Transcripts For CNBC Street Signs 20240712

Bottom to the top. Well speak with the analyst that sparked the probe at 10 15 cet. Auto stocks go into reverse after car sales across europe plunge into 17 . But because of weaker demands and concerns weigh on sentiment. Snowflake gets a warm reception as shares spike more than 100 on the first day of trading on the new york stock exchange. The ipo is not the highlight of my life it is a milestone. We are here to build our business thats what we are excited about. Thats what we do. Thank you for joining us today. Reversal for the Major Industries you are seeing sizeable falls. All in lock step yesterday the uk stock market was down and we had improvements across the boards there does seem to be reaction as they are talking about low Interest Rates for a long time the market looking a little bit weaker at this stage wall street is soggy we are picking up on some of those queues the bank of england closely watched. Lets see where some of the green is coming from these are better performers. You can see them all moving south. We had a reversal. Better performers are health care, retail and mainly indo tech that were positive from the markets. There has been a lot of news flow travel and leisure having a better but weaker session. In terms of the worse performers with a loss to the Banking Sector down more than 2 . A lot of negativity to the space. Giving up recent gains we were higher on the back of chinas production figures technology, insurance, media and all weak witnessing modest gains across the market have been reversed in todays session. We got weakness on the board for wall street. This follows a mixed day of trade yesterday. We did see the nasdaq 1. 25 lower. Yesterday, the dow did outperform slightly. This is why we are looking at more losses for the dow this morning. Weak start after the meeting yesterday. In terms of the day ahead for the u. S. Markets weekly jobless claims and housing. Ahead of the fed decision, the fed Officials Say they expect Interest Rates to remain near zero until at least 2023 as the fed provided a fresh update. Policymakers added they will not tighten policy until risen for some time. Fed chair Jerome Powell defended the guidance it is a slow process but it is a process inflation does move up over time we expect that to continue and we expect the guidance is powerful and we expect thattout come we expect the policy to remain accommodated very strong into the recovery, this should get us there sooner than later powell renewed his call saying monitory policy should not be the first line of defense against a down turn. There has been a p strong effect of course the details are for congress and the fed there are roughly 10 Million People still out of work and in industries that may need to struggle and may need Additional Support as they try to find their way. Weve got struggling Small Businesses especially those facing the state and local Government Spending has gone up much related to the pandemic the bank of japan issued more on the economy the central bank said the economy has started to improve as the country battles the pandemic while welcoming in a new Prime Minister investors will see how the boj works with suga and vowing to the economic policies of his predecessor. David, i thought it was fascinating. More were looking for the relationship between suga and corona the market just wants continuity we are going through the Pandemic Response and economies have been hit globally thats what we need. In japan, you will see the bank of japan has been doing what it has been doing and focusing on the same policies weve had in the past that is positive for recovery longer term. Weve seen a lot of volatility move in some chatter whether the market will try to test the resolve in suga to intervene in the currency are you hearing anything on that front and do you think it is likely when you get new people in government, the market will try to figure out what the resolve is and how much it is for the previous administration. It is natural they will try to do that. We have rates that are pretty much zero across the world in the past, they tried to force that it will be a relatively muted response david, good morning, one of the big topics of discussion that has come about from the fed meeting is how much more these Central Banks will do to stimulate growth, not just to provide and secure liquidity on that front, do you think we are at the end of the road or do you think they have more in the tool shed to get the economy growing again. The Central Banks have more they can do to continue to grow the Balance Sheets most of those three you spoke about are in the bond market can you see that expanding more and more, if necessary all of them have focused on do we need fiscal response . In europe, weve seen fiscal response and in europe there is probably more coming. And in the uk, there has been a sizeable response. We are seeing that they have to work in tan dem with the authorities. If you dont get that, the recovery will work even longer the rates will be down here in europe at the short end of the curve, it will be well anchored they are more willing to allow inflation to creep up in the curve and make it more in a few months not immediately. We have to get through the Recovery First so they are willing to let that creep up. When do you anticipate inflation picking up to the 2 mark in the u. S. The fed already said they dont think it will until 2023 no reason to disagree with that. In europe, they think it will be at 1. 