good morning. the china factor. president trump prepares to meet his chinese counterpart for the first time today. the stakes are high. what you need to watch coming up. wild swings, the dow and s&p post their biggest one-day reversal in more than a year. the factors at play and what's ahead. and why jeff bezos is selling $1 billion a year in amazon stock to finance his race to space. it's thursday, april 6, 2017, and "worldwide exchange" begins right now. ♪ >> doesn't get better than

barbie girl for throwback thursday. good morning. i'm sara eisen. >> i'm wilfred frost. good morning to you from me as well. throwback thursday, and we're throwing it back with one-hit wonders. that's unfair. i'm sure they came back with a second one. >> i'm sure you knew it. >> i don't think they did anything else. >> at least one in the uk. >> let's check in on the global markets after that big reversal yesterday in stocks where the dow was up about 200 points, we were sitting there and tlen it clothen it closed lower. a number of factors, including what cramer called the equity bad mouthing, saying how some see stock prices overvalued.

the yields were kind of in search for direction all day yesterday. a bit lower this morning. 2.34 is the yield on the ten-year. that was after a strong adp report on private sector jobs showed 263,000 added during the month. that was sort of weighed down throughout the morning by sentiment and by the fed minutes. >> i think worth talking about the minutes in more detail because of the fact of what it did to markets. we actually saw the ten-year treasury note yield rise a bit yesterday. yet in terms of the selloff after the minutes kaem out, tca, banks were the worst performing sector, down about 1.5%. you would think for something taken as a generally more hawkish tone from the fed was a surprise. particularly as yields rose. the focus was on what they planned to do in the long-term and what they plan dodd with neh

the balance sheets as opposed to interest rates. the thought was if they want to tighten, there would be a tradeoff in their mind versus the rate hikes versus reducing the size of the balance sheet. if that's an alternative way to tighten than rate hikes, that's less good for the banks than just rate hikes. >> i think that balance sheet normalization was a wake-up call. people thinking it was a next year story. the fed minutes saying this year. a private survey showed japan fell short of forecasts, in india, policy kept rates on hold. japan down 1.4% this morning. europe is softer. part of the reason for both asia and europe's softness is that it had a better march than the u.s. so a bit of profit taking this week. europe across the board softer

by a half percent. the ftse the laggard of those markets. oil lost some of its early big gains yesterday. still did close higher by a quarter percent and is climbing again this morning. a little less than that. wti sitting at 51.23. brent higher, almost a third of a percent at 54.51. nat gas is flat. as for the u.s. dollar, reaction hawkish as wilfred mentioned to the fed minutes, also to the strong adp report. little changed in this early morning action. the euro at 106.64. the u.s. yen the pou the dollar/yen, up 0.11. and for gold, nothing really

going on. >> that board should really just be the pound. >> gold prices up a half percent in early action. mario draghi says he needs -- he sees no need to deviate from the central bank's stated policy path. he addressed the conference early this morning. >> we are confident our policy is working. and that the outlook for the economy is gradually improving. as a result, the forces that are currently weighing on domestic price pressures should continue to wane. >> this mea had this meant teact two weeks ago, it would have been different, but the tone this morning was more dovish than the hawkish tones at the

end of the last formal meeting. i would say what he said here is even if they get to the end of the bond buying program, that doesn't mean rates will go up soon. he cited the improvement they have seen in europe already very much as down to his policy. it's reliant on his policy. he said that about oil prices, too, but they have not seen the structural supply side reforms or fiscal policy support to sugge suggest improvement is coming from anywhere other than his policy. >> they were spooked a bit at the last meeting when the rates jumped. >> we had hit 1.09, so we had come down a lot on the euro/dollar. that's why it's 0.2% reaction this morning. mario draghi's speech this morning followed the surprisingly hawkish fed minutes yesterday. the minutes suggesting that fed officials wanted to start

unwinding the central bank's massive 4$4.5 trillion balance sheet later this year. janet yellen said the unwinding would amount to a rate hike. >> i think it makes some sense. i don't think it's urgent for them to start reducing the balance sheet. assuming you want to do this at some point in the next year or two t makes sense to get started before the leadership transition at the fed. >> among other headlines out of the fomc minutes, the fed is likely on a faster pace with rated hikes ahead. some members are concerned that the stock market may be overvalued. add it all up, we have a little bit of a hawkish reaction from the fed. never -- investors never like to hear the fed commenting on the stock market, the stock market valuations.

