Transcripts For CNBC Street Signs 20161206 : vimarsana.com

Biotech giant actelion while hedge funds continued to bet on a rival offer from Johnson Johnson. And president Francois Hollande names a new french Prime Minister. Good morning, everyone. Louisa is out at a conference today. We have a jam packed show for you. How about we kick things off with a look at the European Equity markets. We are slightly higher for the stoxx 600. Yesterday we shrugged off the italian no vote and renzis resignation. We are seeing weakness in copper prices, crude prices down. Lets see the xetra dax is comfortably higher to 0. 2 . German Industrial Orders were up by 4. 9 in october. The biggest rise in more than two years. The cac 40 pulling up to a quarter of a percent. The ftse mib, up by 0. 9 almost, this is after yesterday saw some choppy trading. At one point the market was down 3 , up by more than 1 . It finished the day lower by 0. 2 . The italian banking stocks came under severe selling pressure. In terms of the sectors, i mentioned it before, were seeing some of the oil and gas and basic resources plays underperforming. Financial services down by 1 . Well get to that story in a second. Utilities banks and real estate seeing modest gains of roughly 0. 9 to 1. 6 for utilities. Lets get back to our top story. An increase in the number of Retail Investors trading cfds prompted the uk regulator to place stricter rules on the service. The fca says it is concerned with the number of suppliers of cfd trading and the amount of leverage and losses built up by customers. The watchdog said it found that 82 of clients lost money on cfd products during a sample survey. Shares in the spreaders are under significant pressure. Ig group off by 25 . Cmc off by a similar percent, and plus500 off by 31 . Earlier sir john gieve spoke about the impact of the new fca regulations. Its very difficult for people in the Financial Sector to realize how little is understood about finance among the greater population. We have had these series of scandals and policies, ppi, which have shown that you do need an active regulator to prevent. At a sophisticated level, theyre not banning these products. There are certainly investors who have a handle on them and know how to use them and can take the chance and balance the risks. I dont think they should get into the banning fear. But, yes, they have to watch out. We had a series of bad scandals in terms of misselling over the last few years. Of course the fca has to be on the job. Just on that story, newman has downgraded cmc shares to a sell warning that rising regulations across europe and the uk would hurt growth and profits. The broker said its rating on ig group was under review. Lets move on and get back to the italian story. Italys political upheaval could affect banca monte dei paschi financial plan. Senior advisers have told bmps to get rid of a state bailout since qatar may consider reinjecting money into the oldest lender. The qatari investor authority is expected to invest 1 billion euros. Shares in bmps this morning, off by he 1 , 18. 48. Julia spoke with the italian finance minister last september and asked him whether he rules out a bailout for bmps. Absolutely. This is total imagination. We are not talking about that kind of money. We are not talking about bailout. We are working within the rules, within the system, which implies strong participation by the shareholders, stakeholders in recapitalizing the banks. This is helped by the fact were putting in place a Legal Framework for dealing with mpls, which is more efficient, much faster, more profitable to banks than in the past. Lets get out to julia still covering this story for us in rome. What will the italians do if a private sector solution falls through . Will they have to bend the state aid rules . Thats a good question. Tough to see that at this stage, but remember there was always this escape clause about generally systemic bank that would allow them to bend the rules somehow. At this stage the rumor swirling is were looking at a precautionary recapitalization which would be a bailin of junior bondholders. There would be a repayment of 100,000 euros for each retail bond investor, but in banca monte dei paschi you have 2 billion worth of bondholders. This was seen as politically toxic for this government. They didnt want to see bondholders bailed in in this case because investors had gone to the banks, been sold products and perhaps were not sure of the risks of investing in this product in the first place. You have to separate the idea of a bailin from what could be a fund that the government put together to try to support those that lose money. It would still be politically and incredibly difficult. You heard the current financial minister saying they would do everything they can to try to avoid that. Very difficult given the current setup. The deal signed was difficult whether or not this was a yes vote or no vote. Three different stages, a debt to equity swap, a Capital Raise of 5 billion euros, and then the big one, trying to get 20 billion euros worth of nonperforming loans off banca monte dei paschi balance sheet. This deal was always going to be tough, but in light of what weve seen here, future political instability and question marks over the next government and their commitment to protecting the banks, its difficult to see any investor stump up cash, particularly when this bank burned through 8 billion euros worth of recapitalization in the last three, four years. Last night we saw renzis resignation being suspended by the president because they want to get the budget for 2017 done. The hope is they can get that done by the end of next week. We have another five, seven days before we start discussions on the next government here. The clock ticking for banca monte dei paschi. Stick around for a moment. Im seeing flashes from reuters saying banca monte dei paschi top management will hold talks with the ecb and frankfurt on tuesday. Julia, where would the ecb come in here . The ecb has been saying to them we need to see a recapitalization. The deadline given was the end of this year. The question is in light of the political instability were seeing here, will they give banca monte dei paschi more time or the deadline holds and you have to make a decision here, either a private sector solution or we need to go to extreme measures. That will all be part of the discussion. Thank you very much for that. Head online to our blog, worldmarketslive to vote in our poll. Should the worlds oldest bank in operation, banca monte dei paschi siena be protected from going to the wall . Lets discuss this further. Joining me now are dave lau lafferty, and igis. Let me kick things off with you, dave. Do you think banca monte dei paschi should be saved . Coming from the american side, i think thats a little harder to make that argument. One of the advances that weve had in the u. S. Was