that's all for this edition of "dateline." i'm craig melvin. thanks for watching. ♪ good morning and welcome to "street signs." i'm joumanna bercetche and these are your headlines. diageo slumps to the bottom of the stoxx 600 dragging the food and beverage with it. the ceo says she is ready for the challenge. >> it was disappointing and we are not satisfied with where we are and i'm rest lless to get bk

to all regions. bbva with a bumper beat on the fourth quarter profit amid the strong performance in mexico he. carlos discusses the ecb rate cuts with cnbc. >> the net interest income for the year will be not growing as much as it grew in 2023 given that we will have the rate decreases toward the end of the year. with that in the eurozone and we expect to growing our business, but in the midsingle digit. and euro whipsaw with the spain economy growing in the fourth quarter and ifo warns that germany could be in for recession. renault hits the brakes and volkswagen says the ipo is a tangible option stating it is

pushing for investments for the battery unit. i'll kickoff the show with some breaking data from germany. annette has been previewing it all morning. we have the q4 from germany. it is disappointing. the adjusted q4 at minus 0.34 on the quarter in line with the forecast of minus 0.3. the unadjusted is minus 0.4 in line. the calendar adjusted at minus 0.2. that tells you the german economy is not had signs from t numbers indicating it was stuck in the doldrums.

minus 0.3% is the official number put out by the statistics office. let me tell you that this is on the back of other gdp prints we he got got with the eurozone. domestic demand dropping in france. spain was a relative out forefor performer at 0.2% forecast. from what we gathered so far, we have france coming in line and germany coming in line, but also at a negative number at minus 0.3%. spain is stronger than expected. we also have italy in the last few minutes as well at plus 0.2% quarter on quarter. the largest european economy and germany still in contraction mode. let's get to annette.

we will not get the full details until later. that is the way the german statistics office releases things. from what we can tell, annette, this was another quarter for the german economy with not a lot of green shoots. we have a problem with annette's audio. let's recap the gdp data. i mentioned there was an upward surprise. the q4 gdp at 0.2% quarter on quarter. that translates to 0.5% year on year against the estimate of 3%. italy is coming in higher than expected. the q3 gdp number for italy is unrevised at 0.1% quarter on quarter. crucially here, italy is showing

two consecutive quarters of positive growth. not the case for germany, which has contracted by 0.3% for the quarter. annette, the signs are not pretty. >> reporter: we have a full audio connection. if you look through the ifo institute and it is showing the forecast for the first quarter of this year and they have the print of the contraction of the economy. it is weakness across the board. there is one silver lining which is the consumer. the ifo institute was saying because of higher wage rounds, which makes up for the high inflationary environment, it

shows the consumer is back. the real estate sector is doing poorly as well as manufacturing which is low in terms of activity. there are a couple of factors. a, the order volume has been gone done. the industry is sitting on a huge order book since the covid crisis. now the order books are lower. those sales are declining. there is not a lot of positive spirit for the economy. one silver lining is the consumer, joumanna. >> absolutely. that is something we will keep an eye on in the coming yo quarters. let's bring in andrew kenningp ham from capital economics.

andrew, just looking through the gdp numbers and figures we he h had in last hour, germany is still very much in the doldrums. how do you see things panning out for the german economy this year? >> as your colleague was saying, the outlook is pretty bad. as the ifo survey would say demand has weakened a lot. the increase of interest rates is effecting german activity more than most other countries. a country depends on industry which is a capital intensive industry. they export out as well. i think the german economy probably contracts in q1 and q2 and stagnant all of this year. we think it will return to growth by 2025 or the second half of the year as interest rates cuts begin to help.

it will take time to feed through. the other concern is the trend growth rate over the medium term is looking to be very weak. >> what are the signals we are getting from the composite pmi numbers? there was an improvement with the latest activity indicators, although a low level and below the 50 mark which is the line of differential. pmi is still below 50 and improving from where we were in prior months. >> i think the january survey was generally weak. if you look at the ifo, it is slightly down from december. clearly consistent with the economy continuing to contract. there also was some signs that some price pressures may have increased slightly. that is a bit of a worry because it is one of the reasons why the

ecb is likely to pause or take its time before cutting interest rates. i didn't think the pmis were particularly encouraging for january. >> how do you think this is going to factor into the ecb decision making over the coming months? they, of course, have one needle in their compass, and the focus is on inflation with those inflation numbers encouraging. the economic back drop is so weak and to your point now, there are not a lot of reasons to be optimistic at this point. >> no, the weakness in the economy and the fall in inflation both point in the direction of allowing the ecb to cut interest rates. i think they will be focused more on the inflation numbers. they have a single mandate to get inflation back to target.

