welcome to "street signs." i'm joumanna bercetche >> i'm willem marks. these are your headlines european oil majors slip and crude prices trade lower after opec predicts higher than expected output this year. that's the spirit. shares in remy cointreau trade higher as third quarter sales growth beats expectations despite the later timing for chinese new year. shares in carpetright plunge

blaming uk consumer confidence and pulling the rug from kingfisher in the sector. and your move, senators. a u.s. golf. shutdown a imminent address lawmakers try to round up enough votes to avoid it. the pressure is on the senate after the house passes a short-term spending bill the iea is forecasting a big increase in non-opec crude production over the course of the next year. it expects the pick up in oil prices to spur higher levels of shale production in the united states but the iea says the recent rally has the potential to rupp out of steam as higher prices weigh on demand. joining us from paris is neil atkinson from the iea. thank you very much for joining us the question i have is about what is going to happen with the opec numbers

we've seen them last year try to curb production. we've seen that spur this higher price. that's encouraging shale producers to get back into the market that could depress that price. is the only solution for opec for that greater demand? >> you could argue that opec achieved quite a degree of success throughout 2017. they cut by what they said they would for the group as a whole and prices have indeed risen of course what we're trying to understand is the responsiveness of the u.s. shale producers. because of the dynamism of the industry and the innovation and vast number of players in the space, in some extent we're in unchartered waters in the latest report we are expecting currently, with prices having gone through 50, 55, $60 a barrel for wti, we expect a wave of new production for the u.s., and opec has to accommodate that and make its

own judgment in the middle of 2018 when it meets next as to what the response should be. >> before that next meeting we have ministers from opec and non-opec producers meeting in moscow this weekend. do you think that will lead to an end or noises about an end to the restrictions we saw introduced last year >> the ministers meeting this weekend will be asked that question by the media, which is entirely reasonable. it's highly unlikely that there will be change to the current arrangements before the ministers meet formally again in june in vienna what happens then is on voicely we'll have to wait and see based on the balances that the iea currently sees for 201, it would be a surprise if the opec output puts were to be ended in the middle of the year, simply because that would release on to the market in theory an awful lot more oil our balances suggested that more supply is not what we really

need in 2018 if your interest is maintaining balance in the oil market >> i would like to ask about the demand side. you revised upward the 2017 growth and demand to 1.6 million barrels a day from 1.5 the forecast for 2018 is 1.3 million barrels, so a drop where is the drop coming from? >> the outward revision to growth in 2017 is tiny it was actually about 40,000 barrels a day. so on one decimal point, it flipped to 1.6 the main point, as you say, in 2018, we see lower growth because as we say in the report, the price of brent crude oil today is about 55% higher than it was in the middle of 2017 so higher prices for brent an other crude oils and of course for products is bound to have a dampening effect on demand

growth if those price levels are maintained so we have taken account of that the oecd countries in europe and elsewhere saw strong growth in 2017, partly due to the fact that oil prices were relatively low in the first half of the year slightly less rampant base of growth in china than we saw in 2017 taking all those factors into account, we do see lower demand growth this year than last but of course we'll have to wait and see how the numbers come through and if, in fact, the underlying strength of the global economies is really strong enough to maintain demand at a higher growth rate. we'll wait and see >> let's focus in on venezuela where they are reaching one of the lowest production points in decades. they had plunges in production of 200,000 barrels a day in december alone this is an unexpected bonus for the rest of opec >> i don't think that the

misfortunes of one country should be characterized as a bonus. clearly lower production from venezuela, if you'd like, hastens the rebalancing process to some extent there is a bonus for opec in that respect but the issue is if venezuela's production does continue to fall, we can't be sure what path it will take, they are suppliers of large volumes of generally heavier sour crude to the united states, to china, other customers, it may be that other producers of similar quality crudes might take the opportunity to move in and supply the oil that perhaps venezuela is no longer able to supply we'll have to wait and see how that develops. the likely fall in venezuelan production, we can't be sure how much, is a key issue we'll be watching on the supply side in 2018, because it is clearly a major risk factor. no doubt about that.