that we forced some recapitalizations on to the banks. We forced some losses. There were some bailouts, but certainly pain before the bailouts. Another good example is ireland. Irelands Banking System rebounded faster than most others. Mostly because the pain was incurred. I know its the oldest bank in the world and it wont feel good. I think your correspondent nailed it politically its toxic, but at some point losses have to be assigned. Thats how capitalism has to move forward. Politically this would be toxic if some bondholders are not compensated for losses. Many of them, it would flock to the main right parties. This is the fear, this would provide more boost the popularity of the antiestablishment movements, the five Star Movement. It would be quite important for the italian establishment that theres an agreement with the eu institutions that they might be given some leeway to compensate junior bondholders to mitigate backlash that they might see further forward. Do you think the market sees bmps as an isolated story or do you think contagion is fully in place and cant be stopped . Is this something that is contained or cannot be contained . Will depend on how they move forward with the trying to stabilize the political situation. This will necessitate a switch establishment of a caretaker government that can reassure financial markets, so that task will fall to the president , sergio matarelli who prefers political stability. That caretaker government would have to move swiftly with the state intervention, helping some of the more beleaguered banks and trying to move forward with amending the electoral law, so that it would on one hand disadvantage the antiestablishment parties and on the other hand help the mainstream parties. Dave, what do you make of the Market Reaction yesterday when the stocks europe was up, by in large markets shrugged this off. Are we now immune to this sort of Political Risk . I dont know if were completely immuned to t but weve had this Central Bank Put option, as it is referred to, and weve seen it time and time again. We saw the selloff with brexit, immediate rebound in two, three days with the u. S. Election, with president elect trump. I think theres a view that Central Banks will continue to ride to the rescue. Im not sure that moving into 2017 thats a great bet that that will continue. The fed is going to start pulling back at some point. I think some of the other Central Banks, particularly the European Central bank have some scale problems. Theres only so many bonds they can buy. Well find out later this week what any type of tapering or timeline might look like. But i think the reason for these rebounds is this idea that Central Banks will be there to support it. And that continues. Im just not shoe if it continues into 2017. Dave, is it feasible that the ecb would look at tapering, if one of the oldest banks in europe, even if its not the most systemic one or the biggest one, is on the cusp of collapse . I think the expression that we always had in the u. S. Was extend and pretend. I think youll see more of that from the ecb. Its not clear theres a clean political solution or where the capital for some type of private sector bailout would be there. So i think its difficult to see. What the European Central bank will do will just continue along the same path. The idea of extend and pretend, dont rock the markets if a Significant Bank is under pressure. If we see he this extend and pretend from the ecb in conjunction with Pier Carlo Padoan as the new caretaker, Prime Minister of italy, would that be an ideal scenario for italy given those circumstances . It could be, depending on whether they can find a good solution for the banking sector. It is also important to emphasize, even under current circumstances we dont see major risk of swift takeover by populist parties and radical shift in the policy direction of italy. A lot of impediments to this. On one hand, the president will be unlikely or unwilling to call snap elections. On the other hand, theres the fact that the current electoral law is under review by the constitutional court. Even if the event there would be snap elections today, we would we would unlikely see a scenario where the five Star Movement wins both chambers. This would necessitate they cooperate with other parties. The thing that a lot of people fear is a referendum on the euro. They would be unable to find political consensus necessary to organize such a referendum. Thank you very much for this. The latest on bmps. Always breaking news. The board meet hag been postponed until wednesday or thursday according to a reuters source. In france, president Francois Hollande has named a new Prime Minister of france, this after valls threw his hat into the ring for the 2017 president ial race, stepping down from his current role to focus on the run up to next years election. The left wing politician will take part in next months socialist primaries after mr. Hollande said he wont be standing next year. Valls is seen as a more popular choice than his predecessor taking a tougher stance on immigration and security. Let us know whether you agree, disagree with anything you see here, follow us on twitter, streetsignseurope cnbc and tweet me at carolincnbc. Coming up, picking up steam. Could Interest Rates abort the trump train . William dudley tells us how the president elect could affect rate rises. Generosity is its own form of power. You can handle being a mom for half an hour. Im in all the way. Is that understood . I dont know what shes up to, but its not good. Cant the world be my noodles and butter . Get your mind out of the gutter. Mornings are for coffee and contemplation. That was a really profound observation. You got a mean case of the detox blues. Dont start a war you know youre going to lose. Finally you can now find all of netflix in the same place as all your other entertainment. On xfinity x1. Welcome back to the show. Youre watching street signs. Some interesting flashes for you. Ge the German Constitutional Court has said the Nuclear Phaseout law is partially unconstitutional. So Nuclear Power operators can sue the German Government for damages after the phaseout decision. This has been very painful for many of the utilities, including wre and e. On. E. On rising drastically on this ruling, up 5 . Rwe up 3. 8 . South korean President Park will resign he in april, thats according to a top official from her party. Opposition politicians want her to step down as soon as this week and said they have enough votes to impeach the president by friday. Park said she will accept an impeachment but will still wait in the role until april as advised by her party. The reserve bank of australia held its cash rate at 1. 