welcome to "street signs." i'm willem marx. these are your headlines investors buy into altice's plans to spin off the u.s. business sending the stock to the top of the stoxx 600 uk retailers battle to lead the ftse higher as better-than-expected christmas sales number help most grocers into the green. the winter olympics helps thaw relations between north and south korea as the two nations hold talks for the first time in

two years. and signing on to the dotted line airbus, pnb paribas edge closer to finalizing deals in china as president macron's trade mission begins to bear fruit good morning let's look at some of the market action in europe, a lot more green on the board than red the stoxx 600 is up almost a third of a percent significant gains there in a number of different businesses let's look first at the specific markets across the continent the ftse, xetra dax, cac and ftse mib in positive territory the ftse up a third of a percent. the cac up 0.4%. and the ftse mib up a half

percent. the xetra dax slightly further fwrak i back from its peers. real estate is the only one not in the green so far. good numbers for basic resources as well as construction. that could be on the back of strong housing numbers technology also doing well, as well as industrials. let's talk about some specific news driving action in asia, where north and south korea just finished their first set of sitdown talks in more than two years. pyongyang will send a delegation and a squad of cheerleaders to the winter olympics. the agreement represents a break through when it comes to repairing ties between the two countries after months of rising tensions over kim jong-un's nuclear program. the south's proposed further talks that would focus on prevent military aggression and reuniting families divided by the border seoul said it would consider

temporarily lifting sanctions against the north. chery kang has the latest from seoul. seems like a positive day for relations between the two sides. >> reporter: exactly we're getting another development out of that border village. so we've got the two koreas agreeing to reopen the military hotline that's been closed off for a while. a lot of communication channels being reopened this new year at this point north korea has not officially responded to south korea's proposal for military talks i think we are getting closer to that goal. and one south korean official who did not give out names -- give out his name did tell reporters that they are getting closer to a certain agreement here of course so far at this point, north korea is certainly on an ultimate charm offensive, as you

pointed out agreeing to send cheerleaders, athletes, high-level officials to pyeongchang winter games next month. here's one sound from north korean top point person for the talks that clearly shows that. take a listen. >> translator: we came to this meeting today with a serious and sincere attitude and with the thought of giving our brethren high ho who have high hopes for this dialogue results for the new year >> as i was speaking to an earlier guest, i asked him maybe this time around things will be different though because the south korean government needs to be more mindful of conservatives in south korea and also that strong push back from the trump administration to the idea of forgiving north korea's "provocations" and giving north

korea that nuclear status that it very much wants and this is what he told us. >> the south korean government is trying to walk a fine line. right now with this type of diplomatic opening i think we'll see a lot of support particularly from the chinese seed the chinese have been advocating the freeze for freeze, north korean would freeze its nuclear weapons development activities, in turn the united states and south korea would freeze military exercises from a chinese perspective what is happening now between the two koreas is viewed as the beginning stages of this diplomatic approach. it's still early to tell if we'll get to that stage but we're seeing core components of that >> it's not just the chinese w we heard from the russian government very much supportiv of the idea of interkorean talks and these two countries, china and russia are the countries that support the idea of putting a cap or stopping the joint

military drills between south korea and the u.s. so it's very interesting how we're getting all these reactions. after today, we'll be focusing on what kind of reaction we get from the trump administration overnight. back to you. >> thank you very much french president emanuel macron has met with his chinese counterpart in beijing as part of a mission to strengthen ties with the asian giant and boost market access for french companies. macron is traveling with a delegation of firms. the french leader is hoping to unveil a multibillion dollar supply deal during the visit china is france's largest asian trading partner. paris reported a 30 billion euro trade deficit next year. they expect to announce a billion investment during mr.

