Transcripts For CNBC Worldwide Exchange 20151008 : vimarsana

CNBC Worldwide Exchange October 8, 2015

She does not support his Transpacific Partnership pact as she outlines her campaign to take on wall street if she becomes the democratic candidate. Not so fast. The japanese retailer misses profit forecasts on impairment losses. A poll tile session yesterday but on this thursday morning looks like the dow is kicking off today on a four day winning streak so well see if the streak and the run continues. Fair value is telling us it should be up to 13 points and the dow jones pricing in triple digit losses so were 115 points below fair value. The nasdaq should be seeing losses of 32 and change but today the story in europe is all about the banks. European banks paired back some of their losses after some steeper declines to kick off this thursday morning and this stems back from Deutsche Bank. Theyre going to issue official earnings later on this morning but germanys largest bank said well tell investors what is going on and stunning the market with a record 6 billion euro loss and exercise in kitchen sinking it. Outlining a slew of charges that may cost them the dividend this year. Total charges topping 6. 2 billion euros. Whats behind all this pain for Deutsche Bank . Its not a surprise. They have been trying to change the strategy at the bank and were looking at declining fees when it comes to Corporate Banking and most of the pain comes from the 5. 8 billion euro impairment charge. And this includes a write down on the post bank state. They also set aside more funds from Legal Provisions Going Forward and logged a write down on the 20 stake in a chinese lender. So as you see, lots of headaches swirling for them still. Absolutely. Lets discuss this further. Carolyn is just joined around the desk as well. We were expecting a much bigger fall in the share price . Yeah. We were. That was to be expected. Yes the divy may be cut completely and what able lists were expecting was a 75 Cents Per Share for this year and that may be scrapped completely and also these write downs are so big it did come as a surprise. We knew some write downs were going to come but we didnt know the full extent of it but then during the course of the morning we saw quite a rebound in shares and theyre up by 1. 2 off the session highs. They were as high as 3 . Why is that . It has to do with capital. If theyre cutting their dividend this year that would give them 1 billion euros to fill their capital hole. They would still have a ratio of around 11 . That wouldnt be so bad. It wouldnt be great. It would be somewhere in the middle when it comes to european banks but the fears of an imminent capital hike are receding and it to quote this morning, the stock is priced for recapitalization if the new ceo can convince shareholders that they can do without a capital hike well then he sees upside for the shares. Im also looking at a note from citi. Their analysts think a capital hike might still come but only in 2016 once the strategy and the restructuring is bed down. Who knows, indeed. Thank you for joining us as well. Quite an interesting swing in sentiment from 12 hours ago before the markets opened to today. Whats your view on why the share price is now up . Well, i guess the key date from here is the 29th of october when the chief executive will highlight the 2020 strategy which the strategy was known to the announcement to previous management with with an almost astonishing lack of data. So the chief executive is taking its time to review the bank and i think of the big number, the total charge, we were expecting it down to Deutsche Bank because when they require it in 2011 the value is clearly different from the value they could fetch. Its intriguing the evaluation which may signal that they cut the activity. Demonstrate that theyre all about capital and out to the third potential. Do you think the market woke up and thought wait a second, this is mostly an accounting loss and not a real loss . Theyre expected to make a billion euros in the nine months. No. If you look at the net profit for the year on the nine month its 1 billion euro. Youre starting for the european markets quite a weak quarter. So in terms of operation theyre getting that so you remember the First Quarter it was good and very bad in terms of cost to income with the cost to income at 85 versus the 65 aspiration. How much do you care about the announcement that was made last night . Its got huge implications for the shareholders. If we do see that cut in the dividend but for bond holders what does it mean . It gets a little bit tied, the 81 bond holder which is a convertible with a write down feature and they set aside Something Like 2 billion euros in reserves out of which they could pay the dividend and of course they do something on bonuses and either reduce the bonus pays to the staff then you may be a strik i can poitricky y paying it. Is this something you would be earning . No, we dont have recommendation. We look at the debt security. The clear trend is more capital which could come by cancellation or dividend. Or potentially a write down the line if need be. Okay. Thank you so much for joining us. Much appreciated. Senior credit analyst. Lets just check in on what european markets are doing now and we have slipped into the red as you can see. The ftse 100 down 0. 4 . Germany and france down a little less than that. Italy still managing to get a little bit of a gain. Of course we had a strong start to october following a weak Third Quarter. October did see five or six trading days of gains in the last day or two we just slipped a little bit off that. The euro stocks on a four day winning streak as well. Lets talk about earnings from japan. This is a brand that virtually every developed market recognizes. The unique brand of clothes owned by fast retailing and the Parent Company fast retailing profit missing forecast due to a one off 16. 