very good morning to you. welcome to "street signs." i'm steve sedgwick. tobacco shares are buzzing higher after a $47 billion bid to buy reynolds. daimler and volvo shares sinking. a mixed bag for sap in the fourth quarter as profit and revenue slightly miss expect takes but the company raises full we're guidance on stronger than expected software sales. and eu leaders keeping up

tough talk on brexit telling theresa may to brace for robust negotiations as she attends her first summit as uk prime minister. welcome to "street signs." let's look at the european markets. we are slightly with a negative tint in terms of the number of stocks down, but positive on the stoxx 600, those stocks falling have less weighting than the ones rallying. british american tobacco is one of the biggest gainers. a bid in that sector on the latest m&a activity which we'll talk more about. sap, people looking at guidance, rather than some of the underwhelming figures. from the broader european markets, we're in a wait and see mode. the markets failing to find a broad direction. the ftse mib in italy is down in

negative territory. on a sector basis, the truckmakers dragging down the autos. daimler taking down volvo trucks. healthcare falling by 0.4%. real estate 0.3% easing. on the positive, you can notice positive win from the likes of microsoft overnight sending technology shares up 1%. sap part of that incline. a look at the foreign exchange markets. a couple flashes hitting the wires on the euro. the euro losing a bit of ground versus sterling this morning. also losing ground against the dollar, 0.42 of 1% easier. falling to the yen to the lowest level since september 30th.

okay. corporate stories. british american tobacco shares near the top of the stoxx 600 after the company announced a $47 billion offer for the stake it doesn't already own in reynolds. it already owns about 41.8%. the offer values reynolds stock at $56.5 per share. a 20% premium to the company's closing price. reynolds is yet to respond to the takeover offer. a leading share hold ner a german acquisition target of general electric said it will reject the takeover offer. e elliot advisers says it is not in the best interest of shareholders. shell offloaded some noncore canadian assets for about $1 billion. it's the latest in a string of

measures for shell trying to trim down some of its assets. i'm delighted to welcome to "street signs," steven maklo smith. good morning to you. >> good morning. >> what are the major catalysts for the markets at the moment? we had a robust season out of the united states, but i can't help but thinking we're helping for a whole host of factors, whether it's renzi's constitutional vote, the fed, the election in the states or more moves on brexit. what's the major catalyst? >> the markets are in wait and see mode. the italian referendum is very tough to call. there are issues. i think writing renzi off at this stage is dangerous, there are an enormous number of undecided voters. 3% of the electorate need to come in on his side to carry the day for him.

the earnings season has been relatively satisfactory. it's a bit difficult to pick the bones out of it. one thing happening is there's a rally in sectcyclical shares an financials. and, you know, i think that as we carry on through next year, the most important factor for europe will be growth in the rest of the world. european growth is continuing. it's satisfactory, nothing exciting. there's a recovery in europe and inflation which mario draghi talked about yesterday. that's important because it drives up nominal gdp growth, from there you get operating leverage. so you can construct a story for 20e 17 that the belief for analysts that things are stepping up. >> our guest host on "squawk box" was talking about the curve in financials.

he is concerned about the value trap. are you? >> financials is a heterogenius sector. within the banking sector there's a huge spread in performance with spanish and italian banks among the banks that have suffered. going into northern europe a eurozone, much better performance from ing, kdc, handl handl handlesbanc. it's a great environment for us. >> one of the banks you mentioned, i had an e-mail from the head of communications, saying how come you're not going gang busters about our positive story. that's correct. we've spent time looking at the who moj n effects of things, but not the

positives. the banks in europe, are they underrated in terms of valuation? >> i'm not sure i would call them underrated in terms of valuation, but if they trade in line with earnings, that will give you a satisfactory return. a lot are paying dividends as well because they repaid their obligations to governments. with that, you are getting a decent return out of some of these institutions. the most important point, it's not about whether you own banks, but the banks that you own. >> indeed. comment that you raised in your notes, european equity markets have suffered seven consecutive months of outflows, as much as you're looking at individual stocks, you don't want to extrapolate from those, the broader sector stuff as well, do you think thoseo outflows are st to continue or do we need to

look at them and say it's time for some inflows to come in? >> from what we can see in the data, the outflows are mainly concentrated in retail from an institutional point of view there hasn't been the same scale of outflows. but american institutions, flarlflar particularly have felt things are too high. it's a tough year, a lot of things that have happened would not have been expected at the beginning of the year. uk referendum came as a surprise. the rise in populist parties in some countries is a negative surprise. and then the italian referendum. when mr. renzi called the referendum he was a long way ahead in the polls. putting his reputation behind it was a logical thing, but as soon as he did that, it became a blight on his leadership. opposition parties picked up on that.