macr macron's visit as well one deal already inked is jd.com announcing plans to sell french goods worth 2 billion euros online the agreement came after macron met with the jd ceo. other deals include a joint venture between pnb paribas and areva is also close to a deal to build a processing plant mike joins us this morning the chinese growth story, is this something you guys will be watching this year closely >> definitely. broadly people are too pessimistic about china. our view is you've seen a big build up in debt that has people worried, but that's a quasi fiscal stimulus that the government pushed through the banking government we think the chinese growth will come in at the 6% to 6.5% region

this year, slightly down from last year but still solid. that's good news for the emerging markets and global economy as well. >> we heard about what sounded like relatively positive developments when it comes to the korean peninsula when it comes to risks for markets, do you see that as the greatest one >> there is always the geopolitical risk bubbling around to me the risk is getting a pick up in inflation that causes the fed to overtighten it's unlikely to get enough tightening this year that causes problems, but it could cause problems in 2019 or 2020 that's the major risk. we will always have this politics bubbling along. if you look at last year, we had all of these political risks that could have gone wrong, none of the things that could have gone wrong did and the one thing that could have gone right in terms of tax cuts did happen. investors are focused on the fact that the global economy is

booming and ignoring politics and focusing on positive fundamentals y >> you heard this week from the atlanta fed president that he doesn't think three rate hikes is necessarily a great idea. is that something jpmorgan agrees with? >> our view is they'll do at least three. i think the market pricing at the moment is suggesting the probability of a fourth rate hike this year that's bit too low not saying it will be definitely four, but the probability is higher than 10%. so his view that three may be too many, that's at the more dovish end of the spectrum so you get at least three, possibly four rate rises that's based on the view you should start see wage growth and acceleration come through. that's been the big question over economics the last year or two. we think 2018 you will start to see it pick up there's a good potential to accelerate to 3% what do you think will drive

that when it comes to tax reform, do you think that will be a driver of that wage growth? will companies start investing in people instead of giving back to shareholders? >> it could, a lot of that mone repatriated are in a limited number of firms. they may use some of that to increase salaries but it won't make a massive difference across the sector as a whole. there's very low unemployment. whether you look at it broader measures which are back to pre-crisis lows. you ask consumers whether they find it easier or hard other to find a job, majority find it easier and that suggests that you should start to see wage growth acceleration, moderate, but nevertheless a pick up start we'll bring some latest news on stocks. if you want to talk to us about u.s. unemployment and the impact you think it may have on wage

growth, feel free to e-mail the show, streetsignseurope@cnbc.com and follow us on twitter, streetsignseurope@cnbc altice says it will spin off the u.s. unit from the european operations the move is intended to simplify the telecom and cable group's business u.s. shares have beenimpacted by worries about its european division and there's concern among american investors they may be asked to boost the european business. the deal will see a 1$1.5 billin dividend payment added to the altice balance sheet another company we're watching is persimmon it expects 2017 profit to be ahead of estimates an increase in home building saw the british company post a 9% rise in full-year revenue. while consumer demand was healthy it was mindful of market risks related to brexit

uncertainty. morrison's topped expectations for underlying sales in the critical christmas period. the uk's fourth largest supermarket group saw its rate of growth pick up from the previous quarter with like for like sales up 2.8% expectations for the full year remain unchanged tesco was the best performer among the major supermarkets over the christmas period. that's according to data from neilsen which saw the supermarket grow 3.4% over the last year. it held on to its share as morrisons and sainsbury's posted slower growth numbers. i want to come back to mike bell, global market strategist from jpmorgan asset management it seems like the grocers are doing okay but non -- all spending excluding food, not such a happy moment for the british public.

where do you see that going in terms of consumer spending and the british economy? >> what's really notable, when you look around the world, in europe, you have some of the strongest consumer confidence since 2001, strong consumer confidence in theu.s., and in the uk consumer confidence has been doing a nosedive. you could make the case that's because of the squeeze on wages and over the course of the year that should ameliorate perhaps we're at the worst point for consumer confidence. certainly if you look at it at the moment, it paints a bleak picture. it's very hard at this stage to say whether we will get that pick up that is probably the most likely fair yo but there a are certainly risks to the down side >> there's weakness in the sterling that's making some people uncomfortable what other positive signs are you seeing are there any?

