tv Worldwide Exchange CNBC April 8, 2015 4:00am-6:01am EDT
4:00 am
welcome to worldwide exchange. >> hi everyone. i'm seema mody and here are your headlines from around the world. >> a major merger in the energy sector. shares in bg soar after a take over by ftse rival shell. he explained why the deal makes sense. >> combining these two portfolios we're not only going to have a much stronger business in terms of supply points and demand points and integrated gas and energy we're going to have really scale in the portfolio. >> speculation in the media
4:01 am
sector as well. shares in sky moving ahead amid reports vivendi is eyeing a take over. >> the nikkei hits a 15 year high as the bank of japan maun tan's -- maintains it's massive spending program. >> greek prime minister set to meet vladimir putin one week before athens is key to make a payment to the imf. >> let's get straight to our top story this morning. shares in bg group are soaring after the company agreed to a 47 billion pound takeover bid by shell. the merger is one of the biggest in a decade and comes amid the tumbling price of oil. earlier our colleagues on squawk box europe spoke to the ceo of
4:02 am
shell and asked him what prompted the deal. >> we have been looking at bg for a few years to be perfectly honest. it's a company we admire for the strength of its portfolio in integrated gas and these are the areas where we are strong at shell as well. it makes a lot of sense to put the two companies together and really accelerate dramatically the financial growth strategy of shell and at the same time derisk the development of bg. so that's the fundamental logic. on top of it there's some cixz yxz synergiess to we'll create a much more profitable business. >> i have a feeling you're calling the bottom in the oil price as well.
4:03 am
shell said 70 to $90. let me know really whether you think this is a deal about the price of oil and the price of gas as well. >> of course the changing environment made this a very good fit and logical deal and compelling one from a financial perspective as well but let me put at the same time this is not a bet on the oil price. this deal works in a whole range of oil and gas prices. we still believe in the longer run in a few years time we'll see the long-term fundamentals should assert itself. we'll see higher oil prices than we see at the moment and then of course it will look not just good but fantastic. it will work in a range of oil prices really. >> ben, i want to ask you a little bit about natural gas and the vision you have for that part of the market. it's tempting to think the oil price generated this deal but you keep pointing us toward
4:04 am
natural gas. an industry that's been so fragmented. what can you achieve over the course of the next few year ifs this still goes through. >> you're right. this is as much about gas as oil. as a matter of fact probably even a little bit more about gas. if you look at bg's portfolio, very, very strong portfolio in areas where we also have some strength but that but they bring new things in places like the atlantic basin and the u.s. and the united states. by combining these two portfolios we're not only going to have a much stronger business in terms of supply points and demand points and integrated gas and energy we're going to have really scale in the portfolio and it is scale that brings optionalty and that's what drives value in the integrated gas business. we're very very good at that. bg is pretty good at that as
4:05 am
well. bringing it together will create a great company when it comes to sbe dprated integrated gas. we've done this before in our energy portfolio last year. >> that was the ceo of shell speaking to steve and karen earlier and he was at pains to point out this is a deal that is going to work at every oil price. i'm not sure about that because if the oil price drops from here on out won't people say that the company has overpaid for bg assets? and he also said it's more about gas than oil but i can't see how this rational for this deal really holds up if we see oil and gas continuing to drop. >> that would be the big question of the day. are they overpaying for this deal but shell has spent billions of dollars over the past couple of years expanding it's oil and gas reserves. it's not an easy task. this is probably an easier way to gain more assets in oil and gas by acquiring bg.
4:06 am
they had a challenging year. the stock is down 20% over the past 12 months and in february it was writing down the value of oil and gas assets by about $9 billion due to the drop in oil prices. >> stock is down 19% but with the pop today we're seeing it high about 37%. remains to be seen whether another bidder comes in and the other bidder that could afford that bid is exxon. the only company that could trump shell. i'm not sure if they're going to come in now. >> they're the world's largest oil producer so this combined entity between bg and shell does close the gap between the three big oil majors. if the deal gets approved of course. >> we've seen quite a lot of deals yesterday. benjamin joins us in the studio.
4:07 am
there's a big feel good factor over the last couple of weeks. do you think that we're getting into an era we're overpaying. >> this is a melt up. it's not an abnormal situation. the cost of capital is aimable and as markets become more and more accept tantant that central banks can't escape this low interest rate world then shareholders will demand something is done with the cash reserves that sit on corporate balance sheets and m and a is a winner in this environment. >> what do you think is the driving force, the catalyst behind the amount of deals we have been seeing in 2015? is it low interest rates? is it the easy money for the central banks? what do you think it is really?
4:08 am
>> what plays the part is the lower cost of capital. we're another year away from the financial crisis so the scars in the board rooms are starting to heal. people are feeling more confident about growth. a bit of q-1 growth is looking disappointing. in europe there's a serving growth coming through. a low cost of capital and demands for shareholders for corporations to do something with that cash is combining to create a tsunami. >> ahead of the interest rate rise we're expecting. stick with us. we want to get your thoughts on the other sectors today. takeover talk driving the media space. vivendi denied a report it's
4:09 am
reviewing a possible bid for u.k. pay tv group sky. stefen is in paris with more on that story. >> good morning. the head of vivendi told me the company has enough on its plate with the acquisition of daily motion. and denied the reports. they started he he collusive negotiations with orange to buy an 80% stake in daily motion. it's offering 270 million euros and would keep the remaining 20%. vivendi sold it's telecom business in france and brazil. it will have a net cash position of 15 billion euros and everyone including the shareholders and bankers are wondering what vivendi will do with the cash. they were reporting they turn their attention to sky after reviewing a smaller potential target in turkey and other fast
4:10 am
growing markets in europe. such an acquisition would fit in the new strategy. mainly focused on television. this would help them to divide up it's own unit. can they afford such an acquisition? not sure. sky has a market value of 76 billion pounds. it would cost as much 28 billion pounds with debt. that's 38 billion euros. they would hold a shareholders meeting soon on april 17th. we may have more information about this potential acquisition which has been denied this morning by the head of press of vivendi but looking at the market reaction on sky perhaps the market believes it could be one option. >> all right. stefen thank you for that. meantime, let's have a look at european markets. one hour into the trading session, the stoxx europe 600 is
4:11 am
higher. we saw a sluggish start to the session and a lot of optimism around the deals this morning. the ftse 100 is an out performer this morning. the dax lacking off by 0.1%. the athens ase down by 1%. not a lot of macro data to focus on today. we get euro zone retail sales later on today but also fomc and ahead of that a little bit of caution. in the currency markets the dollar slightly after a strong session. higher by half of 1% and the dollar falling slightly against the japanese yen on the back of the action. keeping it's monetary policy unchanged. 119.87 and the aussie dollar
4:12 am
with another jump against the green back after the surprise move by the rba. of course it didn't move. that was the bigger surprise. brent crude down by 1.5%. 58.25. wti down 2.3%. 52.73. we have the largest than expected increase based on the api report. we get the eia report today and we heard the saudi's producing at a record pace. seema, what's coming up on the show. >> heres what's coming up. bio tech shares on a tear over the last year but is the sector heading for a correction? one expert tells us how to play the volatility in bio tech and he tells cnbc he's still bullish on the commodity sector. find out where he is putting his money. plus we hear from a major shareholder who says now could be the time to invest in european banks.