unusual. >> unusual. i think overall -- >> are they usually right? maybe. >> a bit hawkish in tone. not in terms of the short-term or rate hikes, which still sat around three for this year, but more hawkish in terms of the long-term, in particular what they will do with the balance sheet. >> then we have to start contemplating that normalization what will it look like? will they focus on mortgage-backed securities? will that influence the mortgage market? will they focus on other bonds? >> the mechanics of it are complicated. the division that exists was also clear in the minutes. we finally got to a semic semi consensus about interest rate hikes. on this, this is something we have not started thinking about, and i don't think they started thinking about it in detail, and the decision on what to do, do they stop the reinvestment of maturities, pull it back? that's the question mark. >> it will dominate the fed talk

that we hear. two interest rates, three interest rates, now it's about how they want that balance sheet normalization. >> it's an interesting implication for the banks, down about 1.5% yesterday, it is seen as a potential alternative route for them to tighten which is less good for the banks, it could mean not this year but the next year and year after slightly fewer rate hikes. that's not good for them. other market moving comments today, house speaker paul ryan suggested tax reform will take longer to accomplish than repealing and replacing obamacare. >> we will need more time to do tax reform. the house has a plan, the senate doesn't quite have one yet. the white house has not nailed it down. even the three entities are not on the same page yet on tax reform. >> the possibility of tax reform has been one of the biggest drivers of the post-election

market rally. the big political economic and market story, president trump and chinese president xi jinping will femeet for the fir time today. xi and his wife will meet trump and his wife melania in florida tonight. they will have a series of meetings at mar-a-lago tomorrow. the entire visit will last less than 24 hours. it's a big deal obviously. the whole world is watching this relationship. president trump made trade one of the highlights of his campaign. he has not let up on the bashing of china and on trade. one question, he will label china a currency manipulator? that's up to the treasury. the report is due april 14th. by all accounts they should not. if you look at the dollar versus the yuan. there's a look back over 20 years. it was remarkably stable because they kept it pegged for so long. what they have been doing is letting the dollar fall and the

chinese yuan rise in a long-term period. that signals they're allowing more flexibility. a stronger currency does not help. it does not give them the trade advantage they once had by pegging it. that's no longer a story. as for the trade relationship, trump is focused on that deficit number. here are the numbers. we import 4$462 billion worth o goods from china. we export only 115. as a result. we have the largest trade deficit with china of all of the trading partners, 3$347 billion. that's been a focus on trump saying, look, we're losing. we're buying more from them. they're gang the edining the ad. that helps their economic growth, true, but is it too late go after that targeting it with tariffs and new trade deals? we'll see. >> we discussed on this show both on currency and on trade deficits how his rhetoric

sometimes frames the issues slightly wrong, even though there are clear terms of trade to address. quickly on his points on the deficit, you are to throw in what the gdp per capita is, about abo about 57,000 per capita in the u.s. focusing purely on the deficit is the wrong thing. should given the overall size of the chinese economy, the relative trade deficit be smaller, perhaps. that comes down to the terms of trade where there are real things that could be agreed on. partly, for example, state-sponsored production of things like steel. now that is available on the international market. that's a fair argument to be looking at. >> preventing dumping. >> autos and finances in china where it's much harder for a

u.s. firm to operate in those sectors and sell goods where there would be demand for them. as the country grows, it's legitimate to have a rethink. in terms of where there could be a win for donald trump in this meeting, i've been thinking a lot about this, to see something that president xi might be willing to offer and seen as a win, a simple announcement for president xi to say we're looking to reassess some of these things on trade. i don't think we'll get a clear agreement, but that would be a positive for donald trump that he could claim as victory and something that president xi might be willing to offer. if you look at the geopolitical issues, much harder for president xi to offer anything at all and not lose significant face back at home. >> though they have to figure out what to do about north korea because the situation is getting worse. moving on to the top corporate stories. several deals or potential deals in the works. unilever plans to exit its

