good morning. welcome to "street signs." i'm louisa bojesen. >> i'm karen tso. >> i'm nancy hungerford. losses of wall street weighing a bit on the european session. though european safe haven flows driving gains for randgold as gold looks poised for the best day in a month. credit suisse shares under pressure on a "wall street journal" report that a u.s. regulator is investigating the sale of bonds in mozambique.

israel is standing in the way of peace, so said john kerry. > >> we recruited nobody. those four countries that ultimately brought it to the floor did so absolutely on their own. good morning. welcome to "street signs." well, an hour into the trading session here in europe, we do have a fair amount of red across the board. overall the stoxx 600 is lower by just a quarter percent. that's slightly better than what some opening calls predicted. if we can give you a shot of the individual boards, let's hone in on the ftse 100. the uk hit a fresh record high yesterday in large part due to strength in basic resources. a lot of miners topping the charts. the uk market was playing catch

up with previous gains because they had a longer christmas holiday. you're looking at that index off by 0.2%. the german main market is off 0.3%. woe have seen weakness in the auto sector. french cac 40, lower by 0.2%. the ftse mib outperforming, but just positive ever so slightly at this stage. giving you a closer look at the sectors one by one, real estate moving higher. healthcare, food and beverage and media all just barely in positive territory. on the down side, basic resources underperforming, off 0.8%. no surprise given that we saw gains in this sector of 2% to 3% by the close yesterday. banks and autos also underperforming off 0.7%. the u.s. secretary of state, john kerry, heavily criticized benjamin netanyahu's policy of building settlements on occupied land saying it jeopardized the middle east peace process. the 70-minute speech drew a

quick rebuke from netanyahu who accused the american diplomat of bias. andrea mitchell spoke to secretary kerry. >> reporter: getting personally, a fiery war of words between john kerry and israel's prime minister benjamin netanyahu, with president-elect trump all in with israel's leader. >> friends need to tell each other the hard truth. and friendships require mutual respect. >> israelis do not need to be lectured about the importance of peace by foreign leaders. >> in an impassioned hour-long exit speech, kerry warning netanyahu jewish settlements in the palestinian west bank and east jerusalem will place the palestinian state and peace in serious jeopardy. >> his current coalition is the most right-wing in israeli history with an agenda driven by the most extreme elements. >> reporter: and in an exclusive interview with nbc news, kerry denying netanyahu's charge that

the u.s. orchestrated friday's u.n. resolution condemning israeli settlements. you did not orchestrate it or sponsor it or push it? >> we recruited nobody as an alternative. the four countries that ultimately brought it to the floor did so absolutely on their own. >> barely two hours later, netanyahu saying that wasn't true. >> we have it on absolutely incontestable evidence that the united states organized, advanced and brought this resolution to the united nations security council. we'll share that information with the incoming administration. >> donald trump tweeting today, we cannot continue to let israel be treated with such total disdain and disrespect. stay strong, israel, january 20th is fast approaching. in close coordination, last week, the israeli leader enlisted trump to try to stop the u.n. vote. nbc news has learned infuriating the white house. is it confusing allies and adversaries? >> i think it's having some impact.

obviously on allies who are questioning what's going on. but they have their own policies. they're not going to be swayed and intimidated by a tweet. >> elsewhere, italy's economy minister said it would have been useful if not kind for the italian government to have more information from the ecb on the criteria they used to recalculate the capital sho shortfall bmps. the 8.8 billion short fall raised by the ecb was not contestable and that he opened the recapitalization would be yo outlined soon. he said this was certainly not on the agenda. germany's finance ministry expressed concern over italy's rescue plan for monte dei paschi siena. they said italy must stick to european rules when dealing with the european lender and that the state recapitalization of banks

can only happen in exceptional cases and creditors must be the first to assume the losses. i want to ask you more broadly about europe. some of your comments suggest that growth next year will be challenging. we're looking for clues about where the yield curve goes, how the ecb might respond in a world where the u.s. is growing. you think consumption might pull back growth across the eurozone next year. >> yes. we think the small boost of consumption from low energy prices, low inflation that will moderate slightly, and inflation this year, 0.2%, we see that going up to 1.2%. and that will naturally hit consumption a bit as real incomes are squeezed. >> when we talk about economics these days, there's a new road

of populous politics that we must overlay into the mix. what is the background of elections across many of the key parts of europe do to consumption? is there an element of uncertainty that will kick in because of those votes? >> yeah. that's likely to have a small effect. i think that shouldn't be overstated. i think we have seen that with the brexit vote. there were some expectations of a big hit to consumption and to investment that has not completely panned out yet. we think that's a longer term process. we would expect to see that show up a bit more in investment with elections coming up in the netherlands, germany, france where everyone is afraid of the populous revolt we've seen. >> what is going to be driving this uptick in inflation? i'm fascinated by how we've been saying for such a long time we're heading back towards 2% and we never get there. for the past couple years, right? >> yeah. we don't see it cutting back to 2% over the foreseeable future.

