hello and welcome to "street signs." i'm live from frankfurt. here in london, these are your headlines. marrow draghi as the ecb geflts set to meet for the first time since the uk voeted to leave the eu. turbulence ahead the travel sector weighs on markets. a nervy outlook from easy jet.

watching for growth. swatch a healthy outlook as ceo tells cnbc brexit has helped. >> first three weeks of july, uk fantastic. the pound is less expensive. we are booming. our shops will up between 50 and 100% sellout so you did the right choice. cost cuts paying off at unny lever. >> despite are very tough environment there. i am certainly not advocate lg we can continue to grow at these levels, but the company continues to do well, we can grow. >> good morning and welcome to p "street signs." on this super thursday for earnings, but also counting down

to the ecb decision where julia is waiting by in frank further. let's bring you up to speed where the european markets are torrey trading just an hour into the session here. taking a breather after the highs we saw on wall street overnight. the ftse 100 main performer off some. this despite some earnings. over in germany relatively flat here. the seth ra dax barely in positive territory. a similar story for the italian ftse mib here slightly higher. however the stock 600 just off p. meanwhile it is super thursday. loout tan is a and easy jet

among them. brutal day from luf tan is a. they've been warning about declining bookings and uncertainly outlook. a lot of this due to terrorist fears. we'll have a guest to analyze later in the show. look at the shares in france. they are moving higher after the luxury company says it expert testimonies an increase in the profitability. in the retail sector as well, swatch up 4%. obviously the two companies key to watch still concerns linger over the entire market. let's give you a picture of where the markets are trading. we have seen a lot of dollar sign. hitting a fresh four-month high. expectations are moving once again we could see a fed rate hike before september. a lot of people starting to call

for september after strong job data. the euro up almost 10%. yen continues to be a big story although it is relatively flat. the weakness continued to push the nikkei higher today. sterling up about a quarter of a percent. now let's give you a view on how fixed income is trading. we did see a bit of bond weakness. it continues here. 10-year german off just slig slightly. we've seen the shift in risk sentiment overall just some slight selling in the bond market. meanwhile the pool of bonds the ecb can buy is getting smaller of course. this as yields have been fushing further into negative. let's get out to julia

chatterley who is in frankfurt. you've been watching these concerns for kwoit some time. we can expect that mario draghi will be pressed during the press conference. >> reporter: absolutely. that is one question he will be asked. he was asked at the last press conference too. i wonder whether he'll push back in this meeting as well and wait until we get the updated forecast in december, but sit a problem, isn't it? if you look at some of the analyst out there, they are saying focus on the german bonds in particular. this is the bulk of the buying. 50% of german government bonds out now. they can't be bought because the yield is too low. does the ecb allow to shake this up a bit. drop the low barrier of negative 40 bases points on yields and

say look we'll buy lower yielding bonds. the problem there is at some point they're going to be in negative equity. so yes they can tinker with qe, but costs of course on the other side. the other things they're going to be asked about as well is the economic, the inflation narl impact of the brexit vote. we haven't had any hard data yet so the other question is going to be on the bank. they took a 20% hilt as a result of that eu uk brexit vote. they then bounced back a bit. we have the likes of deutsche bank, credit swiss, ubs trading at or around record lows. what does this say for the banking sector. and the big question is the italian banks. real hit once again to confidence in those. we keep hearing all sorts of

rumors about potential bailouts being organized, being discussed. i've not yet heard anything credible. question is what is mario draghi thinking. he's probably going to avoid answering on that one too. so i'm not quite sure what we get, but he's going to spend 30 minutes answering questions. >> it will be interesting. one of these days where the press conference becomes the focus here. stay with us we are joined by barn bi marten. thank you for joining us this morning. i want to pick up first with somebody julia is talking about. that is the scarsty problem when we talk about bonds. >> i think it's inevitable they have to do something to give themselves more access to government debt going forward. there's no hope of euro zone inflammation getting back to 2% which is draghi's definition.

