. hello. welcome. you're watching "street signs." i'm carolin roth. these are your headlines. french stocks underperform in europe as paris reels from a terror attack that leaves one policeman dead and two others wounded just days ahead of the presidential election. a rally for rio tinto as barron's asks if it's time to buy the stock, saying the iron ore selloff is overdone. danone sweetens its forecasts, raising its guidance for 2017 earnings, but shares trade lower after disappointing sales in europe and brazil.

a confident relationship. german finance minister wolfgang schauble tells cnbc that contrary to some opinion, the meeting between chancellor merkel and president trump was a successful one. >> people in the media are looking at a strange situation, shake hands or not, shake hands or not. that was totally wrong. it was a meeting of mutual confidence. good morning, everyone. it is friday, it is a crucial trading day before the first round of the presidential elections in france. just want to bring you some data from the eurozone. april composite pmi flash, estimate was at 56.7, versus a forecast of 56.4. just a tad higher than expected. also want to tell you about the french pmis, given that we are headed into this yuscrucial election, manufacturing pmi at

55.1, up from 53.3 in march, confounding expectations for a drop to 53. the services sector rising to 57.7. the composite number reached a six-year high. that tells you that businesses were quite confident, despite the uncertainty that you would expect surrounding or in the run up to the french elections. that probably confuses many. let's have a look at the european markets. we are a bit under water when it comes to the main european equities, except the dax which is trading higher, up 14 points. ftse 1 00 is off 0.1%. cac 40, which saw a stunning outperformance to the tune of 1.5% in yesterday's trading session, is either seeing profit taking or the terror effect. hard to say which factor is outweighing the other. let's look at the sectors one by one. basic resources are trading higher, outperforming the rest, up 1.8% on the back of a

recovery in mining prices or metal prices rather. banks doing well. incidentally it is the french banks which are doing well. real estate, food and beverages, household goods underperforming. let's get back to our top story. the shooting in paris that has left a policeman dead and two others injured has been claimed by isis. the gunman, whose identity remains uncertain was shot and killed at the scene. president francois hollande has promised the upmost vigilance for sunday's elections. donald trump said terror attacks just never end. >> our condolences from our country to the people of france. again, it's happening, it seems. i saw it as i was walking in. that's a terrible thing. a very, very terrible thing going on in the world today. but it looks like another terrorist attack.

what can you say? just never ends. we have to be strong, we have to be vigilant. i've been saying it for a long time. >> let's get out to claire and nancy for reaction. claire, how is this expected to change the race just two or three days before the first round? would it boost the far-right marine le pen or fillon? >> what it's doing, it's providing ammunitions for marine le pen and francois fillon who have tough instances on immigration and security. emanuel macron, the favorite in the polls, but that was before the terror attack of last night. we won't have polls after to assess the impact of these new events. but macron is seen as softer than his rivals on these issues. all three of them are giving statements this morning. marine le pen in a couple of minutes, followed by fillon and

mckron, th macron. it will likely have an impact. but to what extent? to what extent will people be scared to get to the polling stations? the government promised reinforced security. 50,000 police officers would be deployed across the country to protect the polling stations. hopefully it won't deter people to go to the polling stations. >> we should mention that we're standing here right in front of the eiffel tower. i have seen a few officers this morning, but by in large it feels like things are normal. tourists are here fakie taking in front of this landmark. it asks the question we will face this threat no matter who the leader is. donald trump saying they seem to happen all the time in terms of these attacks. do you think there's a sadness here but almost a complacency that this is the world we live

in? >> unfortunately there's a feeling of deja vu this morning in france. there was also a glimpse of hope lately because tourists were coming back to paris. they also are coming back to paris because they seemed to have assessed that zero risk doesn't exist no matter where you go in the world. in paris, yes, there's been attacks and we'll probably have to get used to them. it's not safe to go anywhere in some sense. >> you did raise the issue, too, talking about marine le pen. initially analysts were quick to say this could benefit her because she has been so strong, a real hard line on issues of national security. but what about francois fillon? could this be an opportunity for him even though we hate to say that in a moment of sadness? >> it's definitely something that could help him. he has been appealing to marine le pen's voters. he has kind of like the same proposals to increase security