1 billion yen impairment loss. Back to its j brand label and unique low u. S. Store closers. We had it falling in participation of the earnings which came out after the bell in tokyo. Lets bring in sri and i would say given corporate earnings in japan they have been strong but when it comes to consumer names its indemic of the entire industry. We have that happening around april 2016. The second recession in two years in japan. Thats true. So its interesting to look at fast retailing because its a proxy for the broader japanese economy and the consumer as well. So sox and jocks. An indicator for japanese consumer spending. The brand inturn generates 47 of its sales from japan. So what this is telling you is that the japanese consumer isnt necessarily firing on all four cylinders. Yes we have seen Capital Spending increase at japanese corporates to, in a way, unleash that cycle and trickle down effect into the consumer and getting to that 2 inflation target but its looking so elusive isnt it . The ball is in the court of the boj. They didnt move this week and i think they very well could on october 30th. Thats when they update their economic forecasts and inflation data. If theyre on the down side at a could very well build a case for more policy support. Yeah and they have stores all around the world. New york, japan, hong kong and china. What does this say about the global macro conditions if theyre not selling as much thermal underwear as they used to. Well its telling you very starkly that were seeing emerging market stress but in the shortterm its interesting to see the price action, isnt it . We all know the impact from the post payrolls disappointment. So the fed interrupted to a certain degree and thats giving emerging market assets something of a respite and youre seeing that in some of these very emotions battled currencies as well. But its still very early days. The fed is going to tighten. Were going to be in a high rate environment and theres going to be volatility associated still to come. Whether were in the early innings of that. We dont know if theyll tighten for sure. No, we do not. They are saying they should be easing more because were not getting close to the financial crisis. I agree with you. Were probably most likely. But most importantly if and when they do its going to be the pace of tightening but a lot of these em assets and markets are looking at. I like it when you say stocks and jocks you look directly at wilf. Well, were men of the world. Thats right. Well give you a run down of what to watch for on this trading day. Weekly jobless claims are due out at 8 30 a. M. Eastern time expected to drop slightly and then at 2 00 p. M. The minutes from last months fed meeting which could give us an indication at just how close that call was not to raise Interest Rates. Three fed officials are speaking today so its busy for fed talk. St. Louis fed president James Bullard. Kocherlakota and williams are on deck and Dominos Pizza reports before the open and alcoa kicks off. Earnings season once again. Its that time already. Theyll announce before the bell. Lets have a look at the top stories today. Dell and silver lake are in advanced talks to buy emc. A deal that could be reached within a week would be the largest tech takeover ever. Emc is worth about 50 billion although a large part of that is from the companys 80 stake in vm wear. They rose 8 in after hours while vmware was up 1 . Theres the price action in germany today. Its similar for both although vm ware fractionally below flat. Costolo has a new gig already. He scored a job with silicon valley. The hit hbo sitcom about six young men that create a tech start up. Well, he is a contributor to the program working on its upcoming third season. Silicon valley creator mike judge says he consults on story lines. Costolo is no stranger to comedy. He did improv in security before moving to the bay area and then becoming twitters ceo. Thats multitalented. Ive never seen that show. I havent yet but i heard its very good and a very accurate portrayal of tech start ups. Trying to get funding and all. Its one ive got to get to. Speaking of getting to, lets talk about sony beating it. 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Com the biggest take over in tech in a play for emc and fast retailing takes a hit as it misses profit forecasts due to impairment losses. Lets check in on european markets. Were in the red only slighting losing a little bit of ground. Were up plflat about an hour o so ago. Theyre all a few bases points below flat. Italy to bear out gains. We started october positively for european markets. So a little bit of decline today. Not too significant. Were on a four day winning streak for the dow. S p is up six out of the last seven sessions. U. S. Futures are selling us were in for a lower start today with the implied open pricing in declines of 10 points. At one point lower by triple digits so pairing back some of the losses and we may be 88 points below fair value and the tech heavy nasdaq should be seeing declines of 24 points and change. Lets talk about the Global Conditions and joining us now we have the Global Equity strategist at hsbc joining us today. Thank you so much. Ben, what do you think about the world right now . We are on a winning streak of sorts in europe. Fourth straight day of gains for the europe stoxx 600 and the dow is on a winning streak so this might have just been a correction and not a bear market. We had a big correction globally. 