tv Street Signs CNBC October 17, 2019 4:00am-5:00am EDT
craig melvin: that's all for this edition of "dateline". i'm craig melvin. thank you for watching. [music playing] . >> good morning and welcome to "street signs. i'm joumanna bercetche >> and i'm julianna tatelbaum. these are your headlines angela merkel says she is not giving up after she says they cannot support the new uk agreement. >> home builders get hammered. reporting a rise in quarterly sales.
>> germany finance minister says his government is spending enough to condition tend with the economic down turn, reaboving the criticism. >> we are spending a lot of money for public investment. we have a fiscal policy in the last years the only thing different is that we are not willing to have extra can debt >> ericson shares are on hold. raising the full year's sales o outlook. >> welcome to "street signs. let's get right to the top story of the day sterling has pairs some losses after angela merkel says there
has been, quote, significant movement towards a brexit deal the eu will negotiate until the last minute. the party says it can't back the current proposal as things stand. concerns around customs and consent issues and the lack of clarity around vat >> as we've been discussing, the market is clearly making a distinction between stocks that have domestic exposure versus those with international exposure you can see today, banks with exposure to the domestic market are the ones underperforming lloyds, metro. it does get hit quite a lot of
rbs down hsbc up .5%. they are more internationally exposed. this is clearly a brexit play. how about uk home builders today is the day whenever there is some bad news when it comes to the possibility of a brexit deal, you tend to see a correlation. a lot of red on the screen for those. i want to get out to willem. the big development was the dup said it cannot accept the deal in the current format. they have problems with the consent and the customs.
it seems the more they give on customs, the more dup is asking consent. where is the balance >> it is important to stress it is not the biggest story today, it is the biggest story this morning. talks are continuing with the government we've heard from the spokesperson, the president of the commission saying every hour or minute counts as we are trying to get a deal before they kick off clearly they loathe to sign on the dotted line unless he feels confidence to get through parliament on saturday don't forget, those between the parliament and the uk and those who did have the vote. they would make that majority difficult on saturday.
worth pointing out if no agreement is concluded by the start of that session on saturday then automatically, unless there is changes, then the prime minister would be forced to ask for the extension. that extension is quite a long one. there are european leaders who wouldn't want to see more talks or to see this drag on even longer there is a chance they'll try to hash on a deal between now that seems to be the position. she says they'll work on this until the very last minute >> with regards to the ben bill. is there any wiggle room on that if they see the parliament is getting much much closer and they are moving in that direction.
is there any room for mod indication when it comes to the original bend bill >> they could always modify it what is very cut and dry is the time line that bill sets out and the date, october 19 there needs to be an agreement concluded by that time the big question would mean legally signed by both sides what it agrees to. what the parliament feels in good faith is working on some of the former members, they might be forced to put under pressure to agree to a few days extra grace before forcing that extension letter to the european union. that is a really difficult question to answer whether those lawmakers that gave up would be prepared to go back on what they
voted on and give a few day's grace. remember the argument was that they didn't trust this government and giving them any time closer to october 31 would raise the risk of no deal. >> willem, i want to come back to the current deal that the dup has come out and said they can't support. yesterday, you ran us through multiple key lawmakers in westminster. where do the other lawmakers stand that matter here >> you've got these 21 former workers. they could have potential difficulty swallowing even a short extension through the eu side you've also got the labor party.