4:13 am
we're back in two. new york state is reinventing how we do business by leading the way on tax cuts. we cut the rates on personal income taxes. we enacted the lowest corporate tax rate since 1968. we eliminated the income tax on manufacturers altogether. with startup-ny, qualified businesses that start, expand or relocate to new york state pay no taxes for 10 years. all to grow our economy and create jobs. see how new york can give your business the opportunity to grow at ny.gov/business
4:15 am
4:16 am
forecasted to be up for a year ago but down from the 4th quarter. they're watching to see if the company is upbeat as it was three months ago as prices continued to fall. shares are down 17% since reporting 4th quarter earnings in mid january versus a 1.5% rise for the s&p 500 and claus kleinfeld will be on closing bell at 4:00 p.m. eastern. don't want to miss it. >> that's right. results come amid what's expected to be the weakest overall earnings season for the s&p 500 in at least 2.5 years. that's right. the range of o estimates from s&p expects earnings to drop anywhere from 3 to 4.5%. that would be the first year over year decline since 2012 and the biggest total drop since q-3 of 2009. now bank of america is cutting it's full year forecast for s&p earnings expecting the first year of negative growth since
4:17 am
2009 due to the impact no surprise here by the stronger dollar. >> but u.s. financials are expected to be among the bright spots for q-1 earnings. this could set the stage for results in europe as well. where bank valuations continue to trail their u.s. rivals. i spoke to the cio or international equity at harris associates. and asked whether european banking stocks would out perform the u.s. this year. >> european banks are well positioned to perform better. i'm talking about operationally. most of the key banks, the major banks have strong capital positions and with the movements made to increase liquidity through the euro region hopefully to extend lending and we have seen loan losses decline with improving economy and hitting the bottom of the cycle so those three factors should mean better operating conditions for european banks, better
4:18 am
earnings growth and at the same time as you mention their sal valuations were low. i would argue there's a lot of room for u.s. banks to improve but from an absolute basis when you look at these valuations many of the banks are trading at or near their book value and, in fact, given normal roes should be in the low or mid double digits would argue for significantly higher valuations. this is a really good time to be increasing exposure to select european banks and what i mean by select are ones that a good operating models good efficiency and good capital positions. >> one of the top holdings is credit swiss. what do you want to see in strategy changing going forward?
4:19 am
>> you know one of the big and i would say last open questions has been it's capital position. by any measure they're strongly capitalized but they are still putting pressure on the ratios to make sure that in switzerland they have the too big to fail idea with credit suisse. they're hooking for them to go through the capital base and if that isn't earning it's return and what i'm referring to are certain businesses within the investment bank and then perhaps it's time to accelerate the departure from the businesses and brady has done a good job operating this bank in adverse conditions throughout his tenure as ceo. what he could have done more rapidly is maybe took away some of those assets that did not
4:20 am
have good sustainable returns and perhaps they'll be a little more impartial and remove themselves from businesses that don't earn adequate returns. >> let's talk more with the head of fund research. benjamin would you put money to work in the retail-supermarket space? >> well there's certainly been a temporary ceasefire in this price war but i suspect it's a bit of a risky move to call the end to the price war just yet. we'll probably sit on the sidelines in the retail sector at the moment. >> a lot of question marks about how the banks faired in the first quarter as they might be the bright spot within all the gloom and doom about the energy sector, the strong dollar and whatnot. trading volumes, they have
4:21 am
certainly picked up. volatility is good for these banks. do you think though this will also be mirrored in the european banking sector and not just the u.s. banking sector? >> there's different drivers of the earnings story in the u.s. and european. you picked up on many of them in the u.s. in europe we're seeing more of a favorable tail wind off a low base. we have seen an end to deleveraging we hope. we've seen a recovery in loan expansion. certainly nothing to shoot the lights out but we're seeing a recovery in loan expansion. there is a consolidation theme. there's sails of noncore assets. it's agent than a margin improvement or hopes of margin improvement in the u.s. >> despite the lack of loan demand we're seeing?
4:22 am
>> you're quite right. the loan demand isn't -- i use the phrase shooting the lights out but it's the trend. in order to get very strong loan demand you must go through the phrase of loan demand. we hope in time as the european recovery becomes more assured that they can move on higher from there. >> you like european equities and the banking sector is there a sector you don't like? don't tell me that's energy. >> there might be bottom fishing there. >> well, i think there's certainly new life breathed into the energy sector by this trade so as we have seen in prooef warehouse cycles this could trigger more consolidation so it's very difficult to write off the energy sector even though i think most would agree that the oil price is structuring the lower trading range. >> let's pivot to u.s. earnings
4:23 am
season unofficially kicking off. next week will be the full swing of earnings season with some of the big tech companies and banks reporting but in terms of themes or stories to watch will it be all about the stronger dollar and how that's going to eat into the profits of multinationals that have high exposure overseas? >> cnbc is always the first for news but as you said the dollar story is a well-known one. it's certainly out there so while we expect u.s. earnings season to be poor we've seen a lot of -- its typical for management and typical from the investment banking to really aggressively write down earnings expectation so there's room for positive surprises in earnings but it certainly won't be a very healthy earnings season and therefore with the s&p not falling with earnings expectations that has left valuations in the stock market looking more stretched. >> absolutely. every 10% rise in the dollar results in a 3 to $4 head wind
4:24 am
to earnings. so a lot of analysts saying the stronger dollar could have a tremendous impact on the bottom line for many sectors with high international exposure. >> but it may have been priced in and we'll see how much of that is reflected in earnings and how the stocks perform. let's talk about greece. the greek prime minister is due to hold talks with the russian president in moscow today. the two sides are expected to discuss ties between the eu and russia which are strained due to the crisis. moscow is reportedly considering lifting it's band on greek food imports and may offer hones or discounts or natural gas supplies. it comes one day before greece is due to make a key payment to the imf of 450 million euros. now there's been a lot of talk about russia maybe helping out greece. i don't think that's going to happen. i don't know how you feel about that but remember with the iceland story, with the cyprus story, these countries were always looking for help from
4:25 am
russia. it never came. especially not now since russia has its own problems sanctions, oil decline. what do you think? >> relying on them to bailout crease is optimistic. you point out the russian situation is increasingly challenged. i do think this adds to the wall of worry in equities at the moment. the greece situation but markets tend to climb. have a history of climbing this wall of worry and the policy measures the ecb put in place. it's right that greece commands the headlines that it does but the policy measures it's put in place such as qe do mean that we believe the transmission mechanism for this crisis would be higher refinancing costs for the remaining sovereigns in the euro zone and if they had given enough confidence in the markets and can keep a lid on them then i think it's a bit of a side show.
4:26 am
obviously there could be a humanitarian crisis on our hands if greece leaves the euro zone but the stock markets and bond markets can actually weather that storm. >> there's been speculation for quite sometime that greece was looking to raise funds from russia but the timing of this visit makes this even more interesting. one day before the imf loan payment is due. do you think russia will give greece the funds it needs? it has the fx reserves available to provide some of those funds to greece. >> it's very speculative to say they will. they will probably disappoint on this. rush wrasia has lots of reserves but may have to draw upon the reserves given the growth situation westbound it's own economy at the moment. i wouldn't want to be too optimistic from here. >> does this bond market look attractive? 18% on the greek three year from now. we're talking about negative yields in switzerland and netherlands. >> that's too much for a leap to
4:27 am
take for our clients. it could be 18%. >> you don't like greek yields but you like pressure yields. >> we do like treasury yields. this may seem horrendous value at 2% but when you're getting thing negative bond yields you are on swiss on bunds. those looking for a portfolio diversity there's a percentage of bonds there. >> makes u. s. bonds look quite attractive. pleasure to have you on. still to come on the show japanese stocks hit a 15 year high even as the bank of japan reveals growing opposition to qe. but our next guest says more easing could be on the horizon. stay tuned to hear why.
