good morning. welcome to "street signs." i'm nancy hungerford. >> i'm carolin roth. mixed fortunes in early european trade. the ftse reaches new highs, the french market underperforms as downgrades in socgen go lower. the dollar slides in asian trade suffering the biggest drop against the yuan in a year and falling over 1% against the yen to the weakest level since mid-december. a sweet result from persimmon, as the uk house builder reports an 8% rise in annual revenue sending the shares higher. jpmorgan says the insurance

sector is underappreciated and offers great growth potential raising its price target on allianz, aviva, and others. all right. let's have a quick look at the european equity markets this morning. nancy, how are they looking? >> looking at the stoxx 600, the picture is flat. this after some minor losses on the index yesterday. overall, yes, we are looking at a loss of 0.06%. this does not tell the full story. when we look at the individual markets here, once again we're looking at the ftse 100, the star of the show this morning, hitting another record high above that 7200 level. now higher by 0.18%. elsewhere, we're seeing a bit of

weakness on the german main market lower by 0.1%. weakness in insurers after a downgrade in that sector. the french cac 40 lower by 0.2%. looking at the italian main market in slightly bearish territory. let's look at the sectors one by one. telecoms moving higher by 0.7%. basic resources in focus throughout the morning and coming over from the asia session. strength in metal prices boosting that sector. that's giving additional strength to the miners in the ftse 100. overall the sector is higher by 0.5%. on the down side, oil and gas moving lower by 0.7%. we have been watching fluctuations in the oil price this week ever since the opec cuts officially kicked in gear over the weekend. retail now lower by 0.5%. a second consecutive day of weakness in next shares in the

uk after the disappointing guidance from that firm. household g household goods lower, insurance also moving lower. nancy, the federal reserve struck an uncertain by hawkish tone in the minutes from the december policy meeting as views within the committee are shifting in response to the election of donald trump. the president-elect's policies to ramp up fiscal production have led that many participants judged that the risk of a sizibility undershooting of the longer run normal unemployment rate had increased some what and that the committee might need to raise the federal funds rate more quickly. there was a time back before november, back before this historic election when the fed

was the biggest player in town, when it came to equity investments around the world. is that still the case with investors parsing every tweet that donald trump sends out at 2:00 in the morning? >> i think the world changed in the november. it's now what is the new trump administration going to do, how will the fiscal policy come through, what are they doing with trade policy? we're all signed up to try to find out what's going on there. the fed has not gone away. we will be clearly watching exactly how much tightening the fed says they'll have to do. what they said in the minutes is actually, look, if trump comes ahead with these fiscal policies, we may need to do more monetary policy. too much emphases has been placed on monetary policy so if fiscal policy can do more, it will raise rates faster. >> some people are jumping on

the bandwagon. others say this rally has gone too far too furiously. some people say it's panic starting to set in because people have not participated so far. do you think much of the buying that we're seeing at the start of the year is just panic buying rather than fundamental belief in trump's policies? >> i think there's two things. the feedback from investors post-election was actually there's a shift here. fiscal policy is good. deregulation is good. for the u.s. corporate tax cuts also good. so positive catalysts why people wanted to get involved in equity markets. having said that, have we frontloaded a lot of 2017 into the back end of 2016? i think we have done. both our european index targets and u.s. index targets are where we are at the moment. we're looking at those, but really now to get more confident about the fact that equity markets can go further this year, either we have to revise

up earnings expectations or say that it's trading at high multiples. so we had a big rally from november. it will be a more gradual process and investors will say we need to see evidence this is coming through. what i would say, if we look at the growth numbers, service sector pmi last night out of china, that all looks good. so perhaps we can get more earnings growth so this can continue. it can't continue as the same pace as november and december. >> the pmi numbers have been robust in europe, and some say perhaps this complicates things for the ecb, at a time where they're still concerned about growth. how do you think this plays out for the investment picture? >> the ecb would expect inflation to be higher this year. so do we. we know oil prices are higher. some other factors are dropping out of the calculation. core inflation is still