basically within five years, we'll get gradually closer. it's the underlying drivers that were always still there and the negative impact of lower oil prices falling out of that comparison that will bring inflation closer to what core inflation has been over the last couple of years, sort of around 1%, at least for the ecb too weak as well. >> as an economist, does inflation have to be more than 1%? does it have to be 2%? i know it's a figure we put out there. what would a healthy inflation figure be? >> well, it's a bit of an arbitrary target to say 2%. i think the problem at the moment is that the low inflation is not just sort of a random number -- >> for europe to function well. what should inflation -- yeah. we would want to see it a bit higher that would be a reflection of the output gap of more narrowing, more resources coming in online.

so, i think with inflation, the number is not that relevant, just in europe we said it should be 2%. >> thank you very much. >> thank you. if you want to take a closer look at what populous political parties you should be watching for in 2017, head to our website, that's ness cnbc.com. we're all on twitter. follow us streetsignseurope@cnbc or tweet us @cnbckaren or @louisabojesen or @nancycnbc. stock markets turning frosty. we leave you with a group of hearty siberians to take a swim in a russian lake to promote healthy living. the group ran a kilometer first and crossed the snowy icy path for a dip in minus 13 degrees.

>> your body heats up even more. >> exactly. but you feel really good afterwards, right? >> so they say. i'm not brave enough. >> they're really taking their time. minus 13 degrees. we'll see you in a minute. with the xfinity tv app,

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you can even download from your x1 dvr and watch it offline. only xfinity gives you more to stream to any screen. download the xfinity tv app today. credit suisse shares are under pressure after a report from the "wall street journal" which said the s.e.c. is investigating the sale of $850 million of bonds issued by mozambique. the u.s. joins a growing global investigation into the country's debt deals involving undisclosed loans and military purchase fas sill ta

purchase fs facilitated by bank like credit suisse. kate spade may be seeking a sale. retailers had been contacted as potential bidders. one options trader purchased nearly 2,000 calls in kate spade moments before the headlines hit resulting a $320,000 profit according to a cnbc contributor. the s.e.c. declined to comment on whether it would investigate on the usual activity. this deal is interesting from the sense that it's happening in a tough retail environment. it's tough when you talk about disruption for many of the usual players. but you start talking about consumer spending which has been ticking along, wages growing in the states, especially with a company like kate spade, and it should be a business that performs in that environment. if it's tough now what will it be like down the track? >> i guess it's also about

identifying the companies that still have consumer appeal, and that maybe don't need a complete overall, and perhaps also appeal to the online shoppers already if that brand is already built up. for example, coach, never quite made it back. >> if you talk about kate spade, a lot of us agree there's a lot of customer appeal around this particular brand. what's gone wrong? was the expansion too much? too quickly? the typical old-fashioned fail for retailing? >> i wonder with the kate spade type brands that are internationally exposed whether the dollar impact is harsher for them. with kate spade, michael kors, coach, the whereas the high high end brands are immune from that. >> they have been an underperformer for the year. let's look at takata shares.

the japanese air bagma maker cod be required to pay as much as $1 billion to resolve criminal charges in january. defective air bags made by the japanese company had been linked to 11 deaths in the united states. we know certainly the doj is keen to get these pending suits wrapped up. we saw it with the banks just before christmas. others are looking out for volkswagen before the obama administration turns over. toshiba shares continue to slide after moody's cut its credit rating deeper into junk territory. the japanese conglomerate has seen over 40% wiped off its share price since monday sparked by the news that toshiba will face a multibillion dollar writedown linked to its u.s. nuclear power operations. global m&a deals topped the $3 trillion mark in 2016 and show few signs of slowing down. earlier this year we spoke to