>> i don't want you to look into a crystal ball, but looking ahead, we see bp moving back into that troubled kurdistan market, hearing about fresh potential difficulties in the niger delta, is there a great deal of geopolitical risk out there that could impact oil prices >> yes i don't think you mentioned libya there, where from time to time we get problems affecting the industry because of rival groups we have nigeria, kurdistan is another issue which was a factor towards the end of last year perhaps slightly longer term is the potential impact on the iranian nuclear deal we did see demonstrations in iran recently, which is another factor and to some extent people are watching saudi arabia with the very, very major reform process going on there so there is quite a list of geopolitical factors, which we're keeping an eye on all the

time by their nature they're hard to predict and we'll have to wait and see what happens >> thank you very much neil atkinson from the iea in paris >> all right thank you very much. let's look at how markets are doing this morning actually in europe we had a bit of a spike in the last 10, 15 minutes or so. we'll get to that shortly. the picture is quite positive behind you we had another positive session in asia as well. nikkei and topix had a good day, recovering from the previous day's weakness, and hang seng also having a good day following on from that strong china gdp print. on the stoxx 600 we had that bit of a spike just in the past couple of minutes or so which means we're up about 0.4% on the day. let's get into some of the european markets on an individual basis it is a green day, everything is trading firmer this morning. ftse 100 is up almost 0.1%

ftse continues to lag as the currency gets stronger keep an eye on cable getting close to 1.40. that's beginning to bite the ftse, which is an open-oriented market xetra dax up 0.70% cac up 0.42% all eyes will be on what happens when the spd congregates on sunday and votes on whether or not they should proceed with the grand coalition talks with cdu a lot of focus on those talks on sunday getting into sectors, basic resources are outperforming, up 1% some of the more defensive sectors, healthcare, chemicals to the down side oil and gas are lagging a bit, that's on the back of opec expectations for lower demand next year non-opec output will increase as

for the iea. telecoms lagging a bit overall in europe, specifically the last ten minutes or so has been quite positive. i want to get into a bit of commentary about what we've been seeing in the u.s. of course a lot of focus there on the potential government shutdown if a stop gap spending bill doesn't get passed by the senate today but all eyes on what's going on with the ten-year u.s. treasury. it's up almost 2.64. the highest level in a couple years time the focus towards the end of 2017 was all on the front end as the fed got into their hiking cycle. the ten-year really stayed between 2.20 and 2.40 for the most part of 2017 and it seems to have broken out of that range and we're topping levels of 2.60 so people say we'll hit 3% next. the next question that flows from that, when this begins to bite the equity trade. we'll get into those discussions

shortly. >> we'll look at specific stocks with some company news remy cointreau reported slower than expected third quarter sales. the company said the later than usual lunar new year cut into chinese cognac sales they reiterated rising demand in china is a key growth driver and confirmed full-year guidance the company also said appetite for products in the united states remains strong. germany's basf opened higher after earnings surged 32% during the past year. the chemical company attributes the boost to strong performance at the oil, gas and cop prote protection units net income jumped to 6.1 billion euros, and there was a fourth quarter benefit of 400 million euros. the oil and gas device saw improvement helped in part by crude oil gains over 2017. carpetright shares have

fallen sharply in early trade after a warning on profit. this follows a weak christmas trading period they blame a reduction in uk consumer confidence. shares in kingfisher are down as well >> down 40% for carpetright. that's quite the drop. shares of ferrovial have been cut from sell to hold by deutsche bank. the german lender did not expect recovery in margins until 2019 deutsche bank slafshed the ebita margin to 5.5% several banks who loaned money to carillion are facing heavy losses loechb loans from barclays, hsby, rbs and lloyds make up the majority of the 1.6 billion pound committed debt

ka r carillion collapsed after the uk government decided not to launch a last-minute rescue of the firm. hsbc will pay over 1$100 million to the u.s. department of justice to settle investigations into forex rigging at the bank. it will be allowed into a three-year deferred prosecution agreement, meaning if it breaks the rules during that time it would be open to criminal proceedings. hsbc is one of the last banks to settle in the u.s. since a forex manipulation scandal erupted several years ago. >> it's been a tough time for hsbc, a lot of big settlements involving a number of different issues feel free to get in touch with us about anything you heard. the address is streetsignseurope@cnbc.com you can also, of course, follow us on twitter

twitter, @streetsignseurope@cnbc you can also tweet us directly ahead, be my guest, but with some conditions. president mac cron invokes beauy and the beast as he tells theresa may the conditions under which the uk could do business aftethukr e leaves the eu we use our phones and computers the same way these days.