4:30 am
4:31 am
demand points in integrated gas and energy we're going to have really scale in the portfolio. >> merger speckulationspeculation. reports that vivendi is eyeing a takeover. >> the nikkei hits a 15 year high as the bank of japan maintains it's massive spending program. markets are not overheating. >> a meeting in moscow. greek prime minister prepares to meet the russian president vladimir putin one day before athens is due to make a key repayment to the imf. >> let's get back to our top stories this morning. shares are soaring after it agreed to a 47 billion pound takeover bid by ftse rival share. it's one of the biggest in a decade and comes amid the
4:32 am
tumbling price of oil. earlier our colleagues on squawk box europe spoke to the ceo of shell that denied the takeover was a bet on the oil price. he also asked about the combined exposure. >> if you look at brazil. if you look at the geology of brazil, what we are looking at here is an absolutely world class upstream province and that is unchanged. that's going to be there for decades to come. if you would look at how we were exposed to that upstream i think people are underexposed. to yes we do have a bit of upstream production at the moment in brazil. of course we went into the project and it has given us a lot of learnings in the past as well but by and large if you want to be a highly profitable top leading company in the deep water you have to have more exposure to brazil. it's fundamentally a very very
4:33 am
competent company. it will come through this as a much stronger pane. we have worked along side petrobras already and we will be the premiere ioc working along side petrobras in an exciting upstream province. >> that was the ceo of shell talking to squawk box earlier and he pointed out a number of times that this is a deal that will work at every oil price essentially. let's look at how it's effecting the rest of the sector. the energy sector is the best performing in europe this morning. higher than 5.5%. bp higher by 3%. oil surging by 10%, this could be maybe one of the other m and a targets still out there. pie mary oil higher by 2% and spain also gaining 1.3%. let's look at oil price. they're bucking the trend. brent crude is off by 1.8%.
4:34 am
we're seeing another decline after we saw a number of factors playing into the mix yesterday. saudi arabia is pumping oil at a record pace. a larger than expected increase in u.s. stock piles and today we get the eia data. >> oil prices still up about 8% over the past two days. let's look at european markets. what does this mean for the major indices? deal appetite and merger activity sending investors into u.k. stocks. the index up about.5%. a mixed session when looking at france and italy. france up .2%. italy flat on the day tnchts. >> the nikkei hit a 15 year high. the central bank is on track to achieve it's 2% inflation goal adding that the third largest economy is recovering at a moderate pace. sri is in singapore with more. >> yes, that's right.
4:35 am
the bank of japan staying the course as they have done since october. remember back then last year we did see the last expansion to their balance sheet but it wasn't exactly a very smooth meeting because we had a descent, the former board member of the bank of japan proposed tapering but not at the 80 trillion yen annual rate as they have been doing. he proposed 45 trillion yen so winding down the program gradually that was voted down of course but perhaps we're seeing associated returns associated with the qe program however the markets seem to be quite agnostic that it wasn't hold this time around pushing further into multiyear highs and it's not beyond the realm of possibility that we could see a
4:36 am
20,000 print by the end of the week judging by the rate the market has been climbing. we have seen earnings growth from corporate japan and rotation from the big public pension funds into the stock market as well and we're seeing confidence associated with the japanese market. a big situation with the market indicators. it wasn't a great deal to write home about and that tells you that there's still pretty low all in all when associated with japanese corporate confidence and the consumer as well though it remains to be seen the overall impact of the meaningful wage increases we saw from corporate japan in the month of march although it hasn't really been followed up by the smes which is quite an important point. just before i go a blistering session for hong kong equities today. up nearly 4%. you're looking at 7 year highs there for the hang seng and volume turnover was the highest
4:37 am
in years. the hang seng playing catch up after a three daybreak and that's where we stand in asia. back to you now. >> thank you for that. >> let's talk more about japan with a global economist at capital economics that joins us live from singapore and deflationary pressures in japan still exist and at the latest economic data has not been encouraging. industrial production down 3.4%. cpi falling. you look at the other data the poverty rate is at 16%. the highest on record. is shinzo abe's attempt to boost the economy through monetary easing failing? what are your thoughts there? >> i don't think his attempts are failing completely. it's probably a slow down at the start of the year. overall, of course the economy has been doing okay since the launch of the program but we think that the boj will have to
4:38 am
step up the pace of easing soon. he downplayed the risks that he sees to the economic recovery but we know that he is not -- he is willing to spring a surprise as he did in october and we think he will do so again at the april meeting. >> that seems to be what's keeping investors in japanese stocks but when does our focus turn to japan's public debt issue which stands at almost 2.5 times gdp. >> i don't think it will turn to this issue any time soon as long as the boj continues buying large quantities of bonds. we think that the boj can continue it's bond buying for almost a decade under the current pace of purchases. as long as this happens yields will stay low and they'll have no difficulties refinancing this burden. >> but isn't there a risk of waiting too long to ease further now that we're seeing the data
4:39 am
points over the last couple of weeks and points? >> we do see the risk. we actually do expect the boj to step up the pace of easing at the end of this month. this may seem a bit unlikely where he said he doesn't see the same risk the last october when he did step up the pace of easing. but we in contrast think there's plenty of risks that need to be addressed. inflation is near zero and wages are simply not picking up as much as the bank hoped for. >> you're still pretty positive on japanese equities. do you see the nikkei climbing to 21,000 by the end of the year, is that driven by qe or better corporate profitability? is there a mix of that? >> it's a mix. if the bank of japan steps up the pace of easing as we expect we'll probably see a further fall in the yen and that's quite
4:40 am
positive for those companies on japan stock markets. most of them are exporters and they'll see the value of the exports, rising yen terms and they'll see profits from the increase and this will boost their earnings and this is one of the main reasons we're positive on the japanese stock market. >> and you know some economies can use lower oil prices as an exclues to why inflation is dropping but japan has been living in a decubitus -- deflationary environment for quite sometime. is this achievable? >> it looks doubtful that the target will be achieved any time soon and we think that the boj may soon have to think about additional easing measures. the bank might lend directly to the government and the government might start directly
4:41 am
spending. this will be one option but under the current program it looks increasingly difficult to reach a 2% target. >> all right. we're going to leave it there then. thank you for joining us here on worldwide exchange. again the nikkei closing at a 15 year high. that's the global economist at capital economics. >> the shanghai composite is on a tear with the index touching the 4,000 level for the first time since 2008. hong kong doing well overmite. mark told cnbc what he is buying in china. >> in china we are in the banks and we are also looking at the smaller medium cap stocks. >> you said we might have a credit in china but you're holding financial stocks. >> the big banks will be safe. the large state owned banks will be okay. it's the smaller banks and
4:42 am
smaller financial institutions that you have to watch for. >> you're pretty confident that the government is going to support growth rates at these levels because obviously that's the big concern that many investors have. >> i think what we have to realize is the growth rate in percentage terms will be trending downwards. maybe to 7s, 6.5. 6, like that. but in terms of dollars the amounts were much larger. when they were growing at 10% about 800 billion was added to the economy. now at 7% 900 billion is added to the economy. i'm confident they'll be able to maintain, 7, 6% that range. >> and mark also tells cnbc why he is long commodities despite the recent volatility. head to cnbc.com for all of that and more. >> now getting a flash in. the austrian finance minister is warning about greece getting close to russia as alexis is due
4:43 am
to hold talks with him in moscow today. they're expected to discuss ties between the eu and russia which are strained due to the crisis. moscow is considering lifting it's ban on greek food imports and may offer loans or discounts on natural gas supplies. this is after they are expected to make a key payment of 450 million jurors rows. >> still to come, no end as the fresh data from the u.s. and saudi arabia keep a lid on crude. we discuss after this short break. the pursuit of healthier. it begins from the second we're born. after all, healthier doesn't happen all by itself. it needs to be earned... every day... using wellness to keep away illness... and believing that a single life can be made better by millions of others. healthier takes somebody who can power modern health care...