he has trick up his sleeve to alleviate that in the short-term so he has to address it. >> julia joins us with a question as well. >> like what? what do you think he does? he's got problems if he takes the yield below the deposit rate fl floor? >> you're right. the obvious thing to do is to cut rates or remove the deposit floor. those things are so political difficult for him now. what we think he does is he moves to a more market weight approach to buying. he looks at it across a range of securities. he may mingle with corporate bonds. that allows him political to get away with moving away from the issue of the capital key, but doesn't necessarily swamp the issue of government debt. >> how exactly is that going to work if they decide fine, we're

not going to buy german bonds and they reall kalt that proportion by the remaining capital key. it's going to be excess wagtd on italy for example and surely the germans are going to have a problem with that. >> gives them flexibility. this isn't a long-term solution. as we can see in europe, the european commission wants spain, it wants portugal tole stay measures. this for me the a stopgap. as we get into next year, the rhetoric in the market will grow. and the ecb buy next to keep qe going for a couple of years. >> they've been buying corporate bonds and aggressively. >> yes. >> would you say overall the prom is too big, too powerful, ultimately too bullish for spread. >> what is the trade then. >> long eligible bonds for now

and think about as all qe works when investors are forced into the next set of assets, what are those assets going to be. we think subordinated securities of financials are attract ichiro here. we think high yields are atralktive. the ecb has really impressed me. perhaps it's a way for them to buy. >>, but it does also raise the question after if and when we get to the question phase. some stage business debt could climb to 75 trillion by 2020. we've heard of a so-called crexit. does it cause corporates to embrace animal spirits. does it cause more companies to lever up and acquire companies in the u.s. hiding behind the knowledge that

the ecb is already the buyer of debt. we look at the u.s. high yelled market. >> no, they don't want to misallocation of capital, but when you have negative yielding debt, you have tom embrace that. >> we will see if president draghi has any answers to those concerns. well, still to come as i mentioned, decision time will hit at 13:30 cet and we will bring you that rate decision. you don't want to miss that one. in the meantime you can get in touch with us by e-mail. get you questions in via twitter. we are watching them trying to get the answers to you. our show handle is @street sienz cnbc, you can tweet me directly.

still to come on the earnings front, we'll hear from unny lever ceo. plus your portfolio. results from basil after this short break. announcer: todd's a great guy. i mean, look at him. what. a. sweetheart. attaboy. wait, todd, what are you doing? how totally selfish and un-toddlike of you. come on, todd, come on, man. earnings front, we'll hear from

goiod morning and welcome back to "street signs." basically flat just barely in negative territory there. keep in mind we did have overall index off just 1% since the brexit level. it has been a bit of a rebound here. investors maybe taking a breather after fresh record highs we saw overnight. today in europe, roche

posting income. that was part of a new asthma treatment and the established breast cancer medicine. the drug maker saw corps earnings surge by 7%. well, car lyolyn joins us live. you've been talking to the ceo. >> reporter: no surprises from roche this morning. slightly beating expectations on the line. confirming guidance for 2016. i spent a lot of time speaking to the ceo about the threat of bio similars. those are copy cat drugs which will be brought on to the mashlgt by competitors over the next couple of years and that could take a huge cut out of roche's cancer drug. he seemed quite calm about that

threat. he seemed fairly relaxed about the threat of brexit. take a listen. >> the impact the rather limited simply because less than 3% of our sales are actually in the uk. for the uk, i think it's a very significant move and also has an impact on our industry and the life science industry and more general terms. the bond elemeone element which critical is the regulatory progress. the uk is currently part of the european regulatory process. the e plrks a is located in london. it's expected this agency be moved to another eu member state. it will be absolutely critical the uk builds up early enough well functioning regulatory system to ensure innovative medicine for their citizens. >> when you talk to him, you can't ignore all the chatter about mma that we've seen

recently. that was special e specifically around one form. this is a firm active in the orphan disease field. many sources are saying that roach at this point in time is focusing on smaller acquisitions. >> while the earnings flee continue this morning in unilever corporates reporting here in the uk and they were boosted by cost cutting measures which did help the company to report a 2% profit rise in the first half of the year. also reiterated the full year guidance on the back of those results. however the big news of the last 24 hours you might see is the acquisition that unilever made. earlier on the back of these results and i asked him specifically about that acquisition and where the company sees its value. >> in order to get the economy to grow again, the monetary