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. welcome back shares of airfrance-klm opened sharply lower after a downgrade from morgan stanley. the bank cut its rating on the airline to equal weight from overweight and slashed the price target to 14 euros from 18.35 euros. the a330 lives. on thursday, emirate s ordered 0 of the planes with the possibility of ordering 6 more the future of the a380 was in

doub doubt. >> be my guest is what french president emanuel macron said to british prime minister theresa may. he insisted he would not oppose any uk effort to remain inside europe's single market but he warned britain would not enjoy the level proposed in theresa may's current brexit plan during the summit yesterday, macron also specifically rejected the idea that a tailored brexit deal would be possible for the city of london. >> translator: i'm going to be very clear with you, i'm not here to reward or punish, i'm here to do the maximum for our mutual interests but i have one request, it's that the single market preserved, because it's fundamental in the european di

access to the single market. if you want access to the single market, be my guest, but it means you need to contribute to the budget and acknowledge european jurisdiction. >> that is something that theresa may said she's not willing to do. she said she believes the city of london will remain a major global financial center and repeated her view that a strong relationship with the uk is in the best interest of the european union >> as we're leaving the european union, we will no longer be for members of the single market we recognize that. there will be a different relationship in the future, a different set of balance of rights and responsibilities. and we have been clear about that but i believe that it is actually in the interest, not just of the united kingdom but also of the european union as it goes forward to continue to have a good economic relationship and partnership with the uk. u.s. ten-year yields have

hit the highest level since 2014 this as china's fourth quarter gdp accelerated for the first time in seven years. and apple's investment plan also nudged yields higher amid concerns it could sell treasuries in order to pay a $3 billion tax bill i'm pleased to say david riley from blue baear asset management joins us a lot of focus on yields here, breaking through that 2.60 mark. people are pointing to different drivers. a week ago it was china selling u.s. treasuries, today it's apple's potential selling of u.s. treasuries. a strong cpi inflation print what do you think is doing this? >> i think there's a meaningful change in the supply demand dynamics for treasuries. we are getting a significant

supply of treasuries because of the tax cuts, so we think increased spending out of washington as well so we should get a doubling of supply >> we should get those numbers in february, right >> we get the quarterly profile of funding from the u.s. treasury department as well. so we are seeing a big increase in supply. at the same time the fed, of course, is starting to shrink its balance sheet. it's reducing the number of treasuries it's holding. that's a big, meaningful shift >> those are technical drivers, also, again, if you flip it, ten-year yields can only sell off so much if it's not accompanied by rising inflation as well. >> good point. interesting what we're seeing is inflation break evens move higher as i suggested, there was strong demand for the ten-year tips actio5 auction. so we're seeing nominal yields moving higher. the big question is how much further can yields move an we still see this sea of green in

terms of stocks? at what point do stocks turn around and said i don't like this much. that's a big question for investors. >> and for yourself. when you see these things happen, there's also a lot of volatility in the equity space the dow continues to move higher, but there's a lot of intraday volatility. vix moving higher. as an investor you see these things happening, are you thinking about hedging perhaps against a pick up in volatility? >> we do think that rates is the principle source of increased volatility across markets and risk assets more generally we've been building and maintained a decisive short duration position, short interest rates futures position. we think that's a useful hedge to have. in some ways we express that through treasury options where the volatility moves up and it increases the value of those options. >> that's predicated on how many fed rate rises this year -- too

many words in that one clearly you built the model around something what is that? >> we think you'll see four rate hikes out of the fed, that are on a quarterly path. the fed at the moment is indicating something in the order of -- indicating three the market is pricing two and a half so the market is underpricing in terms of where rate hikes go why do we think they're moving higher because the global economy, the u.s. economy is accelerating we think the investors are still underestimating the short-term at least impact to growth of the u.s. tax cuts. the fact that china gdp is also strong so global economy warrants, i think, higher rates. >> talking about the fed what about the ecb is it a good idea for them to end the bond buying program in september? >> it's really interesting how the market is also been shifting towards anticipating that the ecb will end in september rather

