hi, everybody. good morning. you're now watching "street signs." i'm louisa bojesen. your headlines today, losing altitude. shares of air france on track for their worst day in 16 months after the ceo says good-bye to the french airline. sources telling cnbc that pfizer and allergan may be over. banking on state help. italian lenders rallying on reports that the government could set up a new fund in order

to buy up bad loans and capital shortfalls. and a win for ted cruz in wisconsin, setting the republicans on a path to be contested at convention. that's as rivals look to snatch the nomination from donald trump. hi, everybody. good morning. very glad you're with us today here for another version of "street signs." we have a lot going on in today's session, a lot of news to get through as well. plenty of good guests lined up. just to kick off the hour, let's show you what our european markets are doing. we're currently flat to a little higher on the stoxx europe 600, as seen here. the majority of equities in europe just trading a bit higher. we were called up some 20 points for a number of our main european markets here this morning. glancing at some of our main markets, the ftse, the xetra

dax, the mib all hanging on to slight gains. let's move on though. let's get into some of the bigger corporate stories out there. the ceo of air france klm has announced he's stepping down to take the top job at iata. he's expected to start at the industry body by august, taking over from the retiring director general tony tyler. the airline group said it has not yet found a replacement to the top job. shares there off by some 5% on the back of this news this morning. shares in the chocolate maker barry callebaut rising after

first quarter numbers beat expectations, offsetting weakness in the cocoa products market. and italy could set up a state-backed fund to help troubled banks. this is according to reuters, which says the country's economy minist minister met yesterday to buy up bad loans and plug capital shortfalls. talks are expected to continue on this. italy's banking sector has been under pressure with concerns over bad loans hitting share prices. in retail, h&m shares have been trading higher, up by almost 3% after preliminary march sales grew by 2% and first quarter pretax profited grew. february profits still fell sharply from a year earlier to 3.3 billion swedish krona. this is because of disappointing weather conditions. they always say that. it is to some extent, though. and the chief of the executive

lse is saying he would consider a rival proposal with i.c.e. the ceo denied the $30 billion merger with deutsche boerse would increase financial risks to the system. in asia, the service sector saw higher activity last month with pmi coming in at 52.2. that's up from 51.2 back in february. but the country's employment figure dipping for the tenth straight month, falling to its lowest level since 2009. sri is in singapore. we're looking at a slight batch of data. in general, what do i need to know about the asian session heading further into europe. >> yeah, let's pick up on the services pmi from china. it was a fairly robust number on headline, but the employment component, that showed signs of stress. this has to be expected when the economy is transitioning from heavy industry towards the

consumer. so herein lies the problem, the big challenge in that adjust rmt process. how to ten sure a stable employment picture while raising those social instability concerns. elsewhere, china markets relatively stable towards the close. i wanted to hieltd the nikkei 225. dollar-yen has been flat, but we have seen the yen at a 17-month high against the u.s. dollar. this is very bad news for corporate japan and the exports. in fact, we've seen the longest losing streak for the japanese equities markets under the abe administration. very real questions being asked about abenomics and the broader economic sustainability and the picture in japan. elsewhe elsewhere, it's a picture of consolidation. consolidation today, but the growth concerns weighing quite heavily on the taiwan benchmark. down 1.7%.

it's going to come down to the external picture. it's going to come down to the fed and the rates outlook there. also, u.s. earnings picture. let's not forget, that global growth concerns the weaker, the sluggish state of the global economy is going to be a feature, is going to weigh on those u.s. earnings. what they say about guidance and the outlook is going to be absolutely critical. that's where we stand. back to you. >> always the outlook. sri, good to see you. thank you very much. continuing on with japan speaking to "the wall street journal," the japanese prime minister shinzo abe said that competitive currency devaluation must be avoided, suggesting that he would not intervene to stem the yen's strength. his commenteds pushing the japanese currency to a 17-month high.

