the dollar index trading at ten-month lows the conventional logic is this is about lack of inflation in the u.s. leading to lower fed rate hike expectations you but is it more about trump than yellen is the failure of republicans to move forward healthcare reform leading to a fear of lack of white house momentum if that's the case does that mean the stock markets are dangerously overpriced i'm steve sedgwick, you're watching "street signs." poor reception for ericsson.

shares in the telecoms arena, as the giant heads for the worst day in nin months after it slashes its 2017 outlook amid declining sales we will speak to borje ekholm in 15 minutes time. swiss pharma giant novartis beats expectations in the second quarter, amid improvements in its eye care unit alcon, as the ceo tells this channel that th collapse of republicans latest healthcare bill will not affect his business >> i'm not so sure it provides certain certainty. what it provides is there will continue to be debate what will benefit patients in the u.s. is if there's some level of coverage whether it's voluntary or mandatory, but to allow the access to medicines through insurance plans that reduce the copays shares of lufthansa struggling despite the german

airliner lifting its profit target for 2017 after a busy summer for bookings netflix blows away expectations for subscriber growth, with investors scrambling to bid up the streaming services stock, sending it higher by more than 10% in after hours european equities giving up a bit of ground in the first hour or so of trading. trading pretty much on the lows of the session 0.5% let's look at individual sectors. yesterday basic resources strong here in europe i.t. stocks one of the best performing sectors in the u.s., 21% higher this year telecoms moving the opposite direction. today we have the major indices down the ftse not getting the boost it got yesterday from basic resources. dax was one of the worst performers in yesterday's session. is it the strength of the euro

which is hurting the german exporters? i think possibly that's one of the questions being asked given how sensitive we appear to be to interest rate moves and currency moves to the underlying level of individual stocks let's look at those sectors. let's see which ones are moving. this is interesting. this is chris griggs, british land story i'll talk more about that one later on safe to say is it more about buybacks than underlying performance of the company if it is, why is the company that has cash to spare not spending it on land, not building more skyscrapers, why are they giving back money to shareholders i'll give you answers on that basic resources down 1.5%. technology down 1.3% you think netflix pretty good. but we have our own problems on this side of the atlantic. that's ericsson. ericsson trading at the bottom of the stoxx 600 it posted a bigger than expected

loss in the second quarter the telecom equipmentmaker which has its own activist problems as well reporting an operating loss of 1.2 billion swedish krona compared with a profit of 2.8 billion a year earlier ericsson said it expected the mobile infrastructure market to decline by a high single digit percentage this year up from the previous estimate but added planned cost cutting will be accelerated. huge numbers of problems potentially inside the company and in the broader environment the ceo, borje ekholm will join us in ten minutes time shares of lufthansa trading lower. everybody is scratching their head this is the chart i wanted to you look at. three-month move 36% higher off the top of my head this one peaked at about 21 euros, which is greater than the five-year peak so it's trading lower despite

the company raising full-year guidance german carrier revised up the forecast in preliminary numbers, but analysts warned, seeing a stronger number in costs i think it's the shares and where they have come from. the shares have rose 60% year-to-date i'll giveyou a bit of valuatio work on this one ryanair trades at 31.76. this one only trading on 6.6 times. you can see why some analysts like this one. trades at a discount to aig, which is the ones that owns iberia and british airways, that trades at over 7 times. and zalando reported stronger second period growth are they a retailer or tech company? while profitability improved after a membership scheme.

second quarter sales increased between 19% and 21% compared with a 23% rise in the first quarter. herein lies the problem. roll that back herein lies the problem. if you trade at 52 times forward, 52 times forward, that's exactly double, i can tell you, what inditex trades. trades at 27 times forward this one trades at double. is it better to be a tech company that does retailer or a retail their does tech better to be zalando shares because they have that 19% to 21% increase, compared with 23% last time around, are they running out of momentum if so, can you justify 52 times forward? just a question. novartis has lifted the outlook for alcon eye care division after surgical equipment sales bucked the trend of consecutive

