hello. welcome. you're watching "street signs." i'm carolin roth. these are your headlines. european equities turn lower as a selloff in miners hits some of the biggest stocks. u.s. vice president mike pence meets japanese prime minister shinzo abe as the u.s. seeks to boost trade ties and attract investment, telling the japanese people the u.s. is with you 100%. the far-left and far-right rally for votes in france as the margin for error tightens, with just a couple of percentage points separating presidential front-runners emanuel macron and marine le pen from francois fillon and jean-luc melenchon.

president trump congratulates turkey's recep erdogan on his referendum win, but international monitors criticize the vote which awards him concentrated new powers. good morning, everyone. yes, you're watching "street signs." glad you're with us today. it's tuesday, though it feels like a monday. we have had this long easter break. hope you all had a great one. the markets seem like they're off to a slow start. the ftse 100 is off by 1%. the dax lower to 45 points, the cac 40 down 0.90%. this despite a rally on wall street and a positive session in asia. seems the basic resources stocks are dragging us lower. that's in part because we are seeing iron ore prices at

five-month lows. let's turn back to the settingers, you'll see the basic resources are underperforming. oil and gas is underperforming as well. oil prices a bit lower in what we're seeing as thin trade. once again, miners keeping a lid on some gains. oil and gas off by 1.35%. this weekend it was all about geo politics. let's kick things off with vice president mike pence, he has met with japanese president shinzo abe in japan and had a working lunch. the vice president told abe the u.s./japan alliance remains a cornerstone of peace and security in the asia pacific region and that the united states was with the japanese people 100%. abe also added he supported donald trump's position that strategic patience with north korea had run out and that all options are on the table. president trump told nkdz

th north korea that it's got to beha behave. hallie jackson has more. >> reporter: at the white house, a jarring juxtaposition, the president posing with the easter bunny, but at the rope line new questions about north korea. >> got to behave. >> reporter: later on fox news. >> i don't want to telegraph what i'm doing or thinking. i'm not like other administrations where they say we're going to do this in four weeks. and that -- it doesn't work that way. >> reporter: that strategy of suspense, a hallmark of this administration so far isn't sitting well with russia, where there's new tough talk. on russian state tv, a putin ally saying, quote, trump is more impulsive and unpredictable than kim jong-un.

the white house tight-lipped on next steps in north korea. >> drawing red lines hasn't really worked in the past. >> reporter: president trump appearing to take his own advice in what you can call the art of the foreign policy deal. he's written negotiators should use leverage. in this case, that's his budding relationship with china, staying in close contact with beijing. secretary of state rex tillerson in touch with his chinese counterpart this weekend. fight back, the president's also advised reiterating now, all options are on the table including military action if needed. and while he said successful negotiators should deliver the goods, experts aren't sure how he will, in an intractable international conflict still unsolved after decades of diplomacy. >> so the danger is, of course, people see this as a bluff and great powers can't bluff. >> japan's deputy prime minister, tara aso and mike pence are set to hold a joint press conference in tokyo. as soon as mr. mike pence starts speaking, we'll bring you that. you're seeing the deputy prime minister there speaking. let's bring in daniel morris senior investment strategist at bnp paribas investment.

it was all about geo politics in the markets. yesterday the dow rallied 100 points out of the gates. asian markets doing reasonably well. in europe a bit of a selloff. do you think by in large, despite the selloff we're seeing today in europe, markets are more immune to what's happening on the geopolitics side? >> i think it will weigh on the markets. how quickly do you think the north korea situation will be resolved? that's in the back drop. what's important now is you're having this at the same time as you have the questions about the republican agenda. questions about the economy in the u.s. today with the retail sales data last week. as much as all these things happening at the same time that's explaining the current weakness. >> the treasury secretary said the tax reform by august, that is simply not achievable. i guess he's catching up with reality. is there a risk that this tax reform is really just going to be a small tax cut and it will be delayed? >> exactly. that's certainly what you wonder about when you see initially 12%

gains in the s&p 500. that was priced in a lot. priced it in quickly. when you get the results of what republicans were proposing. not only could it be delayed, it could be much less than you expect. and that could be going away. >> so it's not priced in yet? >> exactly. it's a bit of a wait and see. i think investors will give republicans more of an opportunity to come up with something. you failed once, you failed twice, you could see a big deflation. >> mnuchin made some interesting comments when it comes to the dollar. he said the dollar strength is positive in the long-term, and that's in line wicontrast to wh president trump said last week. >> the dollar has been moving the last couple of weeks. you have to keep in mind, despite what governments say, they don't control the value of