so shinzo abe talking about how countries should avoid weakening their currency with arbitrary intervention. >> i expected no less. you have a situation where the yen continues to gain strength despite all efforts by policymakers to avoid that. i think what he's doing is maybe some regional control in terms of making sure that, you know, while the yen strengthening is not offset by other countries in the area, sort of devaluing their currency and really putting the yen in a bad position. you know, what you're seeing clearly in japan is the policies are not working. we're seeing the yen strengthening. we're seeing import prices continue to weigh on inflation number, and that's making it even more difficult for the deflationary fight. >> the advance, though, happening in the yen. is that due to fed? is it due to kind of a safe haven status of the yen? >> it's both. the front end of the u.s. yield

curve is flattening and not moving to any type of data or even comments from fed policymakers. there's a real disbelief in terms of inflation and growth numbers in the u.s. and expectations for rate hikes are vanishing quickly. without that differential to power the dollar-yen, we don't want to see significant movement. we're seeing that buyers are flocking to foreign investments, but that's not offsetting the safe haven buying we're seeing. >> precisely on that point, they're hosting the g-7 summit come may. given they just adopted negative rates in january, there's not a lot they can do to stem the strength of the yen. >> i think the limitations of the boj's policy is really coming to the forefront. the next step would probably be buying previous assets, which is probably for the most part a

no-no in central bank decision making policy, but that's something that's going to be the next step. basically, the microtuning we're seeing in japan is not having an effect on the yen and not helping the inflationary outlook in japan. they are sort of getting to the last stages. i think that's what the market is betting on. the primary driver to the yen weakening has been the boj policy. without it, you know, it's time to buy back into the yen. >> then you're looking at fiscal stimulus packages. >> yeah. >> as opposed to monetary. >> you need some type of demand stimulus moving forward, but that's not coming any time soon. right now the market is focused on the boj and the limitations of their policy. >> we just mentioned the fed a second ago. today, more fed news because minutes from the fed's meeting in march, they're due to be released at 20:00.

observers will be watching to see how far apart the views of the committee's doves and hawks are. >> the macro story around the fed is the comments are extre extremely complex and confusing to the marketplace. one day you have evans come out and next day you have bullard, yellen. the market and the dollar has been flying all over the place. if you look at the treasury market, it has very little expectation for growth in the u.s. you look at the fed fund future rate, it's also fading the idea of a rate hike. so the markets are saying, while we're getting commentary and short-term volatility, overall there's some disbelief and will the fed really pull the trigger. i would suspect that today's fomc minutes will show diversity in outlook for growth in the

u.s., but the overriding theme will be yellen's cautiousness and moving slowly. i think the market is overrating the speed at which the fed is likely to raise rates and should be looking at yellen's sort of longer term view, more cautious. that's really going to provide a more dovish fomc statement today. we could see the dollar sell off significantly. >> i was just looking at my yields. the lower u.s. treasury yields, also less support for the dollar. now we're looking at a yield of the u.s. ten year, 1.3. march we had a peak of 2%. interestingly, the same thing going on in germany. >> there's some real skepticism. even when the nfp numbers came out last friday better than expected, very little movement on the front end of the u.s. yield curve. that says a lot about whether data is actually pushing it or

sort of commentary and expectations of the fed. that's a primary driver right now, reading what the fed is saying. i think the markets should really pay attention to yellen because she's a leader of the majority and primary decision maker at this point. >> so what do i do? what am i supposed to buy? how am i supposed to be positions myself? >> we're still very much based on this sort of em recovery and sort of high beta yield seeking with current account surplus ems. we think there's still opportunities there. yes, we're going to get some volatility. the last two days have been suffering. equity markets are selling off. people are saying risk haven trade. i think in the broader and midterm, there's a story there. on one hand, you have the global central banks that continue to keep it easy, you know, monetary policy. the fed is likely to stay dovish. we're seeing, as we saw in china, international data is

going to stabilize and slightly improve but not to the point where, you know, it's likely to spill over into central bank tightening. at the same time, you have the fundamental story ems sort of have bottomed out. we're starting to see a recovery in these ems. we're seeing improvements from a fundamental story, and that should continue to keep investors moving into ems. >> interesting. i'm just listening and thinking. peter, thank you very much for being with us this morning. head head -- by all means, go et in touch with the show. streetsignseurope@cnbc.com. you can get in touch with us on twitter. @streetsignscnbc.