declines this after a smaller than expected 2% drop, in core net income the ceo joe jiminez said novartis was on the cusp of a growth phase >> we expect a new drug to be approved in october of this year the fda action date is october we will commercialize that we'll file the second indication before the end of this year, which means we will be selling in 18 -- 2018, most likely two indications. the second one being significantly bettigger than the first. i said novartis is about to enter its next growth phase, cart 19 is part of it once we get out of the patent expiration of gleevec at the end of this

year, we should begin a growth phase in 2018, 2019, and 2020, cart 19 will be part of that >> how does the sandoz business fit into that? it's a truchunky part of revenu but looks tobling in the u.s. around retail generics declining sales. >> it is true there is a lot of price pressure in the u.s. in the generics industry. those are basically the -- more of the commodity generic side of the business our plans for sandoz is all in bio similars in term of how we grow that business, sales and margin the bio similars business, these are generic versions of boilogi. we were able to get our generic

version in oncology and our generic version of imbril in immunology those will have an impact in the second half of 2017. we believe the outlook for sandoz is positive in the long-term. >> the latest republican healthcare overhaul bill is dead after two more republican senators said they won't support it that has led to the senate majority leader, mitch mcconnell, conceding the votes are not there to repeal and replace obamacare. president trump tweeted republicans should repeal obamacare any way and worry about a bill to replace it at a later date interesting. so here's my question you saw from the top of the show this is what's going on with the dollar, what's going on with the dow. and i'll show you this i think it's interesting you have thedollar trading at ten-month lows and the conventional logic is, i think, it's very much about the lady to the right of that.

the fed chair, janet yellen, whether she will be able to raise rates or not people have questioned the lack of inflation despite the narrati narrative, and the unemployment rate and says the phillips curve looks broken at the moment the chart to the right, it's about this gentleman, love the smile. it's about him certainly he believes that's why the market is up 18.5% over the period since the election in november as well so, my question is the same one. richard do we have a problem here in market valuations? ie, the 4x are looking at the dollar and the equity market is looking at mr. trump and if so, if the trump rally was about mr. trump reinvigorating the financial economy, and the dollar is about the lack of ability to raise rates, do we have a disparity problem here i'm wondering now if the dollar move is also about the fact that we have a logjam on capitol

hill >> i think there's been a big asset allocation trade going on. i never bought into the trump trade. i think people were mistaken to say all of this were because of mr. trump. you know, i think people mistook the fact that the u.s. data was getting strong before we went in there. it was the strongest data surprises. when trump was elected, it was the strongest data in five years and in the eurozone, we were all focusing on hillary versus trump. we priced that in. people built irrational expectations on the back of that and we've taken that out people wanted to be long u.s. fixed income and long u.s. equities i think the dow was along for the ride in some regards, people were bidding up european equities nobody wanted to touch european with a ten-foot poll after quarter after quarter, people realized the euro was not

falling. >> okay. just on your point about the euro, karen tsao have argued about this in your view, is the european side of the story becoming more dominated than the american side of the story >> absolutely. you can start to price good news into the euro but only so much draghi and the ecb will be cautious over what they want you to price in. there's a difference between the exuberance getting priced in the euro now versus what we saw in the beginning of the year. in the beginning of the year, the ecb muddled the message. they started pricing in hikes for 2017, that was silly now they're pricing in for the second half of 2017. maybe they're good enough and the ecb is tightening. that's appropriate there's another 10, 15 basis points higher for bunds. >> the market has begun to price

in chance that there won't be a rate hike later. i think 42% now think there will be one it was much higher than previously is this regardless, in spite of what the president can and can't do as well you say -- it was convenient to say it was a trump trade rather than looking at fundamentals just be clear here, are you saying there's nothing to do with the president on why we had that rally >> i think if the republican administration could have gotten significant tax reform, fiscal stimulus into the pipeline that would have added upside risks to the fed and tightening from what we have seen the end of this year through 2018. the fact that's gone takes away the upside risks it leaves it appropriate for the fed to be hiking two to three times each year. >> i looked at the sub sectors for the latest cpi out of the united states. mrs. yellen clearly believes that there are some transitory factors that could come out of data and keep rate hikes