>> what do you think about the market's attention span on the italian referendum? at one time we were clearly worried about a cypriot vote, then we don't care. at the moment we're focused on italian constitutional issues, but win or lose tsh, it will be same country after, won't it? >> yeah. the banking issues in italy are being sorted out. >> are they? >> yes. there's a lot of clarity that we haven't had in the past. one of the great advantages of the stress tests is the clarity. we can quantify the capital the italian banking sector needs. it's just where it needs to come from. because of the issues in italian banking, it's difficult to generate credit growth within italy.

banks don't want to extend further credit. it's blocked corporate activity in italy. we had bank of popular go through last weekend, but we need more. you can't have those mergers unless people are clear about the quality of the balance sheet with which they're merging. the point here is that you're at a moment of decision. there is a catalyst, which is the recapitalization of the system, that could clear out an enormous number of problems for italy. mr. renzi when quizzed about italian banks time and time again has said look north of the border, look to germany, look to their derivatives position. let's look to germany. briefly. if deutsche bank -- i don't know how you are talking about individual companies. if deutsche bank gets his doj deal, between 5 billion and 8 billion euros, is that a catalyst for the market to have -- you talk about it not

being whomogonous, but does tha clear up other areas? >> when the doj came up with the fine of 14 billion, that frightened the horses. because that's the market cap of deutsche bank. but they trade at a discount to book one value, tier equity. it has 5 billion euros for settlement of litigation. i'm not saying it's not a major blow to deutsche bank, and it will be expensive for shareholders, but, you know, there's been no read across into the rest of the european banking sector. that's one thing that distinguished this year from 2009 and 2010 and 2011 the sovereign crisis when funni ifu

costs went up for everybody. this time funding costs are very low. >> steven maclow-smith, thank you for joining it's. you can e-mail the show. streetsigns@cn streetsigns@cnbc.com if you want to e-mail the show. you can tweet the show as well, streetsigns@cnbc. coming up on this show, daimler sees a boost from sales in china, but was it enough to overcome weak chness in the tru division? we'll look under the hood after this. guess what guys, i switched to sprint. sprint? i'm hearing good things about the network. all the networks are great now.

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. welcome back to "street signs." you want to know what the boj is saying? i'll tell you. increasing labor force participation, further rise in labor productivity are essential to lift japan's sustainable long run growth. i don't think we'll disagree with that. adding doesn't see a sign of risk taking and financial overactivity. that's a bold statement from some quarters. negative interest weight policy is weighing on some. doesn't see a problem to destabilize japan's financial system. that's interesting, having spoken to mr. kuroda at a g-8 summit a year or so ago, he felt

the clock was ticking on the government's efforts to reform their own balance sheet. that's a slightly different point. again, if he's got concerns about the long-term viability of a government that runs a debt to gdp over 200%, maybe that's something that would weigh on the financial system. any way, japan has raised the low end of its -- did i say japan? sap has raised the low end of its 2016 operating profit in what the company called a strong third quarter, boosted by an increase in software licenses. this even as europe's largest software company reported a 19% slide in net profit. sap, not japan, said it expects full operating profit to be in the range of 6.5 billion to 6.7 billion euros. intercontinental hotels group says the global hotel sector remains compelling despite slowing growth.

