On two u. S. Dollar bonds due today staving off what would have been the first default. Xpeng announces plans to expand into germany as automakers continue discussions at the auto show. The move is about prestige according to the ceo. It is the highest standard market for oems. To be here and make our Product Available to the customers in this market will help us further penetrate the continental european market. And novo nordisk dethrones lvmh as investor appetite for weight loss drug soars. Good morning. Welcome to street signs. Just in the last couple minutes, we have been getting the final pmi numbers for the month of august in eurozone. Let me tell you, they are worse than the flash. It is not positive. The final composite pmi for eurozone is 46. 7. Lower than the flash of 47. It is suggesting that the downturn is deeper than initially thought. Just to give you context as well, the number today is down from julys figure of 48. 6. It is the lowest level we have seen since november of 2020. Quite a stark downward revision with the final pmi numbers for the month of august. In terms of services, the eurozone august figure came in at 47. 9 against the forecast of 48. 3. Services also disappointing to the down side here as well. Many economists have started to downgrade expectations for growth. People are saying the numbers are indicating that the net quarter on quarter growth could be leaning negative. That tells you eurozone is teetering on the brink of resec rece recession. Looking ahead, i want to point out the business index has dropped further to 46. 7 from 484 48. 2. That is a low not seen since early 2021. The numbers have not been positive as of late. Currency down. 40 . Julianna, lots of negative news for the euro szone this morning and the central bank alike means what this will feed into the next policy meeting. Taking you back to the markets. We are lower across the board in european equities. Benchmark down. 70 . Lets break it down by region. You can see the broad based nature of the pullback. Cac 40 is down 1 . Under performing in large part because of the sizeable pullback in luxury. Dax is down. 60 . We have. 50 lower for the italian and spanish equities. In the banking sector, a sizeable pullback. Here is a picture of the big movers in europe this morning. We had a number of analysts downgrades this morning. They are weighing on the sector. You have Deutsche Bank down 3 of the commerzbank down 4 . Socgen down 3 . You have another downgraded. Over all, a pullback in the banks. On to luxury. Cac 40 is leading the losses because of the pullback in luxury. Lvmh down 1. 8 . Part of the reason we have seen novo take that position as the largest stock by market cap in europe. Lvmh has gone down and novo has appreciated. Chris matian dior down 1 . Let me hand it over to joumanna with data from the ecb. Julianna, we have been piecing through the signals on the pmi side of things. We just spoke about the composite numbers coming in lower than the flashes estimate. We are also getting results of the ecb survey with the respect of inflation. Expectations for inflation in the next 12 months are unchanged at 3. 4 . That is higher than the 2 target. Expectations for three years ahead have risen to 2. 4 from 2. 3 . Why am i emphasizing the word rise . This is key for the ecb and what it is trying to achieve. When they tighten Interest Rates, the aim is to bring down expectations of where inflation is going to get. At a time when the growth has started to slow down, the activity has started to slow down and you think the expectations would slow as well. That is not the case today. You think going into next week this is worrisome for the ecb. They are looking at a hike a at the next meeting. Rising expectations. This is potentially hiking to a recession. That is the big story partly for europe in the second half of the year. Speaking of weak activity, lets take our attention to china where Service Activity expanded at the slowest pace in eight months in august with the pmi coming in at 51. 8. This is amid weak demand in the second largest economy despite stimulus measures. Composite pmi edged to 51. 7. Country garden wired money to creditors to u. S. Dollar bonds today. That is according to reuters which cited a source close to the company. The group offered to extend repayments on eight onshore bonds by three years. This comes after the embattled chinese developer agreed to an extension of 3. 1 billion yuan last week to avoid an onshore debt default. A story we have been watching closely. For more on china, lets bring in George Magnus. Author of red flags. George, i cant think of a better time to have you on right now with everything going on in china. Lets ask how bad the Economic Situation is actually on the ground . We have been piecing together the indicators with a slowdown and you see the real estate problem and capital outflow away from the country. How bad is it, do you think . Good morning. It has been pretty bad. A torrid summer of Economic Data and Overall Economic perf performance. I think as we come to the summer and look to the fall, i think things might pbe on the cusp bea b bit better. Weakest service pmi numbers since 2019. In manufacturing and construction, actually things are beginning to stabilize. In fact, local governments authorized to accelerate borrower in august and september and what local governments do is finance lowcost housing. The possibility is certainly there that things will pick up in china and the rest of the year. We shouldnt get too excited about it because it is really just a cyclical rebound from what was a very, very low starting point. It is not quite the collapse that a lot of people were talking about a few weeks ago. Very interesting to hear your perspective. There is a lot of