♪ good morning and welcome to "street signs." i'm joumanna bercetche. >> and i'm silvia amaro and these are your headlines. burberry shares tumble as the british fashion group offers a profit warning amid a luxury demand. reporting a 7% drop in end of year revenue. a retaliation after the

houthi ship attacks. and the u.s. banks all due to report before the bell. and taiwan goes to the polls in the election that could prove key relations with china and the west. welcome to the show, everybody. we are starting the show looking at the luxury sector after the british brand burberry issued a profit warning after the slowdown in luxury demand. it expects the adjusted operating profit of 410 to 460 million pounds versus previous guidance at the lower end of 552 to 668 million pounds.

it warned in november that the revenue target this year may be out of reach. looking at the share price move at this stage with burberry trading lower by 6%. let's discuss this with charlotte. charlotte is joining us now. good morning, charlotte. what else did we hear from the company and how concerning is this profit warning from burberry? >> it has been tough for burberry. they have been going through a turn around. new management in 2022 and the creative director dan iel lee with the new collection. there has been a muted response on the new collection. doing that turn around at the time of the slowdown of luxury products is tough for burberry. we have seen this waning for all players.

burberry burberry announced the new target. they warned they would reach the lower end of the guidance they had given and now changing guidance all together cutting it to 410 to 460 adjusted operating profit for the year. burberry management is confident to realize burberry potential to achieving the full revenue ambition. here we are again. tough play for busrberry. the slowing demand in the u.s. after the boom last year or two years ago. the recovery in china is not fast enough for the brands. now it has been across the board and burberry is exposed compared to other luxury players that can play off lvmh and others. when you have one brand, with a lot of exposure to outlet, a

branding itself with the issues. the famous episode in "succession" last year. they were trying to do this revamp on the luxury . it has been tough for them. >> charlotte, one thing that stood out is how weak the sales were in the u.s. over the course of the last few months, we have talked about weakness in china. burberry with the domestic economy here. the weakness in the u.s. with sales falling 15%. this wraps into the theme of the aspiration of the u.s. consumer with other luxury brands. they are impacted by it, too. >> it is coming through in the past year, really that u.s. was fitting the post pandemic boom in 2022 and the slowdown coming from the cost of living crisis

and high inflation and all of the shoppers squeezing their belts. it is interesting. with burberry, they are not a must-have brands. some have managed to survive if shoppers were buying two or three luxury items, burberry may not be one they go to. >> charlotte, thank you. burberry is down 6%. it was 14% lower. we have rebounded, but weak price action in burberry this morning. turning to the top geopolitical story overnight. the u.s. and uk launched tries in retaliation on the houthi

rebels. president biden says attacks by hostile ak ctors in the region will not be tolerated. you see brent shy of $79. these are the key oil majors and companies which are higher on the day. totale leading up 1.7%. the rest up .50. we see the likes of maersk up 3%. others up 1%. many of these companies have said they had to divert traffic away from the red sea and opt for longer shipping lanes around the cape of south africa. something to keep in mind there. the defense stocks in focus as well given the escalation overnight. you get a picture of some of them up 1.3%. france up 3.2%. no surprise that some of the key he big defense stocks in the european markets are trading

positively this morning. let's get out to dan. dan, just walk us through the events overnight. to what extent is this being seen as a major escalation from players in the region? >> reporter: we heard from saudi arabia who said they would like the u.s. to urge restrained here given the already heightened tension in the region. joumanna, this was a surgical strike that may have been months the making given the commercial shipping in the red sea. coalition forces say they hit more than 60 targets overnight in total across 16 different locations, including radar installations and fmunition

depots. more than 100 precision types were used in the strikes as well. u.s. president joe biden said the strikes are a clear message that the united states and partners will not tolerate attacks on personnel or allow imperil freedom of navigation. he says the united states is not going to hesitate to direct further measures to protect people in the free flow of international commerce as necessary. what we see is the united states issuing a commitment to protect those vital waterways that are so important for international trade and supply chains. of course, as a result of the houthi attacks, we have seen the cost of commercial shipping go up and insurance premiums go up ands disruption to global trade. 20% of the global trade forced to reroute africa rather than