4:44 am
4:46 am
oil prices are pulling back today after wti crude settled at the highest level since the end of december on tuesday. it comes after a report by the american petroleum institute shows a build in inventories since record output in march. api says u.s. supplies surged by 12.2 million barrels last week versus forecasts of 3.4 million. the much more closely watched inventory report is due later today. joining us now is the head of commodity market strategy at
4:47 am
bmi. harry what exactly are you expecting from the eia report. at what point can we expect that the inventories are coming down a tad. >> the api is indicating a large increase u.s. wide. 12 million barrels. we think that with further accumulation there's a real risk that the price is going to head lower. so oil prices some what rebound in the past few days on geo politics the attention is going to be focussing on fundamentals and the fundamentals that matter are those in the u. s. and the inventory glut there is quite immense. >> but even if production slows and we saw that for the first time last week in the government data, at what point is this going to be reflected in the inventories? in the eia and api data? is this the second half of the year? what is it? >> you make a valid point.
4:48 am
i think it will take sometime to work through. so as much as production begins to slow down what we're looking at is a need for refinery runs to increase more than where they're at at the coming moment. we're not expecting significant crude inventory draus until may or june. that's where the market could sustainably start moving higher. >> how are you factoring in geo political conflict? because saudi striking yemen resulted in a little bit of price volatility and oil despite the move we're seeing today. oil prices gained about 10% over the past two days. >> yes, geopolitics does play a role and what's been happening in yemen raised concerns but as long as the conflict is contained within ye hemen i think the market is going to discount that. in terms of other geopolitics we
4:49 am
still don't have that much clarity in terms of when an agreement will come around with iran and even if it does by the end of june the lifting of sanctions on the iranian oil exports and oil sector is going to be one that's going to take time. so we don't see significant volumes of iranian oil coming on to the market possibly before the end of the year if not even next year. so in essence the geopolitics are contained in yemen and as far as iran goes, well they're looking probably less bearish than a couple of months ago. >> you mentioned iran but oversupply concerns have been heightened with the prospect of oil coming back online. a frame work is set between the u.s. and iran. we're waiting on the details on when and if sanctions will be lifted. if they're lifting in 2015 how quickly do you think iranian oil will come back online? >> if we get an agreement in june the important thing is that
4:50 am
sanctions remain in place until the international atomic energy agency says iran made the steps to meet it's commitments. i think the lifting of sanctions will take some time. there may be slippage in that and they may be able to export more oil from all the oil it has stored in tankers but i think from a production point of view from a significant return of iranian oil that's not going to happen before 2016. >> i know you're not an equity analyst but it's tough not to talk about the bg shell tie up today. do you think this is a bullish call on the oil market? >> well i think what you're looking at is with the decline in oil prices you had a decline in the valuation of several equities making a lot of opportunities out this for larger players to acquire new assets and possibly even you know, be able to lower the average cost of production. in this case i'm sure it fits the business model in the sense
4:51 am
that you have a company such as bg that is involved in gas and gas is going to be part of the energy future so we're not necessarily making a call on oil here or call on gas but i think this is a business decision and one where, you know the value of the assets were attractive for shell and that's why they probably did it. >> that's a trigger for more consolidation of the sector you think? >> it is possible. again as i said like the valuation of oil companies in general has been battered by the decline in oil prices. we wouldn't be surprised to see consolidations and mergers take place. this has been the biggest one in a decade but we could also see mergers and consolidation in the u.s. oil sector for example. smaller independence absorbed by larger oil companies. i don't want to say this is the beginning of a wave of acquisitions. this deal has been thought up now for several years according to shell ceo. >> thank you for your
4:52 am
perspective. appreciate it. the head of commodity market strategy. let's change gears. wholesome shareholders are set to vote on a tie up with lafarge next month. the fate of the cement merger still hangs in the balance with several undecided investors voicing their concerns. i spoke to one of those investors. cio for international equity on the third largest shareholder and asked if he was comfortable with the deal as it stands now. take a listen. >> i think the biggest difficulty we still have is voting for something that you know if we don't know who is going to manage the business you know it makes us a bit uncertain. we're happy with the improvement in the exchange ratio. it's still a touch light but we can live with the proposed exchanged ratio. in order for us to be enthusiastic about this deal we really need to know who is running the business. >> what quality should the new ceo have?
4:53 am
does he have to come from the cement industry? >> well not necessarily but really it needs to be someone who is skilled at integrated businesses. the beauty of this deal is you're able to get better operating leverage out of your fixed asset base. the problem is too much capacity and driving down returns on those assets and what you need is someone that can unemotionally go through the asset base and make sure that the most efficient assets are used and the best people are chosen to run those assets and a nonpolitical fashion is possible. so you need an integrator and operator. >> so as we go into the meeting and you still don't have a name are you still willing to sign off on that deal or are you going to hold off on that? >> it's unlikely. we really want to see who this person is going to be and if
4:54 am
it's an acceptable person we'll vote for the affirmative. if it's an unacceptable person in all likelihood we'll vote no. so we have not decided how we're going to vote but it really does depend on who the ceo is going to be. now they made a change the proposed ceo was changed and that's -- to me again was a positive. was a positive because the original proposed ceo was not skilled in what i just described. >> now a trade that didn't go so well for harris investments was tesco. they had a 3% stake and narrowed it down to 1% last summer and they said to cnbc and other media that they weren't fond of the stock in terms of profitability. let's look at the latest tesco numbers. that gives us the market share
4:55 am
numbers. down 0.2% in the 12 weeks to march 29th according to the panel. their market share now stands at 29.4% but tesco has been inching up 0.3% in the 12 weeks to march 29th and that is further improvement for tesco and shares have risen some 50% from their lows in december and harris investments was not part of that. coming up we'll hear more from david. sold 2-thirds of that company's stake in tesco in august last year but with the stock moving higher since then i asked whether he regrets that move. stay tuned to find out what he has to say in the next hour. >> they bought an additional 4.7 stake in the car maker bringing the state's holding to nearly 20%. it's a big day for deals. let's talk to stefen for more on that story. over to you. >> france wants to guarentee
4:56 am
it's double voting right ahead of the next shareholders meeting that will take place at the end of the month. the government is planning to buy up to 14 million shares. that's 4.7% of the capital. most of the operation was completed yesterday. 9.5 million shares by the state. with this the government wants to make sure that it will be able to block a resolution which will not authorize the new double voting rights scheme since it was implemented in france two years ago, double voting right scheme is in place and more than half of the companies listed but the shareholders can adopt a resolution blocking this new system. that's precisely what some of the shareholders are planning to do. the french states will get double voting rights in companies and even if it would decide to reduce it's stake. in a statement the finance
4:57 am
ministry says that the state has no plan to keep a long-term stake of more than 15%. it has secured options to scale back this almost 5% stake that was both yesterday and today. back to you. >> all right. stefen, thank you so much. still to come on the show royal dutch shell seals a deal for a 70 million dollar energy group. we hear about it straight after this break. stick with us.