a lot depends on what happens in the next three months. three more months of inflation data before the march meeting. tomorrow and the next day is the january inflation data. i think that's going to be a bit disappointing and we expect this inflation to stall with the headline rate unchanged in january and maybe core rate possibly edging down slightly. germany, again, will be a problem. there have been a number of tax rises to push the inflation rate up there. so, yeah, i think we'll have to see. the ecb will be aware of the activity issues and concerned about the risk of overtightening and pushing the economy deeper into the downturn. at the same time, we have to keep their eye firmly on inflation numbers. >> it looks like the weakness in demand is coming from two sources. both dmek particular ininternal.

to what extent are the rate hikes and monetary policy has contributed to the weakness in growth we are witnessing? >> that is tricky to answer with any certainty. it certainly is one of the factors which has been causing the weakness. initially last year, it was more to do with the energy prices and hits to real incomes and impact on the industries and more energy intensive sectors. the interest rate effect will build up. it has had less effect on outstanding debt than we expected. a lot of debt had been fixed for quite long periods of time with fixed interest rates. the new borrowing has been hit. cumulatively is picking up and it is having a significant impact. that is why i think even once the ecb begins cutting, it will

be the several months before that reverses and we see new lending picking up again. >> where do you think, if anything, a growth impetus is going to come from? again, fiscal is not the way forward. there are plenty of discussions happening about fiscal consolidation and tightening the purses. where is the growth catalyst going to come from frothe furth rate cuts and the absence of the pickup of external demand as well? >> well, that's really the problem. there is no immediate source of growth, i would say. we think fiscal policy would be tightened by more than .50% gdp this year. that is a clear negative. the one area which is going to improve is households and real incomes which should pick up

because inflation will be low and wages are still rising relate pa relatively quickly. that may be why we see the green shoots with the consumption growth. it is interesting that europeans households are not spending much. their savings rates are still high compared to the pre-pandemic norms. a lot of caution out there and not the sense they are going out and spending the exception savings. that is a contrast with what is happening in the u.s. where the economy obviously is racing ahead. i think it will be quite a long time. eventually, we will see real household income growing and external environment improving and the interest rates coming down in the second half of the year and that will eventually help. >> sentiment indicators are a powerful thing if the u.s. economy is anything to do by.

andrew kenningham from capital economics. let's take a look at markets. a lot of green on the heat map. positive start for the stoxx 600 up .60%. mixed from asia overnight. hang seng in focus. a lot of debate with the property sector there now evergrande has officially gone under. that is having ramifications. over here in europe, we are focused on individual stories and some of the corporate earnings that have come through in the early hours of trading. in terms of the boards, every board is trading in the green here as we spoke about at the top of the show where we have been monitoring the gdp data this morning. big upward surprise in spain. ibex up .80%. better gdp figures than the market had forecast. and the ftse mib in italy with

stronger numbers in italy quarter on quarter. dax were talk about the german when. minus 0.3%. not boding well for the back drop in the coming months. despite that, dax is performing well. it is an outward focused index. just shy of 17,000 here. cac 40 in france is up .30%. the figure came in line with gdp flat for the fourth quarter in line with expectations. of course, we are focused on earnings today. renault is one of the names we are watching today after the company decided to postpone the ipo. despite that, the company is doing well in trading. over here with the ftse 100, 100, .60% firmer. at the bottom is diageo with

disappointing sales with the earnings in the u.s. and latin america. a topic we will discuss more on the show. in terms of sector, media is up 1%. that is led by gains from wpp. retail is putting in a good day today up 1%. financial services is up .80%. on the flip side, the defensive with food and beverage do down .70%. basic resources is coming off weakness from china into the european session down .50%. let's talk about the yields in the u.s. treasury. this is after the treasury will issue new government debt which is down from the previous estimate of $816 billion a few months ago. this is ahead of the fed policy rate decision on wednesday with close to 50%of traders eyeing the first rate cut in march.