lots of good stuff coming up. among other things, we'll be bringing you the latest on pfizer and allergan, saying the merger is over due to tighter tax inversion rules. >> big corporations aren't playing by a different set of rules, the wealthiest among us aren't able to game the system.

hi, everybody. welcome back to "street signs." i'm louisa bojesen. republican presidential hopeful ted cruz is projected to win the wisconsin primary, dealing a blow to donald trump and raising the prospect of a contested convention in july. on the democratic side, bernie sanders took the dairy state, as nbc's steve handlesman reports. >> reporter: winning tonight means momentum for ted cruz when he needs it most. >> i am more and more convinced that our campaign is going to

earn the 1237 delegates needed to win the republican nomination. >> reporter: donald trump, who had hit a rough spot, stumbling on abortion, minimized his need to win wisconsin. >> we talk about delegates, which i'm far and away number one, but the votes are even more impressive. >> reporter: voters in wisconsin lined up past polling time. >> we have now won seven out of eight of the last caucuses and primaries. >> reporter: though he remains a mathematical long shot. hillary clinton moved on to new york, where the primary is in two weeks, slamming trump and cruz. >> battling prejudice and paranoia is not the new york

way. trump may be the most outrageous of the republicans, he is saying what all of them believe. >> reporter: tonight what cruz is saying louder is that he will be the gop nominee. i'm steve handlesman, nbc news, washington. some of you may have noticed this already. whatsapp has strengthened its encryption settings as the face-off between apple and the fbi spurs tech companies to rethink approaches to safeguarding customer data. whatsapp messages will only be available to the sender and recipient. staying in tech, financial disruption is a buzz word at the money 2020 fintech conference in copenhagen with social trading company itoro making strides. nancy spoke to the firm's ceo and asked about the innovation taking place in the banking space. >> i definitely see a lot of the

big banks in europe, starting with commerce bank, whose venture arm invested in etoro. so that's one of the largest banks in germany. you see sort of a very refreshing breeze of people understanding you have to innovate or die. sort of that statement of the silicon valley has now entered europe, into the financial services. they understand that they need to innovate or other banks who simply innovate or partner with etoro are going to come for their lurch. >> well, nancy is still in copenhagen and has been following the moving trends out of fintech. >> reporter: that's right, louisa. one of the big questions taking center stage is whether or not finance is having its uber moment. for that very question, let me bring in the ceo of ing group. ralph, thank you for joining us here. we were just hearing from one of

the disrupt to bers here at mon 2020. >> i think we felt it a couple years ago when we set out in our strategy. that was fully focused on the digital opportunities and the changes that would come in the banking industry. for ing, being probably one of the first fintechs around, when fintech was not even a word 20 years ago, we knew it was coming. we're ready to work with it. >> reporter: so are you innovating from within or looking outside, looking to acquire some of these so-called disruptors? >> actually, both. we're doing innovation from within. we get a thousand new ideas every time we do a boot camp. we accelerate those, test those ideas, and deliver new ideas in order to service our clients. on the other side, clearly there's a lot of good ideas outside as well.

we see a lot of fintechs with useful propositions in order to improve the client experience. clearly, we look outside and we do look for corporations and partnerships. that's what we're doing as well. >> reporter: how do these innovations, the fintech charge, what does that translate to when it comes to the bottom line? do you think it's a realistic estimate? >> i certainly think it's an estimate that's indicating the disruptive element of it. i don't know if it's exactly those percentages, but we see the change happening already. in ing, we have two worlds. we have the world where we are a branch bank, where we are going through major changes for years already. closing branches as well, moving people to internet and mobile. our strategy is really to do everything mobile first with our clients, whether we're in a

branch world or where we're a disruptor ourselves. in germany, we started 15 years ago with an internet bank only. we have zero branches there. we have now 8 million clients after 15 years, and we get a thousand new clients a day. so yes, i think that some of the research that's produced out there is showing that this will be very impactful for the existing banks. ing is a mix of, you know, new banks, challenges, if you will and disruptors. the way it impacts ing is different per area. >> reporter: and of course this does raise the question of post-financial crisis. banks are still having a difficult time when it comes to profitability. it's been a rough start to the year. do you expect this turmoil to continue, or looking ahead, what is your outlook? >> if you look at the headwinds banks are coping with, one of those is the remnants of the french crisis, pressure on margins, regular story costs.