the global vice chair of transaction advisory services to get his outlook for m&a next year. >> back in october i said it would not be a record year, but 2016 would be a very good year. it looks like we will finish 2016 behind only 2015 and 2007. so not bad. we're expecting 2017, as you said, to be a really strong year. in fact, i think it could be a record year in terms of deal volume, maybe not value, because we will see smaller, more small deals as we talked about last time. always some mega deals. but 2017 will be a great year. why? the same reasons we talked about in october are still there. ceos searching for growth, uneven geographic growth driving cross border activity and digital disruption driving deals of all types as companies deal with sector blurring. >> what about the coos who have the fear of missing out? because everyone is doing m&a and they think they need to jump

on the bandwagon, even if it doesn't create value. are you seeing some extent of that? >> standing still is not an option in today's world. but deals that are not creating value, we don't see that. frankly companies have become much more skilled over the last five, six years. when you go back and turn the clock five years back and you hear about statistics such as 70% of deals fail, it's the opposite now. companies have gotten very astute at how they commercially assess deals, synergy planning, execution on capturing synergies. that's not an issue i worry about. >> has the financing of deals changed? >> the financing of deals is constantly changing. it varies by geography. you still see deals at a fairly high leverage rate being done, corporate financing deals based on balance sheet position. so, that will always be a moving target. >> do you anticipate more cross border deals or less cross

border deals, also with regards to protectionism? is that depending on the area of the world? we saw a lot of activity from china into the u.s. and europe. >> i believe we will continue to see a lot of cross border deals. you spoke about china. china will continue to be a big outbound acquirer. make no mistake about it. the purpose -- one of the main purposes that china really moves by is they want to be a leader in several key world industries. they'll continue to do that. we'll continue to see a lot of cross border deals. will regulation curb some of those? sure. i do not expect a downtick. >> you think trump is good for m&a? we're also seeing the repatriation of overseas cash. >> the early indications are that trump will be positive for m&a. if you think about our capital conference barometer in october,

that survey was taken during a period of time when the election was close. it was very optimistic, 57% of companies plan do an acquisition. 75% of the u.s. companies planning to do acquisition. starbucks, all right? starbucks, before starbucks became starbucks, it was another company called seattle coffee company. that was created by a husband and wife couple in '95, three years later it was sold off to starbucks for a whole bunch of money. that's the backbone of starbucks. >> i love these stories. >> 98 million over the course of three years. that's what they made from it. >> but the early days before there were a ton of boutique coffee stores across big cities. >> yes. >> they did do something quite special. >> they did. they did it was a hot and wife couple. they created seattle coffee company. they sold it to starbucks three

years after they created it for $98 million. since then they started a whole bunch of companies including the italian restaurant chain, carlucio, and a pizza chain called mod pizza. it's a big thing in the u.s., they have 100 plus outlets. made on demand pizza. >> are they reinventing the wheel here? >> not reinventing the wheel, but they know how to do stuff. they have big backers, lots of big venture capital backers. i met with scott, i asked him to explain this concept of this new enterprise. >> mod stands for several things. one is reference to made on demand. but my wife and i lived here for 11 years. we were fortunate to be involved with building a coffee business, seattle coffee company. >> which you sold to starbucks. >> that's right. >> and we helped to launch

carluccios. we loved our time in the uk. when we launched mod, we wanted to bring some of the attitude and spirit of the uk back to the united states. so the mod era in the '50s and '60s was one of our inspirations. >> when i think of london, i think of a lot of pizza places and isn't there uncertainty in your timing? >> in the united states, pizza is the second largest category in the industry. there is a lot of saturation, but we're doing it in a completely new way. over the last several years we emerg emerged as being the fastest growing chain in the united states. coming to the uk is like we're coming home, bringing the concept back to where it was inspired. we come back to the uk with a big dose of humility. the uk has a restaurant scene

that i believe is as strong and dynamic and innovative as any in the world if we were only planning for the next two, three, four years we wouldn't be doing it. it's an incredibly competitive market, uncertainty around brexit. but we're building our business and planning for the next 30, 40, 50 years. we believe this will be a fantastic market. consumers will love what we're doing and we have a purpose behind our business of making a positive social impact. >> in the past, as you indicated with seattle coffee company, you've been a part of laufrming big stuff. what's the success behind launching something new in a new town? what has to happen? >> my wife always says if you're going to start a new business, make sure you're starting something that needs to exist. a lot of people, i think, will try to pursue a business opportunity because they think they can make money. when we started seattle coffee company, it was after four years