5:00 am
let's start with deals. a mega merger in the energy sector. shares in bg soar after it agrees to a $70 billion take over by shell. ben explained why the deal makes sense. >> combining these two portfolios we're not only going to have a much stronger business in terms of supply points and demand points and integrated gas and energy we're going to have really scale in the portfolio.
5:01 am
>> alcoa is set to kick off the u.s. earnings season reporting results after the closing bell today. the numbers come after analysts project this could be the weakest set of earnings for the s&p 500 in years. >> despite earnings fears u.s. futures pointing higher as they await the latest fed minutes amid optimism they could delay the first rate hike. >> a meeting in moscow. the greek prime minister appears to meet vladimir putin one day before athens is key to make a payment to the imf. >> good morning, everyone. if you're watching from the east coast and here in london it's 10:00 in the morning. let's get straight to our top story. shares in bg group are soaring after it agreed to a takeoverbid by shell. it's one of the industry's biggest in a decade and comes amid the tumbling price of oil. earlier our colleagues spoke to
5:02 am
the ceo of shell and asked him what prompted the deal. we have been look at bg for quite a few years. it's a company that we admire for the strength of its portfolio in integrated gas and in deep water and these are the areas where we're very very strong at shell as well. so it makes a lot of sense to put the two panes together and accelerate dramatically the financial growth strategy of shell and at the same time also derisk the development of bg. so that really is the fundamental logic. on top of it there's sinergies so we're going to create a much stronger, much more competitive and much more profitable business. >> we've seen a lot of deals in the oil and gas sector. much smaller than this one as well. i have a feeling you're calling
5:03 am
the bottom in the oil price as well. i know shell said 70 to $90. looks like the range it will be as well. let me know whether you think this is a deal about the price of oil and the price of gas as well. >> well, you know it's fair to say that of course the changing mecca environment made this deal apart from being a very very good fit and a logical deal of course a very compelling one from a financial perspective as well. but let me put at the same time that this is not a bet on the oil price. this deal works in a whole range of oil and gas prices. of course we still believe and in the longer run in a few years time we will see the long-term fundamentals will assert itself. we'll see higher oil prices than what we see at the moment and this deal will look not just very good. it will look fantastic but it will work in a range of oil prices really steve. >> it's karen wang in here. i want to ask you about natural gas and the vision you have for that part of the market. it's tempting to think the oil
5:04 am
price generated this deal but you're pointing us toward natural gas. what can you achieve over the course of the next few year ifs this deal goes through. >> thank you very much. you're right. this is as much about gas as oil. probably even more about gas. if you look at bg's portfolio, very strong portfolio in areas where, indeed we also have some strength but they bring new things as well particularly in places like australia and places like the atlantic basin and in the united states. so what we see is by combining these two portfolios we're not only going to have a much stronger business in terms of supply points and demand points we're going to have really scale in the portfolio and it's scale that brings optionalty and that's what drives value in the integrated gas business. we're very very good at that. bg is pretty good at that as
5:05 am
well. so bringing it together will really create a great company. we have done this before on a smaller scale when we integrated the assets in our energy portfolio last year. >> that was the ceo of shell speaking to squawk box europe earlier today. question marks this morning as to whether shell has been overpaying for bg seema and he was at pains to point out a number of times this is a deal that -- it works at a wide range of oil prices. this is what he said and our motivation certainly wasn't the oil price but what if the oil price falls from here. does that deal still make sense or are analysts out there going to say shell has certainly overpaid for these assets? this really just works on the assumption that oil prices are going to rise and this is shell's forecast for the medium term but there is one point why i would say this is a good deal
5:06 am
and not a sign of the industry and a good sign for the cycle we're in this is a deal that's coming not at the top of the oil and gas cycle. it's coming at the bottom. >> right we've seen a depreciation in bg shares over the past 12 months but interestingly enough you mentioned the price of oil i would say that a bigger company and integrated company together would be able to cushion the blow of a further depreciation in the price of oil so perhaps together as a combined entity they can fend off lower oil prices but what does a combined bg and shell look like? combined the companies pumped an average of 3.7 million barrels of oil a day last year. exxon mobil produced 4 million barrels a day in 2014. so they're closing the gap with exxon mobil which is the world's largest oil producer. >> but do you think exxon will come in? that's the only company that could still mess the deal. >> i can imagine they wouldn't allow this one big entity to
5:07 am
come together. >> no a counter bid. do you think exxon would come in and snap up bg. >> as we have been discussing here many analysts saying given the depreciation in oil prices a bet on further consolidation in oil and gas does make sense. deal activity helping european markets today. take a look at u.s. futures. we did see a reversal in trade yesterday. a lot of talk around comments coming from different fed officials. the dow indicating a higher open up about 36 points. nasdaq up about 4. keep in mind our focus will be turning to earnings season with alcoa reporting today. right now we're looking at the s&p 500 up about 4 points. european markets, as we told you deal appetite the center of the discussion when looking at the u.k. markets. the out performer up about 30 points. taking a breather. still holding on to 12,000 but down about 30 points. france up about 8 points and one
5:08 am
day until the repayment loan is due. athens, the greek equity index down about .7%. >> let's have a look at the currency markets. we're seeing the dollar pulling back a little bit in today's trading session. euros some what higher today. all right. euro dollar higher by half of 1% at 108. we saw a strong session further the u. s. dollar in yesterday's trading session but all eyes on the fomc minutes today. dollar-yen pulling back after the boj held steady and we're seeing another rise for the aussie dollar against the green back. this is after yesterday's unchanged move from the rba. let's have a look at oil prices as well. another decline for brent crude. we had the api data. today all eyes on the eia data. the crude price is down by 2.3%. 5276 and saudi arabia as we
5:09 am
heard all along is producing at a record pace. let's check in on markets in asia as well and sri is standing by as always. the hong kong the topper former today. why is that. >> rally for the hsi. a lot of pent up demand for equities in hong kong. there's a three day holiday since thursday so catch up after the holiday. also catch up with the rally we have been seeing on the composite as well and more flows on the stock connect which is good news. i wanted to talk about japan because the boj staying the course keeping policy unchanged. but what was interesting was that we did have the board member propose tapering. this is interesting. asset purchases at the rate of 45 trillion yen compared to the current rate of 80 trillion. that was voted down of course but it does tell you that
5:10 am
perhaps the boj is hitting the law of diminishing returns here. remember the macro has been deteriorating. zero inflation. it wasn't a great deal to write home about so it's conceivable that we could still see the boy come to the table with further action and expanding their balance sheet in addition maybe toward the end of this quarter. i wouldn't rule that out. fresh two year highs. seem to be quite agnostic about the inaction in the boj and as you pointed out earlier as well dollar yen on the back foot. 120, 125 is the new trading range we're stuck in at the moment for dollar yen. back to you. >> thank you for that. meantime singapore telecom struck a deal to buy trust wave for $810 million. it's the biggest acquisition outside of the telecom sector. they have more than 3 million business customers offering a range of services including data
5:11 am
based scanning and risk management. last year it pulled plans for an ipo due to market conditions. >> now it's been the victim of a gold heist. armed robbers made off with 7,000 ounces of gold from its mine in northwest mexico. now at current prices that would be worth about $8.5 million. they have insurance against this type of incident but says it's policy won't be sufficient enough to cover to entire loss. >> how do you get all of that gold out of there. >> no idea. sounds like it's out of a movie. movie plot. and as they kick off earnings season find out why investors are bracing for a disappointing first quarter. we'll be back in two. it took tennis legend serena williams, fencing champion tim morehouse and the rockettes years to master their craft.