spreads units which includes country crock and i can't believe it's not butter. the move is part of a business review after kraft-heinz made and pulled a takeover offer. unilever plans to increase its margins target and launch a 5 billion buyback next year. paul polman will be on "squawk box" today at 8:30 a.m. eastern time. reuters reports that cardinal health is in talks to buy medtronics supply business. a deal worth about $6 billion could be announced sometime this month. and japan's seven & i holdings, the parent of 7-eleven is buying more than 1,000 u.s. gas stations and stores. seven & i generates 80% of its profits from the stores. mgm is buying epix in a $1

billion deal. when we come back, the wall street agenda including another read on the jobs market and we'll take you to china for a look at the ekxpectations out o today's big trump-xi summit. you get used to food odors in your car. you think it... ...smells fine, but your passengers smell this bell dinging new febreze car with odorclear technology cleans away odors... ...for up to 30 days smells nice... breathe happy, with new febreze.

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welcome back.

on today's agenda, weekly jobless claims out at 8:30 a.m. eastern. and some fed speak, john williams will be speaking in frankfurt, germany. as for earnings, carmax and constellation brands, both before the opening bell. there's an interesting trump trade around that one. constellation brands produces all the beer and it produces in mexico and has been a big loser, thought to be a loser on some of the president trump policies. >> really worrying how the mention of things like this so early and i think how i would love a beer right now. >> not me. >> i'd prefer a european beer. heineken or -- >> a hotted to ed ttoddy. >> you always need your hard liquor. the other big event on the calendar, the start of president trump's meeting with chinese president xi jinping in florida. eunice yoon joins us live from beijing for a look at what's at stake from the chinese p

perspecti perspective. good morning. >> president xi will be arriving in florida in a couple hours. the message from him will be don't blame china for your problems. they will be saying china contributed a lot to the u.s. economy. the foreign ministry has run off a list of statistics to back up the argument saying 40% of china's trade surplus is because of u.s. companies. 2.6 million american jobs were created by birlateral trade and investment and american families save $850 a year because of cheap chinese goods. one headline read u.s. job losses are not xhin thchina's f.

and another said it's unfair to blame china for u.s. job losses. in bringing home this message they hope to deflect heavy criticism by trump on them for the trade deficit, job losses in manufacturing. but it's also a window into what they're worried about. that is that this meeting could deteriorate into finger pointing, and conflict, which would destabilize the relationship. >> i also read that this is an important year for china and president xi specifically. i know they don't have elections, but it's being deemed an election year. can you talk about the significance of that and how important it is for this to go well. >> you are talking about the communist party congress which will happen in the fall. that's very, very important for president xi, because it's a time when the top leadership is chosen for the next five years. so all the emphases has been on

stability this year. making sure that president xi is not embarrassed in any way. that's why the nightmare scenario for them at this meeting is any sign of awkwardness or open hostility or any disrespectful tweet by president trump to president xi. anything that would be seen as diminishing president xi's standing domestically. that's the worst case scenario. the best case scenario is if they can establish constructive dialogue, avoid a full-on conflict on issues of trade, market access or north korea, and they just want to make sure they see signs of stability in the relationship. that, again, as you pointed out, is the key here. they want to make sure this year, with the economy slowing down, with the party congress at the end of the year that it will be a stable one for president xi. >> eunice, we know that president xi is seen as one of the strongest leaders for quite

some time in china. he respects strength. the chinese more generally respect strength. if you put aside some content of the attacks on china particularly during the campaign trail that trump made what is the level of respect for him as a leader and someone who managed to win this election against all odds? >> he has a lot of respect in the country. he also fashions himself as the defender of china against western influence. because of that in some ways he has painted himself into a corner, where he has to project a strong persona. not only because, as you mentioned, all that anti-china rhetoric that president trump had been saying, which would be getting president's attention, but also the chinese audience and how that plays with the chinese back home. he has to show he's just as strong if not stronger than

president trump. >> $850 a week you said? that was the figure they're throwing out for how much american families save? >> $850 a year. so you save $850 a year on average because of cheap chinese goods. >> eunice yoon, thank you. still to come, the u.s. senate could go nuclear today as democrats and republicans battle over president trump's supreme court nomination. that's coming up next.

