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tv   Street Signs  CNBC  July 9, 2019 4:00am-5:00am EDT

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good morning and welcome to street signs these are your headlines >> basf shares sink and they blame the u.s./china trade war deutsche bank shares extend losses as the german financial giant begins to cut global jobs and the cfo warns of significant uncertainty over breaking even
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in 2020. and the online grocer delivers a confident outlook after a fall in first half earnings and former ecb president throws his weight behind christine lagarde's nomination telling cnbc that she is a born leader >> i'm sure that she will do it well not only because she has knowledge and experience, but also because she's a good team leader she's always been a good team leader and don't forget, central banks are key. well, a very warm welcome to "street signs" this morning. let's get right into the top corporate story of the day which is driving a lot of the moves in equities more broadly and that is basf. shares are sharply lower after the company issued a profit warning for this year.
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the german firm expects earnings to fall by up to 30% sales are also set to fall instead of growing basf had early planned to slash 6,000 jobs as part of its cost cutting strategy and taking a look at basf shares this morning, down more than 6%. in terms of theismi ichis ichiis analysts were expecting -- were already expecting downgrades, already expecting a weak quarter, but this profit warning was massive relative to expectations jpmorgan down graded the stock to neutral and they are flagging potential concerns around sustainable of their dividend. and on the other hand, the bullish side of this warning, this puts pressure on management to turn around what the market is saying is an underperforming
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conglomerate in terms of the drivers of the warning, it is lower global weaker auto sales in particular in china and also weaker ad in the u.s. so that can be sx trap latk cano the broader sector overall raising concerns area of autos and china. let's take a look at autos on that note. daimler down more than 2%. across the board losses in the auto space monday night we had a profit warning. so all-together this is painting a fairly negative picture when it comes to autos and chinese
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demand for autos >> as you mentioned, a lot of s posse exposure to china. and singl singling out the trad. now they are in deep negative territory. a huge down grade for the sector no wonder they are down 6% today. >> really seeing the macro head winds translating into hitting corporate earnings i think that is why we're seeing a negative sector. >> and another reason are focusk shares extending monday's slide. you can see down more than 3%.
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thousand employs of employees are either awaiting their fate or have already been sent home remember yesterday the stock was down more than 6% in trading optimistic, ambitious, radical, these are just some of the reactions deutsche bank's major overha overhaul questions remain over sxug and future he revenue growth we're following this story closely. and we were speaking about this literally 24 hours ago and we had seen a positive reaction to the deutsche bank stock price, but that quickly petered out, down 6% yesterday, down 4% today. what is going on here? >> actually the market is focusing on the details and that
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is going on. and that is what we have seen already in the second half of yesterday's trading day and details are crucial here so for example deutsche bank has a revenue level of 25 billion euros for 2022 which is the same level as now, but at the same time, they cut a huge amount of assets so in that current market environment, the question is how they want to achieve that. this is one big concern. another big concern is the new return on equity target and here some experts are saying that it is not even the cost so this is not really ambuitious or a great break through oig for the the bank so general market environment, they are not positioned for the down turn so that could get in
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the way of the strategic overhaul this is not only a chemical story, this is a german economy story and that will also affect deutsche bank which is now claiming to be the leading better man bank with the global footprint. and these are the problems people are saying what are we getting in the near term in the near term there is nothing, just a lot of costs, no dividends and a lot of in-security surrounding the stock. and that is why the shares are lower and lower i guess. >> annette, thank you very much for weighing in. an important point in terms of deutsche bank effectively
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doubling down on germany at a time when the manufacturing sector is under so much pressure basf obviously a huge company within germany so doubling down on germany at the moment seems like a challenging short term proposition if you want to read more about what analysts have said about deutsche bank's restructuring plan, go to cnbc.com >> and that is a name that we are closely following given that the stock is down another 4% today after 6% declines yesterday. but let's talk about broader price action you can see that there is a lot of red on the heat map in europe today. we are very much in riskoff tone after a weakish session on wall street biggest declines led by apple and as well as boeing. and asian equity markets not fairing so much better there is concern about the upcoming fed not the fed will s