or against terrorists. for example, just like marine le pen, he wants to close mosques that are deemed as radicalized. he wants to expel foreigners who are suspected of terrorism. so they have platforms of ideas very, very close that could help him for people who were hesitating between macron and him, but who don't want to vote for marine le pen, they might go for fillon. because emanuel macron at 39 is deemed by many inexperienced and too young for this kind of problem. >> that's interesting. because fillon suspended a campaign event. and macron said we should be doing the opposite. now we're expecting marine le pen to speak any moment now. what does it say about how the individual candidates are responding to this sort of terrorism threat? >> you have the three main candidates who decided to suspend their campaign. the two left-wing candidates,

who quite rightly said we don't want this to change the way we consider campaigning and democracy. they had a point in that. they said we're continuing. no matter what, we won't be discouraged. the three other candidates said, well, it's a matter of decency. we are putting our campaign on hold. they will make declarations once again this morning to reassess their petal statresidential sta. >> when you talk about macron's response, we are waiting for his speech later today as well, you mentioned the experience question. that's something we hear from both business leaders, various guests and analysts. when you talk about the photo he posted on twitter, on the phone with u.s. president barack obama, initially that was seen as an attempt to show his experience, international dominance. when you look at u.s. former president barack obama's record so far in this election season, both with brexit and when he

supported u.s. campaign leader hillary clinton at the time t wasn't so successful. could this backfire? >> because we don't see it the same way as english people or american people see it. barack obama is tremendously popular in france. it is a major asset for macron to say, look, i'm speaking as equals with the former president of the united states. on top of that, not only did he speak to barack obama, but he also gained support from the former foreign minister. he's gathered big wigs from the left, center and right. once again to appear more presidential two days ahead of the i lelection. >> still too close to call. so we'll watch those speeches coming throughout the morning. back to you. >> we're sitting here with bated breath. let's look at the market reaction. the ten-year spread between the

oat and the bund yields that has been widening over the last couple of weeks. tightening over the last few days. it's been widening as a result of higher polls for the far-left candidate, mr. melenchon. want to talk more about what this fear gauge actually means with john taylor, portfolio manager at alliance bernstein. thank you very much for joining us. do you think this fear gauge should be wider than it is right now? >> i think there's a bit of a sense of deja vu. it's similar to what we had in the run up to brexit and trump. so in the months before brexit, the pound was weak, rallied into the event itself. in the trump election, we had the mexican peso selloff and rally aggressively. we're seeing it in the french oat spread. widening in the months before the election and in the days before tightening again. the reason this is worrisome is the fact that melenchon is increasing in the polls, he's seen as a market unfriendly

candidate. a few months ago, it was le pen who was unfriendly, now we have two friendly candidates, two unfriendly ones. the market has gotten a bit complacent. >> what ask dodoes this mean fo monday morning when the bunds start trading again and if le pen and melenchon are in the final round? if le pen gets in, we could see spreads, 200 over, melenchon, 150, 200 over. the market is below 70. so the bund is looking for macron and fillon getting in, or a runoff which is possible, but a low probability event at this stage. >> would these levels be worrying for the french state? for the french banks? >> i don't think so because the overall cost of borrowing is

low. the yield is 90 basis points for ten years. if the spread widens, given the fact that debt in france is particularly high, i think the market's real concern is rather than the level is le pen's threat to redenominate the bunds. >> the bunds are not being bought by the ecb. so we've seen more nervousness there. is there a play in the french bunds? >> i think there's plenty for the french bonds to rally. a few months ago, french bank bonds were trading in line with the scandinavians, now they've gone past the uk banks and now closer to where the spanish banks trade if we get a market friendly outcome, we'll see a rally back in spreads. whether you want to do that trade today or see what the first round vote is, that's up

to investors. the level of uncertainty is so great. it's a four-horse race, polling error and commitment to individual candidates is so unknown that we want to see some evidence of what the first round vote is, and then what the indications are for the second round. >> how do you feel about btps? often that's used as a problemsity for tproblems i proxy for the overall risk for the eurozone. is btps the way to trade this risk event? >> i think it's more of a high beater for trade relative to the french spread. we could see a 50 basis point tightening in btps, if it's a market unfriendly outcome, bonds could underperform france as well. they have an unknown risk attached to them. >> john, thank you for that round up. you can join us on sunday as

we keep you up to date with the latest from the first round of the french presidential elections. that's live on cnbc. we'll be back in two minutes after a quick break.