>> unless you get another sharp fall in sterling or oil prices moving materially higher from here, then it's mathematically pretty much a certainty that you will see some downward move in inflation. that on itself, even if wage growth remained where it is, would allow for improvement in the real wage story. add to that the fact in the uk you are seeing a higher churn rate, that may lead to a bit of a pick up in wage growth not talking about anything spectacular, but just improvement relative to things >> so better pay jobs. >> people moving jobs at the moment are getting above-average pay rises. as that starts to filter through, you may start to see pay growth come through across the people who are remaining in their jobs, unemployment in the uk is still low. of the major developed economies, the uk is skewed to

the downside >> you touched on consumer confidence in europe i wanted to ask you about europe versus the u.s when you look at markets and economy, do you see there being more potential in europe than in the u.s. this year coming into 2018 >> normally you would say yes. margins are coming off a lower base european equities will have a good year. consumer confidence is booming the unemployment rate is likely to fall to 8% the u.s. looks expensive, but the problem is you could have said that last year. you have the benefits of tax cuts coming through and we think there's another $10 that can go on to the end of 2018 earnings estimates. the market has partly moved to reflect that, but it's not in the earnings estimates yet that suggests the pe is making stocks look more expensive than they are in the u.s. you add to that the fact you have this boom in the tech

sector, which is a heavy component of the u.s if that continues, you wouldn't want to bet against u.s. stokes. growth in the u.s. and europe is about the same this year both markets could do reasonably well >> one final question on the u.s., your views on shale recovery you talked about the impact this tax overhaul might have, what about energy in the u.s. we already see shale drilling come back on so we think over the first quarter that's going to be a support for the u.s. economy you are seeing if you look at capex intentions across the u.s., surveys suggesting a further pick up. most acceleration you've seen in the business investment part of the u.s. is coming from that pick up in shale we think that's got further to go that will be a support for u.s. growth in the first quarter. >> thank you very much that's mike bell, global market strategist at jpmorgan asset management coming up, announcement gaffes and surprise resignations we are talking about british

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welcome back to "street signs. silvio burr llesconi says leavig the eurozone would be back for the economy and he backed mario draghi's easing monetary policy. burlesconi's center-right bloc looks to come in first place in the upcoming general elections but would fall short of a majority this is significant because some partners have spoke about challenges to italy in the monetary union the last quarter of 2017 saw the biggest fall in non-growth spending since 2009. with inflation hovering near six-year highs, shoppers cut back on almost all non-food related items on the run up to

the holiday season the divergence in food and non-foot sales has never been so stark. staying here in the uk, prime minister theresa may endured a tough cabinet reshuffle yesterday following the surprise resignations of the edition secretary. greening quit after refusing to take on work and pensions post another stood down for health reasons. mrs. may appointed brandon lewis as party chairman, and david davis and boris johnson all held on to their jobs sterling in response hit a three-week high against the euro following that reshuffle we're joined by richard myles from absolute strategy research. it didn't go very well for mrs. may yesterday, did it? >> it started poorly of a job that chris graley actually

wasn't given and got worse from there. many are refusing to leave their jobs, others are refusing to take jobs. jerry hunt was going to be moved, that didn't come off. in terms of substance, you didn't get big moves and the main jobs, foreign secretary, chancellor, these are the jobs where if you had a strong prime minister, they would have been sacked by now, but we have a weak one since that election debacle. so there wasn't a huge change here the balance of remainders and levers has been carefully maintained theresa may can't be seen to favor one of those factions over the other. the optics of this become more significant. this was about trying to demonstrate that theresa may kind of regained her grip on the government it didn'twork out that way unfortunately. >> for our european viewers,

essentially theresa may is trying to give jobs to people who don't necessarily want them and trying to move people out of jobs who want to stay in them, but she's not able to do that. this shows her to be in a weaker position than she wants to be. >> the word reshuffle evokes this image of skilled people manipulating a pack of cards, but this was the cards fighting back if you have someone like jerry hunt who you want to move from the health position to first secretary of state which would have been her number two, if he doesn't want to move, then the threat that he's posing over her hangs over her head is if you remove me, i'll resign if you're weak as she is, you can't afford to lose base and have them outside the government causing problems for you whilst we had the cabinet position reallocated yesterday,