15 . You havent seen many of those globally. Traditionally markets will bounce back from that and a big change in fundamentals and we dont think fundamentals changed here. The fed was going to make a policy mistake and be reemptipre here raising rates and people are concerned on global dproeth out growth out of china and we see room for markets to move higher here but its one of a low growth world with relatively high multiples so i wouldnt overdo how far markets can run here. You said it right there. This is a low growth world with high multiples particularly looking at the u. S. Maybe the fundamentals havent changed but have investors just woken up to how challenging an environment were in . Particularly if rates are going to go up given where valuations are after 6. 5 year bull market . We had some what of a bull pack here. Your Global Equity premium evaluations are clearly 15 . Its some what more reasonable. Bond yields stayed low here and could actually come lower and thats clearly going to be we think supportive for equity multiples. But i think most importantly in this low growth world you want to go looking for growth and the regional divergences are important here. Were in this 2 to 2. 5 u. S. Gdp range where somewhere like europe were seeing earnings accelerating quite nicely. The highest earning growth in the world. We think that consensus number is far too low and were at the beginning of a multiyear earnings cycle and were looking at a relatively low Economic Growth world and you have to be focused on where the Earnings Growth is going to come through and europe is our focus here. Yeah. Thank you so much for your tile. Well take a break here on Worldwide Exchange. Still to come on the program, wall street is under fire. Stay tuned to hear how Hillary Clinton proposes a crack down on financial risk taking. Care of my heart. Thats why i take meta. Meta is clinically proven to help lower cholesterol. Try meta today. And for a tasty heart healthy snack, try a meta health bar. Hillary clinton will unveil a plan to curb the abuses on wall street. Lets get out to tracie potts standing by in washington d. C. Good morning, she is also making headlines because she has rejected at least so far the Transpacific Trade Partnership that president obama has been pushing and that she as secretary of state backed and laid the ground work for. She is worried about the impact of american jobs. That puts her on the side with Bernie Sanders and against joe biden. Were also following donald trump. He and marco rubio will both be in nevada. Trump remains at the top of the polls for republicans. He even says its about time for his numbers to level off. Meantime, rubio is number three in the latest florida poll and hes in a battle for support with jeb bush there. Bush talked about rubios lack of experience. Rubios response, its not a big deal. Take that. Thank you so much. Lets take a look at the headlines coming through in ab inbev and theyre trying to push through its take over of sab miller. Well they rejected that offer and ab inbev coming up today saying they intend to work proactively to resolve any of these anticompetitive issues in this deal and theyre surprised that the board of sab miller continues to say this proposal still very substantially undervalues sab. They is repeatedly offer to Share Analysis with sab miller and advisors each time they refused to engage with them but this is the third time and every time they increased the offer but sab refusing on this merger still calling it substantially undervaluing the company. Sony is moving ahead with plans to sell half of its Music Publishing units. They held the business with Michael Jackson and the pop stars estate after his death since 1995. So its estimated that its worth around 2 billion. Sony triggering an exit clause allowing one partner to buyout the other. They own the right to most of the beetles songs as well as marvin gaye and taylor swift. Lets check in on shares. Tokyo down 1. 5 . Lets quickly get to baseball and continuing his stellar run and the chicago cubs shut out the Pittsburgh Pirates 40. 40 advancing to the National League division series. Pitching a complete game shut out. Scattering for hits and striking out 11 pirates. The cubs ace is unbeaten and has allowed only four earned runs in his last 97 innings pitched and the nhl season kicked off with the defending stanley cup champions Chicago Blackhawks raising their latest stanley cup banner to the rafters. However the rangers jumping to an early 30 lead. Lundqvist making 32 saves and the rangers held on for the 32 win last night. Lets check in on the futures. U. S. Market futures after the continued winning streak yesterday. Welcome to Worldwide Exchange. Here are your headlines from around the world. Deutsche bank shares rally out of the red after a record 6 billion euro loss. The largest lender taking a massive write down and warns it may scrap its dividend. A deal for dell. Rumors swirl that the pc giant is in talks to buy Data Storage Firm emc in the largest tech deal ever. Hillary clinton takes on wall street. The democratic president ial front runner is planning to unveil a sweeping plan today to tackle abuses in the finance industry. Strike averted. Fiat chrysler reaches a temporary deal with the United Auto Workers union to avoid a stoppage sending shares higher. Good thursday morning. Thank you for joining us. Lets track the markets and how theyre fairing ahead of the u. S. Open. We had the dow on a four day winning vehicle. Also the s p up six

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