relatively subdued in europe. we expect it to remain so the ecb said it will do qe but a bit less qe. you know, we know they're pretty much doing that to the end of this year. i think it would take quite a surprise further on the upside inflation or further on growth for them to get to tweak that stance. look, you know, we're expecting a bit of higher inflation, stronger growth in europe, that's actually a good thing. >> how will that benefit the spread you're seeing between the european bonds and u.s. treasuries? >> again, what the markets have done, they looked at what the two central banks did the fed tightened, raised their dot plot. two central banks moving in different directions, that's caused the gap in the bond yields. can it go much further from here in i'm not sure we can. we have a widespread by historical standards. you've seen that translated into

a much weaker euro. >> let's go back to your equity outlook for this year. a lot of people have been on the show say buy european equities versus u.s. equities because u.s. equities are too expensive. does the picture look so much better for europe when it comes to valuation? >> it's looks better for valuation but it has for a long time. the big thing between the europe and u.s. since the financial crisis is eurou.s. has had earn growth. if we get that earnings growth, could be a decent year for european equities. >> quickly on the ftse 100 have you been surprised by the moves and do you think it could push further? >> the interesting thing about the ftse 100, if you look at it in sterling terms, we're at all-time highs.

in dollar terms, ftse was down last year. a lot of this is a function of the currency but also the fact that the ftse contains mining companies, oil companies, which we have seen rerated. our view is potentially sterling has more downside this year. >> james, thank you very much for bringing us that perspective. james bardy. you can get in touch with us, let us know what you think about the direction of these markets, kicking off the new year on a strong note. some softness in some european markets. get in touch with the show. the address is streetsignseurope@cnbc.com. get in touch with us directly on twitter, streetsignseurope@cnbc, a @carolincnbc and me, @nancycnbc. coming up a look at uk and u.s. motoring successes for the

past year after this. take one.

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only xfinity gives you more to stream to any screen. hello. welcome back to the show. let's turn our attention to china. china's pmi rose to 53.4 points in december, the highest level in 17 months. the spread between the off-shore and on-shore yuan has extended to the widest level since august 2015, this after the offshore currency saw the bigge efges egy gain in over one year. let's check in on how markets responded to this in asia. pauline is in singapore. >> good morning, carolin. china was focused on the off

shore and onshore yuan. right now trading at 6.88 and 6.81. we saw beijing step in to try to prop up the currently. the concern is capital outflows as the currency has been weakening. also lunar new year is coming up. so, policymakers want to firm up the currency as lots of cash transactions will be happening as we get closer to lunar new year, the holidays there and the trump inauguration, beijing authorities don't want the currency to weaken ahead of that because they don't want to be accused of being a currency manipulator. that was the focus of investors on the shanghai composite. it ended up 0.2%, but it was a seesaw session there with the composite. also the pmi numbers you mentioned, the services pmi came in stronger than expected. that lifted the hang seng up 1.5%.

hong kong had its own pmi numbers which showed expansion for the first time in 22 months. we also saw a softer dollar weighing on the yen. so the yen strengthening off the back of thachlthat. that impacted the nikkei. the softer dollar didn't have much of an impact in terms of commodities. we did see the asx 200 ending up 0.3%, as asx 200 sitting at a 19-month high. nancy and carolin, back to you. >> joins us is kit jukes from social generale. forget the fed and donald trump tweets, because the yuan is trump's boat. to steal your phrase. what happens next. >> the capital controls and measures like that are a bit

like i plug one hole here, one there, it will be hard to do it. they don't want to see too -- outflows that are too quick, foreign reserves that are too fast or anything too disorderly. they're trying to get their arms around this. my sense is that the squeeze in offshore yuan liquidity in hong kong is a temporary phenomenon, we'll get a few days of this, and then back to stability in dollar yuan and weakening. and markets can get back to the u.s. equities higher, fed will hike again, better economic data, stronger dollar. themes we have in mind for the first year. it's all an echo of last year when offshore yuan liquidity was tight, yuan turned around, markets turned around. >> a bit of deja vu then. >> a bit of a warning. >> so what does stability look like in terms of price levels

then by the first half? >> i think by the time we get to the french elections, beginning of -- end of april, beginning of may, we'll have parody in euro/dollar. 3% on the ten-year treasury, dollar/yen somewhere low mid 120s on dollar/yen. with the dollar yuan rate might be 7.3. that would make it feel like the fed is in control. >> back to the yuan, it seems heavy handed. they tried to manage the currency before with little success and that drew consternation by the international stage. now trying to restrict international flows, m&a flows, individual cash, now try doing this. are they losing more credibility? >> i don't know whether they want -- yes, they're losing some credibility on the surface, but