the development we see now with digital and the fintechs is actually supporting development. we know what it can bring. we know what it can do in order to improve customer services, and we know what it can do to our cost space. >> when you look at the impact of the low interest rate environment, is the central bank having a diminishing effect? >> i think the last step was the one where they went into the other area, where it is not helping anymore. now we get into such a low interest rate environment, if not a negative interest rate environment, where our consumers basically start to worry. if you get negative interest rates on your savings, we think psychology works in reverse. you save more because you're afraid of what the future brings for you. so you start to save more.

it will actually take money out of the economy. that's one. secondly, it will and it does influence banks' profitability. banks may not have sufficient capital to grow their balance sheet and give the loans the market needs. so i think the last step was one step too far. >> reporter: does that suggest that the measures the ecb took to improve the debt markets that you're not going to benefit from that? >> it's true. we're not going to benefit from is as a balance sheet lender. we're certainly benefitting it in order to help these corporates accessing the market and accessing the cheaper funding, that's for sure. so it plays on both sides. question is as a bank you have to look for growing your balance sheet per se. we are, but we're doing that in those areas where we can really support the economy. >> reporter: if you think the ecb has gone too far, they might

say what's the alternative? what would you suggest to president draghi? >> well, you know, i'm not draghi. i don't have all the information. i think we should not have this competition between central banks as to who can go the lowest on this one. at a certain moment, we just have to look at the politicians and ask them, you know, do the reforms in the countries that still need to do the structural reforms to make the economy sustainably healthy. i think what we're trying to do now with this last step is actually -- you know, it's not a sustainable move. sustainability of turning the economy around can only come from structural reforms and some of the countries in europe. >> reporter: all right. well, thank you very much. that's the ceo of ing group, really discussing some of the macro trends, the headwinds banks continue to face as they try to innovate. coming up, we'll be speaking to a very special guest, blithe masters. i'll be moderating a panel with

her. we'll have sound for you in just a little bit. louisa, i will be flying back to london very shortly. ive enjoyed my time here in your home country. i decided to learn a phrase. i want to see if you recognize this one. >> go for it. >> reporter: [ speaking foreign language ]. >> to travel is to live. >> reporter: you got it. >> you're fluent. fantastic. nancy, you tweeted a picture of the hot dog. it's like a sausage with everything. but it's the wrong one. i want the classic one which is bright red. you're not able to see this on your screen, but we're showing viewers a picture now. i'll tweet a picture of it later. bright red sausage. >> reporter: i'm not sure what customs will have to say about that one. >> well, you know, i don't know.

i was going to say hide it in a suitcase or something. but don't, definitely not. but do go try it. street food. it's brilliant. this is the picture that you tweeted, nancy. we're just showing it. but see, this one has like bean sprouts and stuff. where does that come from? >> reporter: it's a little bit posh, i think. where i come from in detroit, we have a coney dog, which is a whole different thing. chili on top and the whole different works. we can have a competition when i get back. >> this has like a fish sauce. try it. it's delicious. the really red one. >> reporter: i'll put it on the list. >> nancy, thank you very much. go take a look at nancy's twitter page as well and check out the picture she tweeted. have fun for the rest of your stay in copenhagen. listen, coming up on the show, thanks to ted, we could be cruising towards a contested convention in the republican party. we're live from washington after

this. we'll also get thoughts on how you should be positioning yourself in the markets right now. and we'll be talking about what's going on in argentina a bit later too. stay with us here on "street signs." your path to retirement... may not always be clear. but at t. rowe price, we can help guide your retirement savings. for over 75 years, investors have relied on our disciplined approach to find long term value. so wherever your retirement journey takes you, we can help you reach your goals. call a t. rowe price retirement specialist or your advisor ...to see how we can help make the most of your retirement savings. t. rowe price. invest with confidence.