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dovish so dialing back expectations today in europe though, a lot more sector specific stories as we were just talking about so we'll get into some of them this is the picture for the stoxx 600, already down one hour into the trading session but let's talk about the individual indices every single one trading in the red. ftse 100, 7500, down about 0.4%. market was encouraged by guidance for the second half of the year and the german dax, we talked about the weakness there 1.3% and a lot of that is on back of the declines we're seeing in the chemical sectors some of those names more than 5%, 6% in trading and that is
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dragging down the auto sector as well basf has exposure. and remember it all ties in together part and parcel of the bigger themes playing out in that china is weakening. so germany not immune this morning. cac and the ftse mib also down and they are bringing in a 50 year bond, so really a turn of the events when it comes to the italian bond market. so it does tell you that there is certainly investor appetite to own italian bond yields here. switching on to look at the sectors, it won't be a surprise that chemicals are right at the bottom autos also down. basic resources, exposure to china, down lalmost 2%. do you have also down 4% and there is a profit warning as
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well unicredit saying that they are looking at a corporate restructu restructure. so lots of banking stories to focus on defensive real estate was up but generally speaking a heavy start to the european trading session thorn. and coming up on the show, hong kong's chief executive says that extradition bill is de, t e udtsadbuthsten aren't satisfied your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown
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welcome back hong kong chief executive carrie lam has announced that her controversial extradition bill is dead and a total failure. the move comes after the legislation faced mass protests across the territory more now on the story. >> reporter: this is the hong kong leader's attempt to get the city out of political impasse and move forward from weeks' long protests.
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carrie lam has once again reiterated that her government has no plan to restart the bill. >> but there are still lingering doubts about the government's sincerity or worries whether the government will restart the process in a legislative council. so i reiterate here there is no such plan. the bill is dead >> reporter: and she also admitted the failure of the government in amending the extradition law but she did not bring herself to say that she is retracting or withdrawing the bill so this morning she went as far as declaring the bill dead, but also fell short of the protesters' demands. they describe today's development as carrie lam playing word games and said that they are calling on more rallies
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to continue with their demands that include the release of those arrested and carrie lam's resignation. on the last point though, the hong kong leader said it is not a simple matter for a chief executive of hong kong to step down and asked for an opportunity to restore trust in the government in the tech space apple shares dropped after it was downgraded from sell to neutral. the company will face a fundamental deterioration over the next 6 to 12 months as iphone sales continue to fall and new products and services fail to make up the shortfall. now, the rise tech conference kicks off in hong kong, it brings together execs and entrepreneurs to discuss everything and argen, i believe that you are joined by an individual who could weigh in on some of those
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topics >> that's right. i have the ceo of air asia and you've made some interesting moves in to the tech space and you've been talking about becoming the amazon of travel. what is behind the tech strategy >> i think if we stand still, we don't innovate, we don't change, then we're in trouble anyway we have a huge amount of very good data. we have a massive geographic footprint. so we see lots of businesses that kind of mix in with what we're doing in the tech field. lo logistics. we are now carrying 100 million people air asia.com can gravitate toward more than just selling tickets. and finally, we see fintech as a very big part of what our passengers want. remittances. we think for many years our passengers have overpaid when
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they are remitting money back as foreign laborers secondly, it is very tough right now for people to get loans. so just like az air assist i ca, it can be inclusive and is a natural inclusive. >> and so tell me why you think consumers would go with your product over expedia, booking.com or other markets >> they generally -- i think on air asia.com, we get unique visitors coming. we can package a flight and hotel cheaper anyone else. many of these customers are coming from google search, et cetera we have direct relationships
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with our passengers. we are phenomenally strong loyalty. so we believe personalization is our advantage, that we can increase engagement to buy other things amazon started by selling books and is now selling cabbage >> and when you look at the revenue model and technology and the percentage of revenue contributed to your business now versus what it might be in five years, how do you see that changing >> i had this lot lofty dream tp that 60% to 70% of our profit will be contributed from our digital adventures and if i could just add, people laughed at us when i said that i'm going to do 25% of my revenue and 50% of my profits will come from the items.