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we deliver super-fast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. we do business where you do business. ♪ ♪ just to tell you that france's far-right leader, marine le pen is speaking at her party's paris headquarters following last night's attack. we don't have an english translation for that. let's just listen in for a few seconds here. [ speaking french ] all right. once again, we don't have the translation right now. i do want to tell that you yesterday she did say to france, i don't want us to get used to

islamist terrorism. we have to stop being naive. we can't leave our children a country that's not able to defend them. i suspect what she's saying this morning will have a similar tone. let's talk a little bit about stocks and basic resources. barron's says it may be time to buy rio tinto as slumping iron ore prices made the stock more attractive. it has been raised from outperform to neutral and buy from neutral. and reckitt benckiser posted a 15% increase in the first quarter. the firm said like for like sales remain flat in the first quarter due to weakness in the european and north american markets. danone raised its forecast for eps growth following the acquisition of whitewave. the group is now targeting double digit eps growth.

danone also reported a 0.7 rise in first quarter underlining sales. philips lighting reported better than expected first quarter earnings posting sales of 1.7 billion euros and net income of 61 million euros sayi saying it's on track to improve margins. we spoke with philips lighting's ceo who said he was optimistic on the company's return to growth. >> as previously indicated we said that we would be improving the growth profit of the company. we managed 0.8% in q1. a substantial improvement versus the previous quarters. europe and the rest of the world are growing. our activities have grown by 19%. as you can see, we are continuing on our transformation journey. we are quite pleased to see the

improvement in the growth profile. >> let's get back to the french story. let's have a look at what the stock market is doing. the cac 40 is lower this morning, off bay half of a percent at 5050. that's the level we're seeing for that french index now. year-to-date it's up 4.4%. over the last 12 months that index is up 15%. james vardy is from bank of america merrill lynch and joins us now. with that performance year to date and over the last 12 months, are we seeing any election jitters in that particular market? >> i think you are. i think markets have drifted lower in the past few weeks partly because of disappointment on the hopes of reflation, but also because the french election has become tighter. three or four weeks ago we were looking at le pen versus macron in the second round, now you have fillon and melenchon close enough. they're within the margin of error, so no one can be 100%

confident about the result on sunday. so there's a bit of risk premium in markets. and some investors have said we'll wait until after the result and then decide what we'll do. >> that's a fair point. that leads me to my next question. i was going ask how do you position for the first round. then i thought a lot of guests have told me there's no positioning really. a lot of people just want to wait and see what happens. is that the overriding sense on the part of clients? >> some people have taken the view that actually it's likely that it's still going to be macron/le pen. if you look at the polls for the second round, macron wins that comfortably. some people have said that's the likely outcome. i'll take a position on that. others, particularly u.s. investors that i've spoken to have said we can afford to wait. european equities have been a disappointment since the global financial crisis. why not wait a bit longer? if we miss the first few percent, that's fine. we would rather buy once we're

sure what will happen. >> i guess that sentiment has changed over the last couple of months. a lot of people who come in here tell us we're overweight european equities, underweight u.s. equities because we see better evaluations for european equities. are you in the same camp? >> we have mixed messages out of our own data. in our fund managers survey, people have gone or said they've gone overweight european equities. but at the same time we have data on funds flows. we saw over 1$100 billion worth of outflows from european equities last year. we're seeing a bit of that come back. i would argue if you get a reaction, result in the french election which calms market nerves, then there's room for more flows to come back in. i think the big difference today for example versus 2015 is that we are seeing a recovery in growth. we are seeing a pick up in earnings. you went through a bunch of earnings numbers.