of complaining about the lack of that type of coffee experience in the uk. we felt it had to be done. with mod, we felt there was a void that had to be filled. it wasn't that we were pursuing something where we thought we could build a big business, we were pursuing something that we thought could be adding value. we're of the view that if you're going to spend your time investing in something, it should be something that you can look back on and be proud of. that's the key for us. >> it's a dream, you have a business, you can keep rolling it out across different markets t translates to cross cultures, you get growth on top of growth. >> everybody loves pizza. it's easy, happy, not reinventing the wheel. and he was saying also he lived in the uk. he understands the market. so it's made on demand pizza, but also mod from when they lived here in the '80s.

the whole mod movement, punk. >> oh. >> what fascinates me about restaurants, businesses involved in food. the bigger the better in terms of profitability sometimes. you're putting every-day food on the plate that people consume. that's where the profit has been, at the low-end of the market. >> they are so exposed to fluctuations and costs, not just in the raw materials, but now for the uk businesses, the employees. >> yeah. >> has to be a concern. >> he was saying it's a long-term investment. this is a 20-year, 30-year, 40-year investment. every single pizza, regardless of if you have only pepperoni or cucumber -- yuck i get. >> i could get a hawaiian pizza. >> it's one cost for everything. what the consumer time and time again proves that they want, why do you go get your coffee from whatever place? you know you can get it fast and it's the same coffee every time. you want to go back and know

you're getting your creme brulee exactly the same as the last creme brulee you had there. you come back for that experience. that's what they're good at, this type of stuff. >> i will check it out just for a bit of due diligence. see whether the market is saturate. coming up, there's just 23 days until donald trump's inauguration what will the key challenges be for his first few days in office? find out after the break.

hi everybody. welcome back. you're still watching "street signs." i'm louisa bojesen. >> i'm karen tso. >> i'm nancy hungerford. here are your headlines. losses on wall street weighing a bit on the european session. safe haven flows driving gains for gold as gold looks for its best day in a month. credit suisse shares under pressure on a "wall street journal" report that a u.s. regulator is investigating the sale of bonds in mozambique. israel is standing in the way of middle east peace, so says john kerry as he launches a war of words with prime minister benjamin netanyahu over accusations that america orchestrated the u.n. resolution on settlements. >> we recruited nobody as an alternative. those four countries that ultimately brought it to the floor did so absolutely on their

own. welcome back. quite a few of you still off for a prolonged weekend yesterday, but back at work today. we're seeing slightly mixed european markets here this morning. a little bit on the flat side on the open. still looking slightly flat. the ftse mib bucking the trend by a couple points. nothing to write home about. when it comes to the fx markets, a brief glance at what is going on there. 104 on the euro/dollar. been around 104 since before christmas. >> that's right. dipped a bit below that. been a 103 handle but marching back up every time it hits that mark. the aussie one interests me. like 74 1/2 before christmas. now it is unwinding back towards 71 handle. >> they had the data, data flow. you know, whether or not we'll see rate cuts coming from the

aussies. >> mm-hmm. it's all about fx volatility in 2016. i wonder if that's the same case for 2017. donald trump who urged companies to keep jobs in the states while on the campaign trail claimed credit for a round of hiring announcements yesterday. the president-elect told reporters about sprint's plans to boost its u.s. work force. >> because of what's happening and the spirit and the hope, i was just called by the head people at sprint, and they're going to be bringing 5,000 jobs back to the united states. they're taking them from other countries. they're bringing them back to the united states. massa and some other people were involved in that. and also one web, a new company, will be hiring 3,000 people. so that's very exciting. >> trump's announcement that sprint would add 5,000 u.s. jobs was greeted with confusion. a sprint spokesperson clarified the jobs formed part of its parent company's pre-existing commitment to create 50,000 new

positions in the states. so a back dated announcement by a couple of weeks. donald trump also spoke on the phone with president obama. the call came just hours after the president-elect accused the currentcommander in chief of making inflammatory statements. tonight a new twist in the ever evolving relationship between the current president and the next one. donald trump tweeting doing my best to disregard the many inflammatory president o. statements and roadblocks. thought it was going to be a smooth transition. not. >> can you elaborate on that. is it going smoothly? >> reporter: those contradictory statements aside, trump spent three days tweeting about president obama. after the president said he would have won if he had run again. >> if i had run again and articulated it, i think i could have mobilized a majority of the american people to rally behind it. >> reporter: he should say that,