today we will have lower down the government people. about 12 new sort of junior ministerial posts will be appointed today. what that means is you have to have 12 people who have had jobs this morning who won't have jobs this evening you already got a couple of irritated former cabinet ministers today. you will have a few more irritated people later today why is that significant? her working majority is only 12 seats. if you are increasing the number of mps who are feeling like they've been slighted, the control of your party will get harder, not easier >> let's talk about the majority it lies in large part on the dup and the relationship the conservative party has with this small irish party. the man who is one of the go-betweens between downing street and belfast has stepped down because of ill health he was in that role for quite

awhile i wonder what impact could that have as we look at this through a brexit prism he was talking the dup off the ledge when the final set of negotiations went through in december he had a critical role to play he built relationships there does theresa may have to start again with the dup >> the dup will be a very difficult problem for theresa may this year. the reason i say that is not necessarily because james burkenshire left, but because the deal between the uk in december was full of internal contradictions the biggest one being she promised there wouldn't be a hard border between northern ireland and the republic of ireland, but also promised that the uk would leave as a whole. now in order to prevent a hard border you have to have no regulatory divergence or customs divergence and no v.a.t. divergence between northern ireland and the republic of

ireland. that implies that northern ireland stays within the eu regulatory framework and customs framework. if the uk is leaving that and northern ireland is part of the uk, there's sort of this tension there, which is difficult to solve unless you break your promise to the dup and you say northern ireland will have one set of regulations, and the rest of the uk will have another. >> that won't go down well >> that won't go down well because the dup stands for democratic unionist party. their key priority is maintaining alignment with the rest of the uk if you go back on that you may lose the support of the dup and losing your majority >> one very quick final question about david davis, the man charged with negotiating on behalf of the dup. he sent a letter to theresa may talking about the fact that the european union is preparing for a no-deal brexit he says that's unfair on british business is that warranted based on the fact that britain is preparing

for no deal as well? >> i think it would be remiss of either side not to prepare for a scenario which is clearly possible the chances of a no-deal scenario were lessened in my view by the december agreement i think there's a lot of people who are quite pessimistic about the chances of reaching agreement in december. as i said earlier, there are contradictions within that agreement which will have to be settled. they may not be. we still have the pos nlts sibio a no-deal scenario it would have to be a huge dislocation in less than two years now and if you don't prepare for that, the disrpuptin will be enormous >> richard, thank you very much. richard miles from absolute strategy research. coming up, we have a crucial new step in the russian investigation that is swirling

around the trump white house robert mueller is in talks to directly question trump himself.

. welcome back to "street signs. i'm willem marx. these are your headlines investors buy into altice's plan to spin off u.s. businesses, sending it to the top of the stoxx 600. uk retailers compete to bolster the ftse this morning as better-than-expected christmas sales numbers push more green grocers into the green a record profit forecast fails to impress samsung investors. the stock sinks after missing expectations as the strong yuan takes its toll and signing on the dotted line airbus, pnb paribas enl closdger to finalizing deals in china

let's look at u.s. markets a fur ho few hours ahead of trade there all are expected to open slightly up. the dow jones implied open 30 points there a bit of a mixed message after yesterday's close. we'll look at european markets, in particular the ftse mib in italy doing strong, up more than a half percent the cac slightly behind it the ftse mib up a third of a percent. let's look at the currencies, the euro slightly weaker against the dollar, down a quarter of a percent. the u.s. dollar weaker against the japanese yen and the pound weaker by almost a third of a percent against the u.s. dollar after yesterday's rally on the back of the theresa may reshuffle in the uk. in the u.s., special counsel robert mueller contacted donald

trump's lawyer to request a private interview with the u.s. president as part of the investigation into russia's interference into the 2016 campaign kristen welker has more on the story. >> reporter: tonight, nbc news has learned president trump could meet face-to-face with special counsel robert mueller within a matter of weeks as a part of the ongoing russia probe. the president's legal team and federal investigators met in december to discuss a range of options. according to three sources familiar with the matter, those options include whether the president would be interviewed directly by the special counsel or his investigators or provide written responses, the location, duration and topics. legal experts say it's unlikely investigators would agree to anything other than an in-person interview. >> prosecutors want a live body in front of them for lots of reasons including they want to be able to assess tone and inflection they want to ask follow-up questions. they want to be able to probe. >> reporter: when asked over the weekend if he's still committed