it's incredibly difficult to control capital flows in an economy where the flows in and out are so big. there was a story yesterday about the size of the direct investment flows from china into the united states over the last couple of years. that's money going out. i have current account surplus, capital flowing in, capital flowing out. chinese people trying to move money offshore, then i have the dark space yuan money market space in hong kong, and i'm not sure who is in control of that. >> let's talk about the dollar. you said the fed minutes weren't much to write home about. it was something for the doves and hawks? >> i think we would said they were hawkish if we didn't have the yuan move. the fed is still on track, still object mystic about the economy, still has a lot of uncertainty about fiscal policy. if we get the programs expected by the new president, we'll get

some hikes within the next year. >> do we sell the dollar here because we think it's appreciated too much? close to 14-year highs, or does the inauguration kick off the dollar strength? >> i don't think the peak ought to happen until 1the 99th day o trump. >> i'll note that. i'll remind you. >> please do. either the thursday or friday before the first round of the french elections. a strategically chosen day in my life. we will probably be at peak excitement around about then. it will match the peak in real yields in the u.s. treasury market. currencies are following long-term interest rates more than they've done in years. we've come down sharply in the last three weeks since the fed rate hike in the states. i don't think we've seen the high-end real yields if the u.s. economy is going to generate growth this year, and the fed

will hike rates. i would be surprised if it's done by now. >> 99th day after trump, investors will be watching that and keen to see what happens to the yen. especially for equity investors in japanese markets have been enjoying renewed weakness in the yen. what do you think happens here? >> i think it will be higher. we had a big yen long for most of last year. the market went from short yen to long. the shortened yen position was bigger by two weeks ago than the long had been for all year. the turnaround after the election was enormous. i think we'll bounce around a lot to. but once we -- if we get back to rising yields elsewhere, the bank of japan policy to anchor that ten-year yield will start to work again. they need help from rising treasury yields. >> all right. kit, great stuff. thank you for joining us.

we'll have to bring you back on day 100 of the trump administration to see where we are. that's kit juckes. business confidence among manufacturing and services firms edged higher in the final quarter of 2016 according to a survey by the british chambers of commerce. the bcc also found that inflationary pressures are a glowing concern for uk companies. 52% of british manufacturers say they are likely to raise prices over the next three months. a new year, a fresh start. citigroup released a bullish note on global equities forecasting a 9% rise in ebs growth thanks to a better world economy. the team says it is overweight uk equities citing the depreciation in sterling. it's taken a neutral stance on the rest of europe because of political risks. to be honest, i want to see one investment house negative on the uk. everyone seems to be going with

the trend. not blaming them this is how you make money, but i want to see bold calls out there. >> maybe come post march after article 50. jpmorgan raised its price target for several european insurers saying the growth potential of the sector is underestimated. among the preferred insurers are allianz, avooiva and st. james. >> shares of zodiac aerospace are receiving a boost to overweight while airbus is taking off. almost up 3% for airbus, 3.1% for soez yam. >> persimmon posted an eight year rise in full-year revenue, this despite the uncertainty around brexit.

the second biggest home builder said average selling prices increased to 4% year on year with healthy customer demand for new homes. persimmon expects second half growth margins to improve as well. new car sales in the uk hit a record high. 2.7 million cars were sold. that surpasses the previous report of 2.6 million set in 2015. however sales to individuals have fallen every month since april, but overall figures were supported by business demand. and u.s. new auto sales also hit a record high in 2016, phil lebeau has the details. >> reporter: for the first time since the early 1920s, auto sales in the u.s. were up for a seventh straight year. 2016 sales came in just above the total we saw in 2015. basically at 17.5 million vehicles. that's due to stronger than expected sales last month. holiday and year-end promotions,