the deal could be confirmed or rejected the choices down the road not yet clear. one option they'd like to see would be a reversal remaining inside the european union. that would be the conservative members even those that may not like this deal would be very, very opposed to. >> willem, thank you for breaking this down let's focus this morning unilever growth slow beauty and personal care including brands like dove soap rose the consumer goods giant did report slowing growth in two biggest emerging markets, china and india. earlier this month, i asked about the potential for margin
expansion in the medium to long term >> if you take the last ten years of unilever's performance, the last five year was valuation on growth. the last five years, we've seen margins expanding very rapidly but with growth at the lower end. i think when we get to the end of 2020, we'll try to create value with more sustained top line and more moderate top line. nestle will return to its water business the swiss food group confirmed the guidance and confirmed slowed sales growth due to declining prices let's get out to jon cox great to have you can us
looking at the price performers. i'm surprised to see nestle is trading down versus unilever is down yet the market is rewarding unilever >> i think there are a couple of things going on. if you try to strip out the q 3 for nestle consensus looking for something around 3.9%. you saw the 10-point miss by unilever i think there is a big wall of man in nestle that has done very well over the last 12 to 18 months situations are changing. this fantastic performance we've seen in consumer staples
unilever and their stock price could come to an end a lot of good news in these stock prices are all chugging along nicely valuations are looking a bit topee versus the market. maybe you'll see more of a switch moving into 2020. >> just to pick up on unilever surprising to me that emerging markets used to be a strength. is this a warning sign for the company that they are slowing growth in those parts of the world? >> i think some is cyclical in the business cycle in both countries. in india, you have the
transformation there having an impact in terms of cash for these guys in china, there is probably more structural play talking about a bit of a slow down and midtear project being squeezed the premium end of the market and healthy end of the market in china and india, you get these ongoing channel shifts increasingly to on line. there are a few different things going on if you look at both countries, they are both big and growing. overall, these are going to be good markets for the whole country and if not the whole space for years to come. >> you mention the big wall of money and these are signs that the strong run that these have had may be coming to an end.
the big question now in the equity space is whether to switch into those more value stocks that have been underperforming. where do you think these stocks could go if we see a meaningful turn of sentiment. >> they tend to trade in the high multiples trading in the 20s. holding all other things equal, you could get a 10% to 20% decline if there is a sector rotation and you start to set the multiples. you may find that consumer staples just don't move the next year or two. if anybody said these guys would be doing 20% to 30% this year, i would have laughed they've done that.
i think these stocks will stall. i don't necessarily see a big sell off i just see a relative underperformance versus the market >> jon cox, we'll leave it there. head of european consumer equities if you want to get involved in the conversation, we are talking consumer goods and brexit so far. tweet us here at cnbc or directly >> coming up, in a cnbc exclusive, olaf scholz hits back at the feeling his country isn't spending enough. more after the break my gums are irritated.
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domestic markets the dax in germany around the flat line. the cac around the flat line and italy also up .2 of a percentage point. more overnight and especially in the u.s. last night. >> germany's finance minister says the trade war has raised fears and accelerated a slow down in an exclusive interview, scholz said it is ultimately up to the two sides to find a solution >> i think it is important we understand that we have a lot of problems looking at growth and
things belonging to that there are a lot of trade tensions which make it very difficult to decide about new investments. if anyone understands it is necessary, then we will have a better growth worldwide. especially for those economies that are effective because they are exporting, importing many things because they are produced all over my view is that they get the necessary pressure to get something like a breakthrough. >> what do you think could be a breakthrough when it comes to the trade conflict it looks like we are moving at glaser speed here. >> in the end, it will be the government of the united states and the government of china that will have to find the solution
christine lagarde said, the government have man made problems and they will fix them. >> are these things that make you optimistic or like political horse trading to calm markets? >> i think anything is useful to help us get out of the situation. it will be the partners in the conflict to find a way out >> scholz also rebuffed criticism that his country isn't spending enough. >> we are spending a lot of money for public investment. we have the expansionary fiscal policy the only thing different is that we are not willing to have extra debt if there is no need for this is the situation. you can't have expansionary