the earnings numbers for q1 look like they're coming in pretty good. so we think that there is room to come in and buy european equities, because the fundamentals are there as well. you just need the right election result on sunday. >> that's pretty much backed up by many of the pmi numbers that we've seen. the french pmi numbers this morning are extremely robust. very resilient. does that surprise you or does it not surprise you at all? because we have seen this resilience in european data for at least six to seven months. >> the european data has been solid. the surveys themselves are actually above where the hard data is. this hard data versus soft data debate going on. if we plug in just the pmi numbers to our own earnings growth forecast, we're up in mid double digits for earnings growth. that's something we have not seen in europe since the preglobal financial crisis. the more of this data that we get that confirms growth is coming through, the more confident we can be earnings are coming through. >> do you still like the reflation trade even in europe

and as the trump rally in the u.s. seems to be fading somewhat? do you still buy the cyclicals, the banks in europe? >> i think some of the reflation trade got ahead of itself. the push back from investors is back soft data versus hard data. we read a note a couple weeks ago that said the market needs confirmation on the reflation, on the data to go on this we may well have seen the low in treasury yields in the last week or so. for me, that's the key. if we see u.s. ten-year yields moving back up towards 2.5% that reflation trade can come back. >> currently stuck at five-month lows. thank you very much for that, james. james vardy, investment strategy at bank of america merrill lynch. i want to breng you baing you b marine le pen who has been speaking. she is calling on the government to immediately reinstate french borders, to expel foreigners who

are monitored by intelligence services. this is obviously in the aftermath of the terrorist attacks that we saw on the champs elysees yesterday that killed one policeman and the attacker himself has been killed by the police force. the attack has been claimed by isis. we'll go for a quick break. do check out world markets live, our blog which runs throughout the european trading day. we'll be back with plenty more discussion of the upcoming french elections after this short break.

welcome back to the show. french stocks underperform in europe as paris reels from a terror attack that leaves one policeman dead and two others wounded just days ahead of the presidential election. a rally for rio tinto as barron's asks if it's time to buy the stock, saying the iron ore selloff is overdone. danone sweetens its forecasts, raising its guidance for 2017 earnings, but shares trade lower after disappointing sales in europe and brazil. a confident relationship. german finance minister wolfgang schauble tells cnbc that contrary to some opinion, the meeting between chancellor merkel and president trump was a successful one.

>> people in the media are looking at a strange situation, shake hands or not, shake hands or not. that was totally wrong. it was a meeting of mutual confidence. let's have a look at european equity markets just two days before the first round of the french presidential elections. the cac 40 off a half of a percent. it had a stellar run yesterday, up by 1.5%. so what we're seeing today may be a reaction to the terrorist attacks but also may be some profit taking. what to draw your attention to uk march retail sales. they dropped in the first quarter, the worst quarter since 2010. retail sales were down 1.8% month-on-month versus february up 1.7% month-on-month. the poll was for a forecast of 0.2% month-on-month. retail sales once again up 1.7

year-on-ye year-on-year. the uk government saying that if political agreement in -- sorry, that's not related to that. what i will say about the uk retail sales is you're seeing the impact of higher inflation. that's putting a dampening on uk spending. let's look at the pound sterling against the u.s. dollar at 1.2798. stable going into the retail sales numbers for the week. it's on course for a 2.3% gain given the surprise announcement of the snap elections on june 8th. and we are keeping a very close eye on euro/dollar, 1.0722. up slightly on the day. close to three-week highs. surprisingly resilient given the fears around a runoff between melenchon and le pen in the first round of elections. french centrist candidate emanuel macron has spoken with

former u.s. president barack obama. the two politicians discussed the french campaign and talked about the important relationship between france and america a spokesman for the former u.s. president said an official endorsement was not the purpose of the call. in the run up to the first round of french presidential elections, we spoke with a number of politicians and academics about the possible outcomes. >> several months we've been leading in the polls and still are as we speak. so we're not worried. we're perfectly enthusiastienth. >> marine le pen has been constantly on top of the polls for months and months. i think most of the marine le pen voters are already there. it's the mass mobilized electorate that wants to push marine le pen in the second round. they know probably they have the unique opportunity to see marine le pen to be elected french president. it's not done already because

wae have seen recently that the voters of marine le pen are a bit on the decline, a little bit less than before. >> even a goat would beat marine le pen in the second round of the presidential election. in france we have a first round and then the two best candidates at the end of the first round get to the -- become finalists for the second round. and the second round there are so many voters who would vote for anything against far-right, that, yes, indeed, even a goat or a duck, a lame one, would beat marine le pen. >> let's get out to claire fournier covering the elections. a few minutes ago marine le pen is calling for the government to reinstate the french borders and expe expel foreigners monitored by