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and people were laughing >> and talk about what encompasses your digital products there was talk about allowing outside investors to invest in this part of your business where are you at in that process? >> i want to build some scale. we're not far from that. we've had tremendous amount of people wanting to invest in big pay and now they ask about the logistics arm. we may take investment directly into companies or at the ventures level we're not far away from doing that six months maybe >> vcs, strategics what are you attracting? >> that is a great question. both come to us. i wasn't ready for it. i never thought -- i thought people would not take us seriously and we would just have to do it ourselves >> and are you considering other fundraising roots, ipo potentially? >> no, i don't think so.
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i think the private market understands the tech side better than the public market and so probably the private root first. but never say never. i'm not an expert on that. we'll see where it goes. my job is to build a business that is worth something. >> and you talk about a big trend in technology companies. those potentially on social media or other parts now starting to move into fintech as well there is a sense that consumers really trust the technology companies. >> well, just that we have a lot of users we have a case on air asia for a start, so a base case there already. we are now seeing -- we have 600 customers in six months on bit pay. 20% is only on airlines. so we're seeing high engagement. we're just doing a product that people want and like we have done exactly what we did in air asia, lowering fees,
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making it more affordable. we think our travelers are ripped off on exchange rates, sometimes 5%, 6%, 7% and we're giving them a much better exchange product so that is very popular. we're making the product very user friendly. we're just about to launch our remittance product and so i think our advantage is use cases are there already in that people who travel with us can save money using our card. when it comes to hong kong, a lot of people walking around here flew on air asia. and if they have a bit pay card, they will save 5% on all expenses so that is one advantage and who wants to go to 20 different apps if one has a lot of what you want >> thanks very much for the insight into your strategy tony fernandez, ceo of air asia. back to you. >> thank you very much for bringing us that interview
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the investing giant has reported a 10% decline in returns. so talk us through where some of the weakness came from and their 3.6% stake in bayer which as we know is a company that we've been following very closely in germany, and that stock be down 40%off the la ovet 12 months. is that having an impact >> that is an interesting point. the toogtsz ital investment of still is up significant ly, 313 billion singapore dollars. they invested less over the last 12 months, divested more and yet they are talking returns over the period actually down, gained
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only about 1.5%, compared to more towards the early double digits what is interesting in how they managed their portfolios, they do see risks because of an impending recession and trade war worries impacting the businesses but they have scaled up on health care, but trimmed back a little on the tech sector and of course within the financial services space in fact i want to focus on that. that jumped out from my interview with the ceo he spoke at length when what is happening in the financials sector and how it is reflective of what they are experiencing right now. they have 16% in standard chartered. and i remembered that in an
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interview back in january, i spoke to him about the relationship with the largest shareholder and he says it is very supportive, where there was much speculation in the media about how temasek was not happy with how they were managing the business but they put the concerns to rest saying they are supportive of the strategy, yes, there are challenges, but they are backing the business he didn't go in to specifics, but he did say that he did support the investments that they are currently sitting on. some performing well and as you see others not done much to meet shareholder expectations
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>> with those two banks in particular, i think the ceos are fully recognizing the issues that are out there and they all focused into areas where they feel that they can get a positive outcome and not be all things to all people. so bill winters has had a program over the years to change the way the bank actually looks at things. a lot of it has to do with processes, but also the bank's own credit assessment and so on. for example he started on a finance initiative as well as a possible opportunity dbs has done it in a different way. they have gone across all product lines. they built up wealth management significantly. put it together with the consumer which is interesting to get to leverage off the benefits of both. and that so far turned out quite well but if you don't keep on evolving your business model, you will fall behind so they say if it ain't broke
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don't fix it, it doesn't apply in this changing world you have to constantly innovate and be ahead of the curve so we will have to see how the banking investments around the world perform in that context. we are investors in fintech too. we have invested in a couple companies that provide sme financing options which allow smes to improve the working capital, et cetera we invest in insurance companies because we think that that addresses a need of both enterprise and consumer. so as we think about our own financial services portfolio, that is also shifting the context of how banking services come into it so an interesting journey for everyone >> and bill winters also in an interview back in january highlighted that temasek is supportive of their chances. so i'm taking that you are also very supportive of what is happening at the business end to
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restructure things and get the business going once again. ed thyou had the buy back progrm possibly a leadership change >> bill has had a very difficult job and he knew what he was getting himself into we've always known that it was a multiyear program and the question is whether you can see the bank improving and in many situations we can see the bank improving yes they have had missteps more recently but that had to do with a period of time before he came in. so i think that he is positioning them for sustainable growth we've seen what he has done. there is no reason for us to be unhappy with what has happened so far obviously there is more to be done and so we continue to monitor. >> and that ceo setting the record straight saying that they
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are backing their investment despite the painful transition that the bank is apparently undergoing also just to wrap up, i think the other thing that stood out as part of their portfolio allocation was their view on tech and he said beware of the tech war because it will divide the world, we will have two ecosystems over the course of the next few years which will make tech investing rather interesting. you can't avoid the space, but it will pose challenges. >> really interesting interview. and especially what he had to say about the sector when it comes to digitization. thank you for bringing us that and also coming up, president trump hits back at a leaked memo by attacking theresa may and her ambassador in washington all that coming up next.