fiscal policy and more if you look at the budget >> what about people telling you can finance all of the extra spending, why don't you do that? >> the biggest problem we are facing now is to get all the public money spent since there is a very high request for construction it is difficult to find companies to work and things like that. as i said, if you have a situation where there is a request for qualified labor, it is very difficult to do something which has an effect on the economic development >> really interesting interview there. i want to bring in the head of global dada to pick up on
comments there pretty much towing the party line that is not what investors want to see out of germany, is it >> no. it isn't just about the party line i think there is a widespread feeling they should see why there is a counter balance the core economic problems seen are related to the broader chinese conflict and the slow down in global capital spending, which are undoubtedly serious problems as we look currently. on the other hand, as we look ahead. if the slow down worsens materially, we get a recession
on our hands then i think germany will likely move i don't think there is a lot of policies left given where monetary policy is i think germany will reluctantly move in that direction but we are not there yet. >> chancellor merkel had comments around china saying germany will make relations with china a key topic during the 2020 eu presidency >> this is so important. because the china/german relationship is a key economic relationship the china/u.s. conflict and with germany which have been very strong reflect the importance of that it is vital that at least bilaterally between germany and china that bad blood doesn't get
in the way in terms of the u.s >> what do you think about germany as a place of investment at the moment? >> i think the issue is that if we do get potentially a stronger, more dynamic eurozone and that includes germany, we would expect german aspects. the german market has not done badly. >> the dax briefly touched a high the other day >> right the dax is outperforming the economy. i don't think we should necessarily regard the two as somehow together >> someone said to me that the
dax is on trading and the rest of it is domestic. >> that is a key point you look at the domestic engines of growth still look reasonably healthy given consumer levels. >> interest rates, we are at minus 38 basis points. close to there since then, the data out of germany has been extremely bad and disappointing. there really isn't a lot of positive signs now why is fixed income moving higher >> i think because there is a little challenge going on, given the ultralow yields we have seen i think with the low going ahead. we've seen the interest. in the u.s., it is a very, very hot topic.
the bond market volatility that division and difference has really picked up it really reflects that global sense that should we be resigning ourselves to lower and lower yields and where is this going to stop? is the u.s. going to the yield over the years there is a little bit of a counter trend. germany is a part of that. >> thank you for sharing your views. coming up on the show, earnings season will continue discussing bank of america's quarterly report and what to leesat when morgan stanley reas ler today
support the new agreement. >> uk home builders get hammered again. consumer goods giant reports a rise in quarterly sales. >> german finance minister says his government is spending enough to contend with the economic down turn rebuffing the criticism. >> we are spending a lot of money on public investment we have a expansionary fiscal policy the only thing different is that we are not willing to have extra debt >> netflix shares soar in after hours as they have more international subscribers than expected and more on the bottom line uk is squarely in focus not the
least because of the comments from the dup the uk sales data have been released the numbers have come in at 3.1% year-on year at 2.6% slightly below expectations. higher than the august number of 2.2% and higher than the reuter's forecast of 2.8%. values of 3.5% compared to the 3.1 percent. this is the second weakest period of growth started off as a strong year for sales but lost in the end of the quarter. still tells you retail continues
to be a strong point we are not seeing much reaction in the pound much of that price has been a function of the political development. still worth baring in mind for the first time in seven months, coming off the back of jobs growth. stoking fear in the slow down could be effecting the u.s. economy's main pillar of support. >> shares rose after the lender beat expectations. gains in fees and consumer loans offset the values. coming after reports of jp
morgan and citi. let's take a step back and paint a broad picture for those numbers that have come out so far. is it fair to say the consumer banks for this quarter are doing better than the investment banks? do you think this is a trend that is here to stay >> in answer to that question, yes, consumer banks are doing better coming through in cards, and autos. the investment banking parts of the consumer banks are doing well we've only had goldman sach report so far. they were down year-on year and perhaps reflecting a stronger q 3 last year than the q 3 this