the currency. it matters what the secretary of state says or donald trump says, but in the end the fundamentals will determine the value of the currency. in the long-run the fed drives policy in the u.s. and what will drive the dollar. >> where do you see the dollar heading? >> at this point we're a bit neutral. we don't know exactly what will happen with fed policy. then we're waiting on the trump administration, the stimulus package from the republicans, that's quite uncertain. you saw that in the dot plots in terms of the fed's own forecast. they are not taking into account stimulus, even though we think we will see some. we need more information on what will happen, how big will it be, and then we could have a better view on the fed and the dollar. >> let's step away from trump and the fed. let's talk about earnings season. two major banks reported numbers on friday that were better than expected. getting more banks out today. the likes of goldman sachs, for example. what do you expect this earnings season. the last one we saw the earnings recession was finally over. do you want to see more

confirmation of revenue growth, higher margins? >> would be nice to see better revenue growth, but driving profits is not only challenging in the itself, inflation is not high enough, growth is not high enough. it is still really is a margin story. people have been concerned in the u.s. that margins are quite high. every quarter you say how will u.s. corporates generate more profits, but they do. so they're confident about the earnings for this quarter and this year. it's a question of the valuation on those earnings. we know the multiple for the s&p 500 is 17 1/2 times. that's quite a bit above average. so what you may see is good earnings but not much of a reaction from the market because so much has been priced in. we need to maybe wait for some time for earnings to grow, prices to be flat, and then from there maybe get a second leg in the second half of the year. >> how much of a hiccup will the french elections be? >> it's part of this global uncertainty that we have. even once we get past the french elections, it's the german leak

shuns and the french elections. it's the next hurdle by not the only one. i think markets have at this point gotten used to this type of volatility. >> how do you position yourself ahead of all that? >> certainly i think investors after brexit and trump have looked to take advantage of options and position themselves. now since everyone is doing that, they're not as cheap as they were before brexit. but definitely positioned for any outcome. >> daniel, thank you very much for that. daniel morris, senior investment strategist from bnp paribas. the vice president of the united states just started talking in japan. let's listen in. >> your friendship and the kindness that you've shown us in the effort that begins today. i thank you for your tireless work to strengthen the bond between your nation and mine. it is an honor to be back in japan. on my very first visit to the asian pacific as vice president

of the united states, i had to come to japan. i bring greetings from the united states of america, president trump. and earlier today on the president's behalf i had the honor to meet with president abe, to reaffirm the alliance between japan and the united states. the united states/japan alliance is the cornerstone of peace, prosperity and freedom in the asia pacific. and under president trump america is committed to strengthening our alliance and deepening our friendship for the benefit of our people and for the benefit of the world. already our bond is growing stronger. prime minister abe was one of the very first world leaders who president trump hosted at the white house. they continued their meeting at the southern white house, and i can attest personally that they have forged a good, personal

relationship, which is already benefiting both of our nations. their relationship truly demonstrates the extraordinary respect that president trump has for our critically important ally, japan. today, as we have for more than half a century, the united states and japan stand united in defense of democracy and the rule of law, not only in this region but across the world. tomorrow i will speak from the deck of the "uss ronald reagan" at yokasuke naval bass, a sign of yunity of peace and security in the asia pacific. under president trump, the united states will continue to work with japan and with our allies in the region including south korea to confront the most only noise thre ominous threat posing this region of the world, the regime in north korea. let me be clear, our commitment

is unwavering, our resolve could not be stronger. as president trump told prime minister abe at the southern white house, so i say on his behalf today to all the people of japan, in these challenging times we are with you 100%. in the face of provocations across the sea of japan, the people of this country should know that we stand with you in the defense of your security and prosperity now and always. now the united states will continue to work with japan, our allies across the region and china to bring economic and diplomatic pressure to bear until north korea abandon its nuclear and ballistic missile programs. but all options are on the table. nevertheless president trump and i have great confidence that together with japan and our allies in the region we will