really big catalyst for the market yesterday. the rally continues with the ten-year note at 4.06. we rally 3.5 basis points today. yesterday, rallied 6 points after the announcement came out. you can see the european picture here which is mixed today in trading as well. coming up on "street signs," delivery hero ditching sending shares in the german food d delivery lower. we will bring you the conversation with the ceo of diageo coming up next. ah, these bills are crazy. she 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 cash. even a term policy. even

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welcome back to "street signs." delivery hero has sold its stake in deliveroo for 767 million pounds. it will hold no more shares in the company. the reaction is stark.

del deliveroo down 7%. diageo sales missed expectations in the first half with the pull back in latin america which caused the company to issue a profit warning in november. this has been going on a couple of months now. arabile is joining us now. what is going in latin america and north america? >> the usa specifically with the ceo pointing to pockets where consumers are not spending as much as they thought in the premium upper echelon of the brands. the super petrremium of the bra. it has been questioned. investors are warning that perhaps that luxury space will not get as high of growth level as it would. one would think there is some hope. you had lvmh wine and spirits

delivering growth in the fourth quarter after two quarters of negative 20% prindecline. you had slightly better than expected declines in the third quarter. still some uptick in some of that space, but not for diageo. latin america business saw sales decline 23%. the ceo saying that is expected to be 10% to 20% in the second half alone. they have a bit with the volumes in that area. they are seeing weaker performance and outlook on that side of the world. it makes up 11% of the net sales value. it does tell you how big an impact that would have. overall, net sales declined 0.6%. the expectation was to be flat

over the period. foreign exchange is the key issue at play there. as i said, latin america is the key factor. the question i asked debra crew earlier, the ceo of diageo, if innovation is important and push on to make latin america grow again. >> what latin america experienced in the perfect storm following three great years of growth and rapid decline we saw off that great growth and got caught long on some inventory is a market with down trading. that being said, we launched johnny walker blonde in the market. it has done well in brazil. what it has enabled us to do is broaden the johnny walker appeal for women. we're seeing women quite attracted. for innovation, what we are looking for is new occasions and a chance to really broaden our

brands andi having more women enjoy johnny walker. guinness is appealing to women, but also johnny walker. >> i spoke to the whchief innovation officer yesterday and he spoke about broadening the brands. that means the cap ex needs to move higher. the company is saying they expect to spend $1.3 billion to $1.5 billion. >> some of the brands they own include johnny walker and smirnoff and guinness and bailey's. it has been down 20% the last 12 months. it doesn't seem they will get a lot of love with the disappointing sales. what is going to turn the fortune of the company around? >> it was really based a lot on

whether the strategy of premium is correct for diageo at this point. as you said, that stock price is down at least 20% the last 12 months. in 2023 alone, it was down 23%. compare that to some of the competitors. remy went down 23% in 2023. in last five years, diageo is actually down around 4% with remy is down 5%. the forward pe down 18.5%. ab around 14 as well. it still plays in the ballpark and doesn't look expensive in comparison to the others. the question is is premiumization going to come to

bear? >> cac 40 is down today and setting the tone for the spirits. arabile, thank you for the update on diageo. switching to autos. renault has scrapped the planned ipo of the ev business citing equity market conditions. the offering had been expected early this year targeting valuation as high as 10 billion euro. the ceo said he is confident that renault can support the development of the ev unit. >> we are realizing more and more the performance of the group which is getting better and better. compared to the assumption two years ago where we announced the project and the ipo and i think the company has changed to go to another level and that allows us to complete the project including the cash burn in the first 18 months of its life. we don't neepowerco.

investor interest remains high and ipo is still an option. this after the report from bloomberg that the carmaker was delaying over the cooling market for evs. plenty to think about in the auto space this morning with renault cancelling the ipo and then all of the reports around volkswagen and battery unit as well. 21 strong is setting the stage to value the arcteryx sportswear company at $18

billion. the investors includings lululemon founder and tencent agreed to a 100-day lock up period. the firm ipo is expected to price between $16 and $18 a share. and fanduel parent company fluter is listed on the new york stock exchange. it will quit the listing in europe which is another blow to the london equity mark. flutter ceo says there is deeper access to the capital markets in the u.s. >> that is why we wanted t coverage. i think from our perspective, i met a lot of u.s. investors who had been wanting to invest in flutter. the high levels of the liquidity compared to the european exchange is something which is very attractive. we hope to benefit from that.