year >> they had a very weak third quarter in 2018. to go back to goldman sach and that hit, almost as much as $300 million. do you think that was a mistake, a bad decision making to get involved in the sector given such a late moment in the cycle and will they be able to give more in these quarters >> on those shares, they take the stakes in part of that i think the listings have been disappointing. you question those values out there. perhaps questioning some of those. perhaps the fundamentals of those stocks and perhaps they need to make money sooner. they need to hold on and take whatever hits to those in the
long term. >> how should we think about those at the moment? >> the retail sales has come in much weaker than the previous data had shown suggesting that perhaps the slow down is going to trickle through to the consumer >> if you look at those retail sales in particular, the year-on year numbers are good. every bank has seen an acceleration in credit card spinding consumer confidence still very high i would say in the retail sales is to be expected. >> goldman sach has a strategy coming up for next year. what do you think of the number one stock performance between
now and then what are you expecting in terms of their new strategy? >> i think it is a wait and hold strategy management talks a lot about the investments made building up marcus and the apple card platform. that has been a drag so far. going into 2020, some of those may draw away and carry on for the year you'll seea bit of an up lift. some targets around that and maybe a bit more about how revenue will progress here on the cost side, we'll see more on the revenue side as well and those targets as well. >> definitely something investors want to watch out for. i want to take you back to another feature. the yield curve is no longer the case that showed up in the net
interest margin. that seems to me to be more or less because the loan activity has been so strong >> you've taken the words right out of my mouth. that has been weaker than expected loan growth has been stronger. come largely in line it has been stronger as well seeing some of the investment banking fees and costs have been very well controlled credit quality too you've seen those up there despite the fact that they've been more or less in line. >> you mentioned the investment in the fintech space yesterday, we were covering the
meeting. are we bound to see significant investment around these for these major banks. >> interesting, if you go back four or five years you've seen big investments by the consumer banks they've vested heavily and are benefitting from all the fintech out there. delivering a lot to customers like mobil offerings like immediate auto loans for example. that has helped in particular on the cost side. if you look at bank of america, their consumer business is very, very efficient a large part of that is applying that to their own businesses
jp morgan vesting $11 billion a year and others $10 to $11. these are big numbers. rather than the negative impact, that is really benefitting in the long term. >> that is interesting, thank you for weighing in. still to come on wall street today, morgan stanley will share their q 3 numbers and state street will also share results and david solomon will speak in his first interview since the wall street giant missed expectations that is today at 20:00 cte >> netflix shares, new conflict titles and fresh seasons for
"stranger things" and "13 reasons why" added more and missed on the domestic front >> sharing lower than expected guidance reassured by better than expected earnings. gaining margins by 300 basis points earnings came in at 1.37 which beat expectation of 1.04 a share. international growth surpassed expectations new u.s. subscriber numbers fell short. investors may be reassured by ceo giving commentary about competition. coming ahead of disney plus and
apple tv plus launching next month. they say they've been preparing for this launch for a long time. saying these new services will be noisy there may be some modest head wind the other ride spot stressing is international growth saying they are expanding non-english language original offerings because they continue to help growth in international markets. they've released 100 seasons of local series and plans for 130 more next year alone saying the company is on track to receive full year operating margin of 13% this year. cnbc business news los angeles >> ericsson has posted better than expected earnings
lifted by strong performance in the 5g business and currency effects. upping sales and margin targets. that stock is up 6.6%. that is a big move in the context of the year. almost half the move happened in today's trading session. shares have risen following the earnings beat. so good day for the telecon industry again benefitting from the positive noise out on the day. follow us on twitter or tweet us directly >> coming up on the show, don't be a fool. president trump sends a strongly worded letter to his turkish counter part as the white house pushes for a cease-fire in syria. more after the break
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>> don't let the world down. don't be a fuool and make a gret deal that is president trump's letter to the turkish president voting to condemn president trump's decision to withdraw troops from syria. i think many people were surprised with the content of that letter very harsh from the president. but also coming at a time where there is clearly a u.s. delegation on the ground in turkey does this hinder progress on the potential of performing cease-fire right now >> an excellent question that does not set up a conversation on the firm footing.