3 i think thats right given all of the dislocation in the economy with the covid issues. It will take time for that to work through and then youll start to see pricing pressure. Until that happens, it will be very muted well continue to keep rates on the floor and look at the other tools in the tool kit. Theyll look to get rates higher because theyve been under shooting for a long time it has been 2 all the time. I want to ask you the debate behind the skens now from the fed. Now trying to get back to the steady growth path weve had one policymaker yesterday, we thought the policy went too far how healthy is it to have a debate at this stage if you talk to commentators, the recovery could be quicker than anticipated. What do you make of the decent behind the scenes now . I think it is okay to have a debate and not get caught up in group think, thats quite healthy. Central banks are in that unique position now to keep policies easy they know what to do to tap the breaks and slow down the economy. They dont want to do that too soon i think thats why you are getting the uber doves where they keep more and more liquidity and keep this economy going as quickly as possible others are going we dont want to get that too far away others will say, what we are doing is correct that is the mark we should be looking at weve got ultralow rates. Does that mean we should be chasing risk down the credit curve . Weve been looking at Corporate Investment grade debt. Weve been looking at highyield names. Specifically in our uk portfolios if you have an accommodative central bank, there will be easy financing for a long time. As the economy recovers, that should payoff well this is more specific to europe and the uk, you want to be more out the yield curve. That will continue to flatten. Until we see inflation pick up which will be some time away youll get paid more down the curve. That will help offset that Corporate Risk or highyield risk you have. It is about building a balance and get yield where you can. David, thank you for joining us as always head of european fixed income. The Central Bank Action continues. The bank of england is expected to hold steady on rates and policy later today governor bailee previously indicated that negative rates remain in the tool box some anticipate a more cautious phone as they tee up stimulus measures catch us for boe decision time at 12 55 cet for now, we are going to take a eabrk. A big one. You were thriving, but then. Oh. Ah. Okay. Plan, pivot. How do you bounce back . You dont, you bounce forward, with serious and reliable internet. Powered by the largest gig Speed Network in america. But is it secure . Sure its secure. And even if the power goes down, your connection doesnt. So how do i do this . You dont do this. We do this, together. Bounce forward, with comcast business. And then found the home of my dreams. But my home of my dreams needed some work sofi was the first lender that even offered a personal loan. I didnt even know that was an option. The personal loan let us renovate our Single Family house into a multiunit home. And i get to live in this Beautiful House with this beautiful kitchen and its all thanks to sofi. Welcome back caixabank and bankia boards meeting and could create the biggest lender alstom cuts bombardier prompting alstom to revisit the terms from early february. The deal would create the worlds second largest train maker. Swiss exchange six readying a bid to acquire borsa they were joining the race to take over the boerse Holding Meetings in a bid to halt the proposed take over. The London Stock Exchange is looking to offload to clear for positions of refinitiv telling cnbc that he regrets the Auditing Firm did not uncover wirecards accounting sooner it is obviously an unfortunate situation. It was a massive fraud we did bring up and disclose in our fiscal orac calendar year i wish we had found it earlier we asked the company to move cash around to ensure it was there. We were given falsified documents and statements the year before. It was a wellorchestrated fraud. For grenke, shares swinging bafin are looking into an investigation. Grenke has strongly rejected allegations calling them false in the statement they reached out to respond to the allegations. Lets get to the researcher and join the conversation. Youve gained a lot of attention on the back of this report the wideranging allegations the latest parties linked to the board and valuation of the assets releasing business to sellers, regular tory breeches in the Banking Division and more than a billion in cash. What do you think are the more serious allegations and what evidence do you have at this stage . What is serious so far and so much coming forward in terms of the victims of fraud where they are sending in evidence that makes it quite here that grenke was aware. The fact being is that 85 of business as they disclose is done through resellers and what is being done to make sure people are not being scammed weve had representatives come forward with millions of pounds of leases backed by pretty much zero in terms of assets. What are they lending on and what are these assets really worth . The related Party Actions are not disclosed anywhere if you fine tune the model, all of this is Public Information. You can check it they havent given an answer as to why, a, they have paid directors 100 million in cash or buying underperforming businesses that lend out in scams and shams. Weve heard bafin is also investigating and initiated