protected the peapr protect the peace and security of this part of the world and achieve our shared goal of a nuclear-free korean peninsula. security is the foundation of our prosperity. promoting prosperity is the main reason i had the privilege of meeting today with your deputy prime minister. at the direction of president trump and prime minister abe, today deputy prime minister aso and i had the great privilege to formerly launch the u.s./japan economic dialogue. this dialogue presents the united states and japan with an opportunity to deepen our bilateral economic jobs, foster jobs, prosperity and growth on both sides of the atlantic. we're building on a strong foundation. but as the prime minister said, our economies have been intertwined for generations, and this is a new day and a new chapter in relations between the united states and japan. every day, though, our nations already exchange goods and services that improve peoples

lives and help businesses on both sides of the pacific succeed. japan is the united states fourth largest goods trading partner and our fourth largest goods export market. japan is one of america's leading investors. japanese foreign direct investment in the united states totals 4$400 billion. the second most of any nation. i saw that firsthand back in my old job when i was governor of indiana. how trade and investment between our countries can be beneficial to us all. in 2013 and again in 2015 i led a group of indiana businesses and community leaders to japan to foster closer economic ties, great jobs and spur opportunity and growth. today the u.s./japan economic dialogue seeks the same objectives for both of our countries in full. it signifies president trump's commitment to strengthening our economic relationship with japan, using a bilateral

approach. today's meeting with deputy prime minister aso was an opportunity for us to broadly discuss how we view the dialogue, structure and goals. the prime minister and i agreed that the dialogue will focus on three key policy pillars, as he just discussed. the first is a "common strategy on trade and investment rules and issues." under president trump's leadership the united states seeks stronger and more balanced bilateral trade relationships with every country including japan. our goal is simple, we seek trade that is free and we seek trade that is fair. this requires breaking down barriers, leveling the playing field so that american companies and extort porters can enjoy hi levels of market access. the second pillar is structural policies with a focus on fiscal and monetary issues. president trump believes that both the united states and japan can enact pro-growth and

fiscally sustainable monetary and budget tear poary policies. the final pillar is what we call secto rashgs l cooperation. the president and i are confident we can find new ways to expand our economic ties with japan -- >> that was the u.s. vice president mike pence speaking in tokyo about the very strong relationship between japan and the u.s. after his tough talk on north korea. he's recently also visited south korea over the weekend. we'll continue with our chat about geopolitics. coming up on the show, talk to the hand. recep tayyip erdogan dismisses criticism of sunday's referendum result after narrowly winning sweeping new powers. we'll discuss the future of turk turk ey. that's in two. don't go away. she said the future frks h o. hocome no one likeme, jim? intel do! just tnk oevything intes doing rit now

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welcome back. just want to bring you breaking news on turkey on the referendum this weekend. turkey's main opposition says it will present its appeal for annulment of the referendum to the electoral board later on today. that is as president trump has congratulated erdogan on the result. the white house said donald trump spoke to the turkish president in a phone call to congratulate him on the victory and to discuss america's recent strike in syria. let's get out to hadley gamble in dubai for some analysis. mr. trump's phone call to mr. erdogan is quite stunning given that the eu leaders have been extremely reserved and there's been clearly no reaction given the concerns that this referendum was rigged. >> at the end of the day this is not too surprising given the fact that even barack obama congratulated president cici took power in egypt after what

was cents essentially a calcula coup. so this doesn't change things for erdogan when we talk about syria, turkey being a nato member rnlg a member, and that that relationship with the wlous w l who white house will be a nimble one. you still have a situation in which they need the united states, they need russia, they need these counties to keep the regional stability. let's listen to what president erdogan had to say about critics in terms of this referendum and the result. >> translator: the recent organization called oxsa had a report saying the elections were like this or that in turkey. first, know your place. we won't see or hear the politically motivated reports

you prepare. we continue on our path. tell that to my hand. this country has seen the most democratic election not seen in any western country. >> so that's president erdogan basically saying what he's been saying for the last several years, that is that the internal politics of turkey is no one else's business. for the european side, for them is difficult, not only when we talk about the social contract there's, the things they feel are being deeply violated in terms of the constitution and democracy and values, but at the same time they have no yegs yeg with turkey because there's a syrian refugee situation that has not been resolved. it will continue. the expectation is the syrian refugee crisis will deepen and contin continue. now that president erdogan has assumed politically these full powers and there is deep division in the country about that, can he deliver?

essentially what we know is that, you know, all those years of economic growth he was credited with those. now that the economy, of course, the jobless rate are in a bit of a downturn, at this point he will have to now take the onus for what happens next in terms of the budget and in terms of the economy, the lira. at this point he has to take responsibility for that. it doesn't go anywhere else. he can't shift blame that has major implications for his continues relationships not just with the white house but for europe and russia. >> thank you very much for that. i do want to pick up on the lira. it's been rallying against the u.s. dollar in the aftermath of this referendum result. we're still seeing the lira just a tad higher against the u.s. dollar, but it has come off its highs. john bates is from pine bridge investments. good morning to you. thank you very much for coming in would you expect more gains in the lira against the u.s. dollar or do you think this was short-lived?