we will cut on to break. when we come back, bbva beats on fourth quarter profits and announces a share buyback program. cnbc spoke to the chair and we will bring you more after the break. hi. i'm wolfgang puck when i started my online store wolfgang puck home i knew there would be a lot of orders to fill and i wanted them to ship out fast that's why i chose shipstation shipstation helps manage orders reduce shipping costs and print out shipping labels it's my secret ingredient shipstation the number 1 choice of online sellers and wolfgang puck go to shipstation.com/tv and get 2 months free

welcome back to "street signs." i'm joumanna bercetche and these are your headlines. diageo slumps to the bottom of the stoxx 600. ceo debra crew is ready for the challenge. >> it was, you know, a disappointing and we're not satisfied with where we are and i'm restless to get back to all regions. bbva posts a bumper beat on the fourth quarter net profit topping 2 billion euro amid a strong performance in mexico. the chairman discusses the ecb rate cuts with cnbc.

>> it will be not growing as much as it grew in 2023 given that we will have the rate decreases toward the end of the year. with that in the eurozone, we expect that still to grow in our business, but mid-single digit. the euro struggle thes s ac europe and germany's economy shrinks 0.3% to end the year. and renault hits the brakes on the plans to list the ev unit and volkswagen says it has a tangible option for outside investment for the battery unit. another solid day for the european board. the stoxx 600 is close to a

two-year high. a turn around in sentiment the last week or so. every board is trading in positive territory here. of course, as we have been highlighting throughout the course of the show, gdp data has been in focus. headline euro shown gdp will come at 10:00 a.m. germany is contracting minus 0.3%. france is better at 0.2. spain is plus 0.6% for the fourth quarter of 2023. positives for those countries. we had a bunch of earnings coming through within the ibex index. bbva is a name we have been watching. we will talk more about that in a moment. dax is up .10%. cac 40 is up .30%. over here in the uk, the ftse

100 is up .60%. remember in terms of macro data, we will be looking for signals from the bank of england meeting on thursday. in the interim, the focus is on basic resources. the asian session has been weak and that is impacting commodities this morning. in terms of currencies, this is the picture. euro trading weaker today down at 108.20. the gdp in line with expec expec expectations. we had dovish comments from the ecb members the last couple days. expectations of rate cuts is building up in the market. dollar/yen at 137.30. let me take you to energy this morning. you can see the picture for

today. we are .40 firmer. brent is up .30%. prices are continuing to climb over the course of the year and we are 8% firmer with the focus on geopolitical developments. also this morning, we had interesting news from saudi arabia. this with aramco announcing they will be shelving plans to increase crude production capacity from 12 million barrels per day to 13 million barrels per day. the move comes a few months after the world's biggest oil producer said it was progresses well with the multibillion dollar project to boost capacity. it will raise questions over the global oil demand outlook. interesting from aramco. they decided to suspend increased production in their oil production plan is a signal

to markets. we don't have a full color on what prompted them to make the decision. it may have something to do with the expectation of how demand will pan out in the coming year. park that thought for now. in terms of spanish banks, we spoke of bbva. the bank is soaring up 3.5% in trading after reporting fourth quarter net profit of 2 billion euro and 30% jump from the year before and above expectations. the spanish lender announced a 781 million euro buyback and it is on track to achieve the 2021-2024 goals. we spoke to the chair who said overall growth will moderate and highlighting the performance in tu turkey. >> turkey is in a middle of change of policy with high increase in interest rates which

were taken up to 45% last week. the year 2023 has been one of big changes. with that, we have made over 500 million euro in net profit. what we expect in 2024 is similar levels of net profit in the way to normalizing the economy and much larger numbers than before the crisis. >> let's talk more about the outlook for the financial sector this year. i'm happy to say chris edelman from oliver weiman is joining me. >> good morning. >> let's start with a general question about net interest margins. obviously that is a theme this year. you have to think of it in partnership with what the ecb will be doing and potentially cutting rates this year. many people say the easy times,