5:12 am
but only moments to master paying bills at chase.com. depositing checks at the atm and transferring funds on the mobile app. technology designed for you. so you can easily master the way you bank. [ male announcer ] some come here to build something smarter. ♪ ♪ some come here to build something stronger. others come to build something faster... something safer... something greener. something the whole world can share. people come to boeing to do many different things. but it's always about the very thing we do best. ♪ ♪
5:14 am
welcome back. shell merges with bg group. alcoa gets the ball rolling as investors brace for a weak earnings seasoned and u.s. futures pointing higher amid optimism that the central bank could delay it's first rate hike. >> alcoa kicks off the first quarter u.s. earnings season when it reports results after
5:15 am
the closing bell. profits and revenue are forecasted to be up from a year ago but down from the fourth quarter. investors will be watching to see whether the company is as upbeat about global aluminum demand as it was three months ago as prices continue to fall. shares are are down about 17% since reporting fourth quarter earnings in mid january versus a 1.5% rise for the s&p 500. the ceo will be on closing bell and a first on cnbc today at 4:00 p.m. eastern. >> results come amid what's expected to be the weakest overall earnings season for s&p 500 companies in at least 2.5 years. the range of estimates expects earnings to drop anywhere from 3 to 4.5% and that would be the first year over year decline since the 3rd quarter of 2012 and the biggest total drop since the third quarter of 2009. now bank of america merrill lynch is cutting it's forecast for s&p earnings expecting the
5:16 am
first year of negative growth since 2009 due to the impact of the strong tlar. we've thrown these numbers at you now. let's talk more about how to invest in the space. he is the chief investment officer and portfolio manager. good morning to you. you say earnings season creates buying opportunities. don't tell me that every miss out this will be a buying opportunity. >> no but i think the way to participate in the earnings season is if you are looking at a stock that you think you'd like to own but it's too expensive, it can create some volatility and it's a great opportunity, for example, during the last cycle, you could buy a few company -- we bought a few companies that we particularly had our eyes on. we were able to immediately buy the stock. sell a deep in the money call and lock in a hedge to return of about 11 12 13% depending upon
5:17 am
the security and giving ourselves 10 12% of downside protection. so in an overvalued stock market it can create an opportunity to do some interesting things in the stock market. >> you know martin, the rally in the u.s. dollar pushed some investors to sell the multinational companies and rotate on the large caps and buy into the small caps that benefit from a rising green back but if you're investing if companies with high foreign exposure would you recommend those individuals to sell the companies now ahead of the earnings season kicking off? >> if you're a long-term investor it's a lot of noise. one of the things you didn't mention in the introduction is the price of oil dropping the way it did is also having a huge effect on earnings. coming into this year the s&p 500 was net long oil. so that is also having a very negative effect on earnings. what we're recommending to
5:18 am
investors and what i say is that in any environment if you own quality companies that have low priced earnings multiples over the long-term you've done well. some of those have strong earnings and here in the united states you can look at companies like ibm and deere and swatch group they're all selling at 10 or 11 times earnings. their problems are well-known by everyone and i think that's where people should be focussing their attention right now. >> you mentioned a couple of european names. there's investors that say don't invest in multinationals that have high revenue exposure overseas given the strong but you're saying be more selective. look for companies with high exposure to jurors and then of course qe also providing i guess a stimulant for the european economy. >> i believe investors should be
5:19 am
very selective and highly disearning and one of the issues with quantitative easing they're creating this liquidity and there are any number of companies out there that should probably not exist but are staying alive because of cheap money and that's creating supply which is creating deflation and at some point that will no longer be here. kurnly we're in a zero interest rate world. we will probably go to a low interest rate policy world and there will be companies that will suffer as a consequence of that. clearly i don't want to own those kinds of companies so investors need to be highly selective now. the rising tiedeing tide has lifted all boats over the last six years or so and what kills a bull market is not the fact that it's expensive or that it's old. what kills a bull market is a recession and notwithstanding the fact that this quarter will probably disappoint and as you mentioned in your lead in the --
5:20 am
some of the great investment firms are saying that earnings will be down notwithstanding that there's no signs in the u.s. that we're going to go into a recession. so i want to own quality companies that are not expensive expensive. >> but you say stocks have been expensive twice. bonds have never been as expensive as they are now. why not allocate more money into commodities and spaces like real estate. >> real estate is enormously expensive if you look at the cap rate. it's -- again, selectively, there's opportunities in real estate just as selectively there's opportunities in the stock market.
5:21 am
i don't consider commodities an asset class. i consider them a complete speculation and the thing that one is reminded of is that oil is a commodity and we were 10 or 12 years to a bull market in oil and we were you know we had a lot of cold water thrown in our faces los angles year. so commodity, on sousely there's temptation as a value investor to look at the companies that produce commodities, however it seems as if this could be like 1986 all over again as they say and if that's the case then commodity investments will be very unattractive relative to what i call the compound. there's companies, good businesses that continue to be able to grow their cash flow and their earnings and their dividends. those are the companies you want to be in. >> steer clear of commodities. thank you so much. >> and warren buffet not the
5:22 am
only big investor to take a hit on tesco. coming up we hear from a shareholder that says the stock valuations are divorced from reality. that's coming up. you can't predict the market. but at t. rowe price we've helped guide our clients through good times and bad. our experienced investment professionals are one reason over 85% of our mutual funds beat their 10-year lipper averages. so in a variety of markets we can help you feel confident. request a prospectus or summary prospectus with investment information risks, fees and expenses to read and consider carefully before investing. call us or your advisor. t. rowe price. invest with confidence.
5:25 am
u.k.'s biggest supermarket is gaining momentum. according to the research group sales were up 0.3% in the period. this follows data that show the strongest sales at tesco in 18 months. >> but a sound recovery for the u.k. supermarket giant will come at the expense of profitability. that's according to the cio of international equities. he told cnbc it's hard to justify current valuations on the stock. they told 2-thirds of the associate's stake in the retailer in august last year saying the risk was too high. at the time they owned 3% of tesco. since then the stock has risen by more than 9% since the december lows. it has rallied 50% i asked if he regretted the decision to sell. >> i regret not owning a stock that goes up. we all have to look at ourselves and say what did we miss here
5:26 am
but given the way we invest in business, given the price today clearly there's lots and lots and lots of improvement baked into this share price. this is a company that will continue to increase sales but it's adding expenses and cutting margins. so the normal operating profit of tesco going forward will be significantly lower than it was in the past and people are seeing the sales and better sales performance and better market share performance but this is going to come at the expense of profitability so you still have the issue with pig box stores that no one wants to be in so i regret not being in when the share price went up but on the other hand i think it's really hard to justify today's valuations unless you are 100%
5:27 am
certain that they could double or triple the margins from where we are today and if they do that it means less expenses and higher prices and if that happens what's going to happen to the top line in market share? they have to establish a point where normalcy is acceptable profitability. and it's hard to see where that makes the stock cheap today. >> he's not the only very successful fund manager that regrets the timing of buying and selling tesco shares. warren buffet $400 million loss because he sold off his shares in tesco. he said that was a huge mistake. but stock has been up 33% year to date. we'll have to see if his
5:28 am
strategy is right. still to come on the show will bio tech stocks continue to get a shot in the arm after a solid first quarter? we'll ask an expert how to play the sector next. plus take a look at u.s. futures after volatility. pointing to a higher open. it's about earnings season. alcoa reporting after the bell.