one of them was a big decline in mobile phone costs another one was lodging costs. the former was about 13% lower year on year and the other was 6.8 if you strip out lodging and i strip out mobile phone services costs, the inflation rate is dramatically higher. about a half percent higher. so, is the market getting very complacent about the low cpi in the united states? that's actually going to get a shock does that create a ripple for the equity markets >> there's no question the pain point for the markets is everyone is caught off guard, we get to the end of this year, inflation is looking better. there's a lot of one-off factors that are in there that will be passing out of the data. the flip side is the wage numbers when you dig into the details do suggest that things are a little bit softer on that side than maybe the headline appears. the headline has already been decelerating that can leave the fed in a bit

of a pause there is a difference there. >> you've done me a favor. you said you would chat uk inflation with me. when we break those figures 15 minutes time thank you very much for hanging around for that. we have a brilliant interview coming up, electric slide down the stoxx 600 for ericsson shares after posting a wider loss than expected in the second quarter we'll have the ericsson ceo, borje ekholm join ftus aer this break.

ericsson has posted a larger than expected loss in the second quarter. they reported an operating loss of 1.2 billion swedish krona, compared with a profit a year prior. i'm delighted to welcome borje ekholm the ceo of ericsson

thank you very much for joining us outline for viewers where you see the biggest problems for your industry and ericsson specifically at the moment >> thank you it's great to be with you. yes. we had an unsatisfactory quarter. our sales were down 13% if we adjust for currencies. we see that it is a tighter market for telecom and for our market in general it's a tighter market condition. we see that relatively concentrated in europe and latin america as well as the middle east and africa. that's where we've seen tighter markets. and we've said that we believe the market will decrease a bit more than we anticipated before. >> looking at gross margins for the second quarter, it's a

precipitous decline. we know prices always go down. do you not have enough in the pipeline in terms of new product with greater margin to offset that what we see is a couple of things impacting gross margin. we see here that part of it is that our legacy portfolio, primarily in i.t. and cloud are falling faster than we can compensate with growth of new product. that's one reason. so what we're doing here is accelerating the growth in our new products getting them to the market faster and growing them faster we are also seeing second quarter impacted by lower software sales which is that our customers are more cautious with capacity investments >> in terms of where you go next and looking at reorganization of the business, do you find

yourself under enormous pressure how is your pressure with chris degardel and the rest of the sevian representatives >> i think it's important to take a step back first, which is to look at what are we trying to do here. and our strategy, which we presented a few months back aims at reestablishing profitability on2018 we said we will double the margin from 2017 and 2018. that strategy is focused on being a product and technology led company. that strategy incorporated tough market it was actually there in order to combat a difficult market the market we see is not the surprise what we see and what we've done during the second quarter is start to quantify our

cost reduction opportunities and efficiencies that is part of our strategy what we see is that we will take out at least 10 billion krona by mid next year in order to be on the path towards doubling the operating margin that is a strategy which all our major shareholders have supported and so has sevian. >> so there's no dispute in the boardroom or with the views of what sevian want to happen and your views for the company, sir? >> no what we're trying to do now is accelerate the implementation and execution of our cost efficiency measures we need do that. of koucourse it is a tighter mae out there. we need to take out costs out faster that's what we're trying to do at the same time we need to invest in r&d in order to be

competitive long-term. that's the strategic direction we have. >> and that's the self help. that's what you can do yourself given the environment as well. i was also interested in the line in your report that you see an increased risk of further market and customer project adjustments with a negative impact on operating income is it just getting much tougher environment? it's not about what's going on at ericsson, it's the broader environment actually quite opaque despite the hopes and we're seeing a global economic recover recovery >> you're partly right it is a tighter and tougher environment out there. that's one thing but the -- what we are also trying to do here is kind of frame this size of adjustments we need to make in order to execute on a more focused strategy these are not -- we can't say they will happen, but this is framing the risk in those