5 . The Australian Central Bank said that a rising aussie dollar might pose risks to the countrys economic transition as it moves away from a resourceled economy. Lets check in on markets in asia. Some dovish comments from them, pauline. They did say they expect inflation to stay low for some time, even though they see price pressures globally. They also said that they were continuing to worry about the housing market. And they saw that prices were still increasing in certain markets, namely cities like melbourne and sydney. Their move was expected. They were expected to keep rates steady. The asx 200 ended up a half percent with financials and materials leading the way. Look at the kospi. Even though theres political turmoil that you mentioned a cup the minutes ago with south koreas president , we saw samsung making up 15 of the index, and that company hit intraday highs as the head of Samsung Group along with executives from nine others testified in Parliament Today in this influence pedalling investigation. They censaid yes, we did give donations to charitable organizations at the request of the government but these were not kickbacks or bribes. Samsung shares hit intraday highs. There the president does face that Impeachment Vote on friday. The hang seng ended up three quarters of a percent, even though this new stock connect had another muted day. Only in day two. We saw mainland investors give a modest take up in terms of the interest in Hong Kong Listed stocks. They invested in 5 of the daily quota allowed for investing in hong kong stocks. Thats a look at how we are ending the day, even though the nifty is up a third of a percent, ending the day in this region. Back to you. Pauline, thank you very much. Bank of England Governor Mark carney has rejected the idea that Monetary Policy has increased fears over globalization. In a speech in liverpool he defended the role of the central bank saying lower Interest Rates benefit lower earnings. If the Trump Administration goes ahead with its planned fiscal stimulus plan, it could prompt the fed to raise Interest Rates faster than anticipated. Thats what new york fed president William Dudley told cnbc. In an exclusive interview wisquk on the street, he characterized the election result as broadly appropriate. I dont think i would make a judgment about where the stock market should be precisely. Ive always been more concerned about where the bond market was when bond yields even a few weeks ago were extraordinarily low relative to the likely path of Monetary Policy in the years ahead. The correction in the bond market probably a bit more overdue. James bullard echoed dudleys sentiment on the bond market in a speech in phoenix yesterday. He said he was not worried about recent bond yield moves. Lets get some final thoughts with dave lafferty. What do you make of bonds at this point . Weve seen such a vicious selloff. Was that it . Investors are always fighting the last battle. Weve been worried about a back up in rates. We dont think the u. S. Tenyear treasury at 1. 30 or 1. 40 back at the february lows represented any real value. As a relative its not a surprise that rates backed up, particularly around some of the Growth Prospects coming out of the Trump Administration. So we sort of saw this coming. Do we think it will continue . Perhaps at the margin but not at the same rate. Again, you always fight the last battle. People look at this 100 basis point backup and think its time to get out of bonds. We think rates will back up another 50, 60 basis points. The Global Economy is not Johnson Johnson<\/a>. And president Francois Hollande<\/a> names a new french Prime Minister<\/a>. Good morning, everyone. Louisa is out at a conference today. We have a jam packed show for you. How about we kick things off with a look at the European Equity<\/a> markets. We are slightly higher for the stoxx 600. Yesterday we shrugged off the italian no vote and renzis resignation. We are seeing weakness in copper prices, crude prices down. Lets see the xetra dax is comfortably higher to 0. 2 . German Industrial Orders<\/a> were up by 4. 9 in october. The biggest rise in more than two years. The cac 40 pulling up to a quarter of a percent. The ftse mib, up by 0. 9 almost, this is after yesterday saw some choppy trading. At one point the market was down 3 , up by more than 1 . It finished the day lower by 0. 2 . The italian banking stocks came under severe selling pressure. In terms of the sectors, i mentioned it before, were seeing some of the oil and gas and basic resources plays underperforming. Financial services down by 1 . Well get to that story in a second. Utilities banks and real estate seeing modest gains of roughly 0. 9 to 1. 6 for utilities. Lets get back to our top story. An increase in the number of Retail Investors<\/a> trading cfds prompted the uk regulator to place stricter rules on the service. The fca says it is concerned with the number of suppliers of cfd trading and the amount of leverage and losses built up by customers. The watchdog said it found that 82 of clients lost money on cfd products during a sample survey. Shares in the spreaders are under significant pressure. Ig group off by 25 . Cmc off by a similar percent, and plus500 off by 31 . Earlier sir john gieve spoke about the impact of the new fca regulations. Its very difficult for people in the Financial Sector<\/a> to realize how little is understood about finance among the greater population. We have had these series of scandals and policies, ppi, which have shown that you do need an active regulator to prevent. At a sophisticated level, theyre not banning these products. There are certainly investors who have a handle on them and know how to use them and can take the chance and balance the risks. I dont think they should get into the banning fear. But, yes, they have to watch out. We had a series of bad scandals in terms of misselling over the last few years. Of course the fca has to be on the job. Just on that story, newman has downgraded cmc shares to a sell warning that rising regulations across europe and the uk would hurt growth and profits. The broker said its rating on ig group was under review. Lets move on and get back to the italian story. Italys political upheaval could affect banca monte dei paschi financial plan. Senior advisers have told bmps to get rid of a state bailout since qatar may consider reinjecting money into the oldest lender. The qatari investor authority is expected to invest 1 billion euros. Shares in bmps this morning, off by he 1 , 18. 