to speaking with mueller in person, mr. trump deflected. >> just so you understand, just so you understand, there's been no collusion >> reporter: but defense attorneys say there are a range of pitfalls to the president testifying in person, pointing to former president bill clinton who seemed uncomfortable at times when he appeared before a grand jury in 1998 about the lewinsky scandal. >> it depends upon what the meaning of the word "is" is. >> reporter: president trump may be a unique legal challenge. >> he will go off script he is very hard to control and control is the key element when you have a client facing a potential investigation. >> reporter: meanwhile, tonight, the white house is blasting a report from axios that the president's private schedule has been dialed back significantly, cutting his time in the oval office in favor of time watching tv and tweeting. a spokesman calling questions about his schedule and work ethic ludicrous. >> that was kristen welker

later on, our u.s. colleagues on cnbc will speak with "fire and fury" author michael wolff about his book's claims of chaos in the trump administration's early months sticking in the u.s., berkshire hathaway stands to make a $37 billion windfall fro the u.s. tax overhaul, that's according to barclays, which claims buffett's firm can lower its tax bill on firms that have gone up in value this means a 12 prgs % increase book value for the firms buffett has not always been a massive tax reform champion. head to cnbc.com to see his views on the white house tax overhaul samsung electric shares weighed on the kospi index after the firm delivered guidance that fourth quarter profits will fall below expectations despite record earnings, the company struggled against the

yuan the chip business was once again the main driver for samsung. it helped operating profit jump 64% year-on-year arjun joins us this morning. that's an extraordinary number when it comes to the chip business that's been a big driver of growth and profit. does it continue to be going into the future? >> that's been a recent shift in samsung's business before it was the smartphone business, that was the crown jewel. things got tough there samsung made a conscious effort to invest heavily in the semiconductor business that bore fruit last year when chips accounted for two-thirds of profit more or less in each quarter. that was successful because you had fundamentals in the chip market that were supportive. one of those was a lack of supply, but also high demand that boosted prices and helped samsung's profit the concern and why you see that reaction on the share price, it's about what happens this year with chips.

you have competitors now catching up, launching their own versions of what samsung is doing into the market. demand still remains high. we're in a world where we need infinite amounts of processing power. servers and everything that powers the technology we use today. there's a lot of concern that some of these prices around some of the chips could fall. samsung is right now one of the market leaders in the space. it's got competitors at the back intel probably the closest of those. so it seems well-positioned in that sense it's going to be a case to see how prices pan out this year, and whether they can sustain the momentum in the chip business. >> that's what analysts are saying about the business. what has samsung said in forward guidance about this coming year that made people pause and think about the stock. >> what they released today was just a couple of numbers they don't release commentary around that we'll get the full results over the next few days

and get more noise around the outlook. the analyst concern is that, but also a concern among the border analyst community that perhaps smartphones are not as strong as they should be that's partly because apple released the iphone 10, and that's competing with a lot of samsung's high-end offerings, where samsung has been strong. they came back to the market with innovative devices that have done well so we have to look at what impact the iphone x and 8 have had. if you look at the samsung business as a whole, they are investing in new areas cars is one business that they pumped money into. they spent million buying harmon last year. that was about trying tojump into the car space as well so there are some areas in which samsung is trying to expand into this is a crucial year for

samsung. they had a massive leadership change the de facto ceo is currently undergoing a corruption trial as well, and they need to prove a lot of these businesses can be sustained over the long run. let's talk about gopro, another company that's seen shares recover slightly after the ceo told cnbc that the company would entertain a buyout offer. shares had earlier plummeted more than 30% after cnbc reported that the firm had hired jpmorgan to handle a sale. the action cameramaker announced it would cut a fifth of its work force and wind down its drone business of course smart devices and the evolution of electric and autonomous vehicle also be key themes for the tech world as ces quicks no full swing samsung and lg are unveiling new premium tvs. intel, kia and hyundai are rolling out new products in the