than do a soft taper i think the challenge for the ecb, this is where i would be a bit concerned, if you want to stop in december, i don't think it makes that much difference. what's crucial is how quickly do you start normalizing interest rateses in europe? the market also priced in a 50/50 chance of a december rate hike got to be a bit careful here of a policy area. the european economy is doing well, but you don't want to derail that either >> i want to ask a big picture question this has come up quite a lot there was an interview with dudley in the ft yesterday where he was talking about the fact that maybe at some point in the future they will have to reconsider that 2% as an inflation target because they're seeing a tremendous amount of asset price appreciation, talking about extreme valuations across the board, not just in equities but also fixed income space. do you think at some point in

the future central banks will have to reconsider their inflation targeting policy and think about matters such as financial instability if valuations stay this stretched >> it's a really good question clearly there's a debate going on across a number of major central banks as to if we don't hit inflation targets, the line so far has been monetary policy is to control the economy and target inflation, macro potential policies is to prevent imbalances they'll move to potentially a sort of inflation range which would allow them, if you'd like, to lean against the market a little bit more. one thing which dudley also did highlight is that even as the fed has been raising interest rates, financial conditions have been getting easier. so the market is almost inviting the fed to push on more. >> somebody said yesterday it's almost as if the fed has not hiked, because they've done these hikes and financial

conditions have gotten loser stay with us we'll discuss more about u.s. politics in a bit. coming up, as president trump prepares to go to davos, we look back at his first year in office. hi. i'm dave nemeth.

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welcome back to "street signs. i'm willem marx. >> i'm joumanna bercetche. these are your headlines european oil majors slip and crude prices trade lower after opec predicts higher than expected output this year. the iea says markets are tightening amid plummeting venezuelan supply. low spirits. shares in remy cointreau reverse and turn lower as negative impacts on profit are expected to be higher than initially thought.

shares in carpetright plunge blaming uk consumer confidence and pulling the rug from kingfisher in the sector. and your move, senators. a u.s. governmen shutdown a imminent as lawmakers try to round up enough votes to avoid it the pressure is on the senate after the house passes a short-term spending bill all right. we got some uk retail spending numbers, and they have come in weaker than expectation on the month. december came in down 1.6% the expectation for the month was down 0.8%. that's after a strong november the monthly data tends to be volatile, but here worth flagging that the november numbers were boosted by those black friday sales and

december's picture has been mixed, but overall footfall has been low and it appears the holiday season spending was underwhelming. those are the numbers out of the uk we have a picture of sterling/dollar up there you can see brushing off the data and continues its stride up to 1.40. let's look at other markets and see what the picture is like there. you can see, again, the major theme has been the weakness of u.s. dollar. that doesn't seem to be getting a break as we head into u.s. golf shutdown that's impacting all of those currency pairs sterling we talked about a bit dollar/yen has broken through 1.11, down 0.5% on the day that yen strengthening is not impacting the nikkei at all. the nikkei did end the session up 0.2% in yesterday's trading let's switch to european markets. and as we said earlier, it is a -- it was a strong start for the euro stocks, and you can see germany is leading the charge

here, up almost 1% now up 0.9%. cac cac is upis up a half perce point. ftse has been dragged down by some weaker earnings we talked about. but now seems to be brushing off that news and pushed higher by the rebound in european markets. all eyes on the u.s. today and what happens with the senate when it comes to the short gap spending vote. we'll see what happens later as you can see, the picture for equities is positive dow jones is looking to open up about seven points higher after a weakish day. u.s. equities go from strength to strength and continue to do so >> the u.s. house has passed a spending bill to temporarily keep the federal government running, but the senate will have to do the same by midnight tonight east coast time in order to avoid a shutdown. with senators at odds over a

