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tv   Street Signs  CNBC  July 15, 2019 4:00am-5:00am EDT

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good morning, and welcome to "street signs. these are your headlines european equities shrugging off china gdp data that show the world's second largest economy growing at its slowest pace in 27 years ab inbev shares after the brewer pulls its budweiser after weak demands. a shot in the arm for a belgium dutch bio tech company
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galapagos after u.s. drug maker gilead doubles its stake with a $5.1 billion investment. and rallies after being awarded $5.8 billion in damages relating to a joint venture in pakistan and as the race heats up for the next managing director of the imf, the fund hosts an event on central and eastern europe. i'll be speaking shortly to the the deputy managing director of the fund well good morning, and happy monday i want to take you to some of the price market action that we've had over the last couple of hours or so on friday we had wall street close at record highs, but the news of the last 24 hours has been dominated by the gdp number that came out of china
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6.2% is the figure while some people are pointing to the fact that the gdp trend is the weakest in seven years, one it's in line with expectations and fixed asset investment stronger than expectations, even retail sales for the month of june in china came in at 9.8% versus 8.3% expectations some of the details were a little stronger, and we'll be discussing that later on in the show the picture for europe is a little more subdued. stoc sto let's switch and talk about sectors. we do have multiple corporate stories we're focused on today and we're just talking about some of them i particularly want to flag that autos finally are bucking some of their downward trend that we've had over the last couple of days or so. you can see autos having a good
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day, up 1%, chemicals up 9/10 a percentage point basic resources up 8/10 of a percentage point that is a sector very much exposed to china and we're seeing a bit of a lift in trading for some of the mining names. on the downside, food and beverages one name in particular we're focused on there, that is ab inbev now, ab inbev has said it has canceled the public offering of its asia-pacific subsidiary, budweiser brewing company for now. valued at $9.8 billion it would have been the world's biggest ipo of the year, even bigger than uber. the company blamed market conditions for the decision. let's take a quick look at how the share price is reacting today. you can see not a positive reaction in trading, and we've only been open for about an hour or so. you can see ab inbev stock is down about 1 and 3/4 of a
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percentage point some would have said you could have seen a sharper reaction given the news that has come out this morning but i have an expert with me on the subject. i want to bring in -- great to have you with us >> thank you. >> just reading about the rationale of them pulling this ipo, they cite market conditions is it really about market conditions or a lack of appetite for the trades given the price offering that they had given to the markets? >> it's probably a bit of both it does come down to valuations so if you read in the press it says on reuters that effectively long only so the big anchor investors who support the book and are long-term holders of the shares couldn't come at the price that was offered on the table, so this was more expensive than sing tow and curen but less expensive compared to china resources,
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united breweries basically what you had was a bit of a reflection of ab inbev. it was just a subsidiary, but you had some wonderful subsidiaries in here we're going to see growth and per capita consumption and volume growth, but other markets that are slower but much more mature. >> do you think we're likely to see them take another shot at this ipo in the future >> there's a possibility what i was doing on friday was basically calculating and figuring out, reading the perspectives that actually the ipo it probably couldn't go if they didn't want to get the price, they'd have to relaunch and do the i p, o', offering all over again if you read on page 276 with per specttive they basically had a time frame they had to get this out. if the interest was below that, it's better to pull it you can come back. it seems right now given the market conditions that we'd probably have to be a bit more patient and maybe those market