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welcome back to "street signs. these are your headlines
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basf shares sink dragging european chemical stocks lower after the german company blames the u.s./china trade war for its latest profit warning. >> deutsche bank shares extend losses as they begin to cut 18,000 global jobs in a euro overall and the cfo warns of significant uncertainty over breaking even in 2020. and online grocer delivers a confident message about its outlook despite a 46% fall in first half earnings. and former ecb president throwing his weight behind christine lagarde's nomination for the central bank's top job telling cnbc she is a born leader >> i'm sure that she will do that well. not only because she has knowledge and experience, but also because she is a good team leader she has always been a good team leader and a don't forget central banks
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are teams. >> european markets are trading lower driven by the chemicals and auto sector, those of course make up a large proportion of the dax. very heavy german tilt to both those sectors. dax down 1.2% underperforming the broader european region. that is on the back of the basf massive profit warning late yesterday. they had warned on a combination of lower global industrial production, and in particular in china and also a softer agricultural print in the u.s. on the back of weather conditions not only is that having a negative impact on basf shares, but also the broader chemical space, what it means for the earnings season and what it means for auto production. so we're seeing the automakers taking a hit as well let's take a look at fx markets, aside from the corporate side of things, investors are bracing
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for a number of fed speakers to speak this week. a couple today ment fed minutes are due tomorrow and then the highlight will be jerome powell's testimony to congress taking place wednesday and thursday of course it is very important as we head toward the july meeting and on the bam of the strong payrolls report friday. so a bit of color for you. the dollar has firmed up as investors questioned whether it is right to have an ultra dovish outlook for the fed given that we had the strong payrolls print. sterling also significantly weaker versus the dollar down more than a third of a percentage point below 1.25. so quite a defensive tilt there for the sterling this morning. and finally a look at u.s. futures, all three major indices looking at a weaker start. yesterday marked back to back a losses for all three major indices. as i said of course the fed largely in focus this weekend,
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investors are waiting the key comments from fed members. >> and let's talk about europe christine lagarde's nomination as president of the ecb came as a surprise since she is not an economist by training. she is expected to have a similar stance on policy to her predecessor recently saying that it should remain accommodative where inflation is below target. the former ecb president backed lagarde for the role saying her previous positions have left her well prepared for the ecb. >> she's been minister of finance and she's been for almost eight years managing direct are tore of international monetary fund. it looks like it is a very, very good training in my opinion.or monetary fund. it looks like it is a very, very good training in my opinion. i'm sure that she will do it bell not only because she has knowledge and experience, but also because she is a good team leader she's always been a good team
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leader and don't forget central banks are teams. they can buy the open market committee or governing council, but also because they have very powerful and good tech know structures >> the imf vacancy is expected to be discussed in paris >> and it seems that it is the year of the women, isn't it? i'm joined by chief economist. walk us through your take on all of this. some of the top jobs globally now taken by women what do you think that women will add to those roles perhaps that we haven't seen from the men? >> i think that perhaps we should say that these jobs are taken by competent women not only women it is a testament to how
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efficient and diplomatic and skilled they have been one thing that impresses me is the ability to combine very technical work with political skills and communication. so i think that it is wonderful and i'm happy for them >> and what happens next in terms of the global growth scenario you've made several warnings in the past couple months about the u.s./china trade status will impact global growth long term we've had the conversations at the g-20, but what is your take today. >> so i have been as you say and i continue to be very, very worried about what is happening on the trade side. two years ago in 2017, trade growth was 5.5%. today it is closer to 2% and in some regions, it is even close to 0%.