contracts. it's typical customer renegotiations that need to be done those things we are conducting and they will happen over the next 12 months we're trying to do our best to minimize the risk, but we want to be transparent and tell what we see >> just something you piqued my interest with. i spoke to ceva breka yesterday, he was trying out for regulators to understand the 21st century telecom setup and to give them perhaps more cohesion and more of a green light to go out and invest and spend do you think there's a regulatory problem or commission-based problem in europe which is preventing investment in infrastructure and the next level of mobile telephony? >> i mean, we should be a bit self critical about the whole industry it's really the vendors or it

includes the vendors as well i would say 2g and 3g were led out of europe. what you see now in the lt world, it has been overtaken by north america. and it's still unclear what will happen to 5g we should start to think as a continent how should we think about 5g how should europe position ourself to be a leader in 5g here it's important to start to talk about this from a regulatory perspective as well as call it spectrum ail location, how will they be alloca allocated. here we need to do more. >> thank you very much for that. it's a key line as well. we need to think about this as a continent. borje ekholm the ceo of ericsson talking to us about the industry and his numbers. looking at sterling. the pound is trading at

multi-month highs. what will we get on the inflation figures ter afthe break? we'll break the numbers and get instant analysis from richard kelly coming up.

welcome to "street signs." i'm steve sedgwick these are your headlines poor reception for ericsson. shares in the telecoms giant head for the worst day in nine months after it slashes its 2017 outlook amid declining sales

ceo borje ekholm tells cnbc he's unhappy with the results >> we had an unsatisfactory quarter. our sales were down 13% if we adjust for currencies. we see it is a tighter market for telecom and for the rand markets. swiss pharma giant novartis beats expectations in the second quarter, amid improvements in its eye care unit alcon, as the ceo tells cnbc the collapse of republicans latest healthcare bill will not affect his business >> i'm not sure it provides certainty, it provide there's will continue to be debate what will help patients in the u.s. is if there's some sort of coverage, voluntary or mandatory, but to allow access to medicines through insurance plans that reduce the copays shares of lufthansa drift lower despite the german airline lifting its profit target for 2017 after a busy summer for bookings

netflix blows away expectations for subscriber growth, with investors scrambling to bid up the streaming services stock, sending it more than 10% higher. uk cpi, 0.0% month-on-month, up 2.6% year-on-year poll looking for 2.9%. ons data lower than expected interesting how the pound gave up some of its gains before the data not saying anything, just making a point. june core cpi ex energy, food, what else is there in life 0.0% months on month london second slowest growth in

all uk regions london house prices huge compared with the rest of the country. let's have a look at what the pound is doing again, gave up some gains before the data 130.32 is where it is currently trading at the moment. richard kelly head of td securities is still with us. what do you think? it is shocking to have a decl e decline. fuel prices were coming off, but energy prices looked like they were passed on to the economy. this might be pulling things forward. i think it helps the bank of england in its dichotomy i didn't think the bank of england would hike this does help for the moment. >> i like people, they talk about the antidote as well as the stats in this environment it doesn't feel like a rate hike environment in the uk. i know inflation is building up. but people, to me, seem like they're stretched quite a lot. you have the j.a.m. story, just

about managing, you have inflation at 2.9, now 2.6. people don't feel we should be in a rite hike environment it feels like the economy is precipitous with the back drop of brexit. >> it's an environment where people are struggling with high prices they don't have the ability to get the wage growth on the back end of it. wage prices shouldn't be getting passed along i think some members are right to talk slightly hawkishly to get things anchored, but it's not a good thing if we needed to hike rates >> how do you feel about the broader uk economy we're stuttering on the growth rate stuttering on wage growth. we have a chancellor who says 1% is fine for public sector works, though that wrangles with other cabinet ministers. how does the broader economy feel to you? >> it feels weak it had been extremely resilient post the brexit vote one thing about the uk, we kept