5:31 am
hi everyone you're watching worldwide exchange. >> these are your headlines from around the world. >> shares in bg soar after it agrees to a $70 billion take over by ftse rival shell. ben explain idea the deal makes sense. >> combining these two portfolios are not only going to have a much stronger business in materials of supply points and demand points in integrated gas and energy but we're going to have really scale in the portfolio. >> alcoa is set to kick off the u.s. earnings season reporting results after the closing bell today. the numbers come as analysts project this could be the weakest set of earnings for the s&p 500 in 2.5 careers. >> u.s. futures pointing higher as they await amid optimism the
5:32 am
central bank could delay the rate hike. >> the greek prime minister prepares to meet the russian president vladimir putin one day before athens is due to make a key repayment to the imf. >> welcome to the show. our focus turns to the earnings season with alcoa reporting today. a slow down in economic activity. lower energy prices and stronger dollar have driven analysts to lower their expectations heading into the earnings season but will setting the ball low allow these companies to beat estimates? the dow up 37 points in premarket trade. the nasdaq up by around 4 points. taking a look at european markets, that mega deal in the u.k. helping boost the ftse 100 up about half a percent. the xetra dax, the german markets seeing a profit down about a quarter of a percent.
5:33 am
an interesting day of trade. it continues to move higher up about .2%. >> let's get back to our top story this morning. shares are soaring after it agreed to a 47 billion pound takeover bid by shell. it's one of the biggest mergers in a decade and comes amid the tumbling price of oil. earlier our colleagues spoke to the ceo of shell and asked if the oil price drought was thriving the deal. >> this is not a bet on the oil price. this deal works in a whole range of oil and gas prices and we'll see higher oil prices than what we see at the moment and then this deal will not just look good. it will look fantastic. >> my colleague also asked if the deal was more about bg's gas business than oil. >> this is as much about gas as oil. as a matter of fact probably even more about gas. so if you look at bg's portfolio, very very strong portfolio in areas where ibndeed
5:34 am
we have strength but they bring new things to the party as well. >> another sector ripe for m and a is bio tech. etf is up over 50% over the last 12 months. however the index has seen a little bit of volatility recently amid concerns over valuations. let's bring in eric the managing director and senior he research analyst that joins us live from new york. a pleasure to have you on. if there's any part of the market that reminds investor of the tech years it's bio tech but you say despite the out performance in bio tech there's more room to run. tell us why. >> we do. i mean if you look at the etfs which you just mentioned they've done very very well. the great majority of that market cap is driven by the large earnings driven names. these are companies that trade at very discreet finite multiples and they're not
5:35 am
expensive. there's a shortage of companies capable of growth. bio tech has no such shortage. heading into q-1 earnings we think gilead and on down the list are well positioned to continue to post in some cases 30% year on year growth. you can't find that anywhere else in the marketplace right now and relative to the multiples we think the earnings driven names are still attractive. >> a potential interest rate coming. volatility rising and growth slowing down in some part of the world. this isn't the best set up for bio tech which we know tends to out perform when the macro picture is intact. >> i would agree bio tech tends to be high beta. if there's an overall correction in the equity's market that would hurt the industry for sure but what we seem to be seeing is a sluggish economic environment
5:36 am
and as you know drugs and biotech products are very economically resistant. recession resistant so right now at least we have a best possible world where biotech companies are able to pen fit from an aging population. a very open pricing environment. obamacare extended reimbursement to a broader number of people. yet there aren't any other industries capable of hosting that growth. >> so eric your clearly still bullish on that sector despite the relatively high valuation. but is this a sector for everyone? for the retail investor? can he stomach such volatility we have seen over the last one or two weeks or so? is this a sector for the hedge fund player that might be more leveraged? what do you think? >> well you know biotech is not for the faint hearted and certainly if you go below the top six or seven names in the industry into the more speculative still profitable companies that don't yet have
5:37 am
drugs it's a very very difficult sector to play and an etf might be the only way they might want to get involved but the larger companies which are essentially emerging drug company with great profits, great earnings visibility i think everyone should be investing in those. >> could be the next target within more consolidation in the sector eric? >> well that's a tough one to estimate for sure. you're right. consolidation is a big theme in the industry. the larger companies are always hungry for new products. we've seen a lot of acquisition activity in cancer i would guess there might be activities there. but we might be right 10 or 20% of the time at best. >> health care is the best performing sector in 2015. what are you expecting in terms of earnings in q-1?
5:38 am
>> yeah q-1 can be a little bit seasonally soft for biotech. that's reflected in most models these days but what we do expect is on a year on year basis, 15 or 20% growth for a great majority of the companies. there were a slew of price increases within biotech over the course of the last three months. that will benefit and the macro trends here in terms of an aging u. s. population. baby boomers having recently turned 65 and obamacare in it's second or third year those are really going to help. >> we'll seal if you're right. thank you for getting up early with us here on worldwide exchange. >> my pleasure. >> and let's take a look at the other top stories at this hour. oil prices are pulling back today after wti crude settled at the highest level since the end of december on tuesday. the decline comes as a report by the american petroleum institute shows a much larger than expected build in u.s. inventory
5:39 am
and saudi arabia reported record output in march. it surged by 12.2 million barrels last week. the much more closely watched weekly inventory report from the eia is due later today. >> they have been victim of a gold heist. the company says armed robbers made off with 7,000 ounces of gold from its mine in northwest mexico. at current prices that would be worth about $8.5 million. they he have insurance against this type of incident but says the policy won't be sufficient enough to cover the entire loss. still coming up on the show setting the earnings barlow analysts predict the first quarter could be one of the weakest for s&p 500 companies in years. we break down the forecast, next. don't go away.
5:42 am
alcoa reports first quarter results unofficially kicking off the u.s. earnings season in what is expected to be one of the weakest periods for s&p 500 companies in several years. what can we expect? let's check in with landon who is at cnbc's hq. >> hey, good morning. alcoa is the first mayor company in the s&p 500 to report first quarter results. profits and revenues are forecast to rise year over year.
5:43 am
investors will be listening for comments about whether they're as upbeat about global demand for aluminum as three months ago. shares struggled following 17% in january while the s&p 500 is up 1.5%. the ceo will be on closing bell today after the company reports results at 4:00 p.m. eastern time. numbers come amid what could be the weakest set of earnings for the s&p 500 companies in some time. profits are expected to fall by 3 to 4.5%. that would be the first year over year decline since the third quarter of 2012 and the biggest total drop since q-3 of 2009. the energy sector is expected to be the biggest driver of the decline. profits are projected to fall by 60% with revenue down more than 30%. overall, revenues are forecast to drop by as much as 4.5%. financials could be one of the highlights. s&p is projecting earnings to
5:44 am
rise nearly 1% leaving all sectors they are trailing only health care but still up more than 8%. bank of america could be a big factor as the company is expected to return to profitability in the first quarter. excluding b of a, financial earnings won't be up less than 1%. bank of america merrill lynch is lowering it's forecast by $2 a share reflecting the impact of the strong dollar. that would imply 2015 would be the first year of negative earnings growth since 2009 but they expect positive growth to resume by the 4th quarter. back to you. >> landon thank you so much. switching focus to greece the greek prime minister is due to hold talks with the russian president in moscow today. two sides are expected to discuss ties between the eu and russia which have been strained due to the ukraine crisis.