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conditions will improve. >> and as you can see it's a function of the pricing and also the market conditions. this isn't the only ipo that got pulled we recently had swiss ris in the u.k., they sheltered plans or postponed them for the time being. what does this tell you about investors appetite to get exposure to the asian business ultimately this is an asian business they were looking to offload. do you think the trade war is playing somehow into this? dm it's a b-- heineken has teamd up with china resources, which owns snow. the big question is on a five-year view what happens is heineken actually -- as they partner up and get the distribution, are they able to grow and steal some of the profit pool from ab inbev who dominate with budweiser in china. i think the uncertainty comes down to more of the stock specifics and what's going on on the ground in some of these key markets. that has a huge impact on
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valuations at the end of the day. >> this is the largest brewery company in the world people were saying this listing was crucial to help them fix or repair system of the balance sheet issues they have obviously it's been shelved for the time being, but they also have targets of net debt to ebitda charges, what does shelving mean for some of those targets? >> they probably could have got below that four times by the end of this year had they got this out, but now it's going to be pushed down the road i didn't have this ipo in my numbers because it goes through and at what price. i didn't have this on my numbers. what i have is getting to just below four times net ebitda 2020 already. without the ipo we still get to those targets. it's not as if they need to update the markets and say all of a sudden we're not going to reach our targets. it's more of the cadence and the
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pace of the de-levering. what you'd like is the company to reduce as fast as possible. >> do you think how much they have on the balance sheet, they will look to perhaps lessen the pace of acquisitions they've been going at over the last couple of years? >> yeah, so this was seen to be a platform for m&a so you could use the shares of budweiser to do a deal with tie bev for example. i'm not sure how advanced those discussions were there's a theory if you are -- you know, if you're based in thailand and you want exposure to local markets and you feel like you understand asia a bit better you'd probably rather do a deal with a locally listed subsidiary is that still out of play, could they still do a shared deal with the parent company they could is that the most attractive thing to do with this attractively priced share? depends on the terms of course as always and devil's in the detail so look, it doesn't -- a lot of
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people actually -- i saw some headlines over the weekend that seem to suggest it's doom and gloom, this company is never going to deliver now it's just not true it's not the facts on the ground. >> if you look at the stock performance it's been pretty decent year-to-date. people still fundamentally see a good story there and buy into what you're saying about the balance sheets otherwise it wouldn't be so much up and down. there's a chart event, year-to-date the stock is actually up 34% irrespective of the movement we've had the last couple of trading sessions i want to ask you about one name in particular. a couple of years back, ab inbev acquired s and b miller. as part of that they're in talks to deepen some of the relations they have with the french kas tell group >> yes. >> do you think this news over the weekend is going to have any significance for those discussions in the future? >> yes, it does. i was trying to think about how long does it delay this, maybe about a year at most
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the cadence in all of this does get pushed to the right a little bit by the timing of the apo they are still quite close and they have the right of first refus refusal. it's largely seen to be that ab inbev will eventually bid for the castel group they're probably not in the position today to do it. what does castel do at the end of the day it probably wants heineken to be in as well it's j a it's just a matter of timing >> great, and just for sake of disclosure, what rating do you have on the stock? >> i have a buy on the share ab inbev sells one of every three globally it makes strong returns on capital, strong in margins i find the shares quite attractive. >> i love starting off a monday show talking about beer.