deal on immigration it's not clear the votes will be there in time to avoid closing down the government tracie potts joins us this morning from washington. we saw bill murray on "saturday night live" playing steve bannon this feels like "groundhog day." we expect to see more of him again and again we have had these short-term measures for funding it seems that in the senate there will be opposition. we heard senator jeff flake last night saying he's not a fan of punting this down the road once again. he was promised a vote on the floor for daca, he didn't get it and he's not happy about it. is he alone? >> no, he's not alone. there's a handful of republicans who say they're willing to work with democrats and try to get something more permanent by today that they don't want another temporary budget that just pushes things down the road you mentioned what the house passed which would extend the

budget for four weeks. some think maybe a very short-term extension, a matter of days might pass the senate today. that would literally give lawmakers over the weekend or a few more days to come up with something more permanent at this point democrats insist they have the votes to block this the question becomes the blame game if the government shuts down tonight over this immigration issue, who gets the blame? democrats for digging in their heels and refusing to pass a spending plan without a deal on immigration, or republicans wo con tro who control the white house and congress and should have been able to get this deal done >> the twitter feed of the president, he will be celebra celebrating this weekend, an expensive gala at his golf club in florida, marking a year since he took office what is his role in the

negotiations and what can he do to avert a shutdown tonight? >> we're hearing that republicans, his own party, leaders here don't know what he wants. they don't know what compromises he's willing to make they do not know what he's willing to sign. that's making negotiations difficult. we saw it earlier this week when a bipartisan compromise came to the president, he said last weekend if i get something i'll sign it, and then he didn't saying that it didn't go far enough to build his wall or to restrict what he calls chain migration. he want to see more money for the military they are negotiating with the top republican on the senate here saying he is not sure what president wants to do. >> i have a question about sequencing t doesn't sound positive for the senate vote later.

if a bill doesn't get passed, what happens do government agencies shut down >> yes, at midnight tonight golf the agencies would shut down essential functions would not shut down. so air traffic control, the mail would still be delivered there are a lot of -- veterans hospitals would stay open, prisons would stay open. there's a lot of government functions that would not be affected but the services people expect from the government, getting passports and visas to some degree social security checks may slow down if this goes on for a long time. there are actually very thick manuals telling each department what employees are considered essential and nonessential plus consider the fact that over the weekend there's usually funding to continue some services monday morning is when people might really start to feel this. >> tracie potts, thank you very much for bringing us the latest.

we'll watch to see what happens with the vote later today. tomorrow marks one year since president trump's inauguration he was sworn in as global elites gathered for the world economic forum in davos this year trump will climb the mountain to address them trump promoted his own trade policies in pennsylvania his support for rick sarconi in a special election came after his support for another candidate lost >> we put america first now, we're doing trade deals. we're doing a lot of things that i said we would be doing it's not easy. these other countries have become very, very spoiled with taking advantage of us

but take advantage of us no longer >> and david riley is still with us we hear more of these protectionist type comments and a rise of the rhetoric between the u.s. and china when it comes to protectionist policies. that's been ratcheting up the last couple of weeks one thing the market should be focusing in on is the nafta renegotiations will take place next week. how are you thinking about that from a trading perspective is it something that worried you? is there a potential that the u.s. may end up withdrawing from this agreement >> you can see how those sort of issues are playing out in terms of the mexican peso. we do have positions in the mexican peso partly because we do think that there's a meaningful risk that the u.s. and president trump does actually announce that they are going to withdraw, have a sort of six-month withdrawal

notification unlike article 50 with brexit, this can be reversed any time. it may well be part of the negotiating process. >> so you're shorting the peso on the expectation that it may drop precipitously when that happens. >> we have positions such that we would benefit, if you'd like, and hedge some other exposures that we have in the event -- >> it's not just the mexicans who have said they would not be happy about this, it's canadians as well. do you have exposure to candidacanada >> and also bank of canada hiked a dovish forward guidance there. i'm wondering how you're thinking about the canada angle as well and whether the bank of canada can continue with these series of hikes. >> as the bank of canada indicated it would be a headwind and source of insertity for the outlook. we're not anticipating an aggressive hiking cycle coming

from the bank of canada. but we don't have sort of strong directional views. our bias is that the canadian dollar would be weaker rather than stronger going forward. but i think one thing which has also been interesting around this protectionism aspect is that the dog has not yet barked. investors seem to be taking comfort from the more that donald trump tweets about the rise in the dow, the less likely he is to potentially engage in meaningful protectionism a lot of those companies -- >> why break it if it's working. >> precisely >> we talked earlier about apple repatriating a huge quantity of money and what that means they have to pay to the u.s. treasury when we look at the tax reform bill we saw passed last month, what's your long-term prediction for what that does to the u.s. economy and lou do you trade around that? >> our forecast for u.s. growth