intelligence services. these comments are hardly a surprise given yesterday's terrorist attack. >> yes. hardly surprising when you know her platform of measure against terrorism. she appeared on french tv and on her facebook page very marshal. she wants to appear as the only one or the best bet to fight against terrorism in france. these are measures that she's already proposed. to expel the suspected terrorists that are foreign, but also to revoke the french identity for convicted terrorists who are french. close the mosques that are deemed too radical. it's all measures we know from marine le pen. she's taking advantage of what happened yesterday to convince maybe some voters that she's the best bet against terror. you heard the political analysts before saying the bulk of the front national voters are already in there. so whether she will be in -- whether she will be in capacity to attract more voters after the

terror attacks, we have unfortunately become accustomed to in france, since it's repeatedly happened to france since 2015, whether she will be able to grab more voters because she does this kind of marshal declaration remains to be seen. as you know, the favorite is still emanuel macron. can the event of yesterday impact him? that's also a question because it's true that he appears less experienced, you know, and quite new. he's 39. is he able to face this kind of threat on our territory? that's a question that maybe people in the secrecy of the polling vote will ask themselves. maybe they will choose to go to fillon. because fillon has been in politics for 30 years. also older. more experienced. so there might be an effect on these events on the presidential

elections. what definitely will be key is still the abstention. will be high? it's expected at 30%, or are people going to mobilize in the last minute and finally go to vote on sunday? that remains the big question. >> claire, thank you very much for that. want to talk about the fx impact with jeremy stretch. jeremy, overnight we saw hardly an impact on the euro/dollar following that terrorist attack, maybe because the market is more immune to these things. why is the euro/dollar trading where it is, 107.19, a three-week high given that the race is seemingly wide open? >> it is. it's surprising we have not seen an immediate reaction. it will be fascinating to see how the bond markets trade throughout the day and if there is a push ridwider for bund spreads. i think going into the weekend vote, because there's been relative stability in the polls

over the course of the last week or so. we don't know whether there will be a last-minute surge in voting. because there has been a relative did he grow of stability markets have been assuming we would get the result of macron versus le pen in the second round. that's very much up for debate. i think the fascinating thing that has come out of both the events of last night and from your commentator, it's going to be about turnout. the mobilization of le pen voters is guaranteed. it's turnout. if we see a moderation of turnout and a lower level than we saw in 2002 when marine le pen's father was running in the race, then i think that puts her in a bet poter position than ot candidates? >> because her voters have strong views about her? >> her vote base is strong, very dedicated. another person earlier on was talking about the voter base coming out in whatever weather condition. that's true. so if we go back to the brexit vote last year, we had heavy rain in london, some of those softer voters may have stayed at

home. exactly the same consequence here if we see a lower level of turnout, those dedicated le pen voters will continue to go through to the polling booth. there's been suspicions that some voters for macron are softer. less mobilized, less energized to go to the polls. so that's why turnout does matter. >> let's look at some of the scenarios that could happen on sunday. what if le pen and macron make it to the second round as expected? do we see reaction in the euro? >> i think we do. that's the best case scenario for the market. that would allow some risk premium to be taken out of the currency. so you will probably see a further compression in spreads. so moving or extending that compression that we saw through the course of yesterday. accordingly i think that does open up the possibility and probability that the euro will appreciate. our immediate forecast is 110 on the proviso that we don't get

unexpected results in the first and second rounds. >> what about le pen and macron making it to the second round? where does it drop to? parity? >> parity to the 103 range is an obvious. if we get that kind of result coming out on -- in the news on sunday night that would make for a lively open to trading in wellington on sunday night. that's why i'll be in the office and you'll be here, our options trader also be trading the market because there is that -- there's that potential risk. that's probably the most extreme scenario for the market. clearly neither will be particularly or deemed to be particularly market friendly, and it will be a fairly inindividual uinvi invideous choice for the voter. >> you made some choices on twitter mentions. >> to look at the mentions of individual candidates or policies within the twittersp e