hi, everybody. welcome back. you're still watching "street signs" here on cnbc. i'm louisa bojesen. your headlines this morning, losing altitude. shares of air france on track for their worst day in 18 months after the ceo says good-bye. sources telling cnbc that pfizer and allergan are calling it quits. banking on state help, italian lenders rallying on reports that the government could set up a new fund to buy up bad loans and plug capital shortfalls. and a win for ted cruz in wisconsin, setting the republicans on a path to a

contested convention as rivals look to snatch the nomination from donald trump. hi, everybody. welcome back. here in europe, our european equity markets were called just a couple points lower this morning. we're currently seeing a little bit of positivity. same goes for the implied open in the states. the dow jones being called higher by approximately 45 points or so. you saw the s&p 500 off by a percent on the close yesterday ahead of a quarterly reporting season which could be interesting. some sharply lower earnings anticipated by many. and you saw the dow with its first triple-digit loss in almost a month yesterday as well. incidentally the vix seeing its biggest gain in around a month too. as mentioned, european markets at the moment mostly in positive territory.

you've just got germany seeing a little bit of red. ftse mib, cac, and the ftse itself all a little higher. oil prices, well, they're trading up quite a bit at the moment. a little bit of a rally there on hopes global produce lers agree to an output freeze at talks. switching gears, iceland's prime minister has stepped down in the wake of the panama papers revelations. leaked files show his wife owned an offshore firm with claims on the country's now collapsed b d

banks. meanwhile, u.k. prime minister david cameron has been forced to issue a statement saying that he and his family do not benefit from offshore funds. this after the leaked documents revealed the prime minister's father was a client of the panamanian law firm. the labor party has called for david cameron to publish his tax returns are, and it also accused the government of backing down on scrutinizing tax havens. the recently elected fifa boss is said to be, quote, dismayed that his integrity is being doubted after he was implicated in the panama leaks as well. the documents show he signed off on a 2006 uef atv rights contract to two businessmen who are now facing bribery charges by u.s. officials. the revelations deal a blow to fifa's bid to clean up corruption in football. and another man also on the defensive, argentina's president, who's named the

director of an offshore firm in the bahamas. speaking to media, he denied any wrongdoing, saying that the company which was established by his father is, quote, a legal operation. >> translator: it is a legal operation made by another person, constituting an offshore company to invest in brazil, an investment which ultimately was not done and where i was placed at director. the company belonged to my father in 1998 when we were all somewhat younger. the society seized operations in 2008 because it did not make an investment, which is great. there is nothing strange about the operation. >> the controversy is there. markets have been enjoying a strong rally since his election. they closed over 2% lower in yesterday's session. kevin daly is an invest pmt manager at aberdeen asset

management. what do you make of his involvement and whether or not the controversy itself, do you think that'll harm him? >> it's highly unlikely to have an impact on the recovery story that's under way in argentina. now, in terms of the economy this year being poor in terms of growth, argentina will be lucky if they have any growth this year. but what is really under way is an economic adjustment. so this new administration after the election in november has moved request d quickly. they've adjusted the currency. they've reached a landmark agreement with the holdout creditors. we're awaiting final legal judgments next week. >> april the 14th, right? >> 13th is the appeals court in the u.s. there's a small group of holdouts who said they're going to appeal the ruling to remove the injunctions, which will allow argentina to come back to the market. so there's that april 13th

hearing. get through that hurdle, then argentina can potentially come to the market with this expectation of a mega bond issue. >> there is speculation that it's unlikely they'll meet that deadline. what happens if they don't meet it? >> it's unlikely because of this hearing on the 13th of april, which i alluded to, right. so the april 14th deadline is likely to be extended. i don't think the creditors will make too much noise about this. argentina will need to come to the market with a bond issue of up to 12 billion to use the proceeds to pay the holdout creditors. they could use some foreign currency reserves and other assets to pay this legal payment to the creditors, but ultimately what they'd like to do is use the new bond issue to pay this legal judgment. >> what would that do to the debt to gdt ratio? >> well, it's very low in

