Transcripts For CNBC Street Signs 20240714

The father of the house senior conservative tells cnbc that he will do whatever it takes to stop a no deal brexit. Boriss outrageous will bring together the divided majority and decide which theyll go for and what the combination should be. China is willing to resolve the trade war with a calm attitude boeing shares jump topping the cac 40 as units help deliver better than expected first half profit well, a very warm welcome to street signs theres been Major Political developments across europe in the u. K. And italy we will get out to steve a little bit later on in the program. Were going to kick off with her in italy and just to note for you before we head over to rome, conti is due to make a statement before meeting with the president. He is expected to be offered a freshman date. The markets have now been open for about an hour and we are seeing gains across the italian index. Its currently up about 1. 3 and green across the board for the italian banks performing well from the auto sector and infrastructure stock also performing well. As i mentioned there, were expecting a statement coming up soon so well be keeping a close eye on that but lets get straight out she joins us from rome she has been there for the last 48 hours or so now and following this marathon thats evolved over the last day or so but now it looks as though the Coalition Government is going to come to power. Give us the latest. Thats the case investors can be happy we have a bit of shortterm clarity that theyre set to go ahead. As we just mentioned conti just met with the president and is due to give a statement but the next question will be about government formation and who is going to take up key roles we need a few more days to hash out details and something that investors should be wary of but i want to talk about the economy here and with me i have an expert on the atter. And markets have been encouraged but lets not forget the Italian Economy is growing at zero what do they need to do to get it up . Provide confidence. Not just to markets but to families to push public and private investment firms are ready to invest and they have the money to invest and they need confidence and the plan and the hope today is that the government will be able to provide the ability to invest. This is one thing that they can agree on which is the fact that they dont want that to occur. How damaging would it be if it does go up by 3 in january 2020 they estimate in our Research Department a negative impact on growth of 0. 3 however, it depends on how you avoid decreasing it because if you bring it above 3 i dont think markets will react positively if its compensated by reduction on income taxes it could be a good thing. I want to take you back to two of the main policy initiatives introduced one is the pension reform. Its one of the key policies going into the elections last time around and then five star have been very vocal on the citizens basic income. What impact have the two measures had on the overall economy . Well, i think overall it was a negative measure because it didnt term or replace workers because most of the early pensioner were in the Public Sector doctors, teachers and its not easy to replace these. Its not like the labor market and also its a negative message that you can retire early if youre in good shape but at the same time it might make it more difficult for low income people to work. So the new government should work on stopping pension reform and go back to the system and at the same time create more incentive to work. Interesting thats something they were talking about is rolling back the pension reforms. Final question for you, what is actually more important for the economy italian here it is what happens for the politics of the shortterm medium term . Theyre buying up all of these and potentially introducing another round of asset purchases and thats being a huge tail wind where yields are trading. I agree with you. Italy is an open economy what happens abroad is more important than italian politics. What is happening in germany with this is extremely relevant and the ecb is extremely important as well. The fact that today is its at 1 its clearly the impact of the end of this crisis but also the season of the ecb to continue. Absolutely. We have to bear that in mind as well ill toss it back to you that was the chief economist from the confederation of industries in italy and former executive director from the imf. Thank you really appreciate your coverage from rome. Lets push on and that of course is brexit. The decision by u. K. Prime minister Boris Johnson to suspend parliament sparked fury among many lawmakers with some calling the move a constitutional outrage it will be more difficult to thwart a no deal brexit. Theres been an up roar among critics for this decision from Boris Johnson but markets are fairly muted in their reaction is this a game changer when it comes to the trajectory of brexit lets wait and see but as you narrowed the time line and speeded up what opponents on october 31st need to do and the time line they need to do it in in order to thwart the Prime Minister and his supporters as well some of the strongest language has come from his own party. Hes a conservative. Hes been under Margaret Thatcher and David Cameron as well father of the house. Listen to this language against his own party and against his own Prime Minister. Its absurd he has given in against the