up with 0 been t.5% wage growthw we're at 0.2, 0.3, we will sustain that there's not the consumer strength that was there. in hindsight people were pulling things forward before price increases were going through, before some of these problems were settling in now they're settling in. you're in shape for a bit of a longer stretch of this softer economy. >> what does that mean for underlying asset classes what does it mean for the pound? i will give tom a shout out there. he said keep asking the question so i will he says somebody laid into cable big time from 130.20 about 15 minutes before the numbers. they have no idea why they did i don't know if someone has got the date taerl a early. interesting price action gone from 131.20 to 130.28 i can only ask the question. it looks very interesting to me. thank you, tom

i will carry on asking the question your point about currency. >> it's definitely the pricing >> you didn't have to make the point about that just in terms of where we're going. >> in terms of sterling, it's still a general sell the problem against the dollar is obviously these swings of trump sentiment, swings in the dollar, if you're talking about euro, euro/sterling higher is a clean trade given the differences going on between the two economies. >> are people getting burned on that trade there was talk about 110, 115 on the cable cross, they have not necessarily come through is that about positioning? once the shorts have got their shorts on, it's like who is the marginal seller? >> those people talking 110 or parity, that side is not going to happen. the issue is when you have this high inflation, this threat of a bank of england hike, that talk is doing what they hoped it would do it puts rate premium in there, scares away people from getting too short away the currency from the dollar and we get stock.

people were trying to pour in. it's not working it leads to bouts of being squeezed higher. overall sterling wants to be weaker >> how does one trade brexit you have the currency inverse impact for the ftse. we've seen that aggressively in how the ftse went from 57 handle on the 27th of june last year to a 75 handle within the last couple of months how do you trade the uk assets or international assets based in the uk on the back of brexit >> the best way to do it is just trading it less and going somewhere else where they have a cleaner trade. that's the easiest thing to do if you have to be involved in the uk, you still have small shorts in the currency a lot of those allocation trades within stocks may be over on that side of things. the sectoral boost to exports. that may be out of there you fade the talk of tightening that's going through the bank of ek la england but go longer.

>> it's been a pleasure to speak with you today thank you very much. richard kelly help of global strategy at td securities. richard likes the euro i think that's fair to say ftse don't know what to make of it 7,407. bad data, pound down ftse up. let's look at the u.s. futures the dow jones down 28 points nasdaq has had a fantastic run what have i got on the nasdaq? seven up for the nasdaq. russell 2000 trading at all-time highs. gold had five or six days

positives. i was going to do these flashes about libya. i cover some opec in my spare time interesting flash from the libyan noc chief, the national oil company. hopes to present a unified libyan position in sant petersburg that will show we can act together in the national interests. libya along with nigeria are the only two countries within opec that don't have a cap on prediction they' production the problem is that has undermined the broader strategy of opec to take 1.8 million barrels a day off. that's why you have that spike that's what we're looking at there. libya is going to st. petersburg to the jmmc, the joint ministerial monitoring committee, the russians, saudis might pop up as well and a few others who will meet to see whether the current strategy is

working. they're meeting on the 23rd and 24th of july they will see whether the libyans and the nigerians can be persuaded to take a cap. mr. novak said last week they'll be invited to propose something to us. maybe a cap for libya and nigeria on the cards that could add momentum to the oil prices u.s. government says trade def s deficit will be the priority when it renegotiates nafta trump has branded the north atlantic free trade agreement a disaster and called for a new round of talks earlier this year he called for them earlier this year we're in the second half, aren't we president trump has kicked off his made in america week to promote the u.s. manufacturing industry he posed in front of iconic u.s. products on display. is that iconic product, a

spaceman's outfit on the right the vase in the middle this was at the white house, promising to make legal and regulatory moves to help american-made goods. hallie jackson has more. >> reporter: at the white house, president trump's focusing on what got him there, jobs and manufacturing. showcasing products made in all 50 states. >> made in the usa we're going to start doing that again. we're going to put that brand on our product. >> reporter: but on made in america week, critics counter the president never put his money where his mouth is when running his own business products that they sell are imported from abroad it would be nice to see a lead by example there. >> reporter: the white house argues president trump's trying to roll back stifling regulations, part of a manufacturing message that plays well here, just outside detroit. >> when i hear made in america, i hear made in michigan, i hear made in macomb county.