traverse the red sea and suez canal and mediterranean. a concerning situation that the senior u.s. official told me that the united states was not going to tolerate and had to retaliate against the houthi air strikes which were the foolish. the question is if they will retaliate and if, so how. >> dan, thank you for the overview. to your point on shipping costs, silvia and i looked at them yesterday. up 250% overall costs for a 40-foot container. it is having an economic impact. to talk about the political consequences, let's talk to peter san. we can't look at the strikes in a vacuum. there have been several months of attempted drone strikes on vessels going through the red

sea. we saw imamajor escalation with drones intercepted this week by western forces. that was a mark ed escalation. what the houthis were attempted to do was provoke the western allies to respond. what happens next? >> yet, everything and nothing has changed overnight with the retaliation of the u.s. an and allied forces. they arie going back to mid-december with the attacks on the global shipping targets. ships related to israel and ships that happened to be container ships throughout. that is one thing that hasn't changed overnight.

the tension is still massive in the region. uncertainty is a huge part of the planning for global supply chains. the one that i thiing that didne is we expect the larger shipping lines of the world to avoid the region until they are absolutely certain that there is restored safe passage. the strikes overnight did not restore that, at least to the extent of our knowledge, just like that. the tension has risen and there is still uncertainty around that. i think every shipper should expect still extended transit times and much higher freight rate up 250% from three weeks a ago. it is dramatic. you better make plans now.

>> i'm glad you arie bringing that figure up. with the tensions escalating day after day, i wonder how the freight rates could go and how long will it take before consumers start feeling that pain? >> i think consumers are already feeling the impact here. we did see two weeks ago the swedish retailer ikea saying customers may not find all they are looking for on our shelves in a short time. since then, it has only gone one way longer transit times. what we are seeing also out of the far east is a little bit of the impact on how to handle a situation like this when capacity all of a sudden, in this case, container ships, spending three weeks more from far east to europe. what we see now is the carriers are not going all the way to the

original starting points. they are cutting. we see stranded cargo and goods at the farthest end of the supply chain connecting far east and mediterranean. that is goods not moving the way it should be and we should expect this to go on for the month of january which is something we can see right now on the platform. that is what you expect. i think there is still a lot of unscertainty to handle that ris. that is as far as it goes. i think everybody just needs to get more product moving ahead of the chinese lunar new year. january is the container shipping. that is making it worse.

>> peter, we heard from maersk overnight saying they are taking new measures in order to be able to bypass the panama canal with the drought taking place there. given the red sea and the climate-related problems in the panama canal, i wonder how you describe the shipping industry at this stage? is this likely to be a difficult year for the shipping industry? >> it has proven to be a very difficult start of the year for sure. dire straits may be the one word that pops into my mind when you see the establishment where maersk announced good moves on rail to transit the other chokepoint of the panama canal

which is operating at 50% to 60% of capacity right now. from a shipper's perspective, the cargo owners, i think information like that brings actionable clarity as they should expect rerouting around the cape of good hope for weeks now. that gives them the opportunity to act, not just wait in limbo for what happens next. they can with some certainty and also facing higher costs and longer transit times, get goods moves on the way. it comes at a bad time with the issues in the red sea and the drought in the panama canal. that was the option as they moved away from panama to suez. some are making it back to make product moving as they do not go through the suez canal.

>> peter, a final question quickly from me. have you got any data as of yet that would show which seeking tors are likely to be the most impacted from the shipping diversions and the fact that costs have gone up so much? are there any particular sectors you should focus on which should be influenced by the development in the red sea? >> actually, our key focus is container shipping. that is the sector mostly impacted by this. i think also that several other sectors, car carriers with the galaxy leader hijacked, and they are taking their risk. they may assess risk to a different extent. what should you look for here? shippers choosing alternatives to ocean freight. if you have time-sensitive

product at a high value, you may consider air freight. air freight or combination product sea-air, may be one a alternative to get product moving where container shipping is by far the most impacted as you can tell from the change of share prices that you talked about earlier. >> very clear. peter, thank you so much for joining us on the show. a story we are monitoring this morning. peter sands. thank you. coming up on the show, we're looking ahead to a slew of earnings from u.s. banks. arabile will join us after the break to tell us what to expect from this earnings season. my name is ashley cortez and i'm the founder of the stay beautiful foundation when i started in 2016 i would go to the post office and literally fill out each person's name on a label