auto space arjun, you talked briefly about samsung getting into the car space, this is getting increasingly competitive this sector >> autonomous driving is made up a lot of different parts you have people and companies in the sensor space, in the chip space. >> could be a lot of winners as well >> there could be. samsung has a claim there. nvidia are making the chip sets, blackberry trying to reinvent their business into part of the automated space as well. it's a big play now. big battleground is the car. it will be interesting to see how this pans out, all these companies trying to stake a claim as leaders in their areas. >> another battleground close to your heart that we'll see at the show in vegas is around speakers smart speakers what will happen there? a lot of them coming out >> more around the voice

assistants that underpin those that's the biggest battle at ces. google has a huge stand this year one of the first years it's had such a big presence there. big marketing budget for me, it's google assistant versus alexa each have different ways voice assistants have been integrated from tvs to ceiling fans to mirrors. what you had in the mobile space was a fight between android and ios. what you're seeing now is the battle for the smart home or the internet of things that's pretty much amazon versus google now whoever wins that really can become the dominant operating system for the internet of things right now very fragmented, a lot of confusion, even for someone who looks at the tech world, what do i buy, who do i go with. >> i look forward to your views on google's efforts as well as alexa. we'll stay with intel, where they used ces this year to

address the company's recent chip problems. it revealed that its first self-driving car was now going to be available in the near future for more of that, head online to cnbc.com toyota used ces to unveil plans for a self-driving concept car, but it wants to use it for services like ride hailing and deliveries the carmaker says it will work with uber, amazon and didi chuxing to develop the vehicle the e-palette, that's the name, will begin road testing in the 2020s. we are joined by the head of autos research at bmi research this space, autonomous cars, electric vehicles, you can separate them out as much as you want, it's going gang busters in terms of ideas and creativity. is that converting it profit >> i think this is the big challenge we're seeing for

companies this year. we had a year or so of high priority about this is what we can do, we can make our cars go driverless, now it's about how do you monetize that and make this part of your business strategy which is why we're seeing companies announce things like we want to have this delivery fleet or car-sharing fleet, or something where you can make a business plan >> because consumer demand is not as certain as it might be? >> it would be difficult to start selling autonomous cars as you would traditional cars to individual buyers. fleet sales make more sense. >> you hear these grand promises from car manufacturers, from countries. i think the chinese official a few months ago was saying the country was looking to phase out production sales of traditional energy vehicles in the near future how close is that future in your mind >> i think it's probably further than a lot of these governments making these promises would like to think if you look at the size of not the new sales market, it's fair

to say new sales weaken the electrifycation or autonomy, but you have to look at the sales of the global feet, and it will be a small percentage of the global feet for years to come so it could be 15, 20 years before we see a major adoption of this technology >> so what is the impact in the short-term to medium term on the bottom line of some companies trying to produce this is this not going pay off for a long time? >> it's a big undertaking. but in many ways it had to be done it's such a traditional industry that had been seen as quite slow moving now we're seeing carmakers realize they have to start moving with things like electrifycation and autonomy to give share holders the idea that they're moving along with the industry it may take a while to pay off but it's something they had to

do. >> one growth area is that move to develop luxury larger vehicles from pretty much every car manufacturer out there is there an intersection between electric vehicles and luxury that you see being an important driver >> absolutely. it's something you could call the tesla effect tesla came along, showed that you could make electric car there's a were not just good for fuel economy but attractive products it's shaken up the premium segment. that's why when you look at the product announcements over the last year, definitely in the premium segment you've seen new electric strategies coming out from the big carmakers >> let's talk about the present. do you see the rise that we've had recently in auto stocks across europe as indicative of something else besides people want to buy more cars? >> is it about consumer confidence >> i think certainly europe has surprised to the upside over the last year.

the autd tos market has been healthy. we expect sales to grow 3%, 4% this year. because it's such a big region, you have countries in the central and eastern european area that have room to grow, it's good on a regional basis. there's a lot of positive sentiment there. >> one exception is in the uk. why is it still in the dull droms? is it about the weaker pond? >> that's one factor the market was overheated. we had a few years of strong growth, fueled by pcps so i think at some point that had to come to an end because sales had already been made in that respect you also have a strong secondhand market with the pcp and lease sales coming back into the market as secondhand you have that alternative for people as well there's a lot of factors that i think had to be expected >> thank you very much for joining us

we'll be returning shortly to the goldman sachs global strategy conference in a few moments where we'll speak to the bank's co-chief market strategist stay with us