this year, we bumped up by 0.3%. we think the year's economy will be expanding 2.75. we think inflation will be higher as well does it fundamentally change the dynamics or the growth potential of the u.s. economy over the longer run i think that's much harder to discern. in the short-term you will get a sugar rush, so we're positioned in terms of having a long risk position across a number of u.s. assets but also the short interest rate position as well we do have a bias for continued weakness in the u.s. dollar. >> switching to the uk, looking at sterling/dollar here. cable is back at post-brexit -- it broke through the prereferendum highs, making new highs at 1.40. lots of things are going on in the uk you have the bank of england insisting they can get away with a rate hiking cycle, you have the brexit talks going on, you have an economy that has

rebounded, weak retail sales, all of this going on what are the plays you're focusing on now from an investment perspective >> we have a short position in terms of long end uk rates it's fundamentally because uk gilts, interest rates are actually deeply in negative territory, when the uk economy outlook is deteriorating and we have to be careful talking about sterling strength. what we're really seeing is dollar weakness. if you look at sterling versus euro, we've not seen anywhere near as strong a recovery. finally, as you highlighted in terms of the uk retail sales number that came out, uk households, they're running on vapor. incomes are declining. how are they sustaining that they're spending and drawing down on savings and increasing debt that's not sustainable what does that mean? you made the valid point, if you compare the pound against the

euro, it's not looking so good do you expect more volatility in that currency this year? what's your forecast >> we do expect more volatility. we expect the euro to appreciate against sterling just because the fundamentals between the eurozone and the uk are moving in opposite directions we also have a bias against sterling more generally. we don't think you're getting compensated enough for the sterling credit. so there's opportunity there's, but generally speaking the premium is not enough to kind of go all in on sterling credit >> just a quick one, carillion has been in the news quite a lot. as a credit investor, are you seeing some of the repercussions from the carillion failure steepen to credit markets? is there nervousness around the construction sector now? >> i think it reinforces weakness in sectors, in construction, things like home

care, social care in the uk are under a huge amount of pressure. one of the sectors in the high yield sector in the uk, things like loans, so you're seeing stress emerge in all of those. in that sense, carillion is like the canary in the coal mine. >> david riley, thank you very much an extraordinary set of pictures this morning. vladimir putin has immersed himself in an ice code lake last night to observe the orthodox christian feast of epiphany. put whon is rin who is running election in march never shies away from a good photo-op. >> i wonder if i can unsee that

image. there it goes again. if you have thoughts on putin or anything else that we've discussed, feel free to e-mail the show the address is streetsignseurope@cnbc.com i'm sure willem wants to hear your views as well you can tweet him directly one final thing to go before we take a break. we have to talk about amazon where the company is risking the president's fire and fury as it has a canadian city in the short list for proposed headquarters for your heart... your joints... or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally found in jellyfish, prevagen is now the number one selling brain health supplement

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morgan stanley shares traded at their highest level since 2007 after a strong set of fourth quarter numbers the wealth management division was the standout performer posting record quarterly revenue of 4$4.4 billion fixed income trading fell 45% from a year earlier, that was broadly in line with its

competitors. the share moved higher breaking a run of ten years that goldman sachs had a larger market cap that morgan stanley. amazon said 20 cities have made the cut for the site as its potential second headquarters. toronto is the only non-u.s. city still in the running. the company says it plans on hiring 50,000 employees and invest more than $5 billion in the winning location amazon will make a final decision this year the bid process for that was interesting. people got quite competitive in terms of their charm offensive calgary offered to change their name to calgazon they didn't make it to the final 20 >> toronto has its own baseball team inside the american league, so you know they're close enough, right? it's close to the border.