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welcome back to the show, everybody. let's look at how markets are reacting to the geopolitical developments. i say at the headline level, the stoxx 600 is brushing off the concerns. the stoxx 600 up .90%.

this after a very weake end to the trading session yesterday. you can see a lot of green behind me in the heat map. overseas in the u.s., we are still digesting news of the hotter than expected inflation print. i would point out that i thought the price action was interesting yesterday after a strong dip in the afternoon with s&p clauwed back to flat. we saw a rally in the yields. despite that hotter than expected print, the headline inflation print coming in higher than expected and we got a big rally in fixed income and by the end of the day, muted price action in u.s. markets. interesting price action over there. today in europe, you see it is more positive. let's break it down. a lot of price action centered

upon the uk. ftse 100 up .80%. we are, of course, seeing a bounce in commodities this morning. oil and gas sector reacting to the fact that brent and crude up 2% in trading on the back of the developments in the red sea. on the flip side, burberry at the bottom of the ftse 100 now down 7% on weak earnings. that is dragging down the rest of the luxury complex. not obvious with the cac 40. it is up 1%. you are seeing luxury names under selling pressure. dax with a solid start in trading. inching back to the all-time highs as well. another good day for siemens. in terms of week to date, it is friday. let's take a look back at the

week. ibex down .90%. germany and france up .60%. in france this week, we had some political developments as well with the cabinet reshuffle and the appointment of the prime minister. many analysts are saying it was not as significant as the headlines would suggest. some of the key ministries, the economy ministry is being held on by bruno le marie. we have to park that back drop as we head into the parliamentary elections later this year. the ftse 100 this week is down .70%. we had loads of retailers are reporting this week very strong negative reaction in the likes of sainsbury and m& s. don't forget the recruitment agencies with hayes under performing this week.

in terms of the sectors, real estate is leading and industrials doing well this morning up 1.5%. media is up 1.5. we have a marginal underp d performance of autos. luxury is under performing as well, but still trade in the green which is impressive with burberry. silvia. let's look at u.s. futures as we approach the equity session. as you see, it is a mixed picture at the moment as we await the start of the trading session in the u.s. yesterday, we saw marginal moves stateside. i will highlight the week to date with the nasdaq up by more than 3%. one of the out performers so far this week when it comes to u.s. equities. of course, we are looking at the u.s. market after we had a new u.s. headline inflation which

rose more than expected in december at 0.3% on the month and 3.4% from a year ago. the core figure excludeing food and energy, 0.3% and 3.9%. the annual print was the lowest since may of 2021. markets raised the expectations to under 70% of a fed cut. it is a big day for banks as four of thewall streets biggest lenders, bank of america and wells fargo and citigroup as well as jpmorgan chase report. we have joining us now patrick spencer, vice chairman at baird. patrick, it is good to see you today. we are all anticipating the new releases from the u.s. pabanks.

tell us what you are expecting to hear from the major banks on wall street. >> good morning, silvia and joumanna. banks have been on a huge tear since last year. the banks being upgraded in the middle part of last year. on the valuation call with the earnings coming out today and you will see the big banks a modest decline in net interest margins and flat fees. it is only recently that m& a is picking up and transactional business is picking up in capital markets. credit quality should be pretty

stable. i don't think we will see a lot of fireworks in the bank stocks this quarter. i think i was looking this morning with three stocks we expect to increase earnings year over year. i don't think you will see a lot of negative spin either. i think it is more a question of these stocks will most probably sell off a little given there will not be a huge amount of upside. i do expect later in the year when the yield curve softens on the back of lower interest rates, value stocks will pick up. for that reason, financials will recover sharply in the second half of the year. no fireworks in the bank earnings today. the only issue, i suppose, could be loan losses. loan losses will be absorbed easily by the big banks. the regional banks that have a lot of exposure to commercial

