Transcripts For CNBC Street Signs 20240714

Shares in Germanys Thyssenkrupp surge after theyre set to buy them. They go wild for hasboros purchase of pep pa pig at a huge premium. And g7 leaders prepare to meet in france with the summit unlikely to end with a formal communique for the first time in its 44 year history fed chair Jerome Powell is set to address the group at jackson hole later on today. The fomc minutes released this week showed members remained divided over a decision to lower rates by a quarter percentage point but policy makers agreed that the move should not be seen as a signal that rates are on a preset course. Now this morning in europe were seeing stocks move higher as investors await this key speech from the Federal Reserve chairman at jackson hole we have the ftse 100 up 0. 6 the dax up a third of a percentage point and the cac and the italian index also moving higher and in italy were all watching Political Developments there. The president has given the Political Parties until tuesday to try to get together a coalition. Were a little bit in wait and see mode when it comes to italian politics lets look at european yields. At the margin more hawkish than the market expected. This has driven a move higher in yields german bund has risen to the higher level since the beginning of the month quite a move in the yield space. Now in terms of fresh comments from the Federal Reserve, the Kansas City Fed president and Philadelphia Fed president told cnbc they dont see the case for additional cuts. My sense was it wasnt required in my view. With the low Unemployment Rate and wages rising and the inflation rate staying close to the feds target were in a good place relative to the mandates that were asked to achieve. I didnt think it was appropriate necessarily but i went along with it to get to neutral but im on hold. My forecast is to hold where we are. One of the reasons is that we run the risk of creating too much leverage in the economy meanwhile the dallas fed president told cnbc he would like to steer clear of the cuts but would remain open minded. Part of this job is to be forward looking and theres a Risk Management part of the job and i want to take all the time between now and september to assess how the economy is acting and id like to avoid having to take further action. But im going to have an open mind about taking action over at least the next month of numbers if we need to and for me the global the global yield but particularly the u. S. Yield curve, im less obsessed with the 2 to 10 and movements back and forth and more focused on the fact that the whole curve has moved down over the last months and the Feds Fund Rate at 2. 25 is now above every rate along the curve which to me is a reality check that says its possible our Monetary Policy stays tighter than i would have thought three or four months ago. The dollar index was down you can see its now stronger. The euro there weaker against the dollar this morning and sterling losing some of the ground it gained yesterday on the back of the meetings between Boris Johnson and Angela Merkel and then emanuel macron in paris. Some of the more hawkish language may have given more investors hope when it came to the future of the European Banking sector. Thank you for painting the pictures of what were looking at in markets this morning thank you for joining us this morning. So a big day in jackson hole everybody is keeping a close eye on Jerome Powell hes in a pretty difficult position and he may not know what comes next for rates and likely wont want to say anything to lock himself in. So is there anything that he could say today thats going to be dovish enough for the markets to actually react well no. Sorry i should expand on that but its right its going to be very hard for powell to be as dovish as the market has been. The minutes clearly showed that it is a divided committee. We have heard those comments from hawkish members of the committee which have actually done powell a little bit of a favor in the run up. A little bit of the market taking the rate cuts and priced out of what he will be concerned about avoiding is a further inversion of the treasury yield curve. Thats something which clearly is a source of concern and referencing the flatness of the yield curve. But it suggests the fed shouldnt be on simple rate cuts major easing cycle hes in a very difficult position because the other thing he has on his back is President Trump and the pressure coming from trump is even louder. Hes been addiment that he is immune to the political pressure hes acting independently. I want to come back to the data. Yesterday we got fresh data on the manufacturing side of things the u. S. Manufacturing pmi showing a contraction for the first time in almost a decade on the Services Side of things which has been the robust part of the u. S. Economy in line with the strong u. S. Consumer nearly stalled we saw that come in above the 50 mark so it did come down and the growth is slowing in that part of the economy how worried are you about the fundamental strength of the u. S. Economy . Its more akin to 2015 and 16 where we again saw a slow down in Global Growth which was lead by manufacturing and at that time particularly the commodity sector thats important in the u. S. Especially if you look at retail sales and look at Household Finances were seeing an increase in Mortgage Rates has come down as well and putting money into household pockets clearly manufacturing globally including the u. S. Struggling against the backdrop of uncertainty slow in china and Global Growth