but i say no way, trump tweeted about the hypothetical scenario. the next day, adding, president obama campaigned hard and personally in the very important swing states. and lost. it's a change in tone for trump. >> i think president obama has been terrific. i found him to be very smart and very nice. >> he's really doing great. he's been so nice. >> reporter: for seven weeks, since their first personal meeting november 10th, trump's praised, even defended the obamas, despite his years-long birther crusade now over. president obama, for his part, demanded his devastated staff facilitate an orderly transition for trump's team. >> president obama could be an enormous resource to donald trump, because donald trump doesn't have any governing experience. >> reporter: late tonight yet another development, not online, but on the phone. >> he phoned me, we had a very nice conversation. >> reporter: the two men still in touch. their relationship? clearly complicated. >> let's get another read on the

situation. ed lawrence joins us from washington. how much do we read into the tensions between trump and obama at this point? how much is just down to obama trying to tidy up office and i guess leave a legacy for the future. >> exactly. president obama is trying to leave a legacy and possibly renew a peace call in the middle east, laying out a framework for that. you saw that in john kerry's speech yesterday. there's a bit of -- they're going back and forth at each other a little bit, jip and jab, either on twitter or in a phone call. clearly president-elect trump was upset in that tweet that he sent out saying the transition was going smoothly, not. that's what he said. then a phone call with president obama and all of a sudden everything is fine. now a transition spokesman came out and said that the -- there is mutual respect between the new administration and the current administration. saying that the staffs are

working well together. still there is this undertone of issue between the two of them. donald trump clearly not liking some of the things that president obama is saying. karen? >> speaking specifically about israel and the push back from the obama administration about settlements from the israelis. the tone from trump is that it will be warmer relations when he takes office. what's your read on the situation? >> exactly. donald trump says that israel has been treated unfairly by the united nations and also within the united states. he said that's going to change when he's sworn in on january 20th. here you have an outgoing administration laying out their plan in the final 20-some days before they are leaving office. the new administration coming in, possibly changing that plan. it remains to be seen what will happen. at the moment, john kerry laid out that two-state solution saying israel is affecting the peace process by increasing those settlements.

israel returning firebasically saying that the u.s. is antagonizing them and there should be a warmer relationship between the two countries. donald trump promising that that will happen when he's sworn in. >> ed, thank you very much. ed lawrence, nbc news. let's continue with this. the u.s. secretary of state, john kerry, heavily criticized the israeli prime minister netanyahu's policy of building settlements on occupied land saying it jeopardized the middle east peace process. the 70-minute speech drew a quick rebuke from netanyahu. hadley joins us again from beirut. some would say the obama administration has been the administration to do the most for israel with this $38 billion aid package to the military eventually. others would say in order to negotiate anything the occupation and the settlement building has to stop. >> i think it's important to look at this in terms of the

historical context. one, this is the first real rebuke of israel by the united states in over 30 years. that's significant. it also means that for the arab states and arab countries, they can no longer say u.s. foreign policy blanketly supports israel. that's significant. you have to look at this in terms of what mr. netanyahu has been doing over the past several years. he understood the position of the obama administration when it came to settlements, and at some point he might face economic impact on what could or could not happen at u.n. in regard to settlements. the eu coming out over and over again in terms of railing against the israelis for the settlements and in terms of the possibility of a boycott, possible sanctions, mr. netanyahu has been working over the last several years to establish trade relationships with countries like mexico, china, even turkey, despite diplomatic difficulties between those two regimes for the simple

purpose of protecting israel in the event something like this happens in terms of economic impact because the european union is the largest trading partner for israel. that's interesting. at the end of the day, what's happening in the next three weeks, a new administration, pro israeli administration is coming in. and the big question over how significant this is going to be. >> hadley, thank you very much. hadley joining us there on the phone from beirut. the obama administration has plans to announce new retaliatory measures against russia in response to the country's role in directing cyberattacks during the u.s. election campaign. nbc news cites two senior administration officials. russia's foreign ministry responded by saying should the u.s. impose new sanctions it could disrupt possible cooperation between the two countries. the hollywood movie star, debbie reynolds has died a day