real estate might have a bit of problem. that is a really good sum of how we see the banks from here. >> we also got new cpi print from the united states which came in slightly hotter than expected. how do you interpret this latest data? how do you think this could actually feed into the banks performance for the rest of the year? >> that's a great question, silvia. i think you are looking at the inflation print. the number was caused really by higher rents and also used car prices. because the economy is slowing, isuspect those will rollover and you will get a soft landing as a result of that. i suspect inflation is going to cool down. everybody is getting excited about the hot print in inflation again with the jobs number next

week. i think it is really, really important to emphasize that money supply is, you know -- when had zero interest rates, money supply is exploding. now money supply is negative. china is collapsing and it is exporting deflation. everybody is worried about wage increases. wage increases do not cause inflation. they follow inflation. i suspect what will happen is as inflation eases, because it is binary here. we will see inflation falling as a result of those things i'm talking about. inflation is going to fall. that means lower interest rates and lower interest rates are better for banks. i would have thought mid-year, the banks will takeoff on the back of net interest margins, et cetera. >> patrick, looking back at 20

r, 3, it was a stellar year for banks. we don't have as much momentum in the first couple weeks this year as we had toward the end of 2023. what is going on? do you think that changes? are we likely to get a repeat performance? >> good morning, joumanna. i think that's a great question. remember, this is the beginning of the year and volumes are low. the momentum hasn't been established. the magnificent seven has done well this week. they recovered quite nicely. i think tech with the absence of growth with the economy slowing will continue to do well. big cap tech will do well in the

first six months of the year. with the yield curve softening, and when that happens, value stocks do better. big cap tech and growth will continue to do well until the middle of the year. at which point, you have to look at the value stocks. the market is broadening. we like health care as well as the discretionary stocks. you have to look at materials and energy and things like the banks. i think it will be a switch from growth to value through the year. it will be tough because everybody came into this year uber bullish. very happy. last year, uber negative. you have to see a little bit of weakness as this works out. there will be some disappointment on the rate cuts. i don't think you will get as many as people expect. >> absolutely. you are fighting sentiment.

patrick, thank you for joining us. we have to pick you up on the conversation the second half of the year to see if the rotation takes place. patrick spencer. we will crossover to t'aipei where a pivotal election is taking place. stay with us. we will discuss everything to do with the taiwan elections. to 13. the queen sleep number® c2 smart bed is now only $990. plus, free home delivery when you add any base. ends monday. only at sleep number. when we started our business

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welcome back to "street signs." i'm silvia amaro. >> and i'm joumanna bercetche and these are your headlines. burberry shares tumble as they issue a profit warning as they show a slowdown in the luxury demand. the red sea retaliation sends oil prices higher as u.s. and uk forces strike a houthi rebel in yemen. and wall street braces for the bank earnings with bank of america and jpmorgan chase as

well as citi and wells fargo all reporting. and taiwan votes to shape the key relations with china and the u.s. welcome back to the show. i want to take you to the market action in europe. equities have been trading for an hour and a half so far. this is the picture at this stage. it is a happy friday mood in the markets. we are seeing most of the big boards in europe trading in the green. this is after we saw thursday's session with a different mood with the stoxx 600 actually ending the session down by .80%. if you look at how asian boards are faring earlier today. only the nikkei 225 was among the major boards ending in positive territory up 1.5%. it is continuing that positive

mood which we had seen on thursday. the other boards posted negative notes. we had a bit of trading data from china which is translating into this action. let me take you into more detail when it came to the trading data from china. chinese exports grew more than expected in december. the inflationary pressure continued in the second largest economy of the world. exports grew 2.3% year on year in december which beat the analyst expectations. consumer prices fell for a third month. >> one stat is china oil imports which risen to a record high for

the year. that was remarkable. you have to think how much of that is imported from russia. park that thought. elsewhere. voters in taiwan will head to the polls on saturday in the contest which kick starts a packed year for global democracy and could prove pivotal with china and the west. emily has the story from t'aipei. >> reporter: we are on the each of elections in taiwan. the ruling party dpp is the current vice president and whether or not he can secure a third term for the party to hold office. the opposition hou yu-ih is the mayor and tpp ko wen-je. the elections come an amn amid surge in china with peace and war. taiwan dominates semiconductors