in washington, senate republicans are expected to change a longstanding rule that requires 60 votes to confirm a supreme court nominee. tracie potts joins us from capitol hill with the latest. this is the nuclear option. >> right. we've been calling it the nuclear option. here's what that means. they changed the rules so republicans can get done what they want to get done without any democratic vote. a few democrats said they will vote for gorsuch, but not enough to reach the 60-vote threshold. so starting this morning and for two hours there's expected to be a series of votes that will lower that threshold to a simple majority. so republicans can get him confirmed with 51 votes. we have not seen this happen, and now democrats are frustrated about it. saying if you have a nominee that can't get 60 votes, you need a different nominee. the danger of this, they won't

be able to get gorsuch confirmed to the court, but the real danger is what happens down the road because of this split. they're not building goodwill for what will happen in a couple weeks. they have serious spending bills that have to be passed. what happens after that? tax reform, a tough issue is that the president wants to dole with and circle back to healthcare. >> and all sorts of market implications. tracie potts, thank you very much. when we come back, the top stories, a round up of global headlines and the markets with some early pressure on futures. plus we'll get you ready for the trading day ahead with mike holland, long-term investor in china. you're watching "worldwide exchange" on cnbc. mom gets breakfast in bed...

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good morning. markets now. u.s. equity futures pointing to a lower open one session after the biggest one-day reversal in

more than a year. the china factor. president trump prepares to meet his chinese counterpart for the first time today. and jeff bezos revolutionized how we shop. now he's ready to change the way we think about space. the details coming up. it's april 6, 2017. you're watching "worldwide exchange" on cnbc. ♪ >> good morning. welcome back to "worldwide exchange" on cnbc. i'm sara eisen. >> i'm wilfred frost, very good morning to you from me as well. it's throwback thursday. this week it's one-hit wonders. as i proved at the break, the song at the top of the show "barbie girl" not a one-hit wonder. they had a follow-up called "doctor jones." even more tacky than "barbie girl." >> theydanish norwegian

band. did you know that before today? >> i did. >> i don't believe you. let's get to the market action. the biggest reversal for the dow and s&p for 14 months. a bit confusing when i saw that headline on cnbc.com. it was down about 0.3% for the dow. the nasdaq down 0.5%. markets facing big gains. the turnaround happened when the fed minutes came out. the tone more hawkish expected. not so much in terms of the short-term or rate hikes, but in terms of the long-term and what they plan to do with the fed balance sheet in particular. banks were the worst performer down 0.7%. banks down 1.4% because in part investors were seeing fewer rate

hikes and the fed will use reduction of the balance sheet as a different tool. a little bit more hawkish tone from the fed ment markets declined a bit in the afternoon. futures off about 9 points for the dow this morning. red in asia and europe. one of the biggest remembers for this is asia and europe are seeing profit taking after a better month of march than u.s. markets. the nikkei down 1.4%. the laggard is the ftse 100. down a half percent. germany facing a half percent of declines. oil looks to start firmer again this morning. lost some big gains yesterday but remains green. wti crude 51.19. brent at 54.45. nat gas is flat to red. ten-year treasury note yield following the digestion of what was conceived as hawkish minutes from the fed, 2.35 is the yield

on the ten-year. that's coming down. some dying of treasuries. dollar trade right now, little changed in the early action. the euro is a bit stronger. 106 1.0668. the dollar/yen, 110. and the pound is weaker against the dollar. gold is up half a percent. i couldn't remember which way because the dollar is had in search of direction and gold could go either way. >> that's right. they've been doing soul searching lately. the big political story, president trump and president xi jinping will meet for the first time today. xi and his wife -- president xi and his wife will join president trump and first lady melania trump for dinner florida