ihg's revpar rose 1% for the third quarter compared with 2.5% in the previous quarter. ihg said challenging conditions continue to exist in france, turkey and belgium amid recent terror attacks in those countries. volvo is reporting weakness in the truck market as it poetspoets posted a drop in quarterly earnings. the sales declined in all markets except europe. volvo says it expects truck demand to continue to slow in 2017 and has trimmed productio volumes. daimler trucks and buses saw a sharp fall in demand from key markets such as brazil as the automaker failed to match the previous year's earnings for vehicles. this despite beating

expectations in the third quarter. a nearly 12% rise in mercedes cars sales helped offset the slump in truck demand. delighted to welcome "street signs" the senior equity research analyst at jeffries. good morning to you. simple question what do you make of the daimler numbers? >> the headline is very good. details are a bit more mixed. you see the end of the auto cycle slowing down, capex coming back up. you see the numbers, that's not what people want to see in those results. on the truck side, the truck is interesting because the stock reacts more to bad news than to good news. we knew the weaker numbers in trucks. no surprise there. what volvo is saying about not talking down the u.s. market for next year, that's a bit more negative than what people had in mind. >> in terms of daimler car

sales, auto sales, one all great to look at the headline figures, we saw some eaca data which was really good data for european sales across the sector. but i feel now it's implicit that we look at the sales incentives as well. zero interest rates. the deals are out there to buy new vehicles. one of our correspondents said he was getting a 0.49% deal to buy porsche. those are amazing finance deals. the margins, how are they? >> they are under pressure. those are exceptional deals, not many can qualify for 0.49%. >> no, no. only analysts over at jeffries are in that band. where is the greatest area of excitement? i would normally ask areas of

concern, a lot of focus on automation, on the next level. do i feel the diesel technology is being left behind now? >> no diesel is losing share in small cars long before this volkswagen scandal last year. we see an acceleration. it remains a value for large cars, but it will lose share in the c segment and below. we're starting to see as a result an acceleration of carmakers pushing electric, a zero emission calculation. as you lose share in diesel you lose support to your co2 road map. this is logic in -- >> a whole suite of cars coming out from mercedes and the opposition as well. when does this become something that is not us talking about the future and becomes now? let's face it. range needs to be better. the batteries need to be able to match tesla, i don't see another

manufacturer doing that at moment. >> renault has done good progress in terms of range in vehicles. >> what are they up to? give me something i can drive. >> they claim 400 kilometers, which means you can probably do 300. >> hang on. is that what we've come to? they say 400, we lop off 25%? >> in the same way they said they put out x number, you have to put in a margin of error. >> how is that allowed? that's another question for the regulators. people were concerned about collusion about regulators, will the regulators be more stringent on the mileage claims and co2 emission claims? if not, then the consumers are not buying what they were told. if they are going to give leeway to the manufacturers, that's good news for them, isn't it?

>> will be more stringent. we have this new test, the real driving testing that we'll see. the gap will have to narrow. but we cannot see that it's clear that the street can get to the mandate they have post 2020. we have to address the target. >> do you like daimler at the moment? >> not particularly. we think this is the end of the cycle in terms of cars, they've done beautifully well. no doubt. the fact that the stock can react overly negatively -- skew more to bad news on trucks, doesn't go up on good news on trucks, goes down on bad news. you don't have that support either. >> you have given us a hint about who you do like. there's a chap out there, who is basically the boss of every company. nissan, renault, mitsubishi. do you like that? >> we're concerned about companies where the market is too concerned about top line

grth delivering. we are cautious on renault because the expectation of toch line is strong, but you see the fixed line coming back. we are a bit more careful. when the market expects top line translating to earnings growth, we step back and look at companies that are cap efficient like bmw or we like peugeot because the expectations of earnings delivery are low. >> so peugeot is top on that list? >> peugeot is on the top. >> nice to catch up with you again. thank you. britain, france, germany have denounced russia's bombing of civilians in aleppo.

there's been notable push back from the italian prime minister, matteo renzi who said further sanctions should not be part of the solution. >> translator: we have approved a document that reiterates the need to get as quickly as possible to an agreement to a real truce and political transition process that we've been awaiting for a while. there's no point in also adding here a reference to sanctions. >> attending her first eu summit as prime minister, theresa may tried to deflect the tough talk on brexit and focus -- was that tough talk from her own cabinet? focus on the bloc's role in standing up to russian aggression. >> this is my first european council. i'm here with a clear message, the uk is leaving the eu, but we will continue to play a full road until we leave. we'll be a strong, dependable partner after we left. it's in the interest of both the uk and the eu that we continue to work closely together including at this summit.