48. Julia spoke with the italian finance minister last september and asked him whether he rules out a bailout for bmps. Absolutely. This is total imagination. We are not talking about that kind of money. We are not talking about bailout. We are working within the rules, within the system, which implies strong participation by the shareholders, stakeholders in recapitalizing the banks. This is helped by the fact were putting in place a Legal Framework<\/a> for dealing with mpls, which is more efficient, much faster, more profitable to banks than in the past. Lets get out to julia still covering this story for us in rome. What will the italians do if a private sector solution falls through . Will they have to bend the state aid rules . Thats a good question. Tough to see that at this stage, but remember there was always this escape clause about generally systemic bank that would allow them to bend the rules somehow. At this stage the rumor swirling is were looking at a precautionary recapitalization which would be a bailin of junior bondholders. There would be a repayment of 100,000 euros for each retail bond investor, but in banca monte dei paschi you have 2 billion worth of bondholders. This was seen as politically toxic for this government. They didnt want to see bondholders bailed in in this case because investors had gone to the banks, been sold products and perhaps were not sure of the risks of investing in this product in the first place. You have to separate the idea of a bailin from what could be a fund that the government put together to try to support those that lose money. It would still be politically and incredibly difficult. You heard the current financial minister saying they would do everything they can to try to avoid that. Very difficult given the current setup. The deal signed was difficult whether or not this was a yes vote or no vote. Three different stages, a debt to equity swap, a Capital Raise<\/a> of 5 billion euros, and then the big one, trying to get 20 billion euros worth of nonperforming loans off banca monte dei paschi balance sheet. This deal was always going to be tough, but in light of what weve seen here, future political instability and question marks over the next government and their commitment to protecting the banks, its difficult to see any investor stump up cash, particularly when this bank burned through 8 billion euros worth of recapitalization in the last three, four years. Last night we saw renzis resignation being suspended by the president because they want to get the budget for 2017 done. The hope is they can get that done by the end of next week. We have another five, seven days before we start discussions on the next government here. The clock ticking for banca monte dei paschi. Stick around for a moment. Im seeing flashes from reuters saying banca monte dei paschi top management will hold talks with the ecb and frankfurt on tuesday. Julia, where would the ecb come in here . The ecb has been saying to them we need to see a recapitalization. The deadline given was the end of this year. The question is in light of the political instability were seeing here, will they give banca monte dei paschi more time or the deadline holds and you have to make a decision here, either a private sector solution or we need to go to extreme measures. That will all be part of the discussion. Thank you very much for that. Head online to our blog, worldmarketslive to vote in our poll. Should the worlds oldest bank in operation, banca monte dei paschi siena be protected from going to the wall . Lets discuss this further. Joining me now are dave lau lafferty, and igis. Let me kick things off with you, dave. Do you think banca monte dei paschi should be saved . Coming from the american side, i think thats a little harder to make that argument. One of the advances that weve had in the u. S. Was that we forced some recapitalizations on to the banks. We forced some losses. There were some bailouts, but certainly pain before the bailouts. Another good example is ireland. Irelands Banking System<\/a> rebounded faster than most others. Mostly because the pain was incurred. I know its the oldest bank in the world and it wont feel good. I think your correspondent nailed it politically its toxic, but at some point losses have to be assigned. Thats how capitalism has to move forward. Politically this would be toxic if some bondholders are not compensated for losses. Many of them, it would flock to the main right parties. This is the fear, this would provide more boost the popularity of the antiestablishment movements, the five Star Movement<\/a>. It would be quite important for the italian establishment that theres an agreement with the eu institutions that they might be given some leeway to compensate junior bondholders to mitigate backlash that they might see further forward. Do you think the market sees bmps as an isolated story or do you think contagion is fully in place and cant be stopped . Is this something that is contained or cannot be contained . Will depend on how they move forward with the trying to stabilize the political situation. This will necessitate a switch establishment of a caretaker government that can reassure financial markets, so that task will fall to the president , sergio matarelli who prefers political stability. That caretaker government would have to move swiftly with the state intervention, helping some of the more beleaguered banks and trying to move forward with amending the electoral law, so that it would on one hand disadvantage the antiestablishment parties and on the other hand help the mainstream parties. Dave, what do you make of the Market Reaction<\/a> yesterday when the stocks europe was up, by in large markets shrugged this off. Are we now immune to this sort of Political Risk<\/a> . I dont know if were completely immuned to t but weve had this Central Bank Put<\/a> option, as it is referred to, and weve seen it time and time again. We saw the selloff with brexit, immediate rebound in two, three days with the u. S. Election, with president elect trump. I think theres a view that Central Banks<\/a> will continue to ride to the rescue. Im not sure that moving into 2017 thats a great bet that that will continue. The fed is going to start pulling back at some point. I think some of the other Central Banks<\/a>, particularly the European Central<\/a> bank have some scale problems. Theres only so many bonds they can buy. Well find out later this week what any type of tapering or timeline might look like. But i think the reason for these rebounds is this idea that Central Banks<\/a> will be there to support it. And that continues. Im just not shoe if it continues into 2017. Dave, is it feasible that the ecb would look at tapering, if one of the oldest banks in europe, even if its not the most systemic one or the biggest one, is on the cusp of collapse . I think the expression that we always had in the u. S. Was extend and pretend. I think youll see more of that from the ecb. Its not clear theres a clean political solution or where the capital for some type of private sector bailout would be there. So i think its difficult to see. What the European Central<\/a> bank will do will just continue along the same path. The idea of extend and pretend, dont rock the markets if a Significant Bank<\/a> is under pressure. If we see he this extend and pretend from the ecb in conjunction with Pier Carlo Padoan<\/a> as the new caretaker, Prime Minister<\/a> of italy, would that