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thank you for coming in. he's the equity research analyst from liberum. christine lagarde has triggered a leadership race at the imf. the bank of england governor mark carney is seen as a f favorite for the role. and former europe greu president are also in contention i have to say one of those names in particular is jumping out to me, karen. that is the central bank governor of the u.k., mark carney i found out over the weekend he also holds an irish passport who would have thought irishman up for the job at imf? >> he does have a number of passports and don't forget britain has never held the role at the imf the question is whether -- it does seem as though with the allocation of recent top jobs
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that there has been a mismatch you've got a german, french, spanish and also belgium position that's been handed out, but nothing in this region as well put onto your list of potential front runners, the lady from bulgaria having representation from this part of the world also quite sug ca -- significant. basically it's talking about structure reforms. at the time two years ago we spoke about the challenges in maintaining the strength of institutions very important to have steady growth this year we're talking about a skill shortage which is a very different challenge to the rest of western europe where we've got a lot of high unemployment levels here you've got record low unemployment levels or pushing in that direction. as you say upward migration, not a enough female participation and older workers retiring early. we're talking about the channels of trying to tackle those
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issues, but also digitization. it remains to be seen who will take that top imf job and certainly a lot of chatter in the back channels about who will be in concontention. many of the people here, central bankers and finance ministers have worked closely with christine lagarde on structural reform there is potential for her to take that debate much better than mario draghi who was critical about the pace of those changes. i spoke to the governor of the central bank here in croatia about how he perceives christine lagarde. take a listen. >> we always thought the central bank actual reform as you know this is one thing that the politics has to do, and she is in a good role i think also to try to convince the politicians to maximum possible extent to do these kind of things a z they usually emphasize, policy can do a lot but it only has its own mandate and it
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cannot do more than it can >> it's an interesting conversation given how political the ecb role may become having a politician in that job and not a typical central banker or an economist, but it is an important challenge. i think we've had this debate for many years about those structural forms that need to happen and it's across many different layers in the economy. just to highlight how challenging it is, female participation in this country still needs to be increased along with many other countries that are neighboring here, but one of the issues is when you spend money on initiatives like this and benefit games, for instance that take 20 years to materialize where you have workers coming into the work force, it can cost 0.7 to 1% of gdp. there is an upfront cost attached to some of these structural challenges. if you think just across there to italy that are trying to embark on structural changes, there are upfront costs, but there's very tight fiscal room to navigate, and that's the challenge in many of these
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countries. back to you in the studio. >> excellent and looking forward to hearing more from your coverage at imf and obviously you will be speaking to the imf managing director in a little while tomorrow we'll be speaking to acting managing director david lipton that will be on "street signs. for more on europe's serge for lagarde's replacement at the imf head online to cnbc.com. you've got covering all this story at all angles as well as on our live tv coverage. also coming up in the show, economic growth in china slows to its worst race in almost 30 years, but some areas of the world's second largest economy still show signs of life we'll have more after the break. it's how we care for our patients- like job. his team at ctca treated his cancer and side effects. so job can stay strong for his family. cancer treatment centers of america.
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welcome back to "street signs. our top story today, chinese economic growth has slowed to its worst rate in 27 years in the second quarter as u.s. trade tensions drag on the 6.2% reading was the weakest since quarterly reporting began in the early '090s but other ke
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activity data beat expectations with industrial production and retail sales rebounding from the month before and joining us live from hong kong is tommy wu senior asia economist from oxford economics. thanks for taking the time to chat with us can i squjust ask you what your take away is of today's numbers? 6.2%, are we still on track to see china's gdp growth north of 6% for the full year here? >> yes, so china's gdp came in at 6.2% for the second quarter today. which is slower than the 6.4% in q1, but then the slowing is basically coming from a slowing demand coming from domestic and also external demand however, we think that the macro policy easing driven bit the
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chinese authorities will help stabilize growth in the second half of this year, so our forecast is that in the second half growth will still slow more to 6.1% year on year, but then it will bring the whole year to 6.2%, so it's still within the growth target of 6 to 6.5% this year. >> there were some surprising bright spots, i just want to talk about them. i just want to talk about some of the particular bright spots that came out. >> right. >> including fixed asset investment for the first half of the year came up at 5.8% versus 5.5% forecast, even retail sales for june came in at 9.8% versus 8.3% what does tell that you about the strength of domestic demand here >> right, so today's monthly data for june actually are quite encouraging in the sense that, well, even though for a whole