after her daughter, carrie fisher. chris pa lone filed this report. >> reporter: debbie reynolds was the hollywood star appearing on stage and screen for seven decades. now in a twist, reynolds died at 84, while mourning the death of her also beloved daughter, carrie fisher. in this video from tmz, an ambulance is seen leaving reynolds son's home wednesday afternoon. she was there making funeral arrangements for her daughter. ♪ >> reporter: it's that song and film that made debbie reynolds famous in 1952. "singing in the rain" cast the 19-year-old along gene kelly and donald o'connell. the el paso, texas native won the miss burbank beauty pageant four years earlier and she was quickly signed to a contract. reynolds starred in 20 films in

the '50s and '60s. ♪ tammy >> i could be anybody. >> reporter: the unsinkable molly brown brought an oscar fom nation. as reynolds career soared, her personal life suffered. a high profile marriage to eddie fisher brought two children including carrie fisher. but it ended in a bitter divorce, the first of three failed marriages. >> i don't choose well. i don't blame anybody but myself. i seem to have poor taste in men. >> reporter: when movie roles diminished in the '70s, reynolds took her talents to the stage both on broadway and elsewhere. for debbie reynolds, her homes on stage and on screen made her one of hollywood's most versatile performers. her son todd told nbc news wednesday night, she has gone to be with carrie. she loved taking care of her, now she'll be with her.

hi everybody. welcome back. we have a funny director this morning. yeah. >> he's made you giggle. >> exactly. control risks projects that businesses are about to face a period of severe uncertainty. according to its new heat map which looks at the biggest risks facing the world in 2017, three strategies that corporates can use to get through next year, the arc, the shark and the whale. earlier we spoke to kip allen and asked about the challenges for businesses on the horizon. >> the uncertainty out there in the world, they think we'll retreat to our core business areas. so where they might be looking at investments in emerging markets, new strategies, new business lines, they think actually we'll just hunker down in other ark and see this

through, wait for better times. >> so which is the more aggressive one? the shark? >> very much the shark. we hear that cliche that business doesn't like uncertainty. some businesses really do like uncertain uncertainty. it provides opportunities for them. you see businesses investing aggressively in a period of uncertifica uncertainty. assets are cheaper. there's competition. those are the sharks looking to expand their businesses during this period. >> and the whale, the big fish in the pond. >> the whale is to get bigger, maybe merge or require other companies and have such a broad range of businesses and activities that where things go wrong in certain markets or sectors they'll be large enough to see it through. those are the three different business strategies. >> i think we've seen that happen across the market, all three scenarios by different corporates what are the big risks they're contending with, whether you take one of these

strategies what is front and center that investors should worry about in 2017? >> front and center is the threat of a real serious trade dispute, particularly between the united states and china. the retreat from globalization, demand from a number of electorates for less international trade in a way, how it's coming through. so for companies who got used to really over the last decade lots of -- lots of expansion, global expansion, they're now having to look at a different scenario. the trade risk identified as the key risk. there are other risks, security risks, terrorism risks, cyberrisks. we are in a period of extraordinary uncertainty. a lot of rules that businesses are used to working within seem to be torn up. you look at 2017, there are many elections in many key markets coming up. pharmaceuticals have been in

focus this year since hillary clinton raised the debate over "excessive price increases" proposing to clamp down on the drug giants. some say donald trump's win was a gain for the sectors, others say the debate is likely to endure into next year. meg tirrell looks at what to watch from the pharma sector in 2017. >> reporter: if investors expected smooth sailing for drug company stocks, they were in for a surprise. uncertainty in the drug industry is as high as ever. and the focus for 2017 will continue to be on drug prices, the fda, and m&a. first, pricing pressure. most likely continued pressure on drug companies. expect increasing scrutiny of the rest of the healthcare system with mounting pressure on the middle men, like drug distributors. next, an eye on fda.

after two years on highs on new drug approvals, medicines approved in the u.s. sank to new lows in 2016. 2017 brings legislation on how we legislate drugs, both brand and others. finally, m&a hope or hype. investors hopes for a biotech rebound rest on a trump tax holiday boosting buying. they hold billions in cash overseas and the expectation is they bring it back at a lower tax rating gobbling up smaller companies. on buyers wish lists, working on drugs for cancer and rare diseases seen as more insulated from pricing pressure. meg tirrell, cnbc business news. joining us is john round tree from nova sector. good morning. no secret that the pharma sector has been hit by pricing pleasures, now with the political agenda, not just in the u.s. but in the uk as well. how does this play out for investors in 2017? >> i think investors have to