argentina because this country has been shut out of the markets. it will increase it to about 56%. still, by any standards, this is still considered to be very moderate and sustainable debt. >> let's talk about some other areas you watched closely as well. south africa in particular. jacob zuma has survived an impeachment attempt after holding on to support from the national african congress party. pressure has mounted amid the latest round of corruption scandals. they involve his relationship with a wealthy industrial family. the anc giving him its backing. what do we think about his long-term future? you have a number of prominent characters that have also come forward over the last couple days. they're asking him to step down too. >> well, again, the anc has 62%

majority within the government. so the likelihood of impeachment happening before the leadership conference at the end of 2017 is very, very remote. so this is where south africa differs from brazil, where the impeachment process is well under way in brazil, and it's highly likely to move forward the next several weeks, whereas the anc has enough blocking votes. that's what we saw last night, where the motion was turned down. zuma will remain under pressure, but there's no real trigger to push him out of power before december 2017. >> and also, you could ask the question what it would solve if he were to be removed. what would that change? >> well, as you can see the market reaction in brazil has been very positive. change is a positive thing. it does bring some sense of optimism, hope that a new government will be more effective than the exhausting gott. in the case of south africa, it's not going to lead to any

improvement in growth. south africa is in a growth trap right now. very high inflation. it's got structural issues, which need to be addressed. so a change of government is not necessarily going to be able to do that. same goes for brazil. there's an expectation that we are going to see dilma pushed out. but again, new government will still have to address the same issues, which is a big, deep recession, very high fiscal deficit, high and unsustainable debt levels. you compare the two countries, brazil is in a much worse situation than south africa right now. >> yeah, we saw contraction of, i think, 4% last year. how much contraction do you anticipate for brazil? >> very similar. probably 3%, 3.5%, could be 4%. this is why a change in government is not necessarily going to be able to change the economic fortunes in the short term. over the medium term, it gives locals and investors hope that a new government will be able to come in and be more effective in

addressing some of these structural impediments to growth. >> maybe also addressing some of the downfalls from within the corporate community and transparency issues as the wewe. >> yeah, i mean, these are long-held structural problems in brazil, where you've had the ongoing investigations, uncovering a lot of these issues. so again, what can a new government do? a new government can say, it's likely going to be a more centrist than right government. that's the positive. you remove government which has been very anti-investment, really holding back the private sector. so the expectation of the new government to come in and address these, but short term, it's not going to aleave the problems brazil has in terms of the economy. >> kevin, thank you for being with us this morning.

>> thank you. now, the republican presidential hopeful ted cruz has won the wisconsin primary dealing a blow to donald trump and raising the prospect of a contested convention in july. on the democratic side, bernie sanders took the dairy state. nbc's tracie potts is in washington, d.c. tracie? >> reporter: well, louisa, let's talk about the winners that we have here because there are really three. we've got bernie sanders for the democrats, ted cruz for the republicans, and the stop trump movement. they had made a stand in wisconsin, hoping to slow down donald trump, and with ted cruz winning, they were successful, at least so far in that state. reaction this morning, pretty harsh words from the anti-trump pac, the group that's been working to keep donald trump from winning this nomination. they tweeted that they stopped him from hijacking the republican party. meantime, ted cruz is calling this a turning point. he won by double digits, by 13

points. our exit polls show he won the wealthy in wisconsin. he won people who were very concerned about experience and the experience level of the candidates, and he also won among those republicans who said their biggest concern was winning the white house back in november. so ted cruz even now admitting that it may take a second vote in the convention, but still saying he's got this mathematical path to winning the republican nomination. on the other side, you have bernie sanders, who really has some momentum now going into not only the wyoming caucuses this weekend but especially new york. that primary two weeks a i way. it's hillary clinton's home turf. bernie sanders is saying repeatedly that he thinks he can win or get a lot of delegates in new york. so he's taking her on literally right there in her own backyard. >> tracie, thank you very much for that. tracie potts joining us live out

of washington. now, donald trump has launched a scathing attack on ford after the u.s. car giant announced a $1.6 billion investment to build small cars in mexico. trump called the move a disgrace and ridiculous, saying, quote, such job crushing transactions will not happen when i'm president. coming up here on "street signs," we bring you the latest on pfizer and allergan with sources telling cnbc that the merger is due to tighter tax inversion rules. we'll hear some of the details on that. keep your questions and your comments coming through. it's streetsignseurope@cnbc.com. we're also on twitter. @louisa bojesen. happy to take your comments live on the show. we'll see you after the break.