with the turkish leader. given the commentary made, it is clear that the coming hours will be crucial this negotiation is pretty much already off to a bad start erdogan playing hard ball here he said he would not like to go ahead with the request for a cease-fire vice president mike pence will be coming into the goal to lay the groundwork for a meeting for president trump next month saying to the media yesterday that that visit is written in pencil, not pen. he's also upset with how washington has handled the relationship listen in >> these discussions and talks
and valuations made about myself, my family, my minister friends are very disrespectful to the turkish public. there is nothing more natural than an evaluation >> back at home in the united states, president trump under continued pressure we have seen hundreds of republicans deciding to rebuke his decision to withdraw troops from syria some say that has led to the green lighting of turkey's inkurgs and abandonment of the kurds. key u.s. allies in the islamic state. he wants to see the relationship with turkey continue to improve particularly as he comes into 2020 this will be an important policy
win at a time when the president hasn't had a foreign policy win. in china, north korea, venezuela, these are all issues looming over him that he is going to have to address now he's put the ownness of responsibility on the vice president. so high stakes now, guys >> thank you now high stakes talks in the u.s. and turkish administrations. >> german minister says the world needs a tax machine. the likes of amazon and facebook are hampering and should be subject to stricter regulations. >> we worked hard to breakthrough in the international taxation
the minimum of big corporates especially i'm really optimistic we'll get an agreement about that next year the same is possibleif we look at the request how we can find an arrangement for the taxation of corporates which includes a better model to tax the big digital platforms. >> would you go as far as saying some regulators tend to have the idea that it is also good to break them up? would you go so far as saying it is a good idea not to have the amazons of the world that are apparently controlling many markets. >> we have to regulate the use of digital platforms as we do with all aspects of our life as well for instance, protecting data is
an important regulation. europe showed it was able to have a very good market for that if this is the case, you have to find ways to get out of this difficult situation to reduce innovation >> the cocreator of libra has come out in defense saying a project is inevitable as foundations of global currency start to shift
speaking on a panel in washington, the libra head told cnbc that libra is not just a disruptor but will aim to rewire the markets. >> the status quo is markets the world is going to change in a really profound way. we see what is happening in china. i think it is actually misunderstood. their goal is not domestic, it is really broad. it has the objective of rewiring the network and the countries. you'll see a lot of projects that will have a more disruptive mindset. we are in the mode of collaborating and wanting to get this right and taking the time to get this right. the status quo is an illusion and it won't last this long. >> meanwhile, saying central
banks won't follow the breakthrough made by technology in finance >> we need to keep up or enable innovation in a safe way we a we are central banks, after all. we are not going to be able to predict where this system is going to go but by leveling the playing field, we should spur innovation because we remove some built in impediments. >> that was a fascinating panel there hosted in washington one key comments was that the status quo is not an option. it is an illusion. suggesting that the push is inevitable and is something we need to work around. he also comments on public versus private roles and the importance that money creation
remains with governments and if we end up in a public/private partnership, it will be stronger and carry more trust which is a key figure that they are very closely watching >> what is key is buying in. i think facebook is finding that out the hard way there are regulators all over saying hang on a second. we need more about what your plans are. to pick up on that interview, look, we are working lahard to e there by next year this is on the heels where they came out under the radar. the proposal there that companies need to be taxed based on theirsales rather than the jurisdiction that will be a huge game changer.
>> it is scholz also spoke about competition. looking at china that is very far ahead. it is reamly a duopoly there he is pushing for a digital landscape. >> an important topic as we were discussing just in the last few minutes, i want to bring you some flashes this time from a senior eu official with he don't know who that is the comments are interesting they are saying, if the leaders have no deal on the table today, they will discuss a potential extension. so extension back firmly on the table if there is no brexit deal in sight in the next 24 hours or so the eu official saying it is always possible and there is some chatter about the potential
of squeezing in beforethe deadline if it seemed like the deadline between the two is closer so far, he's saying there has to bepatience that is it for our show today. i'm joumanna bercetche >> and i'm julianna tatelbaum. "worldwide exchange" is up next. your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory.
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>> it is 5:00 a.m. at cnbc headquarters netflix ex bracing the growing slate of streaming forms work to be done. treasury secretary steven mnuchin giving investors reason to worry after the president's highly touted phase one of the china trade deal on the verge of a deal reportedly closing in on a deal