but i dont think yet we should be ringing the alarm bells and this is where i think the market has got ahead of itself at least in terms of the United States and pricing in about 100 basis points of rate cuts between now and this time next year. You talk about the consumer one of the efforts put forward by Central Banks is when they revert to an easing cycle like they have over the last few months and certainly the language is trying to encourage investors to take on a bit more risk and yet, what we have seen is a lot of investors. Arguably the safest assets out there. How can Central Banks try to steer them away from that . Youre absolutely youre highlighting the dilemma part of the concern i have right now. Central banks are trying to force investors to take more risk and reduce the cost of capital without equity markets or in Credit Investors arent doing that. Theyre buying more and more duration which is driving yields down in order to actually hedge their growth sensitives risk assets and a key reason for that particularly in europe is investors are skeptical that more rate cuts and more qe is actually going to do the job governments need to spend more money and hey germany and hey netherlands. How could this go wrong for some of these investors that made these decisions for a long duration, do you think well, i think if we do, as i think we will get a stabilization in Global Growth obviously theres uncertainties around that particularly with u. S. Trade policy, in light of the easing that we already had that i think you can get some repricing of u. S. Rates and also of global bonds and it doesnt take weights and you see it move higher and if youre holding a bond thats yielding zero and its a ten year bund giving you minus 60 basis points theres no cushion there in terms of offsetting the losses that youre going to incur as a result of higher rates. Thank you very much david for weighing in. Stick around plenty more to chat about. David reilly, chief investment strategist well continue our coverage from jackson hole later today when our u. S. Colleagues speak to more fed president s as well as to the imf chief economists and bank of England Governor Mark carney the economist that first made the link between the yield curve inversion and recession could hit sooner than expected head online for the full story in Corporate News this morning, thys serks thyssenkrupp is in talks to buy kloeckner. The german industrial book is also working to sell its elevators business. Hasboro is to buy the u. K. Listed studio that produces the peppa pig franchise. Theyll pay 4 billion in cash at 5 pounds 60 pence a share u. S. Giant said the acquisition is part of the strategy to add new family brands that will help deliver higher toy sales and coming up on the show with one week to go before the new u. S. Tariffs on beijing kick in, well be live from chinas industrial south do you have concerns about mild memory loss related to aging . Prevagen is the number one pharmacistrecommended memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. A lot of folks ask me why their dishwasher doesnt get everything clean. I tell them, it may be your detergent. Thats why more dishwasher brands recommend cascade platinum. Its speciallydesigned with the soaking, scrubbing and rinsing built right in. Cascade platinums unique actionpacs dissolve quickly. To remove stuckon food. For sparklingclean dishes, the first time. Choose the detergent that lets your dishwasher do the dishes cascade platinum. The number one recommended brand in north america. Welcome back to the program. Huawei says revenues from its Smart Devices will take a 10 billion hit this year but the sales are much better than they initially feared they would be the chinese tech giant continues to battle the white house as part of the trade war with beijing and they announced the roll out of a new Artificial Intelligence chip called asend 910. It will be available in the u. K. President trumps top economic adviser claims the u. S. And china will still hold face to face trade talks next month despite washingtons plan to impose new tariffs on the first of September Larry kudlow cited a constructive Conference Call this week. He says he expects the chinese team will travel to the u. S. For further meetings now with a week to go before the new tariffs take effect, our colleague has been reporting on the supply chain impact and joins us now from chinas industrial south. Thanks so much. Well, you mentioned President Trump. President trump had said that American Companies have been pulling their supply chains out of china well, we found out that that is not as easy as you might think with new tariffs just days away American Business man is in china looking for suppliers anyway the truth is eunice, right now, there isnt another alternative for us. He helps run a michigan based start up that specializes in industrial lighting. The company was hit with 25 tariffs in may and expects more products to be struck on september 1st. That pushed him to explore other countries to source his goods but none could match china. Factories like this are the only ones and often times the entire supply chain of a product is here. Those advantages have helped this supplier shrug off the u. S. Tariffs. Singapore owned aztec has been manufacturing in china for 25 years. Any additional cost so thats a lot. So then you dont split the costs. We dont. Have your orders from the u. S. Gone down because of the tariffs . No. In fact, we see another increase. But that means he and his start up have to contend with the extra cost