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and we know that trade and exchanges is essential because it makes a lot of people work. so the other number that i want to highlight is investment again in 2017, investment was 3.5% and now less than 1.7% so divided by two. and with investment and good jobs so we are slowly eroding and bringing it down to very low territory. and we can't afford that when we still have the feelings of many people >> and in the medaliiddle east, know that you were working with the iran conversations how damaging is the narrative between washington and iran
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today? because many people have said that this is another red flag just as much as the u.s./china trade has become as well >> this is a very good question because it is part of the marginal conversation and how much uncertainty we are creating in the world we're creating uncertainty with trade and there is uncertainty with guy oeopolitical tension. and energy remains vital resources for many firms we've also created uncertainty with various political movement. and the more uncertainty we create, the less investment. since the brexit negotiations started, investment growth has been a flat line so all these risks are undermining the growth of today and tomorrow >> are there opportunities for
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emerging markets, perhaps even egypt, their finance minister said that they have paid the price of all the reforms that they felt were necessary to get the economy back on track. and these are companies not risk diverse. for them not necessarily an inhibitor to growth. >> i think you're right. when we compare the world today to let's say one or two decades ago, emerging market has tremendously progressed. and they have also tremendously learned from financialcrisis foreign exchange for reserves, they want to move on and digital is offering them this opportunity. so if we want them to strive for themselves and the rest of the world, in certainty about the business environment, the geopolitical environment, and especially in the regions where you come from. >> absolutely. thank you so much for joining
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us we'll leave it there and i want to give you some sound from the finance minister talking about using egypt as a gateway to african investment, that they have paid the price in terms of trying to get the economy back on track and he said seeing the fruits of that labor. listen in. >> if you look at many of the countries in the region, you would see that from gdp growth, egypt is the highest from stability, egypt is a stable country from market, from location, from a country to improve the environment and all of that, i think that egypt is moving in a good position. our position is to have good
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relationship with all our neighbors. because our main interest is development and improvement and making it the life of not only the egyptians, but even we are talking with our labors in africa, trying to be of help with them, trying to increase our trade with them. so this would mean that our consideration now is on growth, on improvement, on development >> and i pushed him on the opportunities there not just as a gateway to affair take in terms of investment and logistics, but also in terms of the security narrative and i also pushed him on the problem in the middle east and certainly egypt has seen it in particular in terms of the red tape and he said we're open for business, we want people to come here, we want them to feel as if they will have the support of the government
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they just need to call us and ask us what they need. so it will be really interesting to continue to focus on how the energy coming out of a country like egypt can galvanize investment but also give them a leg up when it comes to their own foreign policy >> thank you for bringing us that interview and let me give you an update on an evolving story. president trump has hit out at theresa may after a leaked confidential document from the british ambassador to washington criticized his administration. andrea mitchell has the details. >> reporter: tonight the u.s. and britain in an uproar over a diplo lolomatic bombshell. the british ambassador telling downing street that the president has in-securities.