policies have run out of steam a bit since the 2007, 2008 crisis we had chm started as a financial crisis and became an economic and government crisis where you've seen play out. we haven't gotten any gross from it so to just throw money at it and leave the interest rate at zero is not the only answer anymore. i think people are coming to that realization. we have to think about a new economic system that is more increw sieve. one of the reasons for the brexit vote was too many people feeling they were currently excluded from the economic system. don't get benefits anymore. they reject. it's very concerning to anybody and it's certainly concerning to unilever. that's why we a long time ago already started tchl unilever sustainable living plan. increase in social impact. we have to get to a more increw

sieve gross or it's not doing to work. over 5,000 people die every year just trying to cross the mediterranean now. that number will only go up if the population in africa grow. we have to address the economic system and ensure that more people benefit from it. >> that was paul poeman talking about the fading impact of the stimulus and we should get in detail about the dollar acquisition. let's give you a view of sab miller because that grufl 6% in the quarter. the stock up just slightly about 3%. now the drink giant sells of alcoholic drinks fell 11% driven by weaker demand in africa and warned of continued trading headwinds. separately the u.s. has approved the takeover of sab miller.

now taking a look at some of the auto movers today. operating profit fell 12% to 3.3 billion euros. that was for the takata airbbag recall. >> like the news this morning. however we did get some early indications a little while ago. what the big take away here. >> the company preannounced these numbers last week because they were ahead of expectations. so today was about the detail. stock is up. and china this was a bit of a surprise. so overall good numbers, but in order to make the full year

target of a slight increase they still need to grow second half earnings by 10%. let's see if they can make that. >> china is strength we were seeing for a while here. that wegs the question of how long the success lasts. >> there's always a question with china. the china story is more stainable than most people think generally for jerman makers. they will continue to grow and offer more product and continue to be a success story especially for the germans. >> what's on the stock relative. >> we have a sell rating. we're straightforward with buys and sells in the sector. it's all baked into consensus expectations. i think names like volkswagon, bmw, they just offer a lot more dynamic earnings potential compared to expectations. >> let's move over to voek wagon. again another unexpected rerelease coming from vw.

it's a first reannouncement from volkswagon in many, many years. they beat market expectations by 30%. it's all driven by the vw brand. i think that delivered 3% margin in the second quarter. >> does this bid well for their cost cutcut itin inting efforts? >> a lot of people called those into questions. >> i think it does. the vw brand is noun for being ale very straight shooter cost cutter. i think these affects of his actions are starting to become visible. they will grow over time. i think when people get the full detail later in the year we get a full turn around program from the company, the market will get even more exciting. >> you've been a bit more bullish. given that the legal headache is still there in the u.s., particularly when we look at the higher end 3 leert models from

volkswagon. >> it's all about risk reward really. volkswagon offers 60% upside. you get it for some risk as well. diesel crisis is still there. i think the pain will increasingly go way. we're beyond this peak moment of uncertainty, and i think that makes it really attractive and people will focus more and more on the turn around. >> the additional 2.5 billion set aside, is it enough? >> i think there are more cost to come because the fix they offered on the three liter diesel engine hasn't been acc t accepted. it won't be another 10 billion. i don't think it will be another

5 billion. i could see a couple of billion more coming during the course of this year. >> so kbha is your price target end of year. >> we have 160 euros price target. it's not aggressive. we're not aggressive with our numbers and still we're 20% ahead of the street. >> i want to get your thoughts on the brexit impact. dimeler ceo saying he does not expect an impact to demand. you've been taking a closer look at the germ german auto maker as well. >> our take it is a problem. uk is germany's biggest export market. that's 30% more than germany exports to the u.s. it's a huge market. we have huge currency, you know, implications on earnings. i think the second half will be difficult, but i also believe that jerny, berlin, has a huge

interest to be constructive in the negotiations with the new government. it's going to take time, but as i said, the second half with the uncertainty it's going to be a head wind for the industry. we surveyed uk dealers recently and 30% are saying they see a negative impact on their showroom traffic. >> does that suggest you think some of the german ceos who have had quite a bit of lobbying power saying don't give the uk hard time in these negotiations. give them access because we need them. >> 100%. the auto industry is germany's biggest industry. i can't see them functioning without functioning trade agreement with the united kingdom. >> i think there's a bit of come place si. . that is head of global out motive research.