>> reporter: it's counties like macomb that are places where president trump really surged compared to republicans' 2012 performance or places he flipped altogether turning them from blue to red. these are the counties that fueled his win, and right now half the people who live there like how he's doing. his 50% approval rating in those counties is ten points better than his performance nationally. >> so far he's done what he said he's going to do >> reporter: but there's a twist to this story. the president's support is slipping from where he was in november dave pelter is now cooling on his candidate. >> i'd probably give him a "b. and that might be going a little -- maybe a little too far but - >> reporter: common critiques include too much action on twitter and not enough on healthcare, with russia a wild card chad sowesky has covered politics in this county for three decades. >> some people are saying when are we going to see this change?

when are we going to get what we voted for? >> reporter: six months in, a question of patience for this president. hallie jackson, nbc news, warren, michigan. citi group is set to pick frankfurt as its eu hub. it will make the german city the trading base in preparation for brexit citi will announce the plans this week but declined to comment on the reports london is beginning to wobble from brexit it is too early to know how the uk's exit from the eu will play out about that weaker growth in the housing market, slowing job creation were the first signs of the impact of brexit if it means london properties get cheaper, i'm up for that david davis and michel barnier have kicked off the first round of brexit negotiations davis returned to london and left talks in the hands of civil

servants officials say the brexit secretary will be back in brussels on thursday to join barnier in endorsing a first set of partial agreements. wow, we got some agreements. amazing. the british teams lack of notes in the meeting compared to the e ushg si u side pile of papers also sparked jokes as saying the eu was unprepared there were documents in the briefcases british land is buying back up to 300 million pounds of shares a buyback was a clear value opportunities as shares are trading at a substantial discount to the firm's asset value. i can tell you what happened, shares trading about 600 pounds, just above it. n.a.v. is 9 pound 15 i have a question for chris grig, he clearly believes the

shares are undervalued are we still happy with the n.a.v. at 9 point 15 questioning. just asking. n.a.v., 9 pound 15 stock trading over six quid. someone is wrong. shares in netflix explode after blockbuster results. i'll raise a few questions after this break your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. the name to remember.

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fresh towels. fresh soaps. and of course, tripadvisor's freshest, lowest prices. so if you're anything like me... ...you'll want to check tripadvisor. we now instantly compare prices from over 200 booking sites... ...to find you the lowest price... ...on the hotel you want. go on, try something fresh. tripadvisor. the latest reviews. the lowest prices. the chinese government vowed to bolster financial regulation in the wake of a mini crash of mainland small cap stocks. the selloff was caused in part warning befoabout -- wait for i gray rhino risks the coin was termed to describe obvious dangers that have been

ignored. i have not heard of them before. have you herard of gray rhinos >> i had not until this report the big, scary gray rhino. investors came back from the lunch break saying maybe they were not so scary. the mainland equities did not recover the steep losses yesterday in what some called black monday, we have seen a rebound in the final hours of trade. these are the closing prints it's crucial to point out the selloff was largely concentrated in small cap stocks. especially for high growth tech startups located in the shenzhen this index declined more than 5% that's because investors stated those firms are the most exposed to deleveraging concerns when we talk about the mention of gray rhinos as they were talked about in the peoples daily article that started these fears. they are talking about debt, real estate concerns, and

financial risks. they are calling on the government to bring out more regulations to control these risks, that's what we're seeing today. even just few hours ago, china's central bank came out saying it will strengthen macro management and counter cyclical adjustments and strengthen financial coordination across agencies this hints at what many could say could lead to a super regulator across the financial system we are hearing the recurring theme, that being regulation some intestdevestors worry in at tackle the gray rhinos you could see an overcorrection coming from the government. it's essential for beijing to strike this delicate balance between tackling the potential risks, the great rhinos that are considered obvious but sometimes ignored risks, and maintaining financial stability. there you have it. a bit of a rebound on the mainland equities today. continue to look for reaction into tomorrow's session.