hi, everybody. welcome back to "street signs." pfizer and allergan will reportedly terminate their merger following new tax rules issued by the u.s. treasury. according to cnbc sources, pfizer will be paying allergan a $400 million break fee as part of the terms of the botched agreement. sources also say that both firms disagree with the treasury's crackdown on inversions but neither company wants to be caught up in a litigation against the u.s. government. expectations that the deal will fall through giving a boost to shares in rival u.k. drug maker shire, as seen here. the move is a victory for the obama administration as well, which has announced a series of steps to hinder tax inversions. the u.s. president called on congress to close the tax loophole for good. >> big corporations are playing by a different set of rules. the wealthiest among us are able

to game the system. that's why i've been pushing for years to eliminate some of the injustices in our tax system. so i'm very pleased the treasury department has taken more steps. >> the u.s. department of justice will reportedly file a lawsuit to keep halliburton from acquiring baker hughes. they may either cancel the merger or fight the government in court. the deal value has dropped to $25 billion. the previous figure was $35 billion. kevin kelly joins us. he's a chief investment officer. good morning, kevin. nice and early for you. what do you make of allergan-pfizer terminating their merger?

>> this goes back to what's happening a lot in the health care space as well, where people are talking about drug pricing. nobody really wants to fight the government or these candidates right now because these issues are being heavily politicized, but what really needs to be addressed is kind of the tax implications here for companies because it has to do with worldwide profits, right. so it's actually cheaper for foreign companies to invest in the united states than it is for a united states based company. so it's something the congress should look at that has to do with worldwide revenues. >> do you think we'll see more of these types of potential deals not happening because of this? >> yeah, i actually do think there's going to be this big overhang. this was really the last big inversion to come out, but there are companies that have consistently looked at trying to figure ways to invest abroad as well. those companies have been caught up in this mix.

so it's going to lead to kind of a quiet m&a period probably until the first quarter of next year where managements can actually figure out what they can do with their balance sheets, especially when it comes to growth via merger. >> why have currencies become the main battleground for what's taking place in equity markets, kevin? >> well, we can actually see currencies really dictate a lot of the market action. you're seeing that with central bank injections, especially into their own economies, but it's interesting because you've had mario draghi finally please investors with all his actions now, but you've seen the euro get stronger versus the dollar. the dollar is actually a bit weaker, and that's helped the market over here. you're seeing the central banks try to fight the global growth slowdown, but what you need to

look at is the economy. it's interesting that the united states economy is doing really well, especially with the job numbers. we saw that the consumer actually really saved us on the latest gdp numbers as well as you're seeing a rebound in real estate market, but the dollar actually has declined against its brethren. you're seeing that's where the battleground is. whatever the currencies are going to do is actually play out into the markets because companies are really dependent on that growth. if they have a stronger dollar, it's going to hurt the american economies abroad. >> you're saying there's negative yield and you give the siemens-ge example. >> yeah, the tug-of-war is actually happening in the equity market as well. if you look at siemens, the debt has traded with a negative yield, but the dividend has traded over 4%. it's got about a 13% pe. that's actually very cheap when

you compare it to its american counterpart, which trades a the a high pe multiple and has a less yield. that's actually pretty telling. you have a great company, and it's very similar to its counterpart, but it just has a different zip code. >> i look at earnings expectations for this upcoming earnings season, doesn't look good. a number of analysts anticipating significant weakness to be seen out of the quarter. what are you expecting? >> yeah, you know, we're on board with that, especially if you look at a couple weeks ago, the number that came out of the commerce department showed that earnings came down at the worst level on a year-over-year rate at negative 11.5%. a lot of that was due to oil and bp oil spill payout. but the issue is that history shows that when earnings actually start to decline, companies are hesitant to invest in capex and hire more.