a shorter term have you been contacted by bafin. As far as we are aware, they send an email. We send some info in our preliminary report we have rekreepts for it, they signed for it. For us, it is indisputable bafin can go and get the documents. Weve reached out, theyve asked where are we based it is on the top of our letter let me jump in here and ask whether youve been in contact with grenke to give them a possibility for them to explain their business to you . Is there any point in contacting grenke when these are undisclosed transactions it is the only company we know of with the unqualified proxy cfo by the operating officer with no accounting degree. This is a Financial Organization what are they going to tell us all is fine. Can you explain to us how you came up with the statement or allegation that most of the cash is actually nonexistent . They are either cyphoning it off or using fake cash the compliance isnt there they bank for crooks after bafin, new zealand, the fca provided warnings for these criminals, they still provided banking to them. I can understand when you dont know when you know, you carry with on providing. From what is real should be at the top of everyones lips go you have evidence the ceo is aware of these issues . Hes aware hes been maid over 100 million or sold loss businesses to the companies. I fail to see. So far, we are approaching, off the top of my head, 7,000 victims of fraud how can the board not know this . They are being investigated by the fca and what is happening. Theyve told their investors that is Material Information can you just clarify for us your position and connection to the business and position in the stock, your short position we are short the stock. We maintain our short. It is pretty much impossible to value the business that lends out 5 Million Euros and buys under performing businesses. We are staying short the reality is, i firmly believe, a, we have more information and, b, the amount of people coming forward with other issues this business is in trouble. Your business has gained notoriety over the years for various reports. Wirecard being the more successful ones. The practices of your company have been under question, particularly the governor of south africa highlighting the tactics short selling to companies profiting unethically but escaping sanctions because the domicile not being in south africa what would you say to the criticism. Do you think you are acting ethically and legally . We always are legally it is all Public Information we are accountable fully accountable. Everything weve exposed if we dont make a stand, who will let me ask you about credit aspects. Most of us looking through the financial crisis and looking at what some of the credit spreads look like. He point out that default rates are too low at roughly 3 and you think they should be roughly double digits. Why do you think there is an elevated risk . Weve got the tide going out and businesses impacted by covid19 youve got the company with aggressive and scammy lending. Provisions are a third of that rate how is that . You are either, a, doing bad business or provisioning less. We have people that cannot afford these leases that theyve been scammed on. Where is the materiality within their close yours where theyve been implicated in scams in england, australia, europe where are the provisions for this time of operations . They simply arent there fraser, youve done a lot of work in the past on wirecard im curious the scale of the allegations you are talking about here, how do they compare to those at wire card . Wirecard was a criminal organization and widespread corporate fraud. This one is basically compliance, compliance, compliance it is simply notthere. I think it is a widespread mentality that they will do what they want. They are disclosing the m a strategy for tsz directors or come out with cash telling us, we wasnt this guy 100 Million Euros and we forgot to disclose it its still contrary to the accounting laws. The company isnt a widespread criminal yet but they bank for criminals and scams and lend to scammy resellers where they are leasing on the value of 500 and the contract is worth 10,000, for a tv one of the issues youve spoke on sitting on well above capital adequacy requirements. Some argue there are reasons and doesnt necessarily imply misbehaver what would you say to those critics . Is there a reason they would not want to engage on this loading up of debt theres many reasons, when you are loading up on debt but it is facted and where it is being lent has some value. If you can show me the value of your tv at home being worth 10 grand as opposed to 250 quid the reason they are loading up is they are stuffing people with worthless assets for those who have joined, ill remind them you are short grenke going from the bottom to the top. What kind of position are you taking on the traders at this stage . Most of the analysts are withdrawing coverage correctly and taking a cautious approach we are publishing a data room later so people can assess the voracity of all. Weve put it in one place. It wasnt linear at all the company is in some form of denial theyve come out and shown where it is wrong. They are documents weve collated thank you for the time. That was fraser Perry Research we want to emphasize that those are the views of the company we have invited the company grenke to come on the show and respond in addition to their written statement matters. We do urge the company to contact us and contact some of our