>> i think we've seen some muted reaction, but i do think we could see more. but it will probably fade off. the market largely priced in the vote. but as we see more rhetoric, more reporting on the contesting of the votes, we'll see more volatility. i think for the leer wira to ge under control properly, the central bank needs to see inflation falling off, at which point it can deal with interest rates. which are still considered low. >> is the central bank after this referendum, is it still independent? is the court system, is it still independent? those are some major questions on the minds of investors. >> that's the biggest risk for investors at the moment. in particular the central bank and the banking regulation. the turkish banking sector is probably the best regulated banking sector in emerging markets up until now. if that loses its independence, we could see volatility.

a lot of these institutions are heavily relintd ptreliant on ex funding, so that is a risk we could see going forward. >> proponents of the referendum have argued that mr. erdogan needs to consolidate power to gain stability in the fight against isis and terrorism in the relationship with the eu and the u.s. that's in part also why the lira has rallied a bit. do you see any upsides to this referendum result in that he may get a better handle on all the international challenges? >> i think the yes vote, if it eventually is confirmed, and it looks like it will be confirmed, removes quite a lot of uncertainty from the table. whereas a no vote would increase the uncertainty on the table. i think that broadly speaking this should be seen as a more positive short-term scenario. but in the longer term, we could

see institutions going the wrong way. >> is there any value in turkish assets? i'm looking at the ten-year yield. 11%. equities up 9% year to date. though over the last year or so, the last 12 months they're down 17%. you say you don't see much value in the lira going forward. when it comes to the bond markets or equities, do you think turkey is investable? >> absolutely. i think institutionally from a corporate perspective, the institutions are very, very strong. takes for example, cox group one of the largest con glom conglomerate groups in turkey. the financial sector has strong capital adequacy. we are starting from a strong base in terms of corporate risk and corporate fundamentals. in terms of valuations, i think

they're -- there is still some value. if you think the banking sector is trading about 50 basis points above the turkish part of the component of the index, then corporates are actually a bit less than that. so there are pockets of value left, but the still relatively low interest rate environment may well bring some of the banks to the market in terms of new issuance as well. >> all right. we have to leave it here. thank you very much for your time and insight. he sees value in the financials. we will go for a quick break. after that we'll be live from paris with the latest on the french presidential race. you can join us on sunday as we keep you up to date with all the latest from the first round of the french presidential elections. that's live on cnbc. we'll be back in two minutes.

hello. welcome to "street signs." i'm carolin roth. these are your headlines. u.s. vice president mike pence meets japanese prime minister shin zo abe telling the japanes people the u.s. is with you

100%. equities turn lower as a selloff in miners hits some of the biggest stocks. the far-left and far-right rally for votes in france as the margin for error tightens, with just a couple of percentage points separating presidential front-runners emanuel macron and marine le pen from francois fillon and jean-luc melenchon. president trump congratulates turkey's recep erdogan on his referendum win, but international monitors criticize the vote which awards him concentrated new powers. all right. good morning, everyone. if you're just tuning in, hope you had a great easter. let's peek at u.s. futures. yesterday we saw a strong session on wall street. we saw the dow, s&p and nasdaq higher to the tune of 0.9%. in fact, closing at session highs. that was on tax reform hopes. though volumes are still fairly low. the s&p 500 this morning seen off 2.6 points.