>> you did a great job over in singapore, fantastic there you go making the transition from london to singapore. the pound fell just before the data true 130 was the handle, now trading 130/120. inflation data is still high above the 2% market, but it's come down from 2.9% to 2.6%. there was a concern we would get a three handle on it what does that mean for interest rates or the broader uk economy? big questions out there. inflation has abated energy costs coming off a bit in the last set of data toshiba shares surged after green light capital revealed it bought a stake in the struggling electronics giant. for more, makiko utsuda joins us >> toshiba shares finished up

over 19% an green light capital announced it had bought a significant stake in toshiba during the second quarter it's unknown how much the fund has invested, but the price was at 234 yen per share, and the fund says toshiba shares could be worth 70% more. toshiba suffered a massive write down from its ailing nuclear power business and is seeking to sell its prized memory chip unit to get the fund foors tus for a turnaround talks have made little progress. at a hearing on friday, the court postponed a decision on whether to grant an injunction to block the sale. the news was expected to trigger a plunge in stocks today which is the first trading day this week, but the news from green light helped to turn the tide. it's not the first time toshiba stocks have been helped by a hedge fund

earlier this year, a 10% stake was bought in toshiba at a price of 800 million totals in march and april and the move was seen to buoyed to sheeba shares the following months even so, toshiba faces many challenges, one of the most critical is whether it can remain listed. and it postponed its earnings report due to refusing to get a stamp of approval if it cannot get the amroefl pproval by auguh a delisting is not out of the questions. netflix shares soared more than 10% in after-hours trading after the tv movie and streaming service smashed subscribers. they added way more customers than expected during the quarter with a significant portion coming from non-u.s. markets

overseas subscribers bigger than home subscribers netflix expects foreign growth to result in its first full-year profit for overseas markets in 2017 what about the problem with this company? these valuations they are big. they are big they are amazon-like valuations. the price is 36 times forward. the 2020 estimates for consensus earnings 98 times forward pe. price to book, 18.1. so you're buying future growth you are buying it at a great premium. the stock has come a long way. watching less. this is interesting. 13% decline last quarter i know subscribers are great you like this. 179 minutes per month in the last quarter is what people watched. july 2016 people watching 268 minutes this can come from new subscribers, not quite up to

speed, orange is the new black, "house of cards," and cash burn. look at this one 6$608 million in the second quarter up 44% on the first quarter. dare i say it, the actual profit figure was small net income 15 cents per share. that missed. everyone ignored that, but it missed what about this company and the growth potential and barriers to entry? let's speak to paolo pescatore, vice president of multi player media at ccs insights. on the surface brilliant looks amazing subscriber numbers. is it at a cost? >> good morning. yes. i think fundabilitily it's ay i fundamentally it's all about the content they are burning through a lot of cash. that's a huge concern for any business focused in the area of video and tv

you need to differentiate, the only way to differentiate is through content. you do that through licensed content or original content. netflix is placing huge bets that its investment in the original content will pay dividends not only in one particular market globally it goes to show in this quarter which traditionally is a poor and challenging quarter, not only for netflix but for other provide providers, they exceeded expectations >> in terms of acquisition costs. it doesn't matter if it's itv, sky, any of the big players, including comcast which owns this channel, are customer acquisition costs still going up is that an area where we should be worried for all companies, whether traditional media player oshs new g playerers or new guys on the block? >> customer acquisition costs

are something all providers need to be aware of but netflix is smart relying heavily on local telco partnerships as a way of increasing presence in the markets. when they first made the for ray in foray into europe, we saw vodafone, vt and working now closely with those telcos. that's one area where you can manage costs and rely on your partners to raise the profile of the company. >> all right paolo, great getting your insights on this company that's it for "street signs" today. i'm steve sedgwick up next is "worldwide exchange." we'll be back on european programming with squawk box europe tomorrow morning.

republicans pull the plug on the healthcare bill. we're live in washington with the fallout. global markets immediately reacting to the news the u.s. dollar dropping to multi-month lows.trading day se. and netflix takes the crown, we'll tell you what's behind that big move coming up. it's tuesday, july 18, 2017, "worldwide exchange" is coming up right now ♪