fanatic elements of his followers. I share all the outrage. I hope it will bring together a sensible majority of parliament that will find an alternative to this but actually saving this from just crushing out the no deal brexit hes sold out the people he surrounded himself with. Theres many alternatives one would be a care taker government lead by either Jeremy Corbyn and your name has been mentioned. All of this stuff about who would lead what, thats daft footnotes. The media are entertaining people with the outrage and personalities. The key thing is are we leading a sensible way that doesnt do damage to our economy and keeps all of our ties with europe and business ties and trade flowing freely or are we going to have a referendum and decide whether to leave at all i think boris is outrageous petty dictator stuff will bring together the rather slightly divided majority in the house of commons and then decide which of those two theyre going to go for or what the combination of the two would be. Was that a no i would do anything necessari necessarily to stop the disastrous mistake of a no deal. He digit say he wouldnt work with Jeremy Corbyn as well he wants another referendum as you heard there but calling his own Prime Minister a petty dictator quite extraordinary as well. Later on in the show she is rebutting quite forcefully what he had to say. Isnt it interesting playing out here on cnbc, not only the Brexit Debate but the civil war in the conservative party. Thank you for bringing us those incredibly bold statements lets get over to italy once more as i mentioned, conte is due to make a statement after meeting with president mattarella. Thats where we expect him to come through any moment now and he is expected to be offered a freshman date as Prime Minister as they agreed to form a coalition. So well be keeping an eye out for that now as we head to break, heres a look at the ftse mib and where things stand a positive territory for italian stocks street signs well be right back applebees handcrafted burgers now with endless fries starting at 7. 99. And get more bites for your buck with late night halfpriced apps. Now thats eatin good in the neighborhood. Mno kidding. Rd. 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. I want to bring you live shots from rome. Conte is expected to be offered a freshman date as Prime Minister after the five star and Democratic Party agreed to form a coalition. Well bring you those shots as they come through. Lets take a look at the italian yield curve. Very interesting were seeing the yield curve move lower across the board from the 2 year out to the 30 year. The ten year hit a new record low of 0. 973 . Currently at 0. 989 so below the 1 mark. Very interesting to see it taking Political Developments in stride despite the uncertainty over the last couple of weeks. A 30 jump in first half current operating profit beating expectations Strong Performance helped offset weakness at its construction businesses it says it expects to improve profitability in 2019. Elsewhere in the corporate space, shares hit a record high after the announcement of a billion euro Share Buy Back and 30 dividend hike. The worlds second biggest drinks maker also outlined new investments in the u. S. And china biggest markets. You saw those shares were up 0. 7 this morning. The charge related to restructuring cost and pension plans. A 5 rise in full year net fees but warned of a tougher trading environment in germany and the u. K. Investors dont like what they see. That stock is down just over 3 this morning but lets take a look at what were seeing in wider markets. You can see there the majority of stocks trading in the green this morning its quite the reversal from the early moments of trade when the stoxx 600 was posting losses but now were looking at gains accelerating through the course of the session its currently up 0. 7 that reversal came on the back of fresh comments from chinas commerce ministry. It reiterated its willingness with a calm attitude saying it opposes escalations and tensions between washington and beijing and investors clearly like what theyre hearing. Lets push on and have a look at individual markets the italian index up 1. 4 . The political situation heading toward a resolution and of course were looking to hear from a few moments and finally lets take a look at sectors and see how things are looking there. One sector in the red this morning. Real estate down slightly 0. 13 at the top so overall, a positive morning coming together for European Markets. Lets bring in our first guest in studio. Steven bell, chief economist to help us understand what to make of what we have seen over the last 24 hours or so. So the reaction you have seen in bond markets is pretty striking. We have seen a ten year yield hit a record low below 1 . Its the development that we convene on the political front this coalition coming together really positive news for italian markets . Probably. The problem with politics is it comes good, comes bad, you never know where you are were not even have it involved. The left party which has ruled this for much of recent years is with the arch enemy five star and how theyre going to stick by the budget rule we love italian bonds but were taking profits because we think theyre too expensive. And you cant get a yield in the euro they would have given me a way a few years ago. Now the fact that yields are negative so spanish yields, theyre. 