calls. Coming up, european car stocks slide after a plunge in august and rising corona cases saw the risk for a quick recovery welcome back to street signs. Im Julianna Tatelbaum with karen tso. These are your headlines european equities follow europe and asia into the red vowing to keep Interest Rates low until 2023 saying the policy will remain accommodative until the economy is very far along to the recovery should get us there sooner rather than later volatile trade in grenke as regulators probe market manipulation the analyst who sparked the investigation tells this show hes critical of their response. The question of them asleep at the wheel is the question theyve come out with the standard response. For us, it is indisputable what we state in the report car sells plunged over 17 in august the second wave concerns weigh on sentiment President Trump expresses concern of tiktoks oracle plan saying he doesnt want china to remain in control. Im not prepared to sign off on anything. We need to see the deal. We need security ill let you know. Theyll be reporting to me tomorrow morning and well let you know lets get a check on the markets. Following asia and the u. S. Lower. We are seeing major forces trading in negative territory. Participating in the down turn we are seeing travel and leisure outperform the only sector in the green. Basic resources and the banks are taking a harder hit. With the Federal Reserve pledging to keep rates where they are until 2023 we are seeing negative territory. Also keeping an eye on sterling which is trading weaker. Some analysts are expecting a move dovish message what does it mean for u. S. Futures . We have futures pointing to a weak start nasdaq pointing to a weaker lower. The dow diddout perform yesterday. Perhaps a little catch up trade taking place there one sector in focus, i want to highlight the auto sector taking a look at auto stocks. Fresh data crossing the wires. European new car sales fell 17. 6 in august. Every eu country besides cypress saw the decline by 20 lets go to ian for insight. This data for the month of august, pretty discouraging. How much emphasis should we be putting on it . We should be looking at it with serious intent to understand as you point out, there are some factors that hint to the need of cautious from the stocks around the market and manufacturers put out. We look at the august number this year compared to a 10year average is not so bad. This comes after a couple of months of recovery particularly, the big five markets especially seeing for the uk given the burst of energy for the market that would continue equally has seen the Strong Demand for return. There is a reason for cautious optimism behind the negative headline what are you expecting in terms of outlook we are waiting for the arrival of new electric model vehicles we have some automakers out there and tesla leading the way. We have choices relative how do you incorporate that into your forecast. People in terms of delaying the positions. How are consumers thinking about it and the medium term for auto sales. To pick on this longer term view overall, there have been all sorts of simulations with respect to the shape of the curve with the eu or the bathtub. We are looking at a little w now. Overall, we are looking at a sorted level the demand level where we are with the uk and the market base is roughly 6 and actually comes from the platform and bell weather for the demand from the demand for the audience weve seen those hints are positive the consumer you are looking for the cars yesterday, there are the surge of interest. Weve researched with the propensity in the audience of car buyers and regulators over the years are growing. Purchase rates are growing fast. Theyve been declining this year theyve asked for small numbers. Roughly 6 this year from last year it is still the growth we are talking the minor part of the audience and the carbuying public receiving the recovery of the car market to be led by electric vehicles leading the factors to come to play one is incentives to the government to bridge the price gap which is usually around 20 or so from a new electric vehicle. The second is additional supply. Simply, electric vehicles are complicated to make and provide millions to the manufacturers. They still scale up and have all of those available and really drive the revolution into car ownership and driving that we like to see. That will happen we are vesting volkswagen pledged 90 million theyll get the cost down and get vehicles out there that consumers are looking for. Choice is actually really good now. It used to be you had maybe one electric vehicle per brand and it felt like a green washing exercise many brands have three or four sporty cars and so on. There is growing opportunity there for people to go and choose an ev that suits them more broadly, i want to ask you about credits. Youve seen anyone who wants to buy a car, buy a car this time, weve got ultralow credits still. That has been a message from a number of Central Banks. We have had job uncertainty in the credit damage. How does that impact the willingness to spend on such a big ticket item. Pointing to the level of optimism headline numbers are clearly operating in the dramatic operations this is a number of the case right now with those lower salaries, they are not remaining car buyers those that need steady employment right now, theyve seen their Household Incomes seen those incomes rise. The opportunities are not as much big ticket items are out there they