let's give you a check on publicis shares. the advertising group ceo said they expect a, quote, sharp slow down in the third quarter. that is largely due to the loss of some key u.s. accounts. he affirmed that pube cyst would improve all the financial indicators this year. moving over to her mess, this comes after the french lurk ri good maker reported a jump in sales. it expects sells of leather goods, it's biggest business to be lower than the same period last year, but to rise 12% over 12 months. that certainly is good news for the broader luxury share and there you have her mess up. travel chaos for investors. we find out how the latest developments in turkey could affect a sector already hurt.

plus, boos for cruz: find out why the senator can't forgive and forget that lying ted remark. we'll have more coming up.

welcome back to "street signs." >> these are your headlines. brexit, a lack of bonds, italian banks. three big questions for mario draghi as the ecb gets set to meet for the first time since the uk decided to leave the eu. turbulence ahead. the travel sector weighs on travel markets after a profit warning from luf tan is a and a nervy outlook for easy jet. watching for growth.

swatch signals a healthy outlook saying the brexit vote has helped. >> first three weeks of july, uk, fantastic. the pound is less expensivexpen we are booming, so you did the right clois. >> cost cuts pay off at unilever, but the ceo sounds a cautious tone. see more market challenges up ahead. >> we are showing again you can go 8% despite a tough environment there. i am not advocating we can continue to grow at these levels, but if the company innovates well and stays focused on what it knows how to do well, we can grow. >> good morning and welcome back to striends. let's bring you some uk details breaking as we speak. retail sales suffering biggest fall in six months.

however no eu affect reported. that referendum taking place on june 23. too early to tell is the story we're seeing with a lot of data at the moment. the june retail sales declined. now on the yearly basis, they were up 4.3%. both of those metrics coming in below forecast. that decline worse than the 0.6% decline expected from reuters. and just shy of the 5% annual increase that was expected. people will question the veracity whether the referendum vote dented. let's give you a view of how the markets are fairing out 90 minutes into the session. they are kountding down to the ecb press conference. a decision expected, not a major decision. those will be looking to see what draghi has to say about the future implications of policy. this is the picture where we are

today. the ftse 100 off about.2%. xetra dax higher .25%. the ftse might be holding steady. earnings focus today. get a look at the big moverers. that the boe was in no rush when it comes to moving policy. let's give you a view of how the markets are fairing after we saw the dollars hitting a fresh four-month high. some of the revised expectations we could get a hike before the end of the year. we have the euro itching higher. right around that 1.1 mark we've seen all week. u.s. dollar slightly weaker an the yen. we have seen yen supportive to the nikkei. look at sterling there basically flat. just up slightly against the dollar. after the data we had on the retail front and the aus si dollar up about .25%. let's get a picture of bonds at the moment. we did see a bit of selling across the board here.

the 10-year slightly higher. 10-year french yield lightly higher as well. guilts with are seeing a bit of selling and 10-year italian bit of selling there as well. bonds will be a big focus today when we talk about scarcity concerns. now let's give you a story of the big movers. the travel index. we did get earnings in from luf tan is a and easy jet that have prompted concerns. highlighting fears over demand impacts after the latest terror attacks. the stock off .9%. digger deeper into the report, they have cut the full year profit target after seeing bookings to european destinations plummet. blamed the fall on terrorist attacks in europe and greater and political economic uncertainty. this as preliminary sells inched lower to 15 billion euros.

meanwhile, easy jet said the recent truck attack coupled with the attempted coup in turkey would hit the budget performance. also warned of uncertainty following the brexit vote. made european travel more expensive for britains thanks to the weaker sterling. joining us now is steven if you are long. thank you for joining us this morning. airlines a key story. how bad is the picture for this stock? >> yes, i mean, it's pretty ugly. in terms as you say we have two profit warnings. one last night from lufthansa and from easy jet. in terms the of lufthansa they were saying that profit guide would be slightly above previous year. now they're saying it's below the previous year. this is despite the few savings that would have had this year.