we must show that robust and united european stance in the face of russian aggression. the uk has put russian actions in syria on the agenda for this summit. we must continue to work together and it's vital that we work together to continue to put pressure on russia to stop its appalling atrocities, sickening atrocities. >> so let's get to nancy who is standing by in brussels. we saw the prime minister breezing in earlier on. what is on the agenda this morning? >> first and foremost is the question of trade. the eu leaders are anxious to move ahead with the ceta trade deal with canada which has been blocked by the region in belgium. that's causing plenty of frustration. a lot of people say the eu's credibility in free trade is at stake if they hold up this free trade deal. especially at a time when

questions are lingering over tt ttip, and if they are pushed out of the single market which is the belief here in europe. we heard a lot of talk from theresa mae that, in fact there will be no tradeoff when it comes to the four freedoms within the eu. francois hollande saying the uk can expect hard negotiations if it continues to insist on brexit. that's where we stand on the brexit issue. russia a topic of conversation last night as well. we heard from the lithuanian president on her way in to the president this morning. she addressed the questions around russia. >> today there is increased tensions, including military ones. this is more important than any discussions about lists for individuals, whatever. i think for us, the main goal

today is to deescalate, especially seeing the military warships are today going from north and baltic seas, russian fleet, going to syria. it is more important things today. and decision yesterday keeps all options open. >> coming up later today, a bilateral meeting between uk prime minister theresa may and eu commission president, jean paul juncker. juncker has been one of the harder line voices in the brexit negotiations. i had a chance to talk to him on his way in. i asked how he found his conversations with prime minister may. he said she was rather charming, this after she boasted herself that jean-claude juncker would find her difficult.

>> you can see sipras and may walking in together. let's move on. we have to take a quick break. but check out world markets live, our blog which runs throughout the european trading day. we will be back after a short break.

very warm welcome to "street signs." i'm steve sedgwick. these are your headline the. smoke signals. british american tobacco shares buzzing higher after it announces a $47 billion bid to buy the rest of reynolds. tough trucking. shares in volvo and daimler sink after both automakers caution on weaker truck sales. a mixed bag for sap in the third quarter as profit and revenue slightly miss expect takes but the company raises full we're guidance on stronger than expected software sales.

and eu leaders keeping up tough talk on brexit telling theresa may to brace for robust negotiations as she attends her first summit as uk prime minister. wait for it. i'm looking at the uk september public sector net borrowing -- gosh. know better. 10.6 billion sterling. of course we have twin deficits in the uk, current account and trade. slightly worse than expected. public sector net borrowing, 10.118 billion pounds. april to september, public sector net borrowing, just a mean 45 billion sterling compared with 47.7 a year earlier. so it's down a bit. 4.8%, still hefty stuff. finance the hit by falling corporation tax stamp duty in

the month of september. sterling trading 122.35. we have not had a sterling flash crash today. trading 122, having been -- two weeks ago we were down to 118 on some 114 on others? u.s. futures how are they looking ahead of the session? mildly better on the nasdaq, easier on the dow and the s&p at the start of trading as well. european futures -- european equities, beg your pardon, 7,028 on the ftse. xetra dax trading 0.09% higher despite pressure on truckmakers, daimler in particular. cac 40 fldown slightly. euro dollar, 1.0883.

you want to look at paper? let's go to it. 0.07 for the german ten-year. uk paper trading at 1.06% for ten year. the european central banks left its record rates on interest rates unchanged. ecb president mario draghi said the central banks have six weeks to decide whether they will continue with the asset purchase program beyond march. he was asked about the concern of the scarcity of safe assets and if there were contingency plans in place. >> we discussed scarcity. we had much of the discussion about howev to overcome scarcit

if that's a problem. it's not a problem now. the asset purchase program continues to run smoothly. the corporate bond program has been a success so far beyond, in fact, our expectations. and so it's not a current issue, but just in case much of the discussion was around that theme. >> paul watus joins us. good morning to you. >> good morning. >> what did you make of what mr. draghi had to say? we had disparaging commentary from viewers saying they learned nothing. >> i mean, the ecb are playing for time here. there's a lot happening in the last quarter, and the long game they have to play recognizes that the eurozone economy remains weak. so, really draghi needs to calm market speculation about tapering. rates will stay low for a long