readjust their forecasts for what prices might be, particularly in the united states. in the last few years people have looked bullish on prices in the u.s. i don't see it cratering, but i see it flattening out. there's not really going to be scope for massive price rises at all. >> do you think this will continue to be a driver for further consolidation? we have already seen m&a activity hit quite a high note. >> i think it will be more consolidation. there is more cost cutting. consolidation is more likely driven by people wanting access to innovation, rather than particularly cost cutting. certainly there's going to be more m&a next year. >> the one company that interests me the most is actelion. johnson & johnson first circled, sanofi came into the mix, johnson & johnson walked away, came back. what should a company like actelion do? hold out or look at

consolidation? >> i always argue hold out as long as possible. >> but cave eventually. >> eventually there's always a price. we've seen in the past where, for example, mylan had a go at metta, a proud company. actelion is the same, proud, independent, extremely successful. at some point the price becomes so high that the board and the investors can't afford to say no more. the current rumors price would value actelion at 15 times revenue. that's a high multiple by anyone's standards. if you say can we really succeed independently, they can. but when you have a price like that, it's very hard to walk away. >> any obvious players that you think will be emerging? >> i think you'll see some of the big pharmas looking to

consolidate. allergan has shown -- sorry, a lot of appetite, not megamergers, but it has a whole open science approach which it thinks is a great approach to innovation. we won't see anybody like the valeants of this world that essentially rolled companies up. it sort of crashed to earth at 94% of its value. but you'll see people bolting in acquisitions. there may be one more mega merger to come. >> why is it so tough to get drug approvals through 2016? >> the fda would argue that so many came through in 2015, you would naturally expect them to come down. the science and technology is more and more complex and difficult. so the industry is facing difficulty in innovation. that creates more m&a as well. does it change your mindset about how you look at the sector? typically you look at the pine

li pipelines, see what's coming into the mix. you should be look at distribution deals, the likes of johnson & johnson with actelion to move the needle? >> people have to find global reach in some way or other. and, you would argue that some companies are trying to cover every region, every country. i think there's more creative deals to be done. each company takes a regional specialist to grow their business there. people can focus down on what is special for them in a particular region. >> if j&j and actelion can't come to an agreement here, could we see sanofi come back to the table? >> i would say anything is possible. they could. the issue for sanofi, i think, it doesn't give actelion as much as j&j.

in the sense it's already a european company, j and j being a u.s. company can give them more benefit so sanofi would have to put an amazing price on it. having walked away and johnson & johnson being exclusive, it's hard to see them back. but there may be others. >> what happens to sanofi if it doesn't get its hands on actelion. does it hunt around for another acquisition in 2017? >> i would say they'll still look. they made no secret about looking for acquisitions. they have a unique problem -- a problem of many big pharmas, the pipelines are not as strong as they used to be. so they have to, in a sense, hunker down and get their internal machine running. but to keep the short-term share price running, they have to do some deals so a mix of both. it's very difficult for them. prices are going so high now to

buy. >> where do you think the bottleneck is to get these deals done? is it pricing in is it, like you say, innovation? regulation? >> i think the bottleneck is no price. because if you look at the trends over the last five years or so, the prices that people are paying to buy external innovation, external sales, are just going up and up and up. at some point something has to give. it's interesting with actelion you only had sanofi and johnson & johnson in the play. maybe there will be more to come as you mention. it's not a mass auction. at that price the bottleneck is you have to pay a lot. >> can i ask you quickly what investors should focus on by diseases? cancer was a big area of growth for investors looking for treatments. but what about diabetes, what about rare diseases, blood disorders. what would you be looking for in 2017? >> i think a lot more in rare diseases. a very attractive market for

people. there are more price ease with rare diseases than other drugs. i think oncology is still going to run. it's going to take some time. immuno oncology is a difficult one. so looking for drugs quickly, they'll be disappointed if they're looking at acceleration of value through pipelines, they may see that. >> john, thank you very much for that john roundtree. >> pleasure. brief glance at u.s. futures. pointing to flat market start. that's it for today. >> i'm nancy hungerford. "worldwide exchange" is coming up next.

good morning. the santa rally features. the dow notches a triple digit loss for only the second time since the election. the president-elect taking credit as two companies decide to bring 8,000 jobs to the u.s. we'll have the details coming up. and your 2017 playbook. predictions on what next year will hold in the world of financials. it's thursday december 29, 2016. "worldwide exchange" begins right now. ♪