the dow jones seen off by 25. the nasdaq could fall by roughly 5 1/2 points. the picture in europe is not much better. the ftse 100 is down by more than 1%. the basic resources stocks, they're really weighing on this index. this is as iron ore prices have fallen to a five-month low. cac 40 off by 0.9%. the xetra dax in germany losing 40 points. in the currency markets, the dollar edging higher on the back of comments coming from u.s. treasury secretary mnuchin who said dollar strength is positive over the longer term. we're still seeing the dollar/yen below that 110 handle. largely unchanged on the day. we have seen some rally in the pound against the u.s. dollar but also against the euro no particular reason here. keep in mind trading is somewhat -- or volume is still somewhat low after the easter holiday. and the aussie dollar seeing a bit of weakness on the back of

minutes coming from the rba and the iron ore weakness. let's get to some corporates this morning. america's third largest cereal company, post holdings, has 5:agr5 agreed to purchase weetabix for 1.4 billion pounds. safran is mulling a reduction of its $9 billion bid for zodiac aerospace, that's according to reuters. the report claims the aerospace manufacturer is considering simplifying the structure of its offer. the source adds that safran is holding back on a firm decision until zodiac posts delayed first half results. ppg's ceo michael mcgarry urged akzonobel to reconsider its takeover bid. in a letter to stakeholders, mcgarry said the dutch paintmaker's management had not

given sufficient consideration to the proposal, adding plans to spin off the chemicals arm are riskier and would create less value. let's turn to politics once again. the latest polls ahead of the first round of the french presidential election on sunday show all major candidates within a margin of arerror of each oth. this as they have a final punch to gain votes. claire fournier is is in paris. at this point, anything could happen. >> very right. we are in the dark five days away from this election. the whole country is literally holding its breath. never before in this presidential election did we have four candidates so close in the polls. you talked about the margin of error, that means that any two of the four contenders can qualify to the second round. they come from very, very diversified political

extreme-right with marine le pen, the extreme left, with macron. never before did we have two extreme candidates coming so close to the second round. and never before did we have an abstention that is expected to be at a record high. 30%, it could reach 30% which is unseen. is there a hidden vote like francois fillon seems to think? he seems to think he'll benefit at the last minute of this hidden vote. people who have not said they would vote for him but would in the end. i asked a political expert that this morning. >> francois fillon communicates a lot. and to mobilize the right-wing voters who have been extremely upset by the fillon campaign. you remember for two months

fillon was under accusation of nepotism, eventually corruption. so the big question for that election is to know if the right-wing is going to save francois fillon. it could be that will happen, because that election was for them a few months ago. it's like if we don't need to have the leak shelection, it's he was the winner of the presidential election. the big question is to know how much right-wing voters truly seek that. in the polls it's difficult to answer the question because normally the right-wing voter is educated, well integrated, responding to online polls. so we can't see why these people would hide their vote for francois fillon, but it could be part of the electorate will switch at the last minute in favor of francois fillon rather than macron for instance. fillon also believes that

the rise of jean-luc melenchon could bring back people for him. is there a hidden vote? that's the question. but still a lot of surprises to come, most probably for the first round. so all the candidates will throw all their energy in the last five days with big meetings all across france. there was macron and marine le pen yesterday in paris. they will go to marseille, the south of france and try to convince the electorate who doesn't know who to vote for. it's pretty high the people who don't know who they'll vote for. a lot of surprises ahead. and tonight, worth mentioning. jean-luc melenchon who wants to appear as a moderate candidate, will hold meetings in seven different cities because he will be appearing as a hologram. interesting that he is using the new technologies to make his affect on the electorate.

back to you. >> he's been very much present on social media. trying to paint himself as the modern candidate. claire, thank you very much for that. let's turn to commodities. chinese iron ore has hit a three-month low. the most traded iron ore on the dow and commodity exchange closed 6.5% lower. let's look at how this is hitting the basic resources sector. it is the worst performing sector on the stoxx 600 today. guy wolf has just joined us. what's behind this move? iron ore usually seen as a proxy for china. is this the usual ebb and flow of demand or something we should be concerned about? >> over the last few years, iron ore has turned away from a long-term supply market to a larger amoupnt of spot activity but it is prone to flash tightness. because it's a relatively cheap material, difficult to store

significant quantities of it. so we are prone to relatively volatile movements at the front of the curve. i wouldn't read too much into it with respect to the underlying economy in china. does that mean the rally seen in copper, in iron ore, in aluminum that we have seen for much of 2016 and swept over into 2017, that's not abating or stopping yet? >> no. i think it's a bull market in base metals. relatively early one. the data we look at, we do a lot of technology driven high-frequency analysis, and it's showing strong demand. essentially the mirror opposite of what we saw in the bear market. however there's many drivers of base metals now. some of them have potentially bullish supply constraints, which copper is one of those. the main fear the market what is china. it wasn't long ago that everyone was panicking about china, about the state of that economy. we have not yet seen the pick up in demand that people are