time to come. >> in terms of the question to the president of the ecb, it is relevant. what on earth are you going to buy? >> in december the ecb have to come up and make some -- make it clear what they're tactics will be to deal with a developing shortage of paper for them to buy, particularly in german government bonds. at the moment, 63% of bunds are trading at less than minus 0.4% in yields. so, of course, that's pushing the -- if the ecb have to buy 15 billion euros of bunds each month, that pushes them out of the curve. you can see yesterday that -- on the flattening and the scarcity in the repo market, the long end of the market has responded well to developments what can ecb do? they can buy -- probably we expect them to actually kit tcu

discount rate further in december. it's a self-imposed rule not to buy paper if it yields less than 0.4%. i don't see why they couldn't just abolish that technical rule. that would free up short-dated paper. >> how much demand is this creating? >> well, if you look across fixed income markets, there's enormous demand for paper. not just an investment grade government bond land, through the credit spectrum. to give an example, we saw a uk travel company -- what are they raising money at? >> double b minus credit, they pay 2 3/8. it broke below 2%. >> traded sub 2%. >> sub 2%. >> kuroda said he does not feel he is creating financial bubbles. do you believe him? >> it was interesting listening to mario draghi yesterday as he

talked about what he thinks about an asset bubble, when you get very high asset prices but also made it a specific reference to the fact that leverage is also high. and then he went on to say that macro rules are what the authorities would look to to try to prevent leverage getting too high. there's quite a lot of speculation in the leverage finance market that the ecb and authorities are look at some leverage lending guidelines for the european market in a similar way to the u.s. >> in times of actually an exit strategy, as you say, the yield curve just responded accordingly to the lack of tapering commentary from the ecb president yesterday as well. how does this end really? in terms of the corporate bond market. will we see more stuff trading at zero or even for double b minus, sub 2%? i'm not entirely sure we're seeing the positive effects. but we are potentially seeing the side effects.

>> at this stage, with monetary policy and, you know, really hitting the zero band, there are some more negative effects that we see as monetary policy continues to sort of push down the road into more -- >> you find corporate pension deficits one of them? >> exactly. the bank's business model as well in a low rate flat yield curve environment and what it does to operating margins. pensions, absolutely. we're seeing pension deficits fall for companies that have defined benefit pension schemes inse v substantially this year. that's a strong headwind for certain companies like bae systems, whose pension fund deficit has increased by 36% in the first six months of this year to 6 billion pounds. >> was a problem in 2006 before the financial crisis, the black hole, let alone what it is now. i remember black holes in uk

pension fund deficit. we talked about it. with all of this, that's only exacerbated the problem. >> yes. the truth of the matter is we're been in a bull market for over 30 years. the problem has been getting worse. though obviously more sensitive at certain points in time depending on where the markets are. clearly what you're seeing is companies looking to address this issue and many companies closing down defined benefit schemes. but from our view, companies need to manage risk and these deficits are effectively increasing adjusted metrics. we see this as a credit negative development for those companies. >> despite the fact we have this lovely list from mark carney of all the british companies that can benefit from the corporate bond buying plan, the same issues in europe, the fact is it's creating as many tensions as problems it's solving. >> not necessarily as many, but basically becoming more

balanced. less positive in terms of the overall development as rates fall. >> got to leave it there. nice to see you. thank you very much for your time. paul watters head of corporate research sap global ratings. dbrs will decide on its investment grade rating on portugal today. as it is currently the only agency that holds the view on the country. a loss of investment grade status would mean the don't cou bonds are no longer eligible for bond buying. hillary clinton and donald trump once again shared the same stage in new york last night. the rumor is they even did shake hands. this time for a good cause. the al smith charity dinner, a tradition amongst presidential candidates that supports catholics charities and the children they help. throughout the night the candidates took some more pot shots at each other which were mostly in good fun.