especially with the luxury brands, typically make december one of the busiest months at dealerships and last month was no exception. almost every major automaker did better than expected in december. leading the pack, general motors up 10%. gm like other automakers focused on keeping inventory lean which is helping the company sell vehicles at higher prices, including the latest models by cadillac. >> we've seen a 14% rise in average transaction prices over the last two years. this is unprecedented and unequalled in the industry. >> with prices up, so are monthly loan payments and that has some wonder figure auto sales will pull back in 2017. keep in mind one of the most important factors driving auto sales, strong consumer confidence. right now, it is close to a record high. good news for automakers and auto dealers as they start the new year. phil also caught up with carlos gohn of nissan after the

company saw the best year in the united states. gohn said they would be making no strategic shifts until they see a definitive policy from the president-elect. the nissan ceo said he is optimistic about the delivery of self-driving technology. >> we are at the level where i feel 100% confident we'll be on time. obviously it doesn't depend only on our efforts. it depends on the efforts of some partners, tech partners, suppliers, the sensors and the algorithms. i feel confident we'll be there in time. volkswagen and its former ceo, martin winterkorn must face a lawsuit against investors in california. the investors are mainly u.s. pension funds which invested in vw shares on exchanges in the united states.

in the fallout from the emissions cheating scandal, the same judge rejected the dismissal of a number of frauds cases against the brand chief. volkswagen remains under criminal investigation from the u.s. justice department. a deal could be reached before trump's inauguration on january 20th. that's the hope of volkswagen. they want to get this case wrapped up with the department of justice because it's expected to be in the area of $3 billion. as you can see, volkswagen shares moving slightly higher today. perhaps investors are welcoming strong u.s. sales. we'll go for a quick break. check out world markets live, our blog which runs throughout the european trading day. we'll be back in two. welcom.

you're still watching "street signs." i'm carolin roth. >> i'm nancy hungerford. these are your headlines. mixed fortunes in early european trade. the ftse reaches new highs, the french market underperforms as downgrades in socgen go lower. the dollar slides in asian trade suffering the biggest drop against the yuan in a year and falling over 1% against the yen to the weakest level since mid-december. donald trump taps a dealmaker to run the s.e.c. selecting jay clayton to become the next chairman of the financial agency and signaling a

reduced focus on regulation. theresa may picks her new man in brussels, picking sir tim burrow as the uk ambassador to the eu. good morning. welcome back to "street signs." we want to bring you some services data breaking in the uk. the uk december services pmi coming in at 56.2. that is well above forecast for a reading of 54.8. this follows stronger than expected data we've been getting on construction and manufacturing so far kicking off the new year for the month of december and on reaction in the markets sterling is ticking slightly higher. the picture shows sterling weakness against the greenback. uk gilt futures are going lore

after this services pmi. the november figure was 55.2. the december services figure at 56.2. it's the fastest growth since july of 2015. >> let's kick things off with u.s. futures. yesterday we did close off the session highs. the dow closed within 100 points of the 20,000 level after the fed minutes were released. the s&p 500 seeing off just a smidge, 3 points. the dow jones seen off by 21 points. nasdaq set to fall 7 points. in terms of european markets, more mixed. ftse 100 still close to record highs at 7,193 points. the xetra dax and cac 40 losing steam with the cac 40 off by 0.1%. we did see a strong start to the new year, that has fizzled out over the last two trading days. let's move on to the fx markets. that's where the big story happened over the past two nights. it was a strengthening in the yuan, particularly against the u.s. dollar closing up nearly 1%

against the u.s. dollar as the pobc continued to intervene in the market. also seeing plenty of dollar weakness against the japanese yen. that also in part because of dovish elements in the fed minutes is helping the euro/dollar rebound above the 1.05 level. pound sterling getting a bit of the boost. the ten-year bond space, we did see yields high after initial falls this morning. selling across the board this morning. lg display is in talks to display television panels to sam thing. the ceo of lg displayed that if the deal goes ahead it won't be a one-time thing. the news following a report that the joint venture supplying

samsung by sharp could end this year. home technology is dominating this year's event at ces technology. everything from your refrigerator, to the thermostat and showerheads can be controlled by your smartphone and smart devices. let's get out to chris pollone joining us from the conference in las vegas. i can see you have a desk filled with gadgets. tell us what the big highlights are this year. >> yeah, nancy. this is a lot of fun. ces kicks off today. this is the 50th year. there will be more than 4,000 manufacturers here showing off their new gadgets and gizmos to more than 165,000 people. and we've collected some of our favorites here. this is, of course, where the manufacturers unveil their new products, move things forward, as you mentioned home automation, the connected home, the internet of things as they call it will be huge this year.