looking for. but we believe it will come. >> guy, you seem bullish about the outlook for commodities. are we in a super cycle once again? where are we in that cycle? are we at the bottom? do we expect another leg up or close to the high? >> no we've seen the lows of the cycle. that's our view. commodity cycles are a bit different to equity cycles. you bump along the bottom. you don't have a v-shape in commodities. they evolve over time. supply cannot react quickly. if you go through five, six, seven years of zero capacity, population growth gradually increases demand. everyone talks about the super cycle. but the question is what does that mean? that could be 50, a 100-year process. it doesn't mean commodity prices must go up every year. it means demand is on a structural growth path. >> citi says inflows in evaluations in the commodity

sector will rise. you on the other hand point out that enthusiasm for the sector really is not there. there isn't enough liquidity. why do you think that is, even though we are, as you say, in the beginning of the super cycle potentially. >> yeah. the industry, the asset management industry got badly burned by investing in commodities the first time around. partly because of this belief that the super cycle meant ever increasing prices. it doesn't mean that at all. higher prices stimulate investment in supply, which causes what we saw which is a period of surplus. we're at the end of that. the challenge investors have within commodity prices is curve structure. that's a highly negative cost of carry, which makes it difficult to extract returns. so i believe many investors may feel they are better off investing in mining companies and other entities related to commodities and directly the derivative itself. >> that's why we're not seeing the high participation?

>> you will. but these things take time. no one -- the industry as a whole is never maximum long at the bottom of the market. they're maximum long at the top. so it will take time for that evolve, but it will happen over the next 12, 24 months. >> guy, thank you very much for adding that perspective. guy wolf, global head of market analyt analytics. china home prices have risen 1 1.3% year on year, and 0.6% in march, the fastest month by month gain since october. as debt ridden toshiba seeks a buyer for its chipmaking unit, foxconn is makingeing moves to secure the bid. >> foxconn has successfully passed the first round of bidding with $30 billion. in mid-may there will be bidders for priority negotiations. foxconn has already asked

softbank and u.s. apple for help in the bidding process. but it's eager approach towards acquiring the chip business has raised concerns that japanese technology could spill out to china or taiwan or be used for military purposes. foxconn seems to be trying to fend off such concerns by involving sharp, its japanese unit in the bidding to ensure negotiations with toshiba go smoothly. sharp is looking to enhance camera parts for smartphones and their memory unit supplies parts for iphone. so if foxconn can acquire the business it will bring expansion opportunities. toshiba hopes to sell the business for at least $18 billion, to pay off the debt in its massive nuclear operations. itis aiming to seek a sponsor before the end of june. bidders have been narrowed to five, including foxconn, but

japanese firms absent in the first round may take part and the decision may not come easily. back to you. still coming up on the show, can the banking rally continue as all eyes turn to today's report cards from goldman sachs and bank of america. we have analysis right after this break. don't go away.

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the s&p 500 rebounded from two-month lows yesterday led in part by a rally in banks, this after jpmorgan, citigroup and wells fargo reported strong first quarter earnings last week. all eyes turn to goldman sachs and bank of america who will be revealing their report cards later on today. for an outlook, let's get in touch with kevin quigg. is it a given those number also be equally as strong? >> i hope so the signs are

pointing towards a positive outcome. i think it's important to keep in mind that the mac crows are still driving a lot of performance for the banks. >> by macro you mean the steepening yield curve? i'm looking at the ten-year note which is down to five-month lows again. i guess that's not sustainable. >> i think when i talk about macr macros, i'm talking about deregulation, tax reform and rising rates. i think goldman and b of a are two good examples of this goldman has about 40% of the business in the trading industry. deregulation and fax reform will be important to their bottom line. bank of america is probably more f traditional. rising rates has been a part of their business, as a fear of rates increase can be beneficial to their business. >> wait a second, deregulation, is that really going to lap to

the exte happen to the extent we expected? and tax reform, we hear that may be delayed, and it may just be tax cuts and not full tax reform. are we running ahead of ourselves? >> i think we were running ahead of ourselves thinking these things would happen more quickly than they are. we are still in an environment where there is speculation in the market. obviously earnings have become increasingly important as a mark on the road to success. i think those macro factors and thousand th how they will play out and how substantial will regulation be. what will happen with the rates environment? those are stories that need to be played out in the marketplace. those will determine the value of the banks far more than any one earnings period will. >> what banks do you want to stick with? the big investment banking and focus banks or regional banks that could benefit from a pick up in lending across the u.s. economy? >> yeah.