quote/unquote, that this is coming to an end and 2024 is more challenging on that front. >> i think that's a fair assessment when you look at the bbva result. one issue was the net interest income. that is a broaden r sign for th next couple days. it will lead to a more need to grow with the fee business which the banks have shown in 2023. it is the fundamental shift from events in net interest income to headwinds that are likely to come. driven on one side which is likely to happen in rates and also driven by changes in d deposit beats. >> that's a valid point. let me come back to how you

expect market investors to distinguish between the banks that are more geared to higher interest rates and perhaps more subject to headwinds when interest rates more lower than those of the diversified business. are we likely to see an outperfoou outperformance of the latter basket? >> some of that is priced in. there is an expectation of the muted overall economic growth for europe which makes it a very difficult market environment. we also expect inflation to be spiky and volatility which will have an impact on how banks manage interest rate books and associated economics. the big opportunity for out performance is on the fee based income. >> for as long as i have been covering the european banking complex, the theme is cost

cutting. there is no end in sight. i wonder in the environment where there is a lot of pressure on companies not just in the financial complex, but broadly speaking to invest in the future and invest in artificial intelligence and whether it will be a lot more challenging for management to put through the type of cost cuts that the market wants to see, but also invest in the future and future proof ready. >> we have seen recovery of the european banks over the last couple months, but let's keep in mind the price earnings ratio is at 6%. average and media bank is still roughly 0.8%. significantly below where the american institutions are here. the levers have been pulled and we expect more share buybacks. we have seen it today and there is more likely to come. cost remains an important topic. that is where we see significant

diff divergence. a little bit less on the revenue side. we see huge dispersion across the banks. >> all right. we seem to have lost connection. that was unfortunate. it was interesting to hear what christian had to say about the cost reduction in the next couple years. christian edelmann from oliver wyman. bbva has been one bank we monitored last lyear. we have ubs up 30% and sitting at 25 swiss francs.

bnp trading flat. deutsche bank down 2%. unicredit is a strong story. i have flown to milan several times to speak with the ceo. the story has been one of strong generation and also a very rewarding share buyback profile for investors in that bank. pretty mixed bag if you look at the european bank index. this is how european markets in general are faring today. we are coming off a more positive session. i would say the hand over from asia has been negative. a lot of focus on the property woes and the china market with evergrande, of course, setting the tone and making the session becoming more negative as things went on. hang seng down 2.3%.

here in europe, the stoxx 600 is positive on the day. it is up more than .30%. the ftse 100 as you see is up .60%. we have the dax trading flat just shy of 17,000. cac 40 in france is up .30%. luxury in focus and we spoke earlier on the show about diageo underwhelminging. disappointing sales in latin america and north america. that has been the picture for you'r european markets. we have reestablished connection with christian edelmann from oliver wyman. christian, you were talking about further cost cuts. let me pivot a bit and ask about the macro picture. we had gdp numbers from the eurozone this morning suggesting it is not doing that well. i wonder if you are seeing signs of credit distress or the

likelihood of further default in the system this year. >> i think that's a great point. we believe there a bit of complacency with investors with the credit outlook for europe. we highlighted germany and the contraction of the economy. we feel there is more to come. the interest rates and the hikes we have seen over the last year or so are only starting to work into the system. we do believe that the rates and the corporate and commercial side will go up which is different from what we are seeing on the retail side. retail is driven by unemployment. at the moment, we have not seen unemployment numbers spike in europe. >> the other big question as we spoke about cost cuts and credit which is on many investors minds, but this is for as long as i have been covering this region, people talk about the potential for cross border m&a. it hasn't materialized.

we have seen a few deals here and there. unicredit is an example of a bank reaveering outside of ital into eastern europe. i wonder if we will see more of that activity in 2024 as some of the bigger banks look to acquire growth. >> i think the one case study to look at here is ubs and credit suisse. when you look at share price development, that inn tremendous gr integration is going well. they will move the scale which that transaction achieves. we will see more effort. i have been covering that sector equally long and we have been talking about m&a for decade ans. the momentum is building. price book is not where it should be.