5:45 am
they are considering offering athens loans or discounts on natural gas supplies. the visit comes one day before greece is due to make a key payment to the imf of 450 million euros. >> and they said they were going to pay that run. rahm he emanuel won a second term as chicago's major. he was president obama's former chief of staff and was forced into the run off after failing to capture a majority against four other candidates in february. he has been criticized for his ties with chicago's business elite and focussing on the wealthier parts of town. >> a washington machine gobbles up our freedoms and must be stopped. that is the rallying call from rand paul who has confirmed what everyone has known for months that he is running for president. the first term senator from kentucky announced his bid saying he would rescue america. >> we have come to take our country back.
5:46 am
we have come to take our country back from the special interest that use washington as their personal piggy bank. the special interests that are more concerned with their personal welfare than the general welfare. the washington machine that gobbles up our freedoms and invades every nook and cranny of our lives must be stopped. >> joining us to discuss is hadley gamble around the desk here. there is a lot of talk about him targeting the younger americans but do you think they'll get behind a candidate opposing same sex marriage. >> you're seeing there he's coming across sounding like a preacher in a way. but he is a libertarian. he is the son of ron paul and
5:47 am
you have to also remember he has been delightfully difficult to pin down on key issues. he'll say one thing but at the same time you know he's voting a different way on legislation and it's very interesting. he's a political wildcard. he's looking to target minorities and young people and these are not the traditional base of the republican party but he still has a lot of backing from tea party members that really ally admire and enjoy that. so it's going to be interesting going forward if he's this wildcard what that's going to do over the next two years because remember we're a long way out. >> you're right. where does he stand on foreign policy? on that front he clashed with many americans. >> he has. it's interesting to see how it has grown over the last four months. you saw him quite favorable to palestinian state and it's interesting to watch him develop and change overtime and you have to also remember he's talking
5:48 am
about the republican party that we vn seen come to the forefront in 100 years. since before world war ii essentially. you haven't seen the level of isolationism among republicans so he's getting a lot of traction there but at the same time he's getting in with that serious base in the republican party that have this over foreign policy. last night he is saying i'm not george w. bush. it will be interesting to see how that plays going forward. >> defeat the washington machine, unleash the american dream. >> just like an evangelical preacher and attacking the special interest. where have we heard that before. >> thank you so much. >> before we head to break, these are the headlines. shell agreeing to a $70 billion mega merger with bg group. alcoa gets the ball rolling as investors brace for a weak earnings season and there's optimism the central bank could delay it's first rate hike. we'll be back.
5:51 am
>> we are at the highest level since july 2007. thank you to shell and bg group and the ftse 100 high by 0.6%. the cac 40 also in the green up by 0.2%. >> futures, let's take a look at premarket trade. right now wall street could have a positive open. the dow is up 37 points. nasdaq trading about 2% below it's recent high. nasdaq is at 2,944. well away from the 5,000 level it broke in march but up about 4 points in premarket. let's get you a run down this trading day. the minutes from last month's fed meeting will be released at 2:00 p.m. eastern which could shed some light on the internal
5:52 am
debate over the rate hike plans. the new york fed president is speaking about the economy this morning and steve is moderating a discussion with fed governor jerome powell today. cnbc will carry a live feed of the event. to talk more about today's trading action let's pring in the managing director at bk asset management. of course the bird fight continues between the hawks and the doves. who do you think is going to win this time around? >> i think the doves still win at this point. the doves are in control because janet yellen is the primary dove that controls the action and i think as i have been saying for awhile it's not necessarily just the fact hah the u.s. economy is doing well it needs to be improving in order for the doves to become completely convinced that they're ready to raise rates so delta is as important as the direction of the u.s.
5:53 am
economy and what you've seen over the last couple of weeks or months is the economy has been declining and accelerating. some of it is weather related and some is geo political related. maybe spring comes back to u.s. economy and only then will the fed begin to consider. i think there's a reasonable chance they go in september but i don't know about june just yet. >> does anyone care about the fomc minutes. they don't even incorporate the very disappointing jobs report. >> well i think they could be market moving if there's a surprisingly hawkish bet. at this point the market expects a relatively dovish cast to them. if they you sort of see the doves considering the potential for a rate hike in june you might get a little bit of a push to the dollar as the day progresses but they're not a primary mover today. >> this could be the first year of negative earnings growth since 2009. what are you expecting this
5:54 am
earnings season? >> you guys were saying thank is m and a for the market. really you should thank mario draghi. if now, i think like everybody else everybody is waiting to see whether the weakness in q-1 was seasonal and temporary or whether this is more of a structural secular issue. at this point i think the market has discounted the weakness in q-1. going to be looking much more forward toward guidance and see if the business is tarting to pick up as the first weeks of spring come into play. that will be the big question for the market as we go forward. >> thank you for that. have a good day. managing director at bk asset management. let's get back to the top stories. shares in bg group are soaring after the company agreed to a 47 billion pound takeover bid by shell. the merger is one of the industry's biggest in a decade and comes amid the tumbling
5:55 am
price of oil. we're seeing bg group high about 37%. ftse 100 lifted by all of that up by 0.6% but shell off by 2.1%. >> of course investors are taking this as perhaps more consolidation in the oil and gas sector. so we're looking at a lot of the european oil and gas majors pretty much higher across the board. the best performing sector here in the u.k. bp up 3.2%. take a look at stat oil up 2.8%. seeing a gain of 1.8% and also seeing a gain at 48.1 up about 1.2% so energy a big factor in today's trade. one of the reasons you're looking at the u.k. index out performing it's european peers. futures are higher. the dow up about 34 points. the nasdaq up about 3 points and the s&p 500 with a gain of 3
5:56 am
points. it's the way we're looking at european markets higher. >> one point on the u.s. markets it doesn't seem as a lot of people are very much invested. volumes are still below average and people are still sitting on the sidelines. sort of a wait and see mode. in term of european markets we're seeing a little bit of a mixed session. the ftse 100 by 0.6%. the dax might be seeing a fair degree of profit taking but the cac in france is also some what higher. that's it for today's show. i'm carolyn. >> i'm seema mody. thank you for joining us on worldwide exchange. we'll be here tomorrow at the same time same place. have a great day. squawk box is next.
5:59 am
good morning. a mega energy deal. royal dutch shell is buying rival bg group for $70 billion in cash and stock. central banks continue on center stage. while we were sleeping the bank of japan kept it's massive monetary stimulus program unchanged. up next, minutes from the last meeting which could give the markets insight into the fed's longer term game plan. and the world's best golfers are in au dprksgusta and claim the par 3 contest today ahead of the official start to the masters
6:00 am
tomorrow and legendary golfer gary player will join us. he's in the first group tomorrow with arnie and jack. it's wednesday, april 8th 2015. squawk box begins right now. >> live from new york where business never sleeps this is squawk box. >> good morning, welcome to squawk box here on cnbc. i'm here along with joe kernen. becky and andrew are off today. it's going to be a family affair at the master's today. tiger woods will be using a much younger caddie than normal. his kids will be there for the traditional par 3 contest. he hasn't played since 2004 and injuries kept him from competitive golf for the last two months. we'll talk a lot more about
122 Views
IN COLLECTIONS
CNBC Television Archive Television Archive News Search ServiceUploaded by TV Archive on