we're seeing a lot of barriers come down between buying separate items from different manufacturing, your door locks and your garage door opener, now you can control them seamlessly. this is called the motive ring. you have seen everyone wearing fitness trackers of some sort. most wear them on their wrist. you can wear this on your finger. you can wear it all the time. it tracks your sleep, tracks your activity all day long it only needs to be charged once every five days or so. waterproof, you can swim with it. pretty cool as the health and technology sector collide here and we see better fitness trackers. i'm drawn to this. the hairmax laser. this is said to regrow hair in people who are losing their hair. so, i will spend a lot of time with this. probably should started now. we like that one a lot. this is kind of cool. this is called the life print printer.

this is a printer. you can put this in your friend's house or parents house or something like that if you want to send pictures to them. they print out on little stick others. remember pictures we used to printout? you can put these on your fridge, take them to work. but the interesting thing about it, you can put messages on them. so this one says dancing with daddy, or send it to whoever you want. if you have a tablet or smartphone, you can actually use the camera for augmented reality. this is actually a video, if you use your camera or smartphone to look at it, it will show you the video that was shot this is the creative halo. bluetooth speakers are huge this year. they're getting smaller, better sound. this one, if you press the right button will give you a light show as you listen to music. obviously a big year here at ces. but you'll hear a lot about car technology and home technology. making your home smarter. nancy. >> chris, excellent stiff.

curious about that hair growth headband s it something you wear just at night? how does it work? >> it uses lasers. it has been reviewed by the fda, it uses lasers, very low power. so it's not particularly dangerous, but you're only supposed to wear it every other day, and i asked, for personal reasons, and they said that it's really good for people who are starting to lose their hair, maybe not quite as effective on somebody at my stage of male pattern baldness. >> so preventive help on that one. >> if this thing works, the founder or the inventor will be a billionaire. this could be a game changer. >> big industry. >> chris, thank you very much for joining us. >> yeah. >> thank you. putting that aside, let's talk about lou yhow you can invn some of these trends.

joining us now is mark cotton. ai is another big thing at ces, talking about the home side to endu industrial uses. how do you get in on this trend? >> it's tough to get in on some of this. it's no surprise that ces happens in las vegas, it's the center of gambling and many of these are a big gamble. the word is littered with devices that seemed to look great at first sight and turned into nothing. so the opportunities for investing at any of these individual gadget areas is actually pretty remote. but there are lots of opportunities within the broader ai area. though i think that got hyped over the last 12 months. ai is a big talked about area. the best area of investment is in the connecting software, some of the personal assistant type

offering. google home, alexa, siri from apple. >> you talk about too much hype going on, one may think of the likes of nvidia with 200% growth last year. do you think that's overdone? >> so we like nvidia as a story. there's a huge move towards using gpus for artificial intelligence. i think it had a huge move last year driven mainly by gaming. the artificial intelligence in other areas is lacking at the moment, though i think it will be big. my expectation is nvidia reflects the typical hype cycle. a lot of excitement, things get pushed up way too high initially. then they tend to come back. this would have been 1999, 2000, things come crashing back down and then a period of much more enlightened growth. so we are in that peak of inflated expectations. the real opportunity has yet to

come. >> you put a big bet on growth stocks. has not entirely paid off yet. is this the year that changes? >> i think it is. two k over a series of time, growth names have went down. google is trading lower than texas instruments or microsoft. that's the first thing. the second is the trump victory drives reflation trade, a bigger risk in assets again. that will act as a cattalyst fo growth names. >> let's talk about trump. with all the allegations about who hacked whom and what, there were a couple ipos last year, palo alto networks, fireeye, they did not work so well. where should you invest if you

want to chase this trend of security? >> security is a big theme. traditionally the way to look at security is to defend your primity. like the physical world. we defend our borders. in a clout-enabled world, where is the perimeter? not where you would traditionally have it. so you need a comprehensive security system. so it's our belief that you need to look at companies that have access to huge amounts of data that can analyze the data, and detect where threats may occur from. two companies that we like in that area are akamai, who see about one-third of all internet traffic. and then another is symantec, which has a huge number of users on its software. let's talk about what you don't like next year.