making 60% of the world's chips and 90% of the world's leading chips. how does it lead for the battle with supremacy with the u.s. and china? 19.5 million eligible voters here on the island. that is when the stations will be diverted into counting statio stations. it is a matter of simple majority in taiwan. reporting from t'aipei, i'm emily tan. >> let's bring in the executive director of the alliance of democracy foundation. good morning. talk us through the global significance of the election. clearly taiwan is a hot spot, but the center of the rivalry that is playing out between china and the u.s. >> that's right. good afternoon from t'aipei

which is where i am for the elections. it matters to the taiwanese voters, but it matters geopolitically because of the relations with china. china sees taiwan as a renegade province and using all means, including military to secure that. taiwan plays a big role economically because they produce a large part of all our semiconductors and micro chips that go into the computers and iphones and game boys and so on. they are pivotal. any war around taiwan would be an impact for the world economy. it is not just china against taiwan, but taiwan aided militarily by the u.s. where president biden several times said he is willing to militarily defend taiwan if they are attacked by the chinese. there is the value question and

if the voters are affirming the democracy and freedom. then you have the taiwan straits. the dividing line is one between democracy. those are the big things at stake in the election. >> i know he it is a blackout period right now. we don't have updated polls. the latest number did suggest the dpp candidate is a little bit ahead of his other candidates going up against him. that should mean a continuity. dpp is the current political party in power. if he goes on to win it, what changes from the chinese perspective? >> china has frozen relations for the last eight years and ramped up pressure economically and disinformation, including in the election, and military, which we have seen increasing

sincing e august of 2022 when t speaker nancy pelosi, visited taiwan. the continuity from the stark increase from the chinese pressure, including military. we will see more of that with lai in power and probably not resumption of dialogue which is what the opposition candidate hou yu-ih and ko wen-je, if elected, they would try to continue dialogue from the chinese side. >> we heard president biden considering sending a delegation post election to taiwan. who could that mean in terms of reaction from china if the u.s. does go ahead with this idea? >> china will be moving to the

presidential election in had mm may. we will see the u.s. do any steps to see if it is moving taiwan toward independence and further recognition in the world. they will try to stamp that out. the chinese will not be happy in the americans come here again with a high level delegation. we saw how they reacted to the nancy pelosi visit in 2022. they use these visits as a way to ramp up their pressure. >> there is a lot of heat on europe and nato more broadly for not paying attention to the kme comments the russian president made in the past when invading ukraine. we heard president xi say this is the choice between war and peace. to what extent is the west taking seriously the comments from president xi jinping? >> i think they are taking it

seriously, but not seriously enough. i think the helps acmessage fro is to doing what they say. taiwan will become part of china and p using whatever means. we should take him at his word. i think it is important after this from the u.s. and european partners is telling the chinese this would be a disastrous plan for you if you initiate any military action with taiwan. the taiwanese are dogginging th. >> just going back to what i was asking about at the beginning.

we don't have the polls with the blackout pefriod at the moment. dpp is slightly ahead, but not ahead enough to capture majority. what does that mean for the decision making and also how is the lack of a potential p parl parl parl parliamentary? >> we have dpp winning the presidency and kmt gaining in parliament. we have to see. it could mean something on relations which china may feel this would be a half win and the fact that the legislature might be taken over by people that want to have more dialogue with china and that could lead to something on the domestic agenda

being stalled because the president cannot get through parliament his agenda. we have known with similar situations in the u.s. and france where they have the president with the opposing party that leads parliament. here, it would be something new. taiwan has decades on its track record. to be watched. >> all right. we are approaching that very important vote. let's see what will be the jut c outcome. thank you for your time. on a programming note, we will hear from china next week when the country's premier will deliver the special address live from the world economic forum annual event in davos. tune in live on cnbc next tuesday at 10:50 cet.

also at the world economic forum, the president of ukraine, volodymyr zelenskyy will make a special address live. tune in for that speech as well on tuesday at 14:15 cet. this as the uk is set to support ukraine 2.5 billion pounds. rishi sunak is visiting kyiv today. coming up on "street signs," we will look back at the key markets and the expectations for the banks reporting. all that after the break. flight. cirkul is the energy that gets you to the next level. cirkul is what you hope for when life tosses lemons your way. cirkul, available at walmart and drinkcirkul.com. hi. i'm wolfgang puck when i started my online store wolfgang puck home