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quarter the momentum is slowing, but then the june data is showing that maybe the impact from the policy easing that by the government is finally filtering through to the domestic economy especially if we look at the retail sales figure, it's jumped quite a bit, and possibly it's reflecting the impact coming from the previous value-added tax cuts, and if you -- well, it seems to be the case that a lot of the chinese citizens are now staying at home to consume, and while this is also affecting tourism, but then we see that more people are actually staying home to spend rather than going abroad, so this is probably reflecting that as well. >> and it's interesting that you say that -- >> and also in terms of infrastructure investment -- yeah. >> yeah, i just want to point out that it's interesting you
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mentioned how consumption patterns have actually changed i wonder how much of that is on back of the trade and if you look at the most recent trade data, it clearly shows that imports from the rest of the world have dropped quite a lot would you say that is largely a factor between what is happening in the u.s. and china on the trade front? >> well, i think the drop in import has to do with -- yeah, it's kind of a conflicting sign with what we see today in terms of the domestic numbers because today the numbers are pretty good for june, whereas the imports were down probably quite a bit, 6.3%, 7.3%, normal growth in june. so yeah, so it's affected by both domestic and also the supply chain effect. now, i would say that it's not just the u.s./china trade war impact that's weighing on the
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import growth but also global trade has been pretty tepid, so this together with probably a slowing domestic demand is actually weighing on imports however, maybe with the rebound or stable ieilizing of domestic economy in the second half, we do see that maybe imports can find some support. now, however, because of the ongoing trade war and also it's still yet to be seen that global trade will be recovering, so, you know, import growth will probably be still quite weak for a while. now there's a caveat in terms of interpreting the import growth, though, because if you look at last year's data between april and october import growth has a very high growth this year because of the base effect, import growth will be -- well, pretty much in favorable
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if you look on year on year growth it's important to look at sequential momentum for imports as a useful indicator of how the domestic economy is doing. >> tommy, thank you very much for taking the time to chat with us, tommy wu from oxford economics. as we were discussing earlier, christine lagarde's nomination as president has triggered a leadership race at the imf karen joins us live where the imf and central bank this time you've got a special guest with you >> i do a surprise guest who's just wrapped up an opening speech here at the imf navigating the future conference it is the prime minister of croatia joining us now nice to see you, thank you very much for joining us and giving us your time. >> thank you very much and welcome to croatia i want to ask you about the uncertainty on the imf leadership, a big long debate about the candidates who could step in to fill christine
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lagarde's role we know from attending this conference that lagarde has been shining the light on this part of the world do you want someone from this region to represent you at the imf so that focus and the high profile nature of this conference is continued? well, first of all i'm very pleased that christine lagarde who i know personally well and knows croatia well will now take on new important duties as of the beginning of november and with the ecb for us this is a fantastic plus because as you know, croatia has a priority to join the euro zone and i'm sure everything we will be doing will come to the fertile ground when it comes to christine lagarde. when it comes to the central and eastern europe, i think this is a region which is basically collectively in the sort of catching up and convergence mode this is the key objective. some of the countries that joined eu faster pass that had road a little easer aier and far my country is trying to speed up
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these efforts and all my reform efforts are directed in the direction. if there would be someone coming from the central and eastern europe countries to become one of the candidates for the success of christine lagarde, i would say why not, but i wouldn't, at this point, speculate about the names. >> let me ask you to about christine lagarde who you worked closely with you're a politician, christine lagarde is a former politician there's been some criticism about whether a politician is the right fit for the ecb, not having an economist in such a key central bank role. what do you think given all the structural channels? >> first of all, i'd like to praise the efforts of mario draghi i think he was very efficient, very helpful for the european economy. i'm sure that christine with all her experience both as a former french minister of finance and economy, that she will give really a new impetus in this