and uncertainty of the trade war the tariffs are concerning not only for the impact and the cost in pricing today but also in our planning going forward. Is there another tariff . Will there be more levels . How does that impact our positioning in the marketplace that is critical to us. And for many other American Businesses too it doesnt quite there yet comments made by the german chancellor Angela Merkel that suggested that britain could have until october 31st to find an alternative to the irish backstop on wednesday merkel told Boris Johnson the u. K. Could have just a month to resolve the issue but yesterday, merkel clarified that point and said it was intended to highlight the urgency of the situation. The comments followed french president emanuel macrons decision to take a tougher stance after his own talks with johnson in bar risk. And key elements are not just technical constraints but a genuine indepenceable guarantee to preserve stability in ireland. The integrity of the Single Market which is the foundation of the european project and this is an integral part of this agreement. Lets go on and do it. Chief investment manager and it turns out david that you quite like sterling these days why is that . Well, i really not liked sterling for a long time we had a short sterling across a number of our strategies in fact, since the eu and before the Eu Referendum its much less ase me trick than it was Parliament Matters more to some extent on these discussions happening in paris and berlin because we know what the eu position is where the parliament will force an early election or force the government to actually seek an extension. You road that short position throughout all the uncertainty but youre saying theres still so much uncertainty you want to get out of it. Just the valuation and the pricing and where sterling is now is such that its just not as attractive as an investment position to have we still do have a short guilt position and we actually think that was a better way of reflecting, you know, uncertainty, both domestic u. K. , domestic political as well as economic uncertainty. On the topic of guilt we have seen yields rise this morning across the curve to the highest levels since july in some cases and this of course comes in line with a rise in yields across europe over the last couple of days we had the ecb minutes yesterday or the accounts as they prefer to call them and you can argue that they were at the margin more hawkish than the market was hoping suggesting that there were nuisances expressed when it comes to the competition of an easing package to come in september. What do you think the markets need in order to really react well to an ecb policy package given how much theres already been put out there how much already disclosed about this what is it going to take to get markets going again on the back of a package. Its going to have to be a package. I think what the market considered to be hawkish from those accounts theres still on going debates so that both has implications for banks because further rate cuts is effectively going to be a tax on banks and we know that banks are in a difficult position within europe and also suggests that, you know, if thats the case, its perhaps less appetite for more aggressive rate cuts at the short end. I do think that this is going to be the last horrah i think hes going to deliver. I think were going to get qe. Were going to get away cuts i still think were going to get that as well whether thats really tough to move the dial, i think, is from a real economy perspective i think is certainly open to question it will help keep it very conscious as well. What do you think about investing in European Bank cocos. Theyre active long position in Credit Strategies and precisely for the reasons being highlighted which is credit fundamental perspective if you make the right direction then we do think theres some value where youre getting 6 or 7 yields on National Champions across europe. I think its part of that sort of story which is equity struggles in a sort of disinflationary low growth environment and grinds tighter and thats what were seeing in europe at the oment. Do you think its the kind of stimulus that weve heard central bankers call for for a long, long time at the moment, a and b, if it does come will that actually help with growth here. I do think is that it will help with growth europe has effectively had an austerity policy since the euro zone crisis in 2011, 2012. And although thats, you know, were seeing some modest easing over the last year, it really is, you know very modest the situation that europe finds itself in now is that it cant keep just relying on the ecb so they need to change the policy and that means more fiscal easing the first question which is a key one and much harder to answer is will it actually come . It was actually lead by Northern Europe and by germany than italy. Theres a debate going on. I think the direction of travel is clear but how soon do we get there . And do politicians basically wait until were in recession before they act . Thank you so much for joining us. Thank you. That was david, chief investment strategist. Now hong kong antigovernment protests are set to escalate again this weekend as demonstrators prepared to once more target the citys airports. One of the busiest in the world. And try to delay passengers and flights. Meanwhile they obtained an extension to an existing junction that has rotests at the airport. The court said the injunction will remain in place until the court orders otherwise elsewhere, the