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welcome back to the show. i want to show you how european equities are trading at the moment. this, of course, as the market has been opened and trading for almost two hours. you see over here to my right, it is mostly a positive picture in europe this friday. i would highlight the ftse 100 up by .80%. over in france, the cac 40 is up

1%. similar moves in germany as well. this is actually a different story from what we have seen on thursday. yesterday, we saw the stoxx 600 ending the session down .80%. here is where i point you to comments where we got comments from christine lagarde. in the interview, she said the ecb will only start lowering rates once it is convinced inflation is heading back to its 2% goal. perhaps at this stage, the ecb is not feeling so comfortable about the direction of travel for headline inflation. a bit too early to understand where this central bank will go and, of course, how that might impact the movement when it comes to stocks in europe. some of the important stories we have been monitoring this week as i take you to the markets and

how they have fared throughout the weeke. today is friday and it is important to step back and understand what has happened in the market. you can see over here in the uk, the ftse 100 is on track to end the week down by .70%. similar narrative with the main market in spain. the other main index is on track to end the week on a positive note. when it comes to this week, it has been a big one for uk retail with largely disappointing earnings from tesco and m& s and sainsbury. consumers facing inflation headwinds. you see to my right with the price reaction so far. sainsbury is down by 8%. marks & spencer down 7%. significant moves in the retail

names. when it comes to recruitment stocks, they sank after the profit warning from hayes. it declared a clear slowdown across job market. the stock fell 18%. here is the picture for the recruiting names. silvia, let's look at u.s. markets. throughout the week, this is the picture for the indices. for the week, the dow is marginally up now. up .23%. s&p up 1.8%. i should mention that briefly yesterday it broke through the all-time high of january of 2022. we are getting closer with the s&p. the nasdaq has had a good week up more than 3%. in contrast to the first trading week of the year, it has been a better couple days for the tech

com complex. one other story in corporate, microsoft briefly overtook apple as the world's most valuable company on thursday for the first time since 2021 after the iphonemaker made a weak start toof the year amid weak demand. apple is still positive up 2.4% despite the downgrades as you spoke about last week from the likes of piper sandler and barclays. the market is digesting the hotter than expected cpi print and the geopolitical developments with the uk and u.s. forces attacking houthi targets in yemen. a big focus from the geopolitical perspective. contrast with the risk-on session in europe.

s&p is opening around flat. the dow is marginally slow and the nasdaq weaker. silvia, earnings season kicks off. we have all of the banks to watch out for today. it is interesting to listen to what patrick had to say from baird. itexpectations are low going into the bank earnings season. higher provisions with the economic climate in the second half of the year sdp. >> and the individual stories. citibank is restructuring. a change of leadership when it comes to morgan stanley. all very important to digest as we await to hear from all of them. >> it is interesting to hear from the bank ceos and what they have to say in terms of the outlook. it tebnds to be the bigger driver. it is not just the earnings, but the likes of jamie dimon and

other ceos have to say about how the consumer is holding up and also what delinquencies are looking like as we start monitoring more of the weakness in data. >> of course, how that might translate into the action here in europe. our u.s. colleagues will speak to bank of america ceo after 8:00 p.m. cet and the citigroup ceo mark mason. do not miss cnbc coverage next week live from the world economic forum in davos, switzerland. that is kicking off on monday, january 15th. that is it for our show. i'm joumanna bercetche. >> i'm silvia amaro. "worldwide exchange" is coming up next. has no idea she's sitting on a goldmine. well she doesn't know that if she owns a life insurance policy of $100,000 or more she can sell all or part of it to coventry for

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it is 5:00 a.m. here at cnbc global headquarters and here is your "five@5." we start with breaking news. the u.s. and allies launch an attack on houthi rebels in yemen. and the risk premium for crude continues to grow. turning to wall street. the dow hits an all-time high despite the hotter than expected inflation report, but futures are under pressure. and today, investor attention turns to earnings season and the strength of the u.s. major