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direction, and we all know her very well. i think she's perceived both as a politician but also an expert in international finance. >> let's shine the light on your country, a motion for you to join the euro zone 2023 might be the time frame what sort of shape is this economy in as you seek to join the rest of europe and have a common currency? >> the strategy for the adoption of the euro was jointly defivis by the national bank and my government we just sent a letter of intent to the members of the erm 2 and to the president of the euro group. the idea is to perform in six policy areas, 19 policy measures, clear deliverables and key reforms in next 12 months in order to fulfill this sort of waiting room for the euro soezoe when it comes to the dates, i think 23, 24, by the end of the
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next european parliament, it would be reasonable for croatia to expect to fulfill the criteria we are rapidly diminishing our public debt. we expect it to be at 71.6% of the gdp by the end of this year. my government has gone out of the excessive deficit procedure that excessive macroeconomic developments, put country back to the investment credit rating by the evaluation of two major of the three credit rating agencies the european commission's summer projections of croatian growth have gone from 2.6 to 3.1. tourist season will be at the level of the last one, so i think that all the key drivers of the croatian economy, which is the fiscal consolidation structural reforms in both public and private investments with the line that we have clearly taken and are holding to can achieve very positive results in the next couple of
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years. >> i take your point, but we have seen in the past that it is very -- to try and join the euro membership, but once you're there, some of those benefits come straight away, you know, more investment. you get the escalation in property prices that many across the country enjoy, the returns that that brings for those earning property on the other side of the coin as soon as there's a downturn, there's less wiggle room we've seen that in portugal. are you concerned about what you're signing up to >> first of all, what we are doing is carefully crafted this is not an abrupt decision of any with us involved overnight. we are conducting a public debate you have to understand that the croatian economy and the croatian, i would say finance is basically -- most of the bank in croatia have other banks in the
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e.u. member states saifr savin savings, credits, everything we have is 55, 60% in euro already. we trade with the euro zone partners over 65%. basically you have to understand that the croatian economy is already very much euroized what we're trying to do is do the catching up as fast as we can. when we started we were only 9% contracted e.u. funds for this financial framework, and now re less than three years later we are above 70%. what i would like to do is speed up the catching up and euro zone comes basically ten years after the e.u. membership and this is actually where we should find ourselves and position ourselves to strengthen our economy in order to have a better living standard in our citizens. >> very important one that has been hosted here today, very much appreciate your time and a warm welcome to your country thank you very much for joining
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us. >> the prime minister of croatia joining us live on cnbc as we continue the discussion here about central and eastern europe let me toss it back to you in the studio. >> excellent great catch there, karen, and such a beautiful setting as well that was karen with the croatian prime minister. also coming up on the show, several key u.s. banks are set to report earnings amid questions over the impact of recent moves in interest rates we'll have more right after this break.
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welcome to "street signs." these are your headlines european equities edge higher shrugging off china's gdp data that show the world's second largest economy growing at its slowest pace in 27 years ab inbev shares fall after the brewer pulls its budweiser ipo due to weak demand canceling what would have been the year's biggest listing. a shot in the arm for a belgian dutch bio tech company galapagos after gilead almost
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doubles its stake, the new $5.1 billion investment. and records are smashed as novak djokovic claims an epic fifth wimbledon title. one of our top corporate stories today, gilead is almost doubling its stake in galapagos with a new $5.1 billion investment sending shares in the belgian dutch bio tech company to a record high, and i'm very happy to say we've got the galapagos chief business officer andre hoekema who's joining us down the line on this important day for the company. i just want to start out by asking you about the economics of the deal. gi gilead are paying about a 10% premium. the gal lapagos stock is up abot
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10%. >> yeah, thank you for allowing me to join the show. we're very happy with the announcement of yesterday, transformative deal and clearly the shareholders appreciate it this partnership is a very creative way of joining forces there has been a lot of talk about will gilead acquire galapagos at one time. yesterday we announce add ten-year partnership where galapagos will remain an independent company. we can actually accelerate that development with the year of the investment that gilead has done. so indeed very happy with this deal. >> let's talk about that partnership actually this deal raises the gilead stake from 12.3% to 22%, but there are also -- there's a provision that states that that stake could go up to as high as 29.9%. how likely is that to happen >> yeah, that's very likely to happen the reason that gilead's