are a growing level of optimism that shows Household Income people are paying down credit and seeing the expense of cars people are seeing the car expenditures are one of those things they need to do and people need to do. They are seeing a third of people more likely to put money in their cars and looking to avoid public transport carmakers are looking for a safe space and given you cant spend it in other areas. The commercial director and auto trader. Holding a Virtual Meeting later today on the output cuts the uae missing its targets due to the highgerg demand. Moving the mark on the market. As the Cloud Company sets a new tech ipo record. Analysis after the break give you my world how can i, when you wont take it from me you can go your own way go your own way your wireless. Your rules. Only with xfinity mobile. President trump says he is not prepared to approve the oracle tiktok deal yet the proposal would make oracle a partner with the chinese Chinas Foreign Ministry has urged the u. S. To expect the principal and offer a fair environment. According to the Standard Life flint spoke to the veteran as part of the singapore summit and asked about how the recent strains have been. Important to the Global Economy and global trade to me, it is inconceivable you can address the challenges in the world for climate change, demographic aging, inequality, terrorism. All of these things cannot be done without the u. S. , china and europe and the rest of the world. The most important issues in the world require people to Work Together that actually illustrates this clearly. Six months ago, seven months ago, every Single Company in the world saw its growth i dont think thats changed, the emerge ens of a strong middle class the anxiety resumes and that means access into those markets. I began u winly believe the right answer in its engagement i believe in history, weve dealt with these things throughout the region we mind a pattern of engagement that address the issues that are so important to us. Shares in Cloud Company snowflake more than double on the debut and what was the largest ipo ever valuing the company just over 70 billion. More than five times its 12 billion valuation earlier this year Berkshire Hathaway nets 800 million on snowflake the move is a departure from his usual aversion to ipos, the last time he went with a laurchling company is when ford was launched in 1956 what is surprising me is how pricing has inked up and still shares soared. We initially were expecting a range of 75 to 80. They upped that range and eventually marketed them at more how did the bankers get that wrong . You think about back earlier in this year in february, the company was worth 12. 4 billion. Now worth five times that. At least the start around the ipo price. How could a company be worth more on the year the only factor that has changed is the way the market views these companies. The view came forward with the gains that carried the nasdaq and finally the investors would view the prospects they are now willing to bank on the growth story it is quite extraordinary. The other thing that jumps out to me, how did no other company take that ticker before this company. The other big thing, key investors. The fact that youve got Berkshire Hathaway and salesforce invested in this company. An investor that made a killing on this company. He helped create the company and served as ceo and was incubating this ipo in 2012 when you saw facebook actually go live then he was sitting quietly in the back drop and now made effectively 12. 6 billion on paper at this stage. An extraordinary amount of wealth to accrue in just 24 hours, really. It seems that part of the hype here is that this company was only founded in 2012 it is relatively young and ambitious because it is seen as a Market Leader key to amazon. If you you are looking at an opportunity to invest in a Company Early that has the potential to be competing with amazon in an optimistic way. Certainly investors are encouraged by what this compan can do weighing in saying we needed to do this ipo for a number of reasons, especially to raise the stature. A real testimony to be seen and how that can breed more success. Talking about other ipos coming to market in hong kong and china. There is a wave of companies coming back to the u. S one calling it back to school week for the ipos. This company snowflake coming market sumo logic and amwel is another one. We talk sentiment. Once you get one that goes gang busters like this, you get more appetite for others. Well watch with interest. It definitely feels like fomo is a big factor here when investors are unsure what to do in the secondary market. Back to action, we are looking at u. S. Futures pointing to a negative start to trade on wall street this follows a down day for tech stocks in particular yesterday after the Federal Reserve meeting. We saw the nasdaq close out more than 1 lower. The dow held up better and now we are seeing the dow with an even weaker start with a little catch up trade there well hand it over to our u. S. Colleagues now thank you for joining us karen stso and myself on stree signs. Wlddexcng cing up next on cnbc it is 5 00 in boston your top five at five on a thursday morning stoc stocks bracing for another day of selling stock futures are down by 240. The fed looking to keep cheap money for the foreseeable future amid economic challenges and well tell you what it means for you. It may be summer but it is all about the snow snowflake surging as the biggest software