pessimism around chinese prospects out there. When it comes to the real estate sector, the theme was deleveraging. You had multiple bond defaults and Country Garden as i talked about was trying to restructure some of the debt onshore and offshore payments under the spotlight. To what with extent will president xi tolerate this much instability in the context of what theyre trying to achieve in terms of deleveraging . Welcome to number one nuance in china because xi jinping, we call him president , but the chinese really dont. Xi jinping really is absolutely adamant about a number of things. He is very adamant about national security. He is adamant about the need to preserve stability above all things which is partly why the government is reluctant as other western economists have proclaimed that they should be actually putting in more powerful stimulus into the economy. The governments very opposed to doing this because they dont want to risk financial turbulence that might happen as a consequence. The real estate sector, no question, it is a disaster area. You know, even though there might be some improvement in sales and transacting volumes from depressed levels remember, sales and floor space and other indicators are 40 to 60 below where they were before the pandemic. So, you know, theres a possibility, particularly given the recent spate of easing of mortgage restructuring measures and urgency of delivering projects to households that have been started. There is a possibility we could see a cyclical bounce in transactions the rest of the year. Nobody should be under any illusion this is a sector that will get better. It is really going to be a very, very torrid situation for years to come. George, you mentioned the importance of stability to president xi. Earlier this summer, authorities stopped publishing youth unemployment data after hitting a record high. To what extend does the high youth Unemployment Rate and broader labor market pose a threat to the social instability in the country . It is always, i think, been accepted by everybody. An informal social contract in china where the government basically delivers ever rising aspirations of a good life to people and they stay, you know, relatively restrained and quiet and supportive of the government. Obviously, we have seen a number of instances. There are hundreds, thousands of instances of unrest and worker disquiet that go unreported. Last years covid protests and concerns this year certainly about youth unemployment. It will weigh on the government without question. I think it is something that they urgently want to try to address. The question is whether there are a lot of things changing in china. A lot of graduates that are coming out of university and not necessarily with the skills that are even needed by companies or perhaps have too much education for the skills needed. Plus, of course, the occupational structure of the economy is changing from high pay and high wage work in manufacturing and construction to much more gig economy and informal economy dominated employment market. These things will be very, very difficult to address particularly in the absence of stronger demand and consumption. Everybody is urging on china and including chinese economists, but so far the government seems deft to doing anything about that. All very linked as you laid out there. Let me switch gears to geopolitics. The g20 summit in new delhi this weekend. The First Time Since 2008, president xi will not be attending the summit. It would be an opportunity for him to meet with President Biden. What is your view on why he is not attending . Therein lies a lot of speculation. Not only is the first time xi jinping not attending, but the first time any head of state is not attending. Putin wont be there either. Maybe these are bedfellows in more than one way. I think, you know, there is speculation it may be health related. Im not sure about that. How would anybody be able to comment with authority about it . I certainly think if it is not health related, it is designed as a snub to india partly because of the new map which china published which india did not like. It doesnt like the tilt to the United States in recent months. Doesnt like the fact that india has shutdown a number of chinese mobile apps and so on. It is also possibly xi jinpings way of indicating that he is not really interested in Government Entities in which china is not the found eer pr er or leader. His attendance of brics in johannesburg is indicative of where china seems to lie with the global south for want of a better phrase Government Entities and where it is bees around the honeyp pot. China wants to align the interests of countries that are prepared to accept china standards. It is a snub to india and partly about the statement of International Governance if it is not health related. George, to round things up, i want to ask about the Semiconductor Initiative for china. The story yesterday caught a lot of attention namely that they used an advanced processor. They managed to come out with a super chip despite the u. S. Export controls and the u. S. Trying to restrict china from developing highend Chip Technology of their own. They seem to be moving in the right direction for huawai. Do you believe china will catch up in the next decade . Im not a chip expert. Among the many things generalists can observe is probably idle banter which is the idea that the american export controls have suddenly galvanized chinese chip making into doing things it could not do before. Remember china is spending tens of billions of dollars for the last 10 or 15 years trying to catch up in semiconductors. The idea they suddenly discovered something last six months or nine months that was beyond them before that is probably a