tonight. trip and xi -- sounds like an interesting partnership -- will have a series of meetings tomorrow. all very confusing, we know what we're talking about. >> joining us now is mike holland, chairman of holland and company. >> chairman holland or chairman mike. >> xi. >> you have been a long-term investor in china and the u.s. how do you see the meeting? >> is important because it will set the stage for the next four years. i'm reminded going into this and with the tradeoff yesterday, part of that was not just the fed but negative anticipation of the meeting, what if things go badly. i heard your piece earlier speaking with beijing. if things spun out of control to

the downside, that's bad for the markets. i think the op sposite thing wi happen. these are two smart guys, they have done their homework. what does he want? what can we give them? what can we get out of this? it's been stage crafted already. i think at the end of the two days, we will have people very happy with the meeting of these two guys. >> what will president xi be coming over and be willing to offer where he doesn't lose face back home? >> very little. it will be much more stage craft. at the end of the day -- north korea is the big issue now. presumably, according to south korean intelligence, we will get stuff going on in north korea over the next two days, nuclear things that will try to disrupt the meeting. he's done this before in north korea. he's done that before. if the two guys come up with something where xi tells trump we will help with you some

things, we can't talk about them. i think he'll get some things from him, trump will get some things. what would be considered -- you said the markets would not like it if they don't get along what do you mean? is it body language? comments? >> a tweet that says we didn't get anything out of the chinese, we have to get really tough now with the north korea. >> suggestions of trade barriers? >> yeah. both on the trade side with china itself but also getting tougher with north korea. so i think that would be coming on the heels of this meeting. >> is it possible, not immediately after this meeting, we'll see an opening up of opportunity for u.s.-based investors in china? could that be something that's opened up in terms of the barrier to entry for u.s. firms, rather than being seen as a

battle of negatives some mutually benefit things can happen? >> bingo. that's an entirely likely possibility. these are two transactional people with their egos at stake but also legacies at stake. both of them, it would like to see -- one-third of the world's economy is meeting in mar-a-lago . of it. the two of them could do exactly as you just described. >> what about your china exposure? how much do you have invested there versus a few years ago? >> absolutely as much if not more. the value there's are compelling. >> equities? >> equities, no fixed income at all. we used to do private equity. there's no reason to do private equity. we're all public equity. we met with our business people, our investment people last week. we've heard these headlines, which scare people. we're about to slow down.

there's no slowing. it's not as high level as two years ago, but it's not slowing. >> you should be in the hong kong market these days. >> yes. which we do. >> that exposure you do through hong kong versus hang seng and -- >> we do all of it. people are in shenzhen, shanghai, singapore. they're over there. we've been fortunate in the 20 years we've been investing over there. one of the reasons is because we're on the ground, these people are on the ground, they know what they're doing. >> in terms of the exposure you would want to have in china. the last decade has been framed by get exposure to the consumer. they have a growing population, growing disposable income. is that still the play or are there other sectors you like exposure to? >> mr. xi and his people are looking for that still. they'll be growing the

domestic -- we helped to grow their middle class dramatically. that will continue to happen. the financial system is one area where investors find smart plays to make. particularly in the insurance area. >> very quickly, the "usa today" cover story, ryan slows down on healthcare bill, pivoting to the u.s. and the trump rally built on the pro-growth agenda. were you disappointed to hear that? does the time frame matter to you? >> reagan had stumbles in his first days. i think that it's possible, talking to people who know something about this, i certainly don't, but the republican party is noticed from its voters, when they go home, these elected officials who screwed this thing up, they'll -- i hear inside that this still has legs. this could actually happen. that would be a huge surprise. was i disappointed? sure. i was disappointed along with everyone else. >> but you think it could still