the reason you say is the uncertainty in advanced bookings particularly on the long-hall root routes to europe. they're seeing in the second half of the year is their unit revenue is going to fall by 8-9% year on year. in the first half of the year their unit revenue fell 5.2%. you can see see an acceleration of the decline in unit revenue because of the uncertainty. >> for lufthansa what is your rating on the stock. >> we have a neutral rating. >> i want to move on to easy jet. when we talk about easy jet the budget carrier seems to have concerns when it comes to passenger traffic in europe. >> for sure. easy jet just finished the conference call. they've been talking about year to date impacts on external

events throughout the year that have affected them in the pbt terms by 125 million. so whether it's paris, brussels events and also they've had a lot of disruptions from atc strikes, which is affected them. it's really a combination of events and things, and, again, the uncertainty there is they're not really giving guidance for their peak summer and july, august, september. they're talking about the 65% of their bookings for their fourth quarter, july, august, september, and that the average revenue procedure for the quarter is declining by around 7 .5%. again, the pound is accelerating unit revenue dedeclines because of the uncertainty. whether it's long hall bookings or short hall, there seems to be

numerous demand issues. >> macro risk coming in the summer season which is traditionally the cash you for the airlines. the macro factors fears of terrorism. they're not specific to easy jet so overall in the sector how do they fare against their competitors, particularly with the likes of ryan air. >> we have more eastern europe focused airline yesterday said the unit revenue down. they didn't actually change their guidance, but ryan air will report on monday. we will wait to see. just to remind people, they have said before their unit revenues were going to fall 5-7% for the summer. they've also guided for next winter down 10-12%. they've already been quite cautious. what we have to see on monday what that say. >> we will definitely await that report. stefen, thank you for joining us this morning. that is equity analyst at davie research. we talk about the increasing

risks not just from terrorism, but the uncertainty now in turkey. let's bring you the latest situation there. president ird yan declaring a three-month state of emergency. that move is expected to accelerate erdogan crack down with those with m expected lings to the revolt. so far 60 thousand people including economics, judges, police and military personnel have been suspended or detained. let's get to hadley gamble. hadley, it appears the crackdown just continues by the day. what has the reaction been on the ground. >> reporter: it's interesting, nancy. it seems as if business is going on as usually. these emergency power came into effect around 1:00 a.m. local time today. the crowds were out in full force just in these main boulevards of istanbul. thousands of people out waving flags, music. it was really like a street

party. this has been ongoing since the day of the coup attempt last friday. it's been very much supported by the government. they were last night giving out free food and flags and water to people who were gathered there, particularly in tompson square. you are seeing some serious work from the general public on the street. the attempts of the emergency power is question going forward is how much will civil liberties be impacted. basically what this allows the president to do. if the issue that's at the end of the day what's happening here. i think for investors that's going to continue to be a big question mark. we heard from the prime minster earlier talking about they're going to maintain their macro economic policies, capital growth control is going to be out of the question, but big questions going forward just how hard the economy will end up being hit. we saw s&p cut their credit rating yesterday. that was reflected in the market. so serious questions about what this is going to do over the long-term to the lira and direct

investments. >> when we talk about the investor perspective, people wondering what will happen with turkey and its key allies. particularly the united states. do we have any updates where we are with turkey's request to extradite fethullah gulen. >> we heard some rhetoric. certainly the parliament debating whether or not the death penalty could be reinstated and everyone in the this country all eyes on whether the man will end up extraditing the man that turkey says is responsible. interesting to sort of listen to the semantics when it comes to how the white house is dealing with this. they're being exextra cautious to walk a fine line between offending a nato ally that is very important in the fight of the islamic state. very important to europe when it comes to the question of migrants. also at the same time trying to

remain neutral in the sense they want all the evidence collected. they want a strong case to be presented and if the president of turkey is saying that's exactly what he's going to do. there is evidence this all relites to fethullah gulen. >> all right. . a delicate situation to say the very least. that is hadley gamble joining us on the phone from i understand bul. thank you. speaking of the white house. there is never a dull moments at the republican national convention. on day three, former candidate ted cruz up sfajed mike pence by refusing to endorse trump and encouraging to voted for their conscious. >> if you love our country and love your children. vote for candidates up and down the ticket who you trust to defend our freedom and to be faithful to the constitution.