. welcome back to "street signs" on this not so sunny tuesday morning here in london let's look at the european markets. ftse 100 there is still up almost a third of a percent. the ftse mib the leader across europe so far, up almost two-thirds of a percent. the cac currant doing well, up a half percent a lot of news coming out of the french corporate sector because of president macron's trip to china. he's been meeting with xi jinping and looking to ink some significant deals, including one involving a french-chinese

investment fund worth about a billion euros. edf shares have been given energy from a nuclear deal edf is the owner after areva and they are set to sign a memorandum of understanding with china worth $10 billion. here in london we'll go over to joumanna shortly at the goldman sachs conference i want to give you news from the u.s. and the fed president of atlanta. he says the central bank may only need to do two rate hikes next year, possibly fewer. rafael bostic is concerned about weak price pressure, but goldman sachs is betting on four hikes this year and calling a short of ten-year treasuries as the top trade for 2018 joumanna joins us from the goldman sachs conference in london interesting sentiment there from them on the chances of a fourth rate hike. >> absolutely. as we heard earlier, they're

sticking to their view of four rate hikes next year and are more affirmed by the recent price 5:sen prices with me now i have francesco garzarelli we will get into what trades are best going into next year. one of your top trades for 2018 is shorting the ten-year treasury why will that work this year >> it's interesting you ask. at the conference we heard clients express the same view, that treasury yields would go up and i think what people have in mind is a bit of a response of rates to this bullishness we see in equities, based on the growth outlook and this exuberance that we get from global gdp so here's how i think about it alongside with the consensus, there's a view that the curve will flatten and that rates in japan and europe will stay low and volatility will stay low i think differently in two ways. i think that as the fed

progresses in hiking rates, there will be more scope for the market to speculate that the boj and the ecb may remove negative rates. that will create a source of volatility at the front end of yield curves which we have not seen for years equally as we progress in this expansion, we may start seeing some inflation, wages in core cpi. last year we had a negative shock to core cpi which depressed volatility and rates we're unlikely to see that again this year. as inflation picks up, we should see volatility at the long end of the yield curve all of this should result in a steeper curve. >> a lot of people are pointing to ten-year which have broken through $2 do you think that's an exposure for the u.s. >> we've been looking at this closely. we wanted to see if it was

merely a reflection of what's happening in the commodity or a repraisal by the market of the trajectory for inflation what we conclude is that it's mostly the former. people have bought break evens as a proxy for going long oil. the expression that looks interesting is the skew in inflation markets. the market still has a central tendency for cpi to be 2%. but really it is underpricing the chances that we have seen outcomie ins above 2% in normal cycle we should see that repricing take place. >> let's talk about europe a bit. with the ecb reducing the size of the asset programs does that make you gobearish on yields i europe >> buys into the story of more volatility europe is continuing to accumulate bonds from a stock effect, think about qe, we will see that stock effect grow.

the flow effect, the purchases that the ecb conduct also fall from half, as we go from 60 to 30, surely there's reinvestment later in the year. we will feel this, that will lead to choppier spreads. >> how do you think about peripheral spreads here. we have an important election coming up in your home country in a couple months time. do you think we might see volatility get priced in on the back of election uncertainty >> they've been performing well. i think about spreads as a three-layer cake first layer compensates investors for systematic risk. the pre-average breakup risk was 8% so there's no need to rerate then there's a second later that compensates for relative macro what investors are trying to

tell us is iberia, spain and portugal, is converging to france structurally you will see more investment italy is the odd man out because of the politics. >> brilliant, frances ckfrancesk you very much. with that, willem, back to you >> thank you very much let's look quickly at u.s. futures ahead of the open. we can see s&p 500, dow jones, nasdaq looking to open positively the dow jones with an implied open up 30 points. that's it for today's show i'm willment mark menem marx. "worldwide exchange" is coming up next.

the new year rally rolls on. wall street pointing to another record open with all the sectors at all-time highs. merck's ceo speaks out. we'll bring i his commenyou his straig comments straight ahead. and the one sector that could see hot returns in these cold temperatures. it's tuesday, november 9, 2018 "worldwide exchange" begins now. good