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the president tweeting i don't know the ambassador but he is not liked or well thought of within the u.s we will no longer deal with him. the good news for the wonderful united kingdom is that they will soon have a new prime minister the frontrunner to become prime minister, the president's favorite, boris johnson. contrary to theed from's tweet, the ambassador is highly are regarded earlier the writ tisbritish govt tried to smooth over the riff. >> i don't share the ambassador's assessment of the administration or relations with the u.s. administration. but i do defend his right to make that frank assessment >> reporter: the british government is investigating the leak looking both inside and at a possible cyberattack even from russia or iran this as the u.s. and britain face a new threat from iran, breaching a critical limit on nuclear fuel set by the iran nuclear deal moving a step closer to possibly a nuclear weapon president trump abandoned the deal last year and is threatening more sanctions >> and speaking of a nuclear
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weapon, iran has threatened to restart its deactivated nuclear centrifuges. they say they are ready to boost up to 20% puritpurity iran blames u.s. sanctions for eliminating any benefits under the agreement and has already exceeded the purity cap. and meanwhile president macron has sent a top official to tehran in an attempt to diffuse tensions with washington and just a reminder, you can follow us on twitter if you have any chemical specific chat you want to weigh in on, i'm your girl or if you have any central bank chat you can tweet us directly. coming up on the show, an upbeat outlook sending shares of ocado higher more on that coming up next. these folks don't have time to go to the post office
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owe c ocado reported a fall and they blamed reduced capacity a after a fire in february and in other corporate news, ceo of remy will step down due to personal reasons and finance ministers will discuss christine lagarde's nomination as president of the ecb. wi willem, you've been there. and there seems to be a desire from the european parts to have yet another european at the head of the imf >> reporter: yeah, that's right. certainly the conversations i've had this morning and overheard with some of the finance ministers as they went into this morning's ecofin meeting,
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anytime any were asked would you like to see a european in the top job, they all said yes somebody who can talk about why that matters is the ceo here of the policy studies thank you for joining me why do we care who runs the imf, who runs the commission behind us >> they are the face of the organization, they are known to a large group of people. but may not be that well-known either basically the person is supposed to be capable of steering the organization on the other hand certainly this organization the european commission, 30,000 people, i think everything is ready for next week for the state of the union in the european parliament and probably she will only change 5% to the speech because the plan is already and the commission simply waiting for
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the new commission president to go to the european parliament to be possibly voted first, but it looks like being a done deal the three groups have agreed, have shared the top jobs so she will most likely be accepted and then deliver the speech of course it must be an acceptable face. on top of that, she is also a woman. and this organization because seen -- not only this one, but also the others as an old boys' network. so that is also again important to public opinion. but again the plan is already. so she can only change a little bit. of course it may be more important for other organizations like the ecb because the grilling in press conferences is stream tough and there was a debate last week can she do this. lagarde is not an economist.
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so you are responding to very technical questions in the press conferences. questions about inflation, about productivity but lagarde says she has done well in the imf, so why couldn't she do it in the ecb but the machinery is there the ecb is there and will continue to run and she will be extremely prepared by all the staff surrounding her. it is a well functioning institution already. where it may matter most is probably the head of the european council which is more of a diplomat and the other diplomat which is the high rent differen representative for foreign affairs. we don't know whether all four will be accepted but the last two positions, it is more the diplomacy that matters. but it is viewed that both will do it well
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bme men borel is 72, but enormous expertise. and they have done a lot in ukraine and elsewhere and so can do something like this and can represent the eu abroad. >> and when you talk about the commission and continuity and the person running it being essentially a figure head, a communicator there are moments where it matters who is in that job and as the europeans prepare for what will no doubt be quite difficult trade negotiations, do you think that they have the ability to stand toe to toe with president trump? >> that is a big question mark and that is why for example in
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germany, german members in the european parliament to her nomination, that remains t iconvinced five years ago that he could do it but he has the experience and so for sufficient experience, i don't know but give her the benefit of the doubt. she is a very charming person. who knows whether she is capable of doing this. i'm not sure, but i will give her the benefit of the doubt but we will just have to see >> thank you so much for joining us with that, i'll hand it back to
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you in london. >> excellent angles there. and of course it is a very important time for europe. but let's not forget some of the developments back here in the uk i want to flag sterling is at a six month low at 0.3% weaker on the session today. we're below 125 now, 124.66. as concerns mount regarding the possibility of a no-deal brexit. remember we heard from governor carney and he warned that one of the major risks is that of a no-deal brexit, that is being priced into the pound. >> and we've seen some broad dollar on the flip side. >> absolutely. that is it for today's show. "worldwide exchange" is coming up next. (danny) let me get this straight.
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the bill is dead hong kong leaders bowing to pressure from the people over the controversial extradition bill we are live in honk to think wi hong kong with all of the fallout. and investors on edge as wall street awaits powell's capitol hill testimony we'll take you live to d.washin d.c. and a big phrma win but will washington fight back. it is 5:00 a.m. on this tuesday, july 9 and "worldwide exchange" begins

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