there is only so much you can do on costs and buybacks. you know, in addition to the capital markets and banking union that we need in europe, we need pan european and scaleable banks. i expect that to happen. >> let me ask you a question about regulation as well since we are having an overarching discussion. do you expect there to be further regulatory headwinds due for european banks? there has been a huge assessment of what went wrong with credit suisse. this is a big debate happening within the swiss community and swiss banking community. what can be done to further strengthen the banking system from the capital requirements perspective. how much of a headwind would this pose for the broader european banking system? >> it is about the end game. what we see is the u.s. debate

for which the initial discussion will go on. in our analysis, we show for u.s. wholesale banking businesses, capital requirements could go up 35%. that would be moving down in the next couple months. that is lower compared to the european estimate with increases for institutions in the range of 10% to 15%. that is different to all of the capital regulations we have seen post the global financial crisis where the impact increases with the ratio across european banks and it creates some opportunity for clawbacks. the one ptype of player we need to watch out for is the one financial player which are in the private equity and private capital on the private debt side

which has grown in market share. >> that is something that also came up in conversations in davos. christian, thank you. i'm glad we worked through t technical issues. also coming up on "street signs," with two more of the magnificent seven set to report. we will bring you what to expect after this break. switch to shopify and sell smarter at every stage of your business. take full control of your brand with your own custom store. scale faster with tools that let you manage every sale from every channel. and sell more with the best converting checkout on the planet. a lot more. take your business to the next stage when you switch to shopify. my name is ashley cortez

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welcome back. we are looking ahead to alphabet and microsoft with results due after the bell today. the so-called magnificent seven stocks are facing high expectations and expected to out perform the s&p peers. that is a similar theme in 2023. arjun joins us more. why are we still saying magnificent seven? it is more like a sizzling six after tesla. >> absolutely. >> that set the tone last week.

what should we watch out for with microsoft and alphabet? i guess a.i. >> it will be different angles. microsoft has been able to make money off a.i. and proven that. that has helped growth in the cloud business and they continued to launch new products. one focus for investors is around the product called copilot. $30 a month. that helps people use word with a.i. a.i. features. if the hype will continue as businesses to spend on cloud is the theme for microsoft. the question for alphabet in a.i. is how will they compete. they launched bard and the platform, but their core business is facing challenges from microsoft. search with microsoft and bing

and generative a.i. is facing challenges as well. of course, the cloud business. google is a distant third behind microsoft and amazon. can google catch up? that is the big question for google and alphabet which is how they catch up and compete. >> arjun, do you think investors are focused on what the companies have to say about a.i. at the expense of how the broader business is doing? if alphabet comes out and says they are behind on the a.i. capabilities, but the advertising market is doing amazingly well, how will the market take that? >> i think advertising is still the bulk of the alphabet business. they said we have youtube doing well in the face of tiktok and that search is continuing to be strong and other areas of the ad business remain strong. the key again is guidance. guidance is really key.

the market is looking for under 12%. revenue for the march quarter is the trough for the tech earnings. any guidance that talks about acceleration of growth is very beneficial to the stocks post earnings and very key for alphabet if on the a.i. front is not looking like it is there for microsoft. >> to go back to microsoft and the ability to monetize artificial intelligence and the system copilot that they plan on bundling with microsoft office. are there signs this will help improve growth on their azure or cloud computing business? does it all serve each other? >> the thing microsoft is trying to do is lock in customers to the broader ecosystem of the cloud products. azure is in focus. analysts are expecting 28% dpr growth year on year in the quarter. microsoft will need to hit that and show that pace of growth

will continue for the rest of the year. it is the big ecosystem they are trying to build around a.i. and monetize that. that is the big story as to whether this stock continues to out perform this year. >> i was going to say it is a bit of a darling of the magnificent seven. so many headwinds facing apple. i'm not sure if microsoft has overtaken apple on market cap. they are close to one another. microsoft had a phenomenal run. >> absolutely. different business now as well with a.i. very much front and center. >> arjun, great to chat with you. wonderful to have you on the show. that is it for our show today. i'm joumanna bercetche. "worldwide exchange" is coming up next. stay with the channel.

it is 5:00 a.m. here at cnbc global headquarters and here is your "five@5." we start with stocks back in record territory, but can they keep going higher? futures are fighting for more gains today. also, earnings well have a say to where the averages go. taking center stage today with the likes of u.p.s. and microsoft and alphabet and more. we tee up the numbers to watch. it is not just earnings that will have an impact today. the federal reserve kicks off the latest meeting with new calls from lawmakers to cu