twitterspere. if you look at the twitter votes or the twitter mentions that macron and fillon are certainly leading the pack. le pen is lagging. now, you can argue that perhaps is a demographic issue. in view of her voter base being rather less metropolitan, perhaps a little older, but it's interesting that macron continues to be ahead in that metric as well as opinion poll assumptions. >> what's your secret for staying up throughout the night? how many espressos? >> i have to pace yourself. >> jeremy, thank you very much for that. jeremy stretch. let's talk about something that we haven't talked about during the show yet, draft eu negotiati negotiation guidelines reveals that britain will be paying off fines for years after the brexit. european parliament president

antonio tajani said brexit could be reversed if the uk wanted to withdrawal article 50 after the general election. speaking in london following a meeting with prime minister theresa may, tajani also highlighted the key brexit sticking point. >> the uk's departure and the european parliament message is clear, strongly defending their interests in our first priority. the students, workers and families are valuibiliable membf society. i yind liunderlined in the meeth mrs. may, for the european parliament this is the most important point. germany's economy is likely to gather pace in the first quarter pushing up tax revenues by more than expected.

however the findings add that political uncertainties like u.s. protectionism, brexit negotiations and upcoming elections are clouding the growth outlook. cnbc spoke to wolfgang schauble in washington and asked him about the criticisms surrounding his country's trade surplus. >> we will try to explain what we're doing. we'll try to explain that the germans are by no way are manipulating it in any way. the exchange rate of europe is -- regarding the strength of the german economy, it will be a bit low. but we have a common monitor union. the monitor policies are decided by the ecb. the ecb has to take a monetary policy not only for the german economy but 18 my economies wi

different levels of competitiveness. we're open to listen, to discuss, to explain. we are interested in the best relations which are possible. >> they argue you could do more. you could lower your v.a.t. tax. you could allow wages to rise more that would help with the trade balance, with the current account surplus because you can't control monetary policy. >> yes, of course. but i can tell you, if you want to give advice to german economic or fiscal policy, you have to know some facts. for example, the wages are much more than the national gross product, by far. the pensions have raised much more. investments in the federal budget, we are only responsible for the federal budget. investments in the federal

budget have raised by 35%. therefore, we have the highest rate of investment in research and development of all european countries and by far much higher than the u.s. in relation to the national gross product. therefore i'm ready to discuss every bit of fact, but you can only give advice on the basis of the facts. i know as german finance minister, i know the facts. >> huge event this coming weekend, the french election. can the euro survive the french election? >> i'm quite optimistic, and i think the french people will take reasonable decision. that means a decision that allows the euro can survive. >> when you have more than 40% of the electorate at this point saying they support someone who is absolutely a euro skeptic like marine le pen or a second candidate who says his support for the euro is only conditional

as long as he gets to spend the money he wants or violate a lot of the things that require membership in the euro. how can you be optimistic when such a large population -- percentage of the population doesn't seem to support that? >> 40% is not the majority of a population. >> no. what do you make of the rise of euro skepticism across europe? what's gone wrong? is the euro not working the way it was supposed to? >> i think it's not a matter of the euro. it's a lot of problems. i think some problems are similar to the reasons for electorate decisions in uk in the brexit and in the united states and the presidential elections. there is some uncertainty and the change of -- the speed of change. >> a lot of people say the euro is about maintaining peace, but do you know what marine le pen says? she says the euro did not bring peace. peace brought the euro, that it exists because of the peace. and that as the peace falls

apart, the euro will fall apart. >> i do not agree with madame le pen with all due respect. by the way, she is using a lot of arguments in the way that other people are responsible for my problems. that is always the message in which demagogues have been very successful, blame the others for their own problems. it may be lovely to listen for to constituencies but it can't be trusted. you have to care on your own problems. everyone has problems. every state has problems. but you have to solve it yourself. you can ask for solidarity. >> president trump announced a trade probe against china and other cheap steal exporters citing concerns about national security. speaking at a white house ceremony with the executives of three u.s. major steel

companies, trump said steel is not an area where we can afford to become dependent on foreign countries. president trump has praised chinese efforts to rein in what he calls "the menace of north korea." north korea state media warned the u.s. of a super mighty preemptive strike, trump said he was confident xi would push its neighb neighbor. the u.s. has deployed special aircraft capable of detecting a possible nuclear test. hallie jackson has more details. >> reporter: tonight a military message off the korean coast. ongoing joint exercises with the u.s. and south korea as the north appears to position itself to conduct a nuclear test with little to no warning. according to multiple u.s. intelligence officials. the military is deploying a