happen? >> people tell me they think this stuff will happen. >> mike, thank you for joining us. turning to the top corporate news. unilever plans to exit its spreads unit, which includes country crock and i can't believe it's not butter. >> did you have i can't believe it's not butter here? >> yeah. >> they are completely restructuring. announcing the move is part of a business review after kraft-heinz made and pulled a takeover offer. unilever plans to increase its margins target and launch a 5 billion buyback this year. as this company retools and does soul searching, the ceo, paul polman will be on "squawk box" today at 8:30 a.m. eastern time. in other corporate news, amazon founder and ceo jeff

bezos taking on elon musk and spacex and says the sky is the limit. landon dowdy has that story. good morning. >> reporter: good morning. jeff bezos has sky high ambitions. the amazon founder says he will sell a billion worth of his shares in the e-commerce giant every year to help fund blue origin, his rocket venture which aims to have paying passengers on short rides into space starting next year. bezos spoke at the 33rd annual space symposium in colorado springs yesterday where he outlined his plans for the future of space tourism. >> if we can make access to space low cost, then entrepreneurs will be unleashed. you will see creativity, dynamism, the same thing in space that i've witnessed on the internet over the last 20 years. >> bezos showed off a mock-up of the capsule which supports six

reclined seats and large windows. he said blue origin had hoped to begin test flights with engineers and test pilots this year, but that's delayed until 2018. blue origin is developing a second launch system called new glenn to carry satellites and eventually people into orbit, similar to the falcon 9 rocket and dragon capsule. bezos is amazon's largest shareholder with near wli ly 18 million shares. back over to you. >> thank you very much for that. i have to say, watching some of these -- i didn't watch it live that speech, but clips on twitter, unbelievably exciting. i don't think we're there yet, but can you imagine like movie style futuristic possibilities in space. i believe in these guys. they delivered on the ground. >> it's interesting to see the race between elon musk and jeff

bezos. they have made it their pet project. >> what i like about these guys, sir richard branson and virgin galactic as well, not a negative, competitive tone. they all want this for the future of humanity. it's not like a fight on the ground to have better margins in retail thing. it's a futuristic -- >> next frontier. >> exactly. when we come back, the must-read stories. you're watching "worldwide exchange" on cnbc. i love you, couch.

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welcome back to "worldwide exchange." time for our must-reads. my pick in the "wall street journal," everyone is trying to figure out president trump's playbook for the president xi meeting. this one comes from john bolton. the former u.n. ambassador, big trump supporter, rumored for a number of trump top security positions. he lays out a strategy here. a resolute message for china that should be communicated.

making america's foreign policy great again should mean that apologies, disinterest and passivity are terms that no longer describe or apply to washington leaders. no grandiose final communique is needed. a simple statement that the two leaders had a full and frank exchange of views will suffice. he did not elaborate on this, but he said the trump administration may be tempted to go to trade and some economic promises, but really n and geopolitical security in the region, the south china sea should be front and center when it comes to president trump's overarching goal of communicating that this is not the obama administration anymore. >> that's a good one. lots of write-ups of this important 24-hour meeting between the two leaders. the best one i read so far was yesterday, kevin rudd, the

form former prime minister's one, or just watch the show that follows us. "squawk box" starts in about 15 minutes time. joe joins us right now. >> is that a fact? >> i believe so. >> surely you knew. surely you prepare all night for your guests. >> interesting day yesterday. talking to cramer about how this is a renewal of the upfrietrend seems like there's always some things in washington that may be playing into what happens, even on a daily basis. ryan started talking about this tax reform thing may take longer than we thought. market heard that. then they'll do obamacare again. the free come caucus was coming along, and then they're getting nowhere comes out. plus trepidation what if these

guys talk, don't get along and has if they have a big fight? they just -- they don't like each other, we have a trade war. a lot riding on the summit with president xi. you have justin john shave dust? what happened there? >> he fell over, hurt his back. he's still expected to play today. >> you hear something like that, it's like -- it can happen to anyone, i guess. you can fall down steps or something and hurt your back. a lot of times what actually happens -- let's say that's what actually happened, but it's weird that the number one player in the world the day before the masters, something like that happens. the first year without arnie, that will be on everyone's mind. i think it's at:0 8:00, billy

payne comes out. >> it reminds me a story of a great arsenal soccer player, freddie junburg, he injured himself in the bedroom the night before and missed a game. >> and apparently he was alone, which is even weirder. >> i don't know the precise details. he's a swedish man, you can guess whether that was correct or not. we have to leave it there. look forward to "squawk box" where joe will not be alone. he'll be alongside -- >> kevin rudd, huh? >> becky, andrew and kevin rudd. >> still to come, we'll get you ready for the trading day ahead. chad morganlander. >> this is 100% not a one-hit wonder. you get used to food odors in your car. you think it...