British Foreign office has released a statement that calls for further information on the detained british hong kong worker the Foreign Office says it has not been able to speak to him since his detention. Meanwhile, youtube disabled more than 200 channels it says were tied to misinformation about the hong kong protest and involved coordc coordinated influence operations it was consistent with decisions taken by facebook and twitter to break up campaigns originated in china. He gives Political Parties five days to ink a Coalition Deal as they set new red lines for a partnership with five star more when we come back ahh. Your teeth hurt . Sensitivity. Gotta do something about it. New crest gum and sensitivity starts treating sensitivity immediately, at the gum line, for relief within days and wraps your teeth in sensitivity protection. Ohh. Your teeth . No, its brain freeze crest. They tell cnbc they see no pace for another rate cut. My sense was we added accommodation and it wasnt required in my view. I didnt think it was appropriate necessarily but i went along with it to get back to neutral im on hold right now. My forecast is just to hold where we are and investors go hog wild for hasboros purchase of the peppa pig at a massive premium. G7 summit leaders prepare to meet in france for the first time in the 44 year history. Well lets take a look at european markets and see how things are ahead of that all important jackson hole symposium where he is set to give his remarks later on today were looking at green across the board here in europe up about 0. 76 the dax up at over. 5 as well and this comes after yesterday we saw the ftse 100 underperform as sterling rallied on optimism around a potential resolution on the backstop we heard president macron dial back the optimism as he stands firm in terms of europes position on the backstop and the prospects of anything changing on that front but overall, european investors striking an optimistic tone ahead of the key remarks. Its mixed territory but the s p 500 and nasdaq ended in negative territory. Now modest gains for all three of the major indices there ahead of the jackson hole symposium and Federal Reserve chair Jerome Powells remarks as well a new round of consultations on tuesday with these two other men as the countrys fragmented parties look to craft a Coalition Deal and end the Current Crisis but the results of talks remain uncertain. The opposition pd party lead by that man, they have raised the stakes for a coalition with 5star lead by this man. That is after they added five more theyre not alone as part of these talks of course but 5 star they also had a series of demands and if we take a look about what a potential tie up would mean inside of the two chambers of the Italian Parliament you have the 5star in yellow with 107 senators currently seated you have pd here in red with 51. You add the numbers together you have 158 thats short of a clear stable majority inside of the senate. They need help from the smaller parties down here. Try to explain the situation inside the Lower Chamber you can see a massive number of seats based on last marchs election and then 111. You add those two together and you do get a slightly more clear and comfortable majority but i would like to stress in italian politics, loyalties are often quite short lived so theres a chance that members of some of the parties might peel away if they dont like the direction that things are going. Now the man that runs the 5star party after he met with the president he had a few comments about how the situation has come to pass. We started all the necessary talks to find a solid majority at the service of the citizens that will converge to the points that i expressed earlier we will not let the ship sink. We will not allow italians to pay for this process because we all are italy. Without political views and of side interests. We have seen a rise in bond yields over the last day or so in reaction to the ecb accounts that struck a slightly more hawkish tone than we have been expecting. Now the italian 10 year trade around 1. 317 so slightly lower. The italian 30 year also lower to 2. 388 and the 2 year so down at the short end of the curve also slightly lower. So bucking the trend after we have seen that move higher in the last day or so why some experts think a snap election is the likeliest outcome. Thats on cnbc. Com. What i talk about in that piece and trying to explain now is the differences when it comes to policies and this is going to be a real challenge in the talks over the next four or five days. A lot of people have given me the impression that they dont think there will be a quick resolution as a lot of people would like to see and thats because 5star is saying we want to see massive reforms to the way that parliament is constructed. They want to slash around a third of total lawmakers we heard they want to revise that plan. We hear a bit of shared Common Ground when it comes to investment they like to invest in that region and we have heard that they would also like to see changes to the countrys economic model to help boost investment another hot button issue, of course migration and while 5star in alliance with the hard right party, they have passed some new legislation around security and migration and they would like to see that repealed if theyre going to take part in any future governments so a lot of potential sticking points there and thats why investors should be cautious about there being a clear cut result by tuesday. Its interesting to see investors are taken this in stride would