again, i think there's a lot to be unseen. but it would seem to me that obviously to your point those regional banks, a lot of those changes taking place in the marketplace, those are change, is that would more quickly affect regional banks and we get an opportunity to see it in the bottom line quicker than a lot of the sweeping tax reform or some of the change, is that would need to take place for larger banks to see it. it depends on the business model. for a goldman sachs, where the trading business is very important to a b of a where rates have more of an impact. regional banks are something where any change could have a faster impact to the bottom line. >> i want to talk about netflix. shares edged up in after-hours trade, after reporting fewer subscribers than expected. there was some disappointment on

past subscribers, but the outlook for new ones was bullish. >> on the whole the trend is positive. the company keeps adding subscribers, international continues to grow and it sees big positives with original shows, which is really where it is staking the future now. a lot of positives from the results. but as well as some concern. spending continues to balloon. that's one of the areas investors are keeping an eye on. content is a risky area. you may have some flops, you'll have some big winners. netflix wants more winners than flops. so those are some concerns around the company. >> kevin, come in here. arjun mentioned content is important. but there is risk attached to this. netflix has done well with content, they've invested heavily, $6 billion. the stock is up 19% in 2017, can it run any further?

>> i think it can. that's a great point he made in that, you know, netflix is a fierce competitor. they're in a difficult business in that content is obviously something that, you know, is plentiful in the marketplace. they have done a strong job in original content and that builds loyalty and keeps your customers coming back. with that being said, the challenge for netflix is twofold. on the one hand, unlike one of their competitors, amazon, this is the core of their business. this is not just something they do. this is something particularly with original programming they need to be successful at. number two, remember switching is easy. so if you want to move from netflix to another provider, that's an easy thing to do. because of that that original programming, getting people to come back is important to the business model. that's something they need to keep an eye on. unlike other businesses, whether it's amazon or others that have a diversification of their business model, netflix needs that original programming to continue to be strong because they're relying upon not only the expansion you spoke about

but allowing themselves to have repeat business, to have people come to them. again, they're a fierce competitor, they have done well historically. they navigated a difficult environment. their able to do that in the future is part of the success. >> one of the things netflix competitor amazon has done is jump into the sports game with the nfl streaming deal. the netflix ceo says this is not a strategy we think is smart for us. do you think netflix should be jumping into new product categories like sports? >> i think i would view that as an extension of original programming. it's important to refresh your brand, try to bring in new viewers. the real challenge with that is number one, netflix in a lot of ways was first to market. they have an embedded market advantage. so the real question for them is sports programming rights, which are getting incredibly expens e

expensive. the marketplace understands content is plentiful. you need to have something that brings original viewers to you, whether that's original programming or sports, that's the bet you make. that has become an expensive way to bring in new customers. for netflix that might be a challenge to the business model because they have an embedded advantage in that they were first to market. newer providers and i would include amazon in that, maybe it's more beneficial for them to pay up licensing fees, because they'll get people coming through the door for the first time. netflix is trying to retain customers. >> before we let you go, can i get 30 seconds on yahoo! which is also reporting today? >> yeah, we said at the beginning, earnings mean different things to different people. netflix, because of the sort of core business model, because of the dynamics in it, their earnings numbers will be important quarter to quarter. when you look at yahoo! they're in a period of longer term transition. that's not a surprise to anyone. unlike netflix. yahoo! in a lot of ways, it has the same challenges.

it's easy for their customers to switch as well to another provider, unlike netflix which has been creative in the marketplace with original programming and looking into other venues. yahoo! has not shown the same spirit of innovation. with that being able with the b corporate issues they have. they're trying to maintain the brand value, the value of the franchise and transition to their future. any earnings period between now and then is a weigh station on to the way they will ultimately be. >> kevin, thank you very much for that. a quick look at u.s. futures, a slightly weaker start to the trading session. i'm carolin roth, "worldwide exchange" is up next.

. good morning. markets now, futuring pointing to a lower open on wall street after stocks see their biggest day in a month. bank of america, goldman sachs, j & j, ibm out with quarterly results today. and donald trump says buying american is a snap. more on the president's big jobs push today. it's tuesday, april 18, 2017, "worldwide exchange" begins right now. ♪ good morning. welcome to "worldwide exchange" on cnbc. i'm sara eisen. >> i'm wilfred frost. good morning to you from m