god bless each and every one of you and god bless the united states of america. joining us from the republican national convention and tracey, not exactly the statement the trump campaign was hoping for from mr. cruz there. >> reporter: no, and we'll see how or if he addresses it when trump addresses the delegates on the final night of the convention tonight. tonight is donald trump's night, and it's really up to him to pull this party together to show or to form some unity after what we have seen issue after issue every day of the convention this

week. whether it was melania trump's speech. whether it was ted cruz last night. turns out donald trump knew what ted cruz was going to say and not say that he was going to be endorsed several hours earlier. that i have got a copy of that speech. he could have pulled him and changed things arnold. he did not. he allowed it to go on. no big deal is what donald trump tweeted afterwards: it was a big deal were ted cruz. he got booed. it was so rowdy in here that people were approaching his wife yelling and harassing her. hay had to take heidi cruz out during that speech and donald trump came in. you heard some of the chants. we want trump. trump came in at the end of the speech. the campaign says because he was going long, but he certainly by doing that distracted some of that booing that was going on. and yes, it upstaged mike pence. it was supposed to be mike pence's big night.

he did a great speech to great applause here in the on the convention floor. penc talking about his vision and trump's vision for the country. painting trump as a true conservative. introducing himself because a lot of people didn't really know a lot about mike pence. so rave reviews on the speech. it was just it came after this big disruption by ted cruz. >> all right. tracey, one thing you can say, it hasn't been a boring few days there in cleveland. thank you for bringing us that update. meanwhile here in the uk theresa may says brexit does not mean uk is walking around from friends. speaking alongside german chancellor angela merkel she also called for britain to be given time to prepare the negotiating stance before brexit talks begin. >> all of us will need time to prepare for these negotiation

skbs the united kingdom will not invoke article 50 until our objectives are clear. that's why i've said already this will not happen before tend of the year. >> for her part, merkel suggested she would not push the uk to trigger article 50 immediately. >> translator: as regards to the process leading up to invoking article 50, only then will the proper negotiations start. the treaties of the european union are very cloor clear on this. today we will discuss the situation as it presents itself now. we will also discuss what's relg vantd to article 50. without engaging in any formal or informal talks regarding negotiations. >> while it is understandable that britain needs time, no one wants a, quote, period of limbo before article 50 is invoked. well, still to come on striends, ba "street signs," bankers behaving

badly. plus, can draghi turn the tied for italy's lenders. our next guest says there's coc .

good morning and welcome back to "street signs." this with earnings in focus and the big countdown underway for the ecb decision. let's check in on the markets in asia. standing by in singapore with the very latest. >> reporter: thank you nancy. i want to talk about the malaise yan state investment fund, but a a scandal embroiling the fund

continues to deepen and the international probes are widening. the latest that we heard overnight from the department of justice in the u.s., a lawsuit and asset seizures. probably the most material and damming so far. as far as the response from the melee shans are concerned, saying nothing to see here. move on. nonetheless, the opposition have called for the resignation of prime minster. here now there has been material impact on the markets. the kl comp was off .6%. going against the grain of the sentiment broadly in the regional markets and the material impact on the currency. at one point was down by as much as .4%. the issue here is perception. there is a cause concern here. if it does color negatively foreign investor perceptions here. if there are issues about

governments. issues about perception of corruption. that's going to be a bad thing in terms of invest flows. you have to contend with that. closer to home i'll be talking about how this probe has widened. the parties here have said they seized assets worth 240 million singapore dollars related to their investigation. there has been some collateral damage on some of the banks based over here. the singapore investigation found deficiencies at some financial institutions in banks here, including dbs. for it's part dbs has released a statement saying they have previously identified certain questionable activities and voluntarily reported these to the relevant authorities. we take on anti-money laundering congratulations seriously. this story is going to continue. sor sort of a black eye for asia. we did see an impact in the