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interest to increase their stake is that that will actually protect us against an acquisition by any third-party, very good for us by the way, they want to remain below the 30 when you reach 30% that would actually trigger under our local law the requirement to make a bid for the remaining shares so gilead is really committed to become our larger shareholder but to a level that we will remain independent. >> sir, and talk to me about what you're going to do with this $5.1 billion cash injection. what are your plans with the cash >> yeah, it's very clear the ambition is to basically double our r&d efforts. we have a lot of programs, about six of them in clinical developments and many of those in patients. we have a lot of programs still in the research faphase, all abt novelty. we want to bring novel toy patients for diseases where there's an unmet need, and clearly we will be able to
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accelerate that. over this ten had -year period will be using this 5.3 to grow our r&d and bring many molecules to the patients during this collaboration. >> looking through your products suite, i see that you don't have any oncology programs yet. is it likely to stay that way, or would you think about getting into oncology as well? you're right we have -- we've really been focusing on inflammatory disorders and fibrosis, two disease areas that are related i would think it would be unlikely that we venture into oncology clearly gilead is interested in that field, but galapagos is independent in the way it chooses its indication areas so definitely over the next number of years, you will see us continue in what we're good at which is to bring medicines in the area of inflammation, fibrosis and osteoarthritis to
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patients. >> excellent thank you for taking the time to chat with us today, the chief business officer at galapagos on the day of the announcement gilyard injecting $5.1 billion into the company speaking of market's reaction, lets talk about european markets. after stwha omewhat of a muted attempt to start off the day in positive territory, most of these majors have dipped into red. ftse 100 is the relative under performer here in like with the cac, the french index trading a little below the line. just about half an hour ago, we were up about 8/10 of a percentage point things have dropped ail wi litt bit. the china gdp data coming in at 6 6.2%, the lowest in 27 years some of the stories that we were
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discussing have been impacting some of these indices performances in terms of sectors, we are seeing the china exposed sectors outperform today in europe switching to u.s. futures. as i mentioned earlier on in the show, wall street's three majors closed at record highs on friday, and it looks like some of the momentum is going to continue this week s&p, dow, nasdaq seen opening up in the green when things open in a few hour's time. there we're getting right into the heart of earnings season as well with some of the key names like citi beginning to report today. as i mentioned, earnings season is kicking off with u.s. banks supporting their second quarter results beginning with citi group as i just mentioned. that happens later today, and then tuesday we'll see goldman sachs, jpmorgan chase and wells fargo all release their latest results with numbers from bank of america coming out on wednesday. a very big week for u.s. banks was let's bring in lori mayors at moody's
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great to have you with us. the first question i want to ask you is a macro question. i was just talking about stocks being at record highs and a lot of that is on back of the dovish commentary coming out of the fed. a fed rate cut is pretty much baked into the price at this point at the next meeting. what does that mean for u.s. banking sector and particularly as it pertains to the net interest margins here? >> well, first of all, whether the rates will be cut or not is a question, and moody's view is that as long as the economic conditions that we're seeing now of slowly moderating growth and inflation running about 2% remain, we don't feel that the fed will be under pressure to either increase or cut rates but it's obvious the market has baked in multiple rate cuts. but if rates do go down later in
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the year, there are certain banks of the universal banks that are more sensitive to a decrease in rates, and that's primarily bank of america and then second jpmorgan, and third citi. >> and what's interesting is actually even when the fed was hiking rates, the pass-through wasn't that great because of the significant amount of competition there. banks weren't able to pass on those rate hikes one for one, not even half a beater, not even 50%. is that likely to continue, or is the competitive landscape changing >> well, we have seen anymores improve for the u.s. banks, and you know, our expectation now is that with the yield conservative flattening, the nims are going to come under pressure, that's net interest margins, and you know, i think analysts will be watching very carefully the extent to which the banks changed their own predictions for net interest margin for the
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remainder of the year. so you know, i guess competition is a factor, but the banks in the u.s. definitely did benefit from multiple rate rises, but it looks like we're sort of seeing an end to that for the moment. >> what about pressure to reduce costs? in europe we spent a lot of time talking about the cost income ratio for european banks and certainly many of the banks there and particularly last week were dominated by deutsche bank news and their efforts to reduce costs. this seems to be less of an issue for u.s. banks so would you agree >> well, the u.s. banks are also focusing a lot on efficiency it's true that because their incomes are higher, their cost income ratios are better than the european peers, but nevertheless, what we see going on in the u.s. is investing in technology and other process changes to create efficiencies to free up income to reinvest and change the bank.