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a drop of dawn and grease is gone. welcome back to "worldwide exchange." futures looking a bit softer, but not anything significant.

down about 4 points, coming off the back of the biggest reversal for 14 months, but slight declines in total, just down 0.2% for the dow, having been up. let's have a discussion of what markets might do today. chad morganlander joins us. thanks for joining us. i suppose all the focus has been on the fed minutes yesterday. your take on that? did it justify that reversal yesterday many. >> that w yesterday? >> was a surprise to everyone, but it's signaling they will reduce the balance sheet. was it proep greappropriate? perhaps. of all the expectation about global growth as well as fiscal stimulus, pe multiples, gdp to market cap, everything looks quite high. we believe there will be disappointment going into the

second half of the year. we believe people should be more cautious about how they layer on risk at this point. >> is that what you thought yesterday's big reversal was about? everybody had whiplash after that 200 point gain from the dow turned into a loss. ryan headlines. fed minutes. some concern about president xi. is that a pattern? >> i think so. the federal reserve will raise interest rates perhaps two, three times this year. equity investors have moved to risk markets because of this low cash market. we believe that's one reason. the second reason is the shape of the yield curve. as the federal reserve starts to reduce the balance sheet, the expectation is there's a steepening of the yield curve. i think that's going to be the opposite. you'll see additional flattening of the yield curve in the second half of the year. >> you'd be selling banks o s oe

back of that. >> i would be cautious. last year we were cautious, went neutral. so neutral to underweight at this time. >> are you loading up on defensive? >> defensive is the main thematic for 2017. you can look at aetna, united healthcare, dr. pepper. >> that was the story of the last few years. >> it will continue to be the story. >> how will we get reflation and break out of 2% economic growth? you're not buying that? >> no you can go from 2% to 2.5%, but the economy has not hit escape velocity as of yet. we would be quite cautious at this point. we are in a synchronized growth pattern. eurozone, china and fiscal

stimulus, but we don't think it justifies valuations. >> internationally, would be investing there? >> we would be more cautious on emerging markets. we think they had their run based on the excitement about fiscal stimulus and credit growth in china we would pare that back because dollar will increase in value. when it comes to the eurozone, i'm concerned about the political effects and fall back for the french elections coming as well as 60 days from now or 90 days from now you will get the trump policy on what they're going to and who they'll take shots at. we don't think that will end well. overall the general thematic from a policy perspective, everything will be watered down. >> chad, thanks for joining us. >> thanks to ivan pointing out, i can't believe it's not butter started in maryland, it's a u.s. brand. >> is it? >> it was rebranded in the uk.

>> i could not believe it was not butter when it came out. >> "squawk box" coming up next.

good morning. china summit. president trump getting ready to meet with chinese president xi in florida. rise of the machines, blackrock's larry fink joins us for an hour to talk about the economy's new strategy for portfolio management. and the masters tees off today in georgia without arnie. a little bitter sweet and bizarre, the world's top golfer suffering an injury falling downstairs. details straight ahead. it's thursday, april 6, 2017. "squawk box" begins right now.

welcome back. you're watching "squawk box," live from the nasdaq market site in times square. ♪ >> good morning, everybody. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. let's look at u.s. equity futures. right now you'll see things are slightly lower, but when i say slight, ever so slight. the dow futures are down, only by about 6 points. s&p futures are down by 2 points. the nasdaq off by three. yesterday was something to watch. we were looking at the dow up y about 200 points before everything came tumbling down. it was a huge reversal. nasdaq was down as well. down by