aggressive style seems to be more common place in your business and your field. do you still see that happening. if so, is that yielding better results? >> it is happening the worlds are merging different traditional styles u.s. style, more aggressive, more public activism the european, less public, more patient style emerging this past year, we saw a lot of what you would consider the typical high public, high media usage types of activists being
very collaborative we see more traditional european activists releasing white papers publicly in a detailed manner. i think the two styles are merging as they are getting more sophisticated. >> interesting space thank you for joining us rich thomas, the head of share holder advisory at lazard. i want to bring you some comments out of the german bdi industry no signs of bottoming out. they see german economic growth at 0.0% in 2020 it was suggested at 0.1% after growing at 0.6% in 2019, that is a pretty low number. bdi calls on the german government to implement a
massive structure to boost gdp growth and also say that the german government must cut corporate taxes to push down the overall burden from 25% to 31% these are pretty remarkable comments >> very interesting. we've heard those calls before the scale of these calls are noteworthy let's push on and talk russia president putin has proposed sweeping constitutional changes that could see him extend his hold on power after leaving the presidency in 2024 the change will see the powers of the prime minister increase and diminish the office of the president. announcing that government would resign hours after the proposals. practice leader joins us around the desk first, why did president putin decide to go ahead with these
changes now? >> the timing is the big question it was kind of expected something would occur at some point. the signaling is a little early but positive for the business and investor environment now, it is just the start of the season secondly, domestic support has been lagging, particularly the last year and a half but especially the last six months since pension reform a year and a half ago the economy is not picking up. people are getting dissatisfied with the lagging living standards. foreign policies he used to use with crimea and ukraine are no longer providing support this early signaling well before 2024 is good for the business environment. >> it is interesting you say that i take your point that any time
investors have a longer notice it is positive there is still a great deal of uncertainty as to president putin's future and who his successor could be if he does step down. how does this translate to a positive business environment? is. >> what is clear is that putin is not relinquishing power his title may change other offices and bodies may see promotions or demotions. in the end, he will still be in power. post 2024, he didn't dictate exactly where he sees himself but he did signal he intends to remain in some level power and high influence >> what sort of role could he craft. you say he wants to stay in power. how and what form? he served four terms with a
break in the middle with medvedev there now this seems to weaken the pour of the presidency and give more power to the office >> what is important is the increased power he gave to the state council which he currently leads. medvedev was in essence demoted. he was put into the state council. it looks like a demotion but over the next three or four years, it could be almost a promotion if he is seen as putin's vice president one thing, putin doesn't want to be president anymore that is clear. he's created this new position
seen done by kazakhstan last year by the president who remains all of the reigns of influence in the country but is no longer president. >> what do you make of the replacement choice for the prime minister he seems to be relatively unknown to the public. a technocrat a safe pair of hands but not going to move the needle that much >> exactly very, very successful reform in the tax service. he's not seen as someone who has extreme political influence who would change the influence it was a smart move to put in someone controllable in that
iran's president has rejected calls for a revised nuclear deal british prime minister borcis johnson called for a replacement that would have been attractive to the trump administration. iran scaled back prompting britain, france and the uk to formally accuse the country of violating the accord president trump backed the notion in a tweet on wednesday the u.s. is looking for a broader deal restricting iran's nuclear activities saudi arabia's former ambassador believes events in
the middle east are straining the iranian regime >> iran, the iranian leadership, i should say, has an agenda and a project. that project is to be the prominent epresent, if you like, of all of islam in the world. they use things like hezbollah and lebanon, iraq, what they sent to syria to kill syrians, the people in yemen. equally terroristic and in my view evil in its intend. >> do you believe we are going to see attacks on the scale again?
>> i don't know. i really can't say i'm not privy to the circulation of information, of course. i base my observations on your meetings with other people who talk with things and journalistic sources >> you have a very long history of dealing with this regime. some might say, you in way way, no their thinking better than other people >> i can't claim that for myself basically, the recognize that iran has an agenda and the project it is implementing is something i am very much convinced of as i said before, i think they will continue that road and use the same methods not devise new ones that soleimani used to extend their influence >> meanwhile, state side, the
u.s. house of represents has delivered two articles of impeachment of president trump to the senate paving the way for a trial to begin next week tracie potts joins us live from washington what do you make of these latest developments and how has the white house responded? >> reporter: the white house and the president himself says let's get on to this and let's get past it. what we are expecting to happen today, this afternoon, the senate will formally accept these articles of impeachment accusing president trump of abuse of power and obstruction of congress for related activities with ukraine and trying to push them into invest gating his political rival joe biden. we are now hearing exclusively from an associate of the president's attorney who has turned over documents.
these documents are text messages and notes, even a voice mail message suggesting that the president was well aware of this campaign after formally accepting these articles, the justice will be sworn in to provide over the trial. he will swar in the 50 senators as jurors and the trial is set to begin on tuesday. >> thank you for bringing us up to speed quick look at u.s. futures it is going to be a positive start after the historical signing of that phase one trade deal also positive start for european equities that is it for "street signs" today. i'm joumanna bercetche >> and i'm julianna tatelbaum. "worldwide exchange" is up next. ♪
it is 5:00 at cnbc global headquarters here is your five at 5:00. wall street doing something it has not done in almost two years as the dow eyes a 30,000 milestone now. phase one fallout as we get new comments from china's vice premier over the deal. a live report from beijing that's coming up >> an admission from one of wall street's biggest banks over allegations of discrimination. talk about not letting the bulls get you down the stock that has
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