some of those stocks in hardware have performed well, but you don't like hardware. that's why you believe shows like ces don't actually have that much significance. tell us why you shouldn't be owning the likes of apple in 2017. that's a hardware company. >> it is. so, if we look back in history, consumer electronics businesses in general don't sustain high margins for a period of time. they might in the early phase when you get the hype period. so fitbit was a hot stock for a period it came back down, now there are many chinese copies just as good as fitbit for a fraction of the price. so generally they don't have high barriers to entry. apple is an exception. it has built an ecosystem in advance of many other companies. so it put u.s. in a strong position for longer period of time than normal. but still in the same situation, it's a consumer electronic device. and not adopting what many other

companies are adopting in terms of being open from a software perspective. amazon back in the middle of last year opened up its software on alexa to allow other companies to access the technology. that's why we see these announcements of ces of alexa linking with whirlpool or used in ford cars. we don't see that for apple because it's a closed system. it's harder for people to get access to it. >> before we go, you have facebook among your top holdings. what is in store for facebook for 2017? >> it's the same thing. facebook is attacking an advertising market of 500 billion, $600 billion globally. i think that facebook and google for that matter have an enormous amount of both advertising market they can get hold of and also the broader marketing market. the whole customer life cycle management market, which is over

a trillion dollars is something for both of those companies. i think we will continue to see 20% to 30% growth at facebook for a number of years to come. and you're paying a very, very low valuation for it. >> mark, thank you very much for joining us. stay tuned for cnbc's coverage of the ces coverage throughout the day. we'll talk to aol's ceo tim armstrong at 16:20 cet. president-elect trump will nominate wall street lawyer jay clayton as chairman of the securities and exchange commission. clayton most recently worked on the alibaba ipo. analysts believe the pick signals trump's intention to reduce regulations. former indiana senator dan coates is the leading candidate to serve as director of national intelligence in the trump administration. this according to a report from nbc news. coates served 12 years in the senate and eight years in the

house of representatives. he was also ambassador to germany under president bush. and the president-elect continues to cast doubt from u.s. intelligence agencies that russia interfered in the itself election. cynthia mcfadden has more. >> reporter: today, vice president-elect mike pence weighing in on what seems to be growing distrust between donald trump and the intelligence community he will soon lead. >> i think, given some of the intelligence failures of recent years, president-elect has made it clear to the american people that he's skeptical about conclusions from the bureaucracy and i think the american people hear him loud and clear. >> reporter: the latest round of sparring began last night with trump chiding the intelligence community about postponing his briefing on evidence they say proves that russia interfered in the u.s. election. "the intelligence briefing on so-called russian hacking was delayed until friday, perhaps more time needed to build a case. very strange."

official washington was outraged. two intel agencies spokespersons contradicting mr. trump telling nbc news last night that the meeting had always been scheduled for friday. but the facts are not that clear. a senior intelligence official tells nbc that donald trump's transition team was told to expect a briefing on the russian hacking case early this week. but yesterday, mr. trump was told the russian report was not ready. the dust-up about the meeting's timing is more evidence of the strain developing between the president-elect and the intelligence community. adding to the overall misery, trump quoting wikileaks' founder julian assange this morning, denying that the russians gave them the hacked democratic e-mails. said russians did not give him the info. but this morning, republican speaker paul ryan spoke out strongly against assange. >> i think the guy is a sycophant for russia. >> it's absolutely astonishing. who would ever imagine you'd have a republican president-elect siding with an

accused sex offender, julian assange of wikileaks, someone who has hostility against the united states and every day it's a new degradation of the intelligence community and every day he's only damaging his own prospects for a successful presidency. it's really just astonishing. >> reporter: president obama is expected to be briefed on the final russia report tomorrow. one senior official, a career intelligence officer directly involved, says if intelligence was merely reporting the obvious, we wouldn't need it. analysts need to admit degrees of uncertainty and mr. trump needs to trust the professionals, all of which is becoming increasingly complex. all right. still coming up on the show, it wasn't a very merry christmas for two of the top u.s. retailers as disappointing holiday sales sent shares sliding. we'll take a closer look after this.