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so this is a huge drive that's going on and the technology budgets of jpm and bank of america, you know, are evidence of that, but you know, largely we see savings being reinvested to improve efficiencies going forward. >> let's talk about the invest and banking side of the business again, deal making in the u.s. has picked up this yeerar not so much the case for europe and in asia. is that likely to show up as a positive detail in some of these numbers that come out this week? >> we definitely expect some trends from q1 to continue, again, such as lackluster capital markets, revenues, advisory last quarter was quite mixed. some firms did quite well in investment bank advisory, and the expectation that's probably going to continue into this quarter, but it's definitely the case that particularly fixed income currencies and commodities are what we call thick and equity sales and
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trading have been under pressure and we largely expect that continue into this quarter >> laurie mayers, associate director at financials institution group at moody's. new york government and utility officials are still scrambling to find what caused saturday's five-hour blackout in large sections of manhattan, the former explosion cut power from west 30th to west 72nd street affecting some 73,000 people but the night before the blackouts new yorkers flocked to observe the manhattan solstice, the event also known as manhattanhenge occurs twice a year and lasts a few minutes when the sunset or sunrise perfectly aligns with the east west streets of the main city fwri grid fans will be debating which was the greater sporting spectacle as sunday saw a day of brilliance in the formula one
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wimbledon, and the world cup cricket. also there's a bit of golf, i think. we'll talk you through them after the break. my digestive system used to make me feel sluggish but now, i take metamucil every day. it traps and removes the waste that weighs me down, so i feel lighter. try metamucil, and begin to feel what lighter feels like.
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welcome back to the show what an epic sunday of sports. let's run you through what happened yesterday louis hamilton made a record breaking six wins at the british grand prix on sunday the mercedes driver finished ahead of his teammate in a dramatic race which featured a crash. hamilton described the milestone victory as one of the greatest moments of his life. the win extends his lead to 39 points the the halfway point of the driver's championship. and now let's talk tennis, novak djokovic won his fifth wimbledon title in an epic five-set thriller against roger federer, the number one seed saved two match points to come back and defeat federer 13-12 in the final set of what was the
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longest ever wimbledon singles final. a tie break was used to decide the match for the first time in the tournament's history when they got to 12-12, and djokovic said the game was the most mentally demanding he'd ever came, overcoming a partisan crowd to lift the trophy and also coming back from two championship points to come back up and lift the trophy epic match, five hours of tennis that's a long time i can't do anything for five hours. speaking of long matches, england won its first ever cricket world cup in a dramatic contest against new zealand. both teams scored 241 and 15 overs and tied a the 15 runs each as they fought over an extra over england were declared winners having hit more boundaries so amazing scenes there. everyone in england is very, very happy with the results. not so much the case for new zealand. amazon has kicked off its annual shopping bonanza, prime day. this year's event will stretch
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over two days and is expected to be the retailer's biggest yet. elizabeth joins us with more tell us what to expect. >> that's right, so prime day is proving to be an increasingly por important day for amazon as it tries to lure in more subscriptions, which is that high margin business it sees possible sales growth in the past few quarters. we are looking at prime day this year this is a 48-hour event. it's gone up in length over the past few years last year is about 36 hours we're seeing a demand from amazon to keep people there longer by offering more than a million deals. this is a very international day. this is focused on markets not just in the u.s., but on trying to lure customers from all of its various markets with deals across the board last year 100 million products were sold, but ultimately what it comes down to is how this translates into sales. if you look at the historical data, what you can see is that this one day has turned into a pretty big revenue booster for