so it does bode well for the business cycle. we're seeing we may be at an inflection point now where we may be towards the end of this business cycle. but like i said, it's amazing how resilient the u.s. economy has been. so we'll have to see if earnings can actually start to stabilize now that the dollar is starting to actually decrease against its counterpart. so earnings season is going to be tough. that's why investors can wait right now for earnings season, see what companies and management start saying and actually pick and choose a lot of the stocks. overall, the entire market may not farewell, but you can pick and choose some great names. >> what do you think is the most interesting earnings play on that note? >> one of the most interestings earnings play is google. that's because they had a great earnings report last quarter. they were firing on all cylinde cylinders, whether it was streaming with youtube on the

mobile side. the ceo said shopping moments have turned into shopping marathons with people shopping on their hand held devices and that bodes well for their android operating system. then you look at what they're down, they're capitalizing very well on the cloud, and they've taken some market share away from amazon web services, but they're still trading below the price they had, which was $800 right after earnings. you're seeing consensus target prices across the street well above $900. they're trading at a reasonable price. you're paying about a 21 multiple, and you get the growth that they've had. they're in the hottest spots right now. so come april 21st, we anticipate that they could actually reach back up to their level above $800 on another good earnings report. >> the u.s. growth story, though, has been scaled back quite significantly. we saw the u.s. trade deficit

yesterday widening by more than expected for february. number of economists then cut their forecasts subsequently for first quarter gdp by half a percent to 0.4% annually, which should be the slowest growth in the region of two years or so. so a real slowdown happening. when looking at some of the market moves at the moment, do you think we're going to see a continued slowdown in general for equities, mirroring what's going on in the economy, even though we're seeing this slight strength in payrolls, we are seeing weakness elsewhere. >> yeah, we are seeing a lot of weakness. we've seen that. you just mentioned the latest numbers that came out. that's been consistent overall. we've seen this happen time and time again where numbers are showing a slow economic environment. that's true not only for the u.s., but it's true globally. what's interesting is that the u.s. used to account for 50% of

the gdp worldwide. and now we're only accounting for 25%. so if the united states can't get this global malaise overwith, then who else can we look to? we've seen even china come down. the problem is these companies are going to have to find ways to deploy their balance sheets and not actually do stock buy backs to increase their earnings. so that's what's going to be a focus, and managements are going to have to come out and talk about how they are navigating this slow global growth. so these high multiple names, you have to be very careful with. >> doesn't it feel good being so awake now? just coming up to 5:00 in new york, right? >> it does. i love starting my day with you guys. >> well, we adore starting our day with you as well, kevin. >> well, thank you. >> thank you very much. have a good day. get a cup of tea and wake up

properly. kevin kelly, chief investment officer. ne here in europe, still trading in positive territory at the moment. a bit of a mixed start to the session. not uncommon. not completely unheard of. we've got minutes from the fed's march meeting taking place at 20:00 cte this evening. last night around they left rates on hold, but they lowered their forecast in terms of how many times they think the fed will be hiking here during 2016. so we need to see how far the doves are from the hawks at this stage based on these fomc minutes. that's one thing that's coming up. on top of that, just keep an eye out on what's going on in oil. i've just kind of been glancing

at the price of oil throughout the show. we're still higher, up by some 3%. brent higher by just over 2%. there are these hopes that we'll have a deal to freeze output. the oil ministers are meeting on the 17th of april. kuwait just here within the last 24 hours or so insisting that the big producers will agree to freeze output. although, there's quite a bit of skepticism on whether or not that'll happen. there still seems to be a trade on the back of these comments. that's it for today's show. i'm louisa bojesen. "worldwide exchange" is up next. we'll be back tomorrow with more "street signs." thank you for all your tweets and your e-mails.

good morning. happening now a crude climb. oil prices bouncing back on support of an output freeze. pfizer and allergan set to end their merger over inversion rules. and ted cruz and bernie sanders win wisconsin, dealing a blow to front runners donald trump and hillary clinton. it's april 6th, 2016. "worldwide exchange" begins right now. good morning and welcome to "worldwide exchange" on cnbc. i'm sara eisen.

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