>> even tonight with all of the heated back and forth between my opponent and me at the debate last night, we have prove than we can actually be civil to each other. in fact, just before taking the desk, hillary accidentally bumped into me and she civilly said pardon me. i very politely replied let me talk to you about that after i get into office. >> people look at the statue of liberty and they see a proud symbol of our history address a nation of immigrants.

a beacon of hope for people around the world. donald looks at the statue of liberty and sees a 4. maybe a 5 if she loses the torch and tablet and changes her hair. come to think of it, you know what would be a good number for a woman? 4 45. >> well, the evening's festivities followed a speech by donald trump earlier in the day again showing reluctance to accept the results of the election. >> i would like to promise and pledge to all my voters and supporters, to all of the people of the united states that i will totally accept the results of this great and historic

presidential election if i win. >> let's join nbc's edward lawrence from washington. it's really important to get the distinction right here. republican supporters of mr. trump have said, look, this is not unprecedented. others have previously contested elections but not done in advance before. that's the difference. that's why so many people are rounding on mr. trump for this one. >> there's a big difference. georgia referring to the al gore moment in a previous election. al gore and george bush were locked in a debate. both said they would accept the outcome once the election is certified. donald trump is saying he may not accept the outcome even if

the leak shelection. he said he would accept the election results only if he win. a lot of republicans are nervous about that, because they believe the peaceful transition of power has made america great for so many years. they're concerned after this election, should donald trump lose, there may not be that peaceful transition of power. that's what is concerning for many republicans about his comments. >> very interesting. everybody rounded on the fact that he wouldn't recognize t he was doing well, having one of his best debates out of the three potentially. are people looking at his policies now are still -- i looked at the press yesterday in the united states, everyone was concentrated on that issue. but in terms on policy front, he did rather well last night, didn't he? >> he did rather well, and e-mails are coming out that are hurting hillary clinton, the

drib and drab of e-mails. the fbi released e-mls just before the debate. the wikileaks coming out have played a huge role going forward. some folks are nervous going forward that donald trump may be gaping power and getting some momentum. the polls are narrowing. some have him 11 points, some have him 4 points ahead. steve? >> nice to hear your views today. nbc's edward lawrence joining us in washington referring to that recount of al gore and bush back in the year 2000. iraqi and kurdish troops say they advanced more quickly to retake the isis strong hold of mosul in iraq. richard engel, this is the most extraordinary package, he has more from irbil. >> reporter: iraqi and kurdish forces today launched their

biggest push towards mosul. the main offensive was from the east, into the town of bartella, just over 10 miles from the city. we climbed into one of the iraqi special forces old american humvees. it's battle worn, shot up, the driver said damage by an isis suicide bomber today. then it was on foot. quickly because rounds whizzed by. this predominantly christian village is one of isis's main defensive positions leading towards mosul. they're fighting hard to keep it. is sending out car bombs. but iraqi troops are advancing faster than u.s. commanders anticipated. we'll be in mosul in two days a soldier boasted. by isis has had two years to prepare for this fight. the soldiers showed us a tunnel they just found. this was an isis escape route. seems to be like one of their

positions. isis fighters lived here safe from u.s. warplanes. just based on the number of mattresses we see, this could have held maybe 20, 50 people. more if they packed them in. the tunnel extended for about a half mile. at the far end, we came up into what appeared to have been an isis headquarters. food still in the kitchen area. half-made bombs, too. and chemicals for more. on the walls, isis' infamous logo. the site of the black flag was once enough to send the iraqi army running. that's how isis took mosul. now it's isis on the run. tonight iraqi forces have taken bartella putting them within striking distance of mosul. coming up next, real estate remains king as the hunt for yield continues. we'll look at where the ultra rich, the jegeoff cutmores of ts

world are investing their cash. that's coming up after the break. ♪

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it's her first eu summit as treatment, theresa may has a message. >> we will play a full role in the eu until we leave, and we'll be a full dependable partner after we leave. it is important that we work closely together at this summit. we must show a robust and united european stance in the face of russian aggression. the uk put russian actions in syria on the agenda for this summit. we must continue to work together and it's vital we work together to put pressure on

russia to stop its appalling atrocities. >> yet everyone has got connections with russia, haven't they? the britons have huge russian presence in londons. others, like austria, they, too have large connections. >> a tricky dilemma here for the eu leaders. theresa may reminding everyone that the uk is a member of the eu until they exit. when there was talk about a hard brexit, francois hollande continues that message yesterday. others like donald tusk taking on a more conciliatory tone. i had a chance to speak to the austrian chancellor and asked him if there was reason to be reassured by theresa may's message last night.