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amazon, ultimately about $4 billion in sales last year. many analysts are projecting between 5 and $6 billion in sales for this year's prime day. what this comes down to is an idea that they can get people signed on to prime, in addition to buying some of those products with the good deals, they'll also stick around. they'll stay with prime, which is about $119 a year they'll spend more money on the platform they'll stick around because of the music, because of the streaming and ultimately this will prove to be a way to retain customers as amazon looks to extend beyond traditional retail sales and grow its business into something that's much wider than a retail platform. >> very interesting points let's broaden the discussion i want to bring in patrick o'brien at global data as elizabeth was saying, it looks as though sales are expected to pass $5 billion this year huge numbers, of course, but does it come at the expense of margins, and is there a reason why they don't do these days that often >> i think that prime day is
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only something they can do once a year it's really a recruitment drive for prime, and it has been very successful as we've just heard now, it is -- it is affecting their sales growth overall in terms of amazon's international sales growth has been slowing, but of course that's a lot to do with the fact that it is selling more through third parties where it only recognizes the service charges on those sales rather than the full merchandise value. but it is actually increasing margins in the longer term. >> how much of an indicator will the prime numbers be for amazon's second half outlook, when you look at this kind of core part of its business and will it in fact show we're looking at other segments as much as we are the retail, what's your expectation there? >> i think it is an indicator. we really see whether or not the sales per consumer, per prime subscriber is really going up, whether the actual -- the prime
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subscribers are using this day to get involved. obviously it's very much a recruitment drive for those who aren't members trying to bring them in. they've cut the price of that subscription over prime day for example. >> let's talk about some of the challenges from the fulfillment and logistics standpoint many of these deals, if yo gou in and order, you're getting same day delivery for many of the prime members. facing increasing amount of competition in that space, would you say that amazon have a real competitive advantage when it comes to the logistics and fulfillment that other competitors would only hope for. >> they clearly do the volumes they go for and the economies of scale they've got within their logistics operations does set it apart from other retailers they're increasingly doing more of their logistics rather than pushing it out to third-party couriers. >> i'm wondering how much that kind of worker backlash might
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weigh on amazon and how does that tie into the broader regulatory threat we're seeing on this company? >> this is a real key issue for amazon, where it is continually over many years now been highly criticized for the way it treats a lot of its warehouse and logistic staff, for example, and it's really something they need to get a grip on there is obviously potential for further strikes, and it really needs to manage not only the deal with its workers, but also how that is perceived in the wider population. >> just to be clear, i want to ask you about amazon's market share in the u.k we talk about the huge market share they have in the u.s., almost 50% of e-commerce online goes through amazon, not really the same in this country how do you see that evolving >> they're still doing extreme well in the u.k. it's not at the same levels as the u.s. we don't have the same amount of prime membership i know it's the majority of households in the u.s. are now
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prime members. it's probably running around 30% in the u.k they're still growing very rapidly. there's very little slowdown in the revenue growth despite it being very mature. >> it seems as though getting people to get onto their prime membership is key to their expansion. we're going to leave it there. thank you very much for taking the time to speak to us. patrick o'brien and our very own elizabeth who's keeping us up to date on amazon developments and all tech developments actually that is it for monday's show i am joumanna bercetche. "worldwide exchange" is coming up next. ♪ more, more, more
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nearly a quarter of men say they've shelled out more than $100 the last time they made an impulse buy. over half of people consider themselves to be savers rather than spenders. it is 5:00 a.m. here at cnbc global headquarters, 5:00 p.m. in beijing, china, here's your top five at five a 27-year low. china's economy growing at its slowest pace since 1992, is it the trade war? citi group, goldman sachs, jpmorgan, wells fargo and more it's a big banks earning bona a bonanza. the rally does roll on, the major averages look to open at new all time highs the dow coming off its third record close of th

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