be an ideal scenario for italy given those circumstances . It could be, depending on whether they can find a good solution for the banking sector. It is also important to emphasize, even under current circumstances we dont see major risk of swift takeover by populist parties and radical shift in the policy direction of italy. A lot of impediments to this. On one hand, the president will be unlikely or unwilling to call snap elections. On the other hand, theres the fact that the current electoral law is under review by the constitutional court. Even if the event there would be snap elections today, we would we would unlikely see a scenario where the five Star Movement<\/a> wins both chambers. This would necessitate they cooperate with other parties. The thing that a lot of people fear is a referendum on the euro. They would be unable to find political consensus necessary to organize such a referendum. Thank you very much for this. The latest on bmps. Always breaking news. The board meet hag been postponed until wednesday or thursday according to a reuters source. In france, president Francois Hollande<\/a> has named a new Prime Minister<\/a> of france, this after valls threw his hat into the ring for the 2017 president ial race, stepping down from his current role to focus on the run up to next years election. The left wing politician will take part in next months socialist primaries after mr. Hollande said he wont be standing next year. Valls is seen as a more popular choice than his predecessor taking a tougher stance on immigration and security. Let us know whether you agree, disagree with anything you see here, follow us on twitter, streetsignseurope cnbc and tweet me at carolincnbc. Coming up, picking up steam. Could Interest Rates<\/a> abort the trump train . William dudley tells us how the president elect could affect rate rises. Generosity is its own form of power. You can handle being a mom for half an hour. Im in all the way. Is that understood . I dont know what shes up to, but its not good. Cant the world be my noodles and butter . Get your mind out of the gutter. Mornings are for coffee and contemplation. That was a really profound observation. You got a mean case of the detox blues. Dont start a war you know youre going to lose. Finally you can now find all of netflix in the same place as all your other entertainment. On xfinity x1. Welcome back to the show. Youre watching street signs. Some interesting flashes for you. Ge the German Constitutional Court<\/a> has said the Nuclear Phaseout<\/a> law is partially unconstitutional. So Nuclear Power<\/a> operators can sue the German Government<\/a> for damages after the phaseout decision. This has been very painful for many of the utilities, including wre and e. On. E. On rising drastically on this ruling, up 5 . Rwe up 3. 8 . South korean President Park<\/a> will resign he in april, thats according to a top official from her party. Opposition politicians want her to step down as soon as this week and said they have enough votes to impeach the president by friday. Park said she will accept an impeachment but will still wait in the role until april as advised by her party. The reserve bank of australia held its cash rate at 1. 5 . The Australian Central Bank<\/a> said that a rising aussie dollar might pose risks to the countrys economic transition as it moves away from a resourceled economy. Lets check in on markets in asia. Some dovish comments from them, pauline. They did say they expect inflation to stay low for some time, even though they see price pressures globally. They also said that they were continuing to worry about the housing market. And they saw that prices were still increasing in certain markets, namely cities like melbourne and sydney. Their move was expected. They were expected to keep rates steady. The asx 200 ended up a half percent with financials and materials leading the way. Look at the kospi. Even though theres political turmoil that you mentioned a cup the minutes ago with south koreas president , we saw samsung making up 15 of the index, and that company hit intraday highs as the head of Samsung Group<\/a> along with executives from nine others testified in Parliament Today<\/a> in this influence pedalling investigation. They censaid yes, we did give donations to charitable organizations at the request of the government but these were not kickbacks or bribes. Samsung shares hit intraday highs. There the president does face that Impeachment Vote<\/a> on friday. The hang seng ended up three quarters of a percent, even though this new stock connect had another muted day. Only in day two. We saw mainland investors give a modest take up in terms of the interest in Hong Kong Listed<\/a> stocks. They invested in 5 of the daily quota allowed for investing in hong kong stocks. Thats a look at how we are ending the day, even though the nifty is up a third of a percent, ending the day in this region. Back to you. Pauline, thank you very much. Bank of England Governor Mark<\/a> carney has rejected the idea that Monetary Policy<\/a> has increased fears over globalization. In a speech in liverpool he defended the role of the central bank saying lower Interest Rates<\/a> benefit lower earnings. If the Trump Administration<\/a> goes ahead with its planned fiscal stimulus plan, it could prompt the fed to raise Interest Rates<\/a> faster than anticipated. Thats what new york fed president William Dudley<\/a> told cnbc. In an exclusive interview wisquk on the street, he characterized the election result as broadly appropriate. I dont think i would make a judgment about where the stock market should be precisely. Ive always been more concerned about where the bond market was when bond yields even a few weeks ago were extraordinarily low relative to the likely path of Monetary Policy<\/a> in the years ahead. The correction in the bond market probably a bit more overdue. James bullard echoed dudleys sentiment on the bond market in a speech in phoenix yesterday. He said he was not worried about recent bond yield moves. Lets get some final thoughts with dave lafferty. What do you make of bonds at this point . Weve seen such a vicious selloff. Was that it . Investors are always fighting the last battle. Weve been worried about a back up in rates. We dont think the u. S. Tenyear treasury at 1. 30 or 1. 