stocks as well. very broadly. market betting on fiscal stimulus and betting the boj, which meets next week, will come to the table and possibly come to a table in a grand way. there is a conversation here about potentially helicopter money being part of the policy option. back to you now. >> all right. thank you. central banks continue to rule the trade of the day. let's get you up to speed involving a story with a hsbc manager who has been arrested in new york and charged alongside a former employee with wire fraud. front run a 3 $.5 billion transaction to benefit themselves and hsbc. let's give you've a view of how the italian banks are faring

ahead of the decision today. it's bmps really pushing higher, but 1.1% and banco popular higher as well. we'll joining us now is fran which he is co-and julia is still with us standing by. let's get to you first. >> reporter: well, nancy, i think he's going to be asked more broadly about the banking sector and the hit it took of course across europe as a result of that brexit vote down 20%. it's managed to bounce back a little bit, but there's still significant concerns about the need for further capital i think. and that does very much pinpoint is italian banks too so he's going to get asked questions about whether or not the bail in rules that impact both sub and

senior debt in particular came too early if for italian banks and what can be done. quite frankly i think he's going to skirt around the equities. the ecb is trying to force the issue. that's an italian problem to solve. what we don't see is the fact there's nothing stopping the italian's setting up some kind of compensation scheme if retail investors in those bonds are hit. they're kind of in a pencil movement here. they waited too long to tackling the issue. now the bail in rules are in place. if you look across the euro zone and compare them to the likes of france and spain, for example. spral banks and governments have used between 8 and 15% of gdp to sort out the mess in the banking sector and italy is no different. the question is how do they go about doing it. these are not questions the ecb can answer and he's not going to

want to preempt the stress test. >> a lot of people suggesting perhaps brussels won't make any decisions until the stress test results come. do you think italy is going to get approval for capitalizing the banks. >> the capitalization position is very clear. and the italian government has already accepted it. it's very little space to capitalize and other bank without bailing in or swapping into equity which is the most likely scenario of subordinated bonds. what we think is that there might be other plans, for instance buying mpls. and then organizing privately funded capital increase. so there are still two scenarios. and on draghi, it's very interesting. he's going to g r be asked a lot

of questions. unfortunately they're asking the wrong person. the right person is the head of suspici super vision. banks spoourp vision. draghi is much more pragmatic trying to reassure the market. >> fran which he is co-as you quite rightly said, i think mario draghi can say anything here, but do you expect to see some kind of solution before the stress test for month depassky bank? they don't look credible to me. >> i think if you come to a solution, i think they will try to have a solution. they are probably unlikely to a pass the stress test. the day we announce we haven't passed the stress it's, they will also have to come out with

a plan. from what we see from the press this morning the plan isn't credible and it would be to take out, buy out a large portion of from month depace. a lot of market solutions so suppose we take out 20 brett lawrie billion. becomes something you can buy or subscri subscribe. it's a completely different animal if you are able to take out 20 billion of bad loans. >> a lot of focus on month december pacific. which are the other concerns for you. >> obviously the europe banking sector in not in good shape. negative rates are attacks for banks and growth is another the other main drag.

regulation is becoming tighter so in italy we all know that unicredit will need to come up with a solution for the weaker capital position. and also we knee that in germany they have problem at various banks are capital. >> all right. >> so not an easy position. >> well, thank you so much for that perspective. that is portfolio manager. and julia chatterley standing by in frankfurt. we'll be back with you in just a little while because we will be live for decision time at 13:30 cet. good buy for now. that's it for today's show. "world wide exchange" is coming up next. p?p?h

good morning. intel shares under pressure now amid revenue growth in key businesses. new this morning. elon musk delivering a master plan for the future of tesla. including expanding into trucks and buses. all the details coming up. plus the dram at the gop convention. ted cruz reopens party wounds in a prime time address and gets booed in the process. it's thursday, july 21, 2016 and "world wide exchange" begins right now.