investors get it if we do see a coalition form between 5star and pd . Theres two areas there one is the idea of how theyll try to construct a budge and what their spending and physical priorities will be and b is how that will be received in brussels and the pd inside government you would expect a slightly more friendly approach from brussels which might alay investor concerns but that will put that deficit number higher than it already has been. All right so we have a lot to keep an eye on between now and tuesday in the meantime, we have plenty to watch g7 leaders descend on the french coastal town this weekend in a meeting set to be charged with contentious topics. For the first time in history, the summit is expected to end without an agreement the french spresident it was due to a very deep crisis in democracy adding that an Opening Statement would be pointless the u. S. President raised the prospects of tariffs against europe targeting the car market in particular. While china does not attend the g7, it will loom large and test the ability to show a united front. Fresh from its visits to berlin and paris, u. K. Prime minister Boris Johnson will be preoccupied with his campaign to redraw the battle lines. The meeting will mark his first face to face with donald trump since becoming leader and a surprise topic thats not up for official debate and set to be on the agenda is whether they believe russia should be allowed back into the group. The event will also feel pressure from thousands of demonstrations as antitrump, antimacron and climate protestors are in a bid to disrupt the event. So a huge amount in stake here and huge number in focus to help us prepare for what we may see lets bring in the professor American Graduate School in paris. Thank you for joining us lets kick off with president macron given this event is taking place in france he is hosting to a degree this summit he has had quite a year. He dealt with the yellow vest protest and plummet in popularity and reemerged after the National Debate on the global stage im curious, what do you think president macron is looking to get out of this summit what is his mission here hes one of the last internation internationalists in the g7 so i think his hope would be to begin a process of dialogue that is getting people together and not for example having trump walk out of the room and leave the meeting early. He already had his test with Boris Johnson and they seem to have smiled and shaken hands and touched a lot. So i think its not Public Relations but its an attempt to try to establish some reality to the g7 that is to informal dialogue among heads of state. Do you think his personal style lends itself well to these kinds of occasions with that informal dialogue . Hes not someone thats terribly aggressive in his persona. Hes a small guy he smiles a lot. And he can play son or brother rather than father and scowling and protecting his gold from the other. Im not sure that he has the clout to convince someone like Boris Johnson that continues to trigger his left hand in a punching maneuver every time he meets a foreign head of state or donald trump that likes to shake hands until they fall down macron is not a tough guy. They have set the expectations low and theyll probably be met. You mention Boris Johnson and its so tempting to try to reduce these meetings to set for individual confrontations and things like that but do you think theres a chance that because he has an agenda when it comes to brexit because he seems to have a strong relationship with President Trump that the two of them will be working against the likes of macron and Angela Merkel when it comes to a policy on brexit that might allow him to exit with a deal by the end of october everything looks like the titanic is going to hit the glacier and hes speeding ahead the boat it doesnt appear at all that they have the slightest influence on his resolve however as he noted this is now a domestic political issue and perhaps even the queen will have some say but its clear europe will not. He tweeted a graph showing a spend on defense which put the u. S. Right up with its nato alli allies could it be used as a way of leveraging President Trumps argument against germany when it comes to potential trade conflict could we see trump use the threat of auto tariffs to get germany to step up in their defense spending commitment . Frankly, its troubling seeing the american president undermine his european allies in the most important global allian alliance fortunately the United States doesnt just spend a lot of money but we have a massive presence in europe its an establishment with hundreds of generals and thousands of officers so i think it will with stastand the tweet donald trump it will be used to justify a growing trade war that President Trump seems fixed on waging with the entire world. Thank you so much for your thoughts this morning. For our preview of this weekends g7 summit and why Boris Johnson could be stuck between a rock and a hard place, head to cnbc. Com well take a short break but coming up we close out Education Week for a look at what the future brings. Democratic president ial hopeful Elizabeth Warren called to wipe out all student debt plus the swedish finance plus the swedish finance minister weighs in applebees handcrafted burgers now starting at 7. 99. Now thats eatin good in the neighborhood now mno kidding. Rd. 99. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Welcome back to street signs. The oecb says swedens gdp is devoted to education spending. Although Higher Education is free for most swedish students they struggle with levels of student debt that are comparable to those in the u. S. With an average of 21,000 the country is expanding Vocational Education and training at a fast pace in an effort to help students adapt to changes in society now the minister for education in sweden joins us now thank you for joining us this morning. In sweden youre expanding your offering when it comes to Vocational Training. Why is Vocational Training so important now until terms of ensuring that people are preparing for the demands of the work place thank you very much the first reason is that we have a interest fewer and fewer Young Persons apply for education that are vocational thats one reason. The other reason is that in the swedish society, we rely very much on an industry and Service Sector which is focussing on exporting services and the goods and in order to do this we need to have highly skilled persons working in the production of services and industry so this is a situation that we need to solve. One of the ways to solve it is to make sure that we have more possibilities to have a Vocational Education. Within a smaller country like sweden where the Education System is largely centralized are you finding that the requirements of industry in one part of the country might be different from another part of the country . And its there that you try to concentrate on this Vocational Training to some extent that is true we have different needs in different parts of the countries but the overall picture is that all over sweden, employers are seeking for Young Persons and Older Persons with Vocational Education in almost every branch and every different profession and so what we really need to do is make sure that Young Persons realize that Vocational Education is heading for the future and one of the things that is really important for us is to make sure that if you take a Vocational Education you have the possibility later in life to attempt either higher Vocational Education or Higher Education to make sure that Vocational Education is part of sort of a life long learning process thank you for joining us. The u. S. Faces a 1. 5 trillion student debt crisis the average american has 34,000. The democratic president ial candidates are already backing it out to deliver the most effective policy Elizabeth Warren is one of them. She is wiping out most Student Loan Debt and ending tuition at public colleges. He recently analyzed her proposal on tuition fees and is now an assistant professor at the university of iowa thank you for joining us is the level of student debt in the u. S. , does it drag on the u. S. Economy or is there a way of looking at it as being offset by the advantages the economy gains from having all of these highly educated individuals at this point it becomes a big business im not sure that thats the type of economy we want to have that depends on students being locked into debt for generations and stuck paying it off for decades. This is holding generations of people back from things like buying a home or even getting marri married, being able to move and holding a whole group of people back and i dont think thats good for the economy. Professor, critics have argued that the idea of cancelling student debt is really a boom to high earnings given earnings potential of a College Graduate versus a nonCollege Graduate what are you saying to that . We had these assumptions about who is going to college and what they are able to pay at the end of it. Its increasingly effecting people of color in the United States, particularly black americans least likely to finish going to college because of financial obligations and now they have the greater debt the ones struggling are unable to pay and theyre not the high ea earners that we see anymore. A lot of the candidates for presidency talk about the wealth gap in the United States what would this proposal do to that wealth gap in the longterm . Thats the difference on the hole between black families, assets minus their debts the problem if you forgive all student debt is that there is a group of people at the very top who do have high amounts of debt from things like going to medical school and law school so if you forgive all debt then they that actually provides significant advantages comparatively to rich white people the people that can pay off their loans. So she wanted to make sure that it was focussing on the people that most needed remediation from this very predatory system and what we found is that this, the number that she came up with 50,000 decreasing as the income goes up would slightly close the wealth gap without increasing the absolute difference black and white im sorry to interrupt you. Thats todays show. Thank you for joining us. Worldwide exchange is coming up next. Tv just keeps getting better. How you watch it does too. This is xfinity x1. Featuring the Emmy Awardwinning voice remote. Streaming Services Without changing passwords and input. Live sports with realtime stats and scores. Access to the most 4k content. And your movies and shows to go. The best tv experience is the best tv value. Xfinity x1. Simple. Easy. Awesome. Xfinity. The future of awesome. Is. Under pressure jay powell feeling the heat as he prepares to deliver highly anticipated remarks this morning in jackson hole, wyoming, investors on edge. Wall street treading water as it awaits the comments from powell. The yield curve between positive and negative as markets fear the fed may not have enough ammunition to stave off a Global Economic slow down. The hawks are out t