the future of cryptocurrency etfs has been thrown in doubt after u.s. regulators said there are serious issues to be addr s addressed. the s.e.c. said there are significant investor protection issues that need closer examination before etfs can be offered to retail investors. the letter expressed concerns about the cryptocurrency volatility and liquidity that we've seen a huge amount over the last few months. softbank has completed its investment agreement in uber, becoming the largest shareholder of ride hailing company. the deal involved earlier inv t investors and employees selling their shares at 30% discount from the most recent valuation of 68 billion. among those who sold shares is travis kalanick, and a source familiar with the arrangement says he will earn 1$1.4 billion from the deal. ibm managed to break a 22 quarter streak of revenue

declines, but shares still slid in after-hours trading as investors remain unconvinced that legacy issues have disappeared. a downbeat forecast from big blue triggered the selloff with the company seeing a one-time tax charge this year will reduce profitability. >> reporter: ibm breaking its years long streak of declining sales and fueling more optimism for a turnaround the company expects revenue growth for all of next year perhaps alleviating concerns that this was a one-time cyclical lift and not the turnaround that guinea ginni rometty that been working on today shares are still nearly 20% off the high price, and it's the eighth most influential dow stock. big blue is making a big bet on next generation technologies

like artificial intelligence, cloud computing and data while the share of total sales is growing, that portion has been choppy. so ibm is growing again, but the your is out on whether or not it will last. that was the latest on those ibm earnings bringing us into the conversation is alex gunz who will run us through his top three picks for shares this year and one of them is ibm the market didn't take their announcement that they have broken the streak of losing revenues over the last couple of years that well. the stock ended the day lower even though the revenue numbers were positive. what makes you so positive about ibm going forward? >> we're very excited about ibm. just to comment quickly on the

move last night, context is important. the move is 10% early this year, compared to the market moving 5% so i sense investors being opportunistic into the news. turnarounds don't happen overnight. what investors should be focusing on with ibm are a couple of things this big shift of what they call strategic imperatives. that's 46% of revenues a lot about cloud, artificial intelligence, blockchain and moving away from the commoditized areas, which this business has been in when we spend a lot of time thinking about future trends, and so much hype about artificial intelligence out there and blockchain out there when you look at real world cham examples, which companies are commercializing, signing agreements, ibm doing a deal with maersk for the port automation, looking at visa

sales, we think this really will put the business in a strong position, not necessarily next quarter but on a one to two-year view to see revenue growth and indeed margins movingup quite strongly from current levels >> so a transformation story if you look at a five-year horizon, ibm stock is down 13% in an environment where everything is posting triple digit returns. so the story on ibm is the fact it has exposure to things like blockchain and technologies. one other top stock pick this year is asml can you tell us why you're so positive on asml >> they sit in a crucial part of the valley chain when you think about technology in one sentence, without asml the future doesn't happen. so for those who are not familiar with asml, they produce lithography machines which allow

semiconductor chips to work more efficiently. so we hear people getting excited about big data, cloud computing and so on, but you need asml systems. >> why is that a clever trade? they're looking to up the dividend, they have given positive earnings guidance and seen huge profit margins of almost 25%, why is that a clever play >> the business has done well. by we see still huge upside potential -- >> doesn't everybody else? >> the shares delivered exceptionally good returns i would argue that what we know very, very clearly is financial guidance that they have given out to 2020. i just met with a company prior to coming on the show this morning, i think the confidence that you see from management is very, very evident i would imagine as we get later through this year what you'll see from the business is probably new guidance given and looking out beyond 2020. that's not yet fully discounted by all investors >> we'll leave it there.

the final thing you wanted to talk about was a midwestern fertilizer company we won't have time for that. thank you for giving us your picks for 2018. the "squawk box" team is off to davos our coverage kicks off on monday when we hear from a number of executives including keith barr from the intercontinental hotel group. >> that's today's show i'm willem marx. >> just before we head out, i want to point out that eurozone stocks are at ten-year highs it's a good start to the day for europe that's it from us. i'm joumanna bercetche "worldwide exchange" is up next.

breaking news from capitol hill the house passes a temporary spending bill to avert a government shutdown, it's now in the senate's hands wait and see, that's the approach on wall street as investors weigh through the d.c. drama. and ibm shares under pressure we'll tell you what's dragging big blue into the red. it's friday january 19, 2018 "worldwide exchange" ge begbegiw ♪ good morning