little bit childish, really. This is the combination of not the combination, but step in the chinas program of self reliance. They want to build and design and manufacture all chips without relying on america or japan or south korea or taiwan and so forth. Will the american controls contain chinese chip making . Certainly not. Whether they have the capacity to get and close the fiveyear or sixyear time lag which people believe china is currently behind is a moot point. The rest of the world is not standing still either. There is a strong possibility the gap will never close. S certainly for the time being, it means the controls have to be tightened and tightened even further. George, thank you for joining us this morning. Fascinating to get your views. George magnus from the Oxford University and author of red flags. Coming up on the show, appetite for weight loss drugs sends novo shares to new highs ofhighs. We will have more after the break. Has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. When we started our business we were paying an arm and a leg for postage. I remember setting up shipstation. One or two clicks and everything was up and running. I was printing out labels and saving money. Shipstation saves us so much time. It makes it really easy and seamless. Pick an order, print everything you need, slap the label onto the box, and its ready to go. Our costs for shipping were cut in half. Just like that. Shipstation. The 1 choice of Online Sellers. Go to shipstation. Com tv and get 2 months free. I suffer with Psoriatic Arthritis and psoriasis. I was on a journey for a really long time shipstation. The 1 choice of Online Sellers. To find some relief. Cosentyx works for me. Cosentyx helps real people get real relief from the symptoms of Psoriatic Arthritis or psoriasis. Serious allergic reactions and an increased risk of infections or lowered ability to fight them may occur. Tell your doctor if you have an infection or symptoms, had a vaccine or plan to or if ibd symptoms develop or worsen. I move so much better because of cosentyx. Ask your rheumatologist about cosentyx. Welcome back to street signs. Novartis has released sandoz First Quarter results of 4. 8 billion and net sales for 2023. Now in todays street smart, we are talking novo nordisk. It has taken over lvmh in market cap after releasing wegovy in the u. S. It made the highly sought after drawing in the uk as part of the con the ttrolled launch. This success of the drug has valued the company with a gain of 41 this year alone. There are still new things to talk about and i kickoff looking at the laust month with the shares up 20 . The leg higher coming from the select study and highly anticipated study in august and showed the drug leads to weight loss, but releases cardio events by 21 . Speaking to analysts and investors, the rally of nearly 20 is a combination of earnings increases and genuine buying and Short Covering. The Investor Community was divided into the results if they would be so positive or not. This march higher is a Short Covering and fundamental buying. And what has happened in the last couple months is factored into the price with the drugs rolling out in europe and uk and our dotcom team wrote a piece of wegovy is starting to be provided with the lvhs. Some insurers decided not to underwrite it. The British Insurance Company has said that wegovy will not be covered under its policy. What is the fate of the stock from here linked to whether or not they they side to underwrite the product . Aside from anything going wrong with the drug like side effects or negative with the drug coming out, i think the insurance piece is the number one determining issue with the stock price and how high it depose. The study was so important that we got in early august was because the assumption is if the drugmaker can prove reduction of the cardio events means they wont have to pay down the line with heart attacks because throwthose are costly events. Really interesting. The other thing that also people have started to talk about and i remember when the study came out the same day with the price action of novo. We were watching the price action in food manufacturers as well. The assumption is peoples appetite will be curbed. They will be eating less processed food. That will have a knockon effect in addition to the alcohol suppliers as well. It suppresses your appetite for food, but also for drinks as well. Thats one of the potential knockon effects we can think about, too. Absolutely. An interesting side story here with the reaction of the companies outside of the realm of pharmaceuticals. Charlotte highlighted a piece from Morgan Stanleys unit this morning with the alcohol consumption. You read the Research Unit found people taking these drugs consumed 62 less alcohol. That is an interesting impact. I would leave it on this note that longer term from a medical perspective, a lot of excitement around potentially harnessing the pathway that these drugs target to address drug addiction down the line. It could be used in a different way. Not these drugs specifically, but interesting discovery. It is reflected when novo gets trading and then eli as well. For more on wegovy rollout in the uk and continental europe, check out cnbc. Com. You can check out juliannas comments online as to what the drugs are and this was the video she put together a couple months ago. Eating a burger. If you want to get involved in the conversation, tweet us on x. We are cnbc juljulianna. The point of the video is you suppress your appetite with one bite. I hadnt tried the drug. Coming up on the show, pres pres presi pres pres president s erdogan and Volodymyr Zelenskyy meet to discuss the black sea grain deal. Know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Cove