special sniffer aircraft that can detect evidence of a nuclear explosion along with drones and spy planes. president trump today alongside italy's prime minister. >> as far as north korea is concerned, we are in very good shape. we're doing a lot of work, we're in a very good position. we're going to see what happens. >> he's basically saying nothing to see here. in fact, the situation is tense and dangerous and we're a long way away from resolving the crisis. >> reporter: to convince north korea to turn down the temperature, the administration is leaning on china. >> some unusual moves have been made over the last two or three hours and i really have confidence that the president will try very hard. >> reporter: the president didn't specify what chinese moves he meant and isn't saying what he would do if north korea does test a nuclear weapon. the first time under his presidency, instead, preferring to preserve the element of surprise. that's been a hallmark of his foreign policy so far and today

on the foreign nuclear deal, another startling break. >> they are not living up to the spirit of the agreement. i can tell you that. >> reporter: but just two days ago, his own state department acknowledged iran is holding up its end of the bargain. another step for donald trump toward developing a doctrine of unpredictability. coming up on the show, no smoke and mirrors. we hear from the portuguese secretary of state for finance who says real financial reforms are being made.

i am totally blind. and i live with non-24, a circadian rhythm disorder that can throw my days and nights out of sync, keeping me from the people, places, and things i love. the people i love have always been there for me. and now, i'm there for them, too. talk to your doctor, and call 844-214-2424 to learn more. welcome back. portugal's junk rating is getting harder to justify. that's according to the country's secretary of state for finance. speaking to cnbc on the sidelines of the imf spring meeting in washington, he told geoff that portugal has made more than just a token effort on domestic reforms. >> one should be aware that one

deficit reacts immediately to the measures you take, when you look at the stocks, stocks are much more sluggish. we need to be aware what they mean. by this time we have -- >> so this is not smoke and mirrors? >> this is not smoke and mirrors. we have injected quite substantial amounts of -- of money in order to repair the balance sheet of financial institutions. last year we increased that. but there were funds that were necessary to recapitalize market terms which was critical for the financial stability in portugal. after we have recapitalized, after the situation of state aid and reimbursing products, we

think that over the coming year we are in a situation by which you can reduce debt and we are already discussing with the esm a new main way to anticipate payments to the imf such that we will reduce the average cost. so we are very focused, committed to repay tax and to make that ratio come down as fast as possible. but of course that needs to be done under sustainable scenario. we are enjoying or recording one of the largest primary surpluses in the area. that's critical for that sustainability. is the primary surplus. this primary surplus is to be maintained over a long period. this will be done. the stability program, that has not been repaired will have maintenance of this primary surplus for a period of up to

the end. so up to 2015, 2021 when you have quite substantial improvement in the fiscal center. the imf may fund the greek bailout for a short amount of time with a small amount of money. that's the latest line from the government in athens as they try to overcome a disagreement on financing terms between the eu and the imf. a government spokesman said it was in discussions with the imf over the possibility of a one-year payment in a smaller bundle. imf chief christine lagarde was at the spring meeting in washington, too. she was asked about the pace of rate hikes from the federal reserve and the impact it would have on emerging market growth. >> that's for the board of the fed to decide. two things on that point. one is if rates increase, that's a clear signal that the u.s. economy is doing better. inflation is up, unemployment down. this is encouraging. it's encouraging for the rest of the world.

if it moves too fast, that's where we might have risks because capital flows will move back from these emerging markets where they are at the moment into the u.s. market. and that could precipitate some disorderly adjustment in the other countries. >> before we wrap up the show, let's show you what the cac in france is doing. the cac 40 off by 0.75%. trading at 5,040 points. danone is at the bottom after poor first quarter sales and profit taking after yesterday's rise and the terrorism attack that may be weighing on investors minds. that's it for the show. seal you on sunday for the french election special. did you know slow internet

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good morning. france on the edge. breaking details on an apparent terror attack in the heart of paris just days before the national election. we're live on the ground for you straight ahead. trump heads to treasury. the president expected to take new executive action today targeting the finance industry. what you need to know straight ahead. and trouble in toy land. the within stoone stock getting in the premarket following an earnings myself. it's april 21, 2017, "worldwide exchange" begins now. ♪