40 back at the february lows represented any real value. As a relative its not a surprise that rates backed up, particularly around some of the Growth Prospects<\/a> coming out of the Trump Administration<\/a>. So we sort of saw this coming. Do we think it will continue . Perhaps at the margin but not at the same rate. Again, you always fight the last battle. People look at this 100 basis point backup and think its time to get out of bonds. We think rates will back up another 50, 60 basis points. The Global Economy<\/a> is not Strong Enough<\/a> to support significantly higher rates at this point. What about the rate sensitive twoyear . Currently the market is pricing in two hikes or so for next year. Weve seen in the past theres a mismatch between what the market is pricing in and the fed. Should the market price in many more moves . I dont think so. Ive looked at the twoyear and fed expectations, ive been surprised at how pessimistic the market has been. The markets have been correct by in large. Now today i see pricing in two moves. This seems broadly appropriate. If you we wind the clock back to last year, the market was pricing in four tightening, we saw a major selloff through the february 11th bottom. That brought expectations back, particularly when q1 and q2 gdp never materialized. Do i think well get more rate hikes next year . Yes, but were probably not going to get many more than two. This is a cautious fed. Dave, whats your playbook when it comes to overall Asset Allocation<\/a> for 2017 . More of the same . More of 2016 . More Political Risk<\/a> . More volatility . I think more Political Risk<\/a>. Our two big themes next year are more volatility and as importantly more dispersion in the markets. Markets have been trading risk on and risk off. Youll see a real divergence in Company Specific<\/a> results. Some companies are more sensitive to higher inflation and can pass it through, some cant pass it through. Some companies are more sensitive to higher Interest Rates<\/a> based on their balance sheet. Some companies are more sensitive to labor demands and wages rising than others. Now that these things are all changing, you will see more dispersion. Those are two of our big themes for next year. Your top trade, u. S. Equity markets or eu . Can they make a comeback . We he probably like european equities based on valuation and maybe a currency headwind. We dont think the dollar will strengthen as much as other folks do. But at the margin its he a tailwind to europe and other nonu. S. Equities. Thank you very much for that. Dave lafferty. Were going for a quick break. Check out our blog, World Markets<\/a> live. Well be back in two. Welcome back. Youre still watching street signs. Im carolin roth. These are the headlines. Betting against the spreadbetters, shares in ig and cmc lose a quarter of value as the uks watchdog cracks down on cfd trading. Shares in banca monte dei paschi siene fall after qatar reportedly reconsiders the private sector recap. And sanofi reportedly eyes a bid for swiss biotech giant actelion while hedge funds continue to bet on a rival offer from Johnson Johnson<\/a>. And president francois hol lapd names Bernard Cazeneuve<\/a> as the new french Prime Minister<\/a> replacing manuel valls who is running for president. Good morning. Lets look at what u. S. Futures are doing, even though were 4 1 2 hours away from the start of the trading session. The s p 500 seen fractionally higher. The dow jones set to add less than 1 . The nasdaq higher to 3. 71 points. Stocks did finish higher in yesterdays trading session. The dow posted a record intraday and closing high. The nasdaq had its best day in three weeks. European markets this morning are mixed. Seeing buying in germany, the cac and ftse mib up by 0. 9 after shedding 0. 2 yesterday with all the volatility around the referendum trade, the banking stocks falling hard. The ftse 100 is off by 5 points or so given the crackdown on some of the spreadbetters. We are seeing oil and gas and some basic resources plays underperforming. In terms of the currency markets, actually a really quiet day when it comes to the dollar and euro what a session the euro had yesterday. Volatile after the italian referendum. Fell to 1. 05 last night and then jumped to 1. 08. Now the focus squarely on the ecb. Euro dollar at 1. 0766. In bond markets, yields in the u. S. Falling in choppy trading yesterday. Traders seeing the selloff post trump as a bit overdone. The yield at 2. 379 . The italian yield did cross the 2 threshold yesterday but back below the 1. 93 is where we currently are. Yesterday we saw a rise of 8 basis points. The government asked the Supreme Court<\/a> to make a decision the ordinary man and woman would understand setting out its argument for why he it should be allowed to use its privilege powers to activate brexit. The government attorney argued these powers were a key part of the constitution. Its day two of the governments appeal after the High Court Ruled<\/a> last month that mps must be consulted before triggering the uks exit from the eu. The uks Financial Sector<\/a> paid 71. 4 billion pounds in taxes last year indicating the scale of the impact of brexit. This marked the highest level of tax continued bugs tax contributions during the nine years the survey has run. Lets get out to howard shore, chairman of Shore Capital<\/a> joining us fromm the Milken Institute<\/a> in london. Mr. Shore represents a pro brexit view. Thank you very much for joining us. How do you reconcile the view that you were in favor of exiting the eu, but at the same time you run a small boutique finance firm . Im looking at the longterm benefits to the uk. I think the big question is how do we take advantage of brexit . Do we deregulate and become the si singapore or hong kong of europe . Its a fantastic opportunity, and you need to frame the arguments in the next 10, 20 years, not the next 10, 20 months. The Financial Sector<\/a> is at considerable risk of losing its passporting rights to the eu. How would that be beneficial for the Financial Sector<\/a> . I had the strong view that well have continued access to the Single Market<\/a>. I think its akin to a divorce settlement. Europes moving in our direction. We saw that with the italian vote. This issue over freedom of movement is, in my view, going to be a nonissue because europe wants the same as us. The solution is quite clear, well continue to pay money into the eu, well be ability to control our own borders, well be able to take back sovereignty, and well continue to have some form of access to trade in the Single Market<\/a>. Its clear and obvious to most sensible people. So, mr. Shore, essentially you have a blue sky scenario in which you are able to cherry pick. The eu said why is that cherry picking . Can you explain why its cherry picking when we simply can i finish . Yeah. Theres no plausible explanation why you shouldnt be ability to continue trading freely simply on the basis that you control your own borders. Theres no person i think who is sensible in france or italy, the italian voters on sunday would not be saying i cant sell my wine to the uk simply because they want to control their own borders. The people simply do not think he the same as these elected politicians, and the politicians are starting to yanked now what the people think on this issue. The eu has made it very clear that they there will be no cherry picking in the sense of keeping access to the Single Market<\/a> while at the same time limiting immigration. I