welcome back to the show. breaking news. the turkish deputy prime minister says links to the it istanbul nightclub attacker have been established. he also says he cannot rule out the possibility of the attacker escaping abroad. it is clear the attack was car rid out by one person but he may have been helped. just want to bring you the latest on the currency. the we are currently at 3.64 against the u.s. dollar for the lira. it was a rough day for the retailers stateside. shares in kohl's slumped over

15% in after-hours trade after they cut their 2016 earnings guidance and warned that fourth quarter sales would miss expectations. co kevin manzel said sales were volatile throughout the holiday season, citing a strong black friday but softness in november and december. not just kohl's is feeling the pain a similar story for macy's. shares extending losses, slumping nearly 11% in after-hours trade. they cut the full-year adjusted profit forecast and plans to close 68 stores and cut 10,000 jobs. the company's ceo said he expects 2017 sales to be consistent with the disappointing holiday trend. with global economic and political uncertainty expected to hit new highs in 2017, private equity could be in for a turbulent time. but my next guest says the brexit uncertainty could see transaction volumes rise in the uk and in europe. and that guest is chris neary.

so, the fact of matter is for much of 2016, companies have been sitting on a whole lot of dry powder, that means money that has been raised but not deployed yet. why is that the case? >> i think it's the past success that's driven more money coming in. if you look at the ten-year, private equity returning 11% compared to the s&p 500 returning 5%, 6%. that's a consistent long-term difference. that's caused more money to be allocated by pension funds globally, insurance companies. so the amount of dry powder has amounted to $1.4 trillion, which is a huge number. >> that is a huge number. i guess with so many strategic financial buyers out there, and they're competing for fewer deals that have gone up in price, wouldn't that be exacerbated in 2017? >> i think so. yes. in addition to the higher amount of money, you have seen the uncertainty mentioned. brexit uncertainty, the election in the u.s., i think they both

caused some delay in deals. so the delay deals from 2016, huge amounts of money waiting to be deployed. it seems to be a common view that prices are high. the interesting thing is to see how patient private equity will be to make sure they don't pay too much for the deals. >> once this money does get deployed what sectors are you watching? any hot areas? >> private equity is always looking for growth. one reason brexit might be causing opportunity is private ek ciquity is good at finding growth. financial and healthcare in the technology areas are hot areas for growth and hot area for private equity money. we've been watching a bit of a rally in global markets ever since president-elect trump's victory took place. how does this play into your

expectations? >> historically pe has exited in a number of ways, either to trade or to other pe companies or public markets. in the last probably couple of years, the exits to public markets have diminished. there's been much more in terms of pe companies selling to each other, their portfolio companies. lodgely a higher stock market brings more public market exits. >> chris, will pe companies have to adjust to a new reality where profitabilities is lower because prices are higher? >> i think price will have a big impact. when you look at returns over a longer period of time, if you pay a higher price going in, it's difficult to get the return coming out. one of the features was the raise of longer dated funds. historically pe has been a ten-year fund. taking a longer view is perhaps accepting that that longer view will be necessary to get the right returns for investors. >> chris, thank you very much

for that outlook. and let's give you a shot of u.s. futures before we go to break. one to watch is the adp private sector employment number ahead of the big non-farms report on friday. a bit of softness called. s&p 500 called just shy of 3 points lower. the dow jones called lower by 12 points. investors want to see the dow get closer to 20,000. >> in europe, a soft start to the morning, now we've turned around. the xetra dax up by 0.1%. similar gains for the ftse and cac. that's is for the show. i'm carolin roth. >> i'm nancy hungerford. "worldwide exchange" is coming up next. g the aln't thall! om n ldoisng g the aln't thall!

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good morning. markets now a weak picture in the u.s. and a mixed bag overseas on the heels of yesterday's fed minutes. retail stocks plunge. soft holiday sales numbers sending shares of some of the biggest department stores sliding. and trump's tweets. we'll tell who is behind them and why they won't change when he's president. it's thursday, january 5, 2016. "worldwide exchange" begins right now. ♪ good morning. welcome to "worldwide exchange" on