>> there's a lot of economic connections with russia, it's hard for us, but it's also about values and it makes sense to have a clear statement. >> that was the austrian chancellor actually talking about the decision on russia yesterday. yes, austria does have considerable economic links to russia. that's win concern we're hearing here there brussels. also it was said all options are on the table if they continue to see an aggressive posture from moscow. back to what the austrian chancellor had to say on the issue of brexit, i asked him if he was reassured given the recent nervousness that we heard about this talk of a hard brexit. >> there are negotiation partners, a lot of interests on both sides. so i'm quite optimistic we will have a good and constructive negotiation process.

>> steve, as we speak, the eu 28 leaders are behind closed doors talking about trade and scrambling to try to get an approval on ceta. though theresa may is the guest of the hour at this meeting, plenty of other issues facing the bloc. >> except lellent work, thank y tiger 21 found that ultra wealthy members aggregate 28% of their portfolio in property. delighted to welcome michael sonnenfeld. nice to see you. property. >> just pulling away from markets and want to find something bricks and mortar? >> it's about half personal real estate, half investment. but when you say away from the private markets, private equity is also away from the private markets, that's number two. >> people are worried about listed evaluations, is that shared by your ultra high net worth individuals? >> i think it is. most members are wealth

creators, first generation entreprene entrepreneurs. so they made their money building small businesses into large businesses. when they sell it, the natural inclination is to roll up the shirt sleeve and invest in another small busines because they have the expertise and tolerance to that. >> i had a guest yesterday talking about the opportunities in small business. he was allocating money in private equity to the smaller businesses because the large caps, there's not a lot of juice left or value. whereabouts in that small to medium business size arena are the best opportunities? >> they're specific. one thing that's important is risk is in the eyes of the beholder. so that if you had built a printing business as an entrepreneur, you might be an investor in a digital printing company. or if you built a taxi business, you might be an investor in uber. the key that most people forget is that you have amazing

expertise. everybody has some expertise. if they can lever individual expertise into their investments, they can really create an edge. >> which is why -- it doesn't surprise me at all, information technology is at the top of the list of where these ladies and gentlemen want to invest. >> in the public sector primarily. >> what about hedge funds? you fend a lot of money investing in hedge funds for a mediocre performance on average. there are some brilliant hedges at the top. but the main are average, but still charging 2 and 20. why are your investments, savvy, smart people, high are they willing to give hedge funds money? >> hedge funds have gone down from 12% to 8% investment, but you still have some area of hedge funds in the long short

area and in the relative value area where even in a low interest rate environment you can get some good returns. historically hedge fund returns were correlated to higher interest rates. in a low interestate environment it's tougher to get the juice out of them. >> we had terrific news flow from microsoft on their cloud offering, and amazon are ahead in terms of aws. the investors like those two. very different valuations on the pair. amazon frothy, but still some juice there? >> in the case of amazon you have to figure out whether earnings are being depressed and if they wanted to focus on earnings, they have been buying market share. the four largest stocks for the first time is alphabet, amazon, apple and microsoft. and it's the first time berkshire hathaway has fallen off the list. they're all high-tech. even more than that is s&p through the van guard and spdrs,

and people are buying through the notion if you want exposure to public markets, go the indexes. >> if i want to put some of my money in there, 10 million investable, don't i? >> just about. >> get into tiger 21. and a chunky fee. that just covers the costs. >> just covers the costs. >> great speaking with you, michael. michael sonnenfeld chairman of tiger 21. let's have a quick look at the u.s. futures. mixed bag earlier on. called higher on the nasdaq. news flow around microsoft has been positive. dow jones down 38 points at the start of trade. the impliedpen for the s&p, down 3.6. that's it for me. have a brilliant weekend. the ne we're talking within a 1% difference in reliability of each other. and, sprint saves you 50% on most current national carrier rates. save money on your phone bill, invest it in your small business. wouldn't you love more customers?

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good morning. happy friday. a view from the cloud. microsoft shares soar to record highs on better than expected quarterly results. a cigarette deal in the works. british american tobacco offering to pay $47 billion for its stake of reynolds american that it doesn't already own. and hillary clinton and donald trump trade jokes at a white tie dinner. the ribbing wasn't all met with laughter. it's friday, october 21, 2016. "worldwide exchange" begins right now. ♪