want to move on and talk about the Supreme Court<\/a> battle. Yeah, but the eu are not the elected officials that are ultimately going to determine the fate of europe. I want to move on and talk about the Supreme Court<\/a> battle. The verdict will be out in january. Of course. Regardless of what this outcome is, do you think that brexit will still be brexit . Ie, were looking at a hard brexit . I think its not a question of hard or soft. Which ever way the Supreme Court<\/a> goes, i dont think ultimately it will make that much difference. Might make a small difference to timing. Because i dont think theresa may will grant concessions to her own mps. I think shell say this is the vote. Please vote on it, i think shell face down her own mps and theyll fall into line. How has your business performed since brexit . Weve seen a strong improvement in the sentiment in Capital Markets<\/a> over the last month. A lot of that is associated with the change in sentiment in the u. S. I always say its the most powerful force, whats happening in the u. S. Weve done four placings in the last month and participated in the Capital Raising<\/a> of over a billion dollars. Business is getting on as usual. The consumer is demonstrating their confidence. October sales were the biggest increase in 14 years. Were expecting a strong christmas. Analysts in the retail sectors are confidently predicting a strong christmas. Business sentiment is following that. Are you saying theres been no caution when it comes to the pipeline here in the uk . Im saying there was an interruption in the summer, im saying that business has come back. Weve raised over a billion dollars or participated in placings of over a billion dollars in the month of november. And the Capital Markets<\/a> have returned to doing business in a normal basis. Do you think that uk businesses can ultimately benefit from the weaker pound, not just because of the translation effects but also because theyre seen as more attractive to outside buyers . The u. S. Companies must be rubbing their hands because they have a strong dollar and can easily snap up some uk businesses. Thats one thing were focusing on as a theme for 2017, the lower pound will attract inward investment, particularly to smes that have been relatively left behind he in the stock market rally and where theres lots of value. I see private equity activity and corporate activity to agree with you. I think its a sector to focus on for 2017. Howard, thank you very much for your time. Howard shore, chairman of Shore Capital<\/a>. Switching to another high profile conference, were looking ahead to the fifth annual london event which will be held on thursday and ge m a will be at that conference and joins us now. Who is attending . The most high he profile speaker is christopher hone from tci, the founder of that a well known activist. He has a private equity style, other people say he activist. Longterm value investor. One of the most interesting things hes been working on this year is volkswagen. He is insistent management needs to change its compensation structure. Its interesting that at these conferences, all these big investors come out with big calls for next year. If you look at some of the calls made last year, how did they perform . Good news is theres room for improvement. Definitely well be asking the same question next year and hopefully more positive results. One of the more positive ones, sylvain macil. Let me explain the conference. You get up, pitch an investment idea, you explain your rational, long or short. So he chose a long and a short. His long was rolls royce which has done well since last years conference. He bet on the resurgence of the industry. Thinks it has strong i dynamics and that the profits were overdone, so they werent getting the correct focus from investors. He also had a short in ericsson which has also performed well 678 he looked at the overall industry and thought there were negative dynamics. Theres one controversial name, carson block, the founder of muddy waters. He was successful with one of his calls . Efrnl he was initially. He said he would short proof point. That went down for the first two months, exactly in line with his thesis this is a cybersecurity company. His thesis was they have competition from serious players from microsoft, for instance, and pricing is one of the ways they make their money. They have Premium Products<\/a> which theyve had to discount recently. It went down in line with his thesis. Since then its rebounded. The share price now is actually higher than when he made the call. Well wait and see on that one. And the most unsuccessful call made last year . Michael cache last year from hunter park investments. His call, again, time frame, he had the same idea as macil did, he took a company which had profit warnings and thought this is the turning point it will turn around. His firm was a publishing firm, and now the problem with this firm is that the threat from digitalization, which he thought was overdone, has turned out to be very real. So thats had quite an unfortunate year, down by 50 since he made the call. Wow, 50 . Cant always go up, right . Thank you very much for that. Have fun at conference. Still coming up, the art of the deal. United Technologies Co<\/a> tells cnbc how he got a good deal with donald trump to save jobs at the companys carrier plant. That and more on president elect trumps evolving policies. Welcome back to street signs. The merry go around around actelion. Sanofi is reportedly making a bid for actelion creating competition for Johnson Johnson<\/a> who made a bid last month for the swiss biotech company. Sanofi has not yet decided if it will go ahead with an offer. None of the companies have commented on the latest report. Lets look at actelion, 2. 0840. The last six months un26 . Amazon launched a Grocery Store<\/a> without quese. Customers scan in the storm with an app. The store will open to the public early next year. The wall street journal reports that it is just one of at least three brickandmortar formats being explored by the online retailer. According to sources, amazon is working on two types of bigger stores, including a store with Curbside Pickup<\/a> and a drivethru option. Deutsche post expects to deliver more packages this holiday season. Amazon is seen as a partner, not competition. We have got a deal with the union last year for the entrance, a different level now. More competitive for our parcel business Going Forward<\/a> because we have a level which is more competitive. Still at the upper end of the market, but significantly lower than the average seller. Amazon is an important partner and customer for us. We believe as long as we are the edge for innovation and service quality, we have the right to serve many customers including amazon. Deutsche post is working on drones also. So maybe come next year or the year after your christmas press