13 . Its just the crazy bond market and the search for yield thats relentless because politics for now looks good. Theyre two parties that are arch enemies by the way and to see them come together to really fight off salvini. Is it only a matter of time before the new Coalition Fractures . Yes Italian Governments very rarely see it five star, i think youre reporting earlier have to address their members to see if they approve it. Well, they may not but we also have to have policies implemented by this. The reason five star want to do it is they want to avoid elections because they lose. Theyre not doing it for the country. Theyre doing it for their own political benefit and as long as its mutually beneficial it will survive and the reason the last coalition broke up was because the lead was too popular, ironically and they wanted the general election thats why the others didnt so its not incredibly stable but its better than general elections. And in terms of what else is contributing to the demand for italian bonds here, we have the ecb in the background poised to announce its stimulus package in september so how much of the reaction were seeing in bond mashlrketss down to the tail wind this would provide versus the actual political situation in rome. Yes, thats the big tail wind its a tail hurricane where Bond Investors realize they havent got enough people with regulatory requirements like Insurance Companies or pension funds, theyre behind their legal requirement and regulatory requirement and theyre realizing theres no more debt going to be issued and what is issued is going to be bought by the European Central bank. Their biggest client in bond by a factor of ten is the European Central bank theyre a monopoly buying up bonds and pushing the price higher some people think this may not be good for the european economy but the ecb believe it works and its going to stimulate more what they really need is fiscal policy but that isnt moving in the right direction at all we heard from japan, policy makers there cautioning against further monetary easing and they should know, shouldnt they . Why is europe going to be any different from japan when it comes to pushing for more negative rates. Well, far be it for japan to lecture europe on Economic Policy because theyre about to increase theirs. This is a completely lunatic policy for an economy thats still suffering. The data on japan have been weak this year. Consumers losing confidence and they dont want a tax hike they should postpone it again. They have done it twice before but theyre going to go ahead with it. So its true its pushed so far that its damaging it. And the length of time its been there is damaging so i can understand all of that the problem is the yen has been going up because everybody else has been easing. So were in a real delima. Lets push on from Boris Johnsons perspective, is this really a winwin . I mean, in terms of what happens now, if they go down the vote of no confidence route, if that vote fails Boris Johnson will, his government will have the authority to judge when to hold that election and could easily put it off until post october 31st theres not a lot that would work against him at this stage. Basically the shortest serving Prime Minister in living memory that would be disappointing but he knows the general election is going to come either way so what he would like is to have a general election on november 1st because that means the brexit party would support him and probably feel candidates against labor. So thats his preferred option but of course he doesnt necessarily have control and although all of these people are outraged at this decision to hold the queens speech which i believe isnt that crazy, its about tactics. Like a game of chess where each side keeps changing the ules he doesnt want that he wants brexit and. You mentioned in italy, that was very unlikely. Those two parties opposing when it came to many topics what are the chances that we see a National Unity government come together in the u. K. Its a good chance. They will be deselected. Ken clark, hes in the twilight of his career quite frankly so he doesnt even care his constituents voted brexit by the way. They cant get it together, the remaining cant complain they had their chance. Well, the pressure is certainly on thank you for your thoughts this morning. Steven bell, chief economist, bmo. Were going to take a short break but coming up on street signs saudi arabias Stock Exchange completed its conclusion in the emerging market index well hear from the ceo, next. 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. The first survivor of alzis out there. Ase and the Alzheimers Association is going to make it happen. But we wont get there without you. Join the fight with the Alzheimers Association. They use stamps. Com all the services of the post office only cheaper get a 4week trial plus postage and a digital scale go to stamps. Com tv and never go to the post office again. Welcome back to street signs. These are your headlines. Conte returns to lead italy after president mattarella gives him a green light to form a new government the british Prime Minister suspends parliament. Boris johnson has given into the brexit fanatics. His outrageous and petty dictator stuff will bring together the rather slightly divided majority in the house of commons and then decide which of those two theyre going to go for and what the combination between the two should be. European stocks reverse early losses as china reiterates and willing to resolve a trade war with a calm attitude and Trump Administration will soon start collecting a 5 tariff we heard from the President Office in italy. Conte is due to make a statement after being given a man date to form a new government. Those are live shots from the president ial palace where were accepting a statement from conte returning to the helm after the Coalition Government has agreed. Well take a look at European Markets. Italian stocks reacting well to the news up about 1. 44 . So out performing the broader European Market but gains across the board, ftse 100, dax and the cac all in positive territory. Just after the markets open suggesting that they want to resolve the trade war with a calm attitude and they oppose an escalation and tension between beijing and washington lets take a look next sterling sharply in focus yesterday. We saw the british currency drop on the back of news of Boris Johnsons plan yesterday and ultimately it closed off the lows of the day and now this morning were seeing stability return to the pond currently traded around 1. 22 versus the dollar. The euro flat as well and the dollar is slightly stronger versus the japanese yen at 106 lets take a look at european yields, next its been an incredibly resilient run for italian yields the 10 year btp did hit a record low this morning a little bit off the absolute lows of the day but moving lower in italy otherwise a slight up tick in yield for german, french and spanish ten year bonds lets take a look at the italian yield curve and there you have from the 2 year to the 30 year all lower this morning and the ten year, as i mentioned, below that 1 mark next lets just take a little bit of a closer look at whats behind the 1. 4 gain in the ftse mib this morning. Italian banks strongly on the back of the news of the coalition coming together and the reappointment of the Prime Minister conte lets bring in our next guest, head of credit at Investment Management lets just kick off with your view on italian banks. I read in your latest Research Notes that you were constructive on the banks in italy. Todays market moves theyre the right call in your view . At least on the shortterm they are and its no real surprise that the scale of the rally we have seen already actually started becoming selffulfilling and its their ability to refinance at such low levels as they are knight now is taking some of it off and i think from a banking perspective, time is king here the ability for them to ignore time to improve the health of their banks through sales and the like, given some of the relief that were seeing here in markets a lot of that is the way its being allowed to the banks. How strong is that linkage between the Italian Government bond market and italian Banking Sector of course this is a huge issue during the euro zone debt crisis in 2012. But how has it evolved since then it still has some way to go its not so you anemic to italy but the amount of time is hopefully going tocontinue to go down the same path. All right stay with us i want to get back out though to rome all morning she is been covering these latest developments. So Prime Minister conte back at the helm give us the latest. Thats exactly it so as we spoke about about an hour ago he showed up to have talks with the president where he is given the mandate to form a government but it doesnt end there. Theres a lot of sticking points its about who would lead the government so we know that it will be conte leading this next Coalition Government but next questions are, well who is going to be in the actual government itself and some of the names coming up here, he was previously Prime Minister what will his role be in this government mateo is not the leader of the party anymore. Former Prime Minister but still a key king maker and one of the first to say lets think about getting into government. Other names that are out there its a name being put forth for the finance ministry role as well as the italian commissioner role at the eu we talked about this very important for lawmakers to try to secure the spot as well in terms of next steps, hell have a couple of days to put together a list of names and then they have to approve that five star have an open democracy system so theyll put that membership to a vote a lot depends on the details of the respective post obviously. I also want to mention another element that we havent talked about enough, if you look at the parliament as it stands right now if you combine the number of both pd and 5star they have a clear majority its razor thin so perhaps in the future, this coalition may have to rely on the support of the smaller parties. And thats going to be as well they would obviously need the support of the parliament and the smaller parties as well. So yes, a lot of the uncertainty has been put to bed but its never fully out of the woods. All of this has come on the back of salvinis push for an election where does he stand in all of this now is he still pushing for that to happen and how realistic is that . So yesterday all of the respective Party Leaders met with president mattarella. They had consultations and at the end we heard from all of them and they gave a speech to the public and salvini said look at the end of the day, this is an alliance, a Strange Alliance with two people who in the past have been sworn enemies. Its very strange that all of a sudden five stars seem to change the way they think about things. Similar perspective. We will never change our mind. We are happy to be in the opposition side and he said even if it takes three months, six months, nine months, were waiting in the opposition for that snap election to be called so that we will even actually get our chance to lead the Italian Government again but not so fast, because since he pulled the plug in the coalition a little over a week ago. They were pulling at around 38 . Theyre down to around 33 now in exchange for that weve seen a rise in popularities and around 23 and a little bit of momentum so its not so clear cut here. Especially given that if another election were to be held he would probably need to rely on the support of other center right parties and obviously theres the far right party. The brothers of italy and its unclear at this point whether if they had a snap election today and not a lot of answers but for now what we do know is that the Coalition Government is going ahead. Thank you so much for comprehensive coverage for rome. The first phase was finished in may pushing the index almost 20 higher hadley is in rijad with more. Thank you for that. Youre right that second part of this inclusion into the msci emerging market index is complete theyre going to add 2. 8 to the index. And there has been considerable momentum placed behind all the movement and all of it of course surrounding the bigger conversation that we have been having now for a couple of years which is about the ipo i had the chance to sit down in an exclusive interview and i asked him, are you ready listen in. We have been working hard to make sure that we are an active player on the success. As of today we confirm our readiness to the ipo. Any clues on when it could be well, at any point in time because we have when we talk about now any other listings ipo in the market, we believe now we are more ready with the inclusion process, with the foreign investors. That will open a new channel for financing and successful ipos in the country. You have to remember of course that this is the biggest market in the region and not just in the gulf area but also in the middle east, region as a whole. And investor in flows since the start of the year. The volume is low heading through the summer months, but certainly considerable momentum and a lot of positivity that were hearing from government members and other investors that we have been speaking to and this very long hot week. Thank you very much certainly a part of the world to keep a close eye on. Well take a close break but coming up, the Trump Administration revisits a plan for ultra long bonds more on the proposal when we come back. Applebees handcrafted burgers now starting at 7. 99. Now thats eatin good in the neighborhood welcome back to street signs. The queen has approved Prime Minister Boris Johnsons decision to suspend parliament in the week beginning the 9th of september. This means proeu lawmakers have less time to try to thwart a no deal brexit. The move was to spring forward a bold and ambitious domestic legislative agenda that is completely untrue look at what were doing were bringing forward a new list on hospitals and making sure that we have the Education Funding that we need and there will be ample time on both sides of that crucial october 17th summit ample time in parliament for mps to debate. Brexit and all the other issues. Ample time. The decision has sparked fury among johnsons critics. Thousands of people took to the streets of london to avoid anger. Protestors sparked a coup as they march toward downing street meanwhile an online petition collected 1 million signatures and theres a legal challenge in the works. Steve joined us from westminster you have been working hard on the green this morning talking to influential lawmakers what are they saying about the latest developments . Its absolutely fascinating especially listening to the con sefb t conservatives at the moment. Its what they see as a coup against democracy and et cetera, et cetera. But we heard earlier on as well, remind viewers hes the father of the house, theres been an mp since 1970 and the previous governments as well, of course and hes basically said that he thinks hes absurd. He thinks this is sold out to fanatics its going to create a lot of damage to the economy and it will be the stuff of a petty dictator as well lets listen in now to the other side of the coin from the secretary of state in the cabinet. A former brexiteer somebody trying to be the leader twice. A very senior politician and indeed for industrial strategy and she rebutted what he has to say. Its very interesting. Listen in. Its been the longest session, parliamentary session in 400 years and its absolutely right that we use this preorganized recess anyway, the conference recess so that we can then clear the decks and get on with the next parliamentary session. Is it disingenuous to say this is about brexit at the moment theres plenty of time to be able to debate brexit and to be able to debate the new Withdrawal Agreement should he succeed, no im confident that this is the right thing to do. Some conservatives will back Jeremy Corbyn if theres no confidence vote. I would doubt that. I dont think that conservatives or many people at all would like to see him as a care taker, leader or any other sort of leader isnt that extraordinary that she doesnt believe that some of the rebels, now its the remainers that become the rebels but she doesnt think the conservatives will go over to support it and i just heard from one conservative that saidly do what it takes and others believe they can do the same and dont forget the conservatives have a majority of one as well. How this goes forward next week. One more point after the show as well theres been so many conservative Prime Ministers of course the man that took us into this in many ways as well in order to sooth the civil war in the conservative party. It still goes on back to you. Thank you so much from one country thats facing can two parties come together that are historically at odds to another, italy lets listen into conte who is speaking in italian so were not going to listen in but theres live shots for you he has been given a man date to form a new government and there he is addressing the crowd at the president sial palace its a very interesting parallel going on in the u. K. And italy where were looking to see here in the u. K. If opposition lawmakers will come together and form a united front against what they dislike about Boris Johnsons plan at the moment so theres conte reinstated as Prime Minister of italy. Lets push on, u. S. Retailers are warning of price hikes as the Trump Administration officially imposes extra 5 retaliatory tariff on chuy niin imports. Theyll begin collecting a 15 levey on the goods including television and foot ware the collection date for the remainder taxed at 15 including mobile phones and toys is set for december 15th. Apple is one of the Companies Set to be hit the hardest by trumps tariffs against china. The supply chain data shows that few u. S. Companies are as dependent on china as the tech giant. Apple produces its ipads, iphones across 40 chinese factories while half of its suppliers are also china based virtually all are among the goods facing a 15 tariff. Meanwhile, Steven Mnuchin said he doesnt intend to intervene in currency markets at this time he also said the issue of ultra long government bonds is under very serious consideration now lets get out to rome and now conte just addressing the crowds give us the latest he has started addressing the public a little over an hour ago he showed up here to have those discussions with the president its been a tumultous week we have a little bit of clarity ability the new Coalition Government he pulled the plug on his coalition. He did not expect it between the 5star movement and pd so a very interesting turn of events here. There was a little bit of resistan resistance thats the Prime Minister ahead of the Coalition Government. And in terms of next steps key now is what happens with respect to the actual cabinet formation. Who is going to be apart of the governments and in the past, conte was technically the overseer of the coalition. It wasnt really affiliated to any one party. You could argue that now hes probably more closely affiliated to fivestar given how five star were pushing for him to take on this role. It will be interesting to see whether or not he also has a role in this next government remember he was also deputy Prime Minister in the previous Coalition Government and reports suggest that he should take on the deputy Prime Minister role yet again but pd are resisting and we talked about the finance ministry very important points here and all of these are things that Prime Minister conte will have to think about over the next couple of days as the two parties come together trying to emerge with some form of a cross Party Platform here. One final note that ill leave you with is remember a couple of days ago, the president of the United States tweeted that things are looking good. He may be with us for a little bit longer. Thank you so much for taking us through this saga in italy. Yes we have brexit yes we have italy in focus we have some comments suggesting they want to approach the trade negotiation with a calm attitude every sector in the green in europe every region in the green in europe is the u. S. Trade paramount relative to Everything Else going on in the world at the moment it should be to some extent there needs to be a Circuit Breaker to what is going on now in the government yield curves and the inversions that you see. It looks unlikely thats going to come from a Macro Economic perspective or earnings. Where it might come from is an improvement in the chinese trade negotiations and i think the way the market reacted to that news overnight tells you about how its very important that its going to have to come from somewhere. Maybe thats the most likely place right now. How do you see the fed reacting in the future given the controversy thats come out over the last week or so or relative to the political situation in washington. We just finished an earnings season right now given the psychology around the inversion of curves its very difficult to be overly optimistic about this if you come from a chief executives perspective. Anything longterm growth capex related is probably on the back burner. Thank you very much head of credit, hermes Investment Management. Thats it for street signs Worldwide Exchange is coming up next a major boost to stock futures but developments in hong kong could turn ugly over the weekend. Rate risks, record low yields keeping wall street on edge. Stocks looking to close out the first down month of the summer ceos blasting the upcoming tariffs while two companies you know are on bankruptcy watch Boris Johnson suspending parliament all ahead of the brexit deadline. The opposition is furious. Were live