he sent from amazon will be delivered by drone. The current bull market is three months from turning eight years old and one month from becoming the longest on record but behaving as if its much younger. Reporter the current bull market in stocks is old by historical standards. At the moment it refuses to act its age. The market run that began in march of 2009 is nearing its eighth birthday. In recent months the sector doing best is among the usual leaders. Smaller riskier stocks have surged ahead, railroads, ate toes, hotels and banks are the biggest winners. Very few of the typical hallmarks of an older market advance have emerged. So what explains the youthful behavior of such a mature bull market . The rapid shift towards more cyclical, faster moving stocks reflects a strong run of mick data on jobs, spending and business spending, along with optimism about possible tax cuts, fiscal spending and deregulation under a president trump. Some market watchers argue that the bull market is not truly as old as it looks. A bull market is usually considered in effect until the broader s p 500 index falls 20 . The index nearly got there in 2011 and in late 2015 and early this year global equities, small cap shares and most industrial stocks all dropped 20 . In any case, the s p has generally gone sideways for nearly two years. By this view the market had a rest and a retrenchment that might have refreshed buying interest in stocks that rely on Stronger Economic<\/a> growth what it means for future returns is hard to say. Decemb stocks did not become notably cheaper due to corporate profits and its unclear how much higher Interest Rates<\/a> can climb without slowing down the economy and affecting stocks. For the moment, investors are enjoying a longrunning bull. Head to cnbc. Com for more on the equity bull markets fountain on youth. James bullard has warned president elect trump should not design fiscal policy as if the United States<\/a> economy is in crisis. Speaking at a luncheon in arizona. Bullard says policiy ies intend to boost infrastructure and overall the tax code may have impact but should not be viewed as Counter Cyclical<\/a> measures. Charles evan echoed bullards view arguing that you dont need explicit stimulus given the Unemployment Rate<\/a> is so low. Last week dropping to a nineyear low. Warren Buffetts Berkshire<\/a> hathaway he could receive a 29 billion boost from the president elects proposed Corporate Tax<\/a> cuts. Trump proposed slashing the tax rate from 35 to 15 , lowering berkshires net Tax Liability<\/a> to 21 21. 6 billion from previously 50. 5 billion. United Technologies Co<\/a> brett says he got a good deal to keep more than 1,000 jobs at the companys indiana plants from moving to mexico. He said well do a lot of things with this country that will make it more conducive to manufacturing, well reduce the tax rate down, when all that happens you will be printing money, but i need you to relook at your decision of closing the factory. Nelson peltz has told cnbc that the Corporate Tax<\/a> reform will encourage more companies to come back to the u. S. And invest in american jobs. If he gets the tax reductions hes talking about, well have more employment, more companies coming back to the United States<\/a>, whether they have gone to ireland or theyre still in america and they have got their tax shelters in switzerland or holland or but this idea president elect trump has announced he is nominating onetime rival ben carson for secretary of housing and urban development. This after carson removed himself from consideration from serving as secretary of health and Human Services<\/a> last month with his spokesperson saying carson does not feel like his life and career had prepared him to run a federal agency. Nbc news has learned the president elects phone call with taiwan last week was long in the works. We get more from kirsten welker. Reporter new signs tonight that president elect donald trump knew exactly what he was doing when he held a call with the leader of taiwan last friday, breaking decades of u. S. China protocol. While top officials publicly insist the call was congratulatory this was a moment of courtesy. Reporter a high level source familiar with the issue tells nbc news that mr. Trump talked with top advisers about establishing contact with taiwan for months. Jon huntsman now being eyed as a possible secretary of state, says it is a smart move. Youve got a businessman who has become president of the United States<\/a> who understands real leverage and how to find real leverage. Reporter for his part, mr. Trump has been unapologetic tweeting did china ask us if it was okay to devvalue their currency . We cant continue to allow china to rape our country. Reporter today china firing back. The staterun newspaper writing creating troubles for the china u. S. Relationship is creating trouble for the u. S. Itself. China policy experts say this is a shakeup. Trump is trying to change china policy, and it is a major reset. He is challenging the assumptions that are decades old. Reporter but others warn the move is risky. It doesnt make sense to me that donald trump should want to start his presidency with a serious crisis with china. I dont see where that gets us. Reporter a sign the call with taiwan was likely no blunder. For trump this is classic part of the deal. Put china on warning. You better watch out. Things will be different now. Before we wrap things up a quick look at the European Market<\/a> action. Fairly mixed picture. The ftse 100 down by a couple points after the fca, one of the financial regulators in the uk, cracked down on some spreading companies. The xetra dax up by 0. 1 . German industry orders rose for the first time in two years, and the ftse mib higher by 1. 2 . U. S. Futures look like this. Mildly positive. The s p 500 seen up by less than one point. Thats it for today. Im carolin roth. Worldwide exchange is up next. X generosity is its own form of power. You can handle being a mom for half an hour. Im in all the way. Is that understood . I dont know what shes up to, but its not good. Cant the world be my noodles and butter . Get your mind out of the gutter. Mornings are for coffee and contemplation. That was a really profound observation. You got a mean case of the detox blues. Dont start a war you know youre going to lose. Finally you can now find all of netflix in the same place as all your other entertainment. On xfinity x1. Good morning. Breaking economic data. A new read on eurozone growth straight ahead. Italys instability today brings more uncertainty as renzis resignation has been delayed. And the United Technologies<\/a> ceo who went head to head with the president elect said there was no quid pro quo for carrier. Its tuesday december 6, 2016. Worldwide exchange